Factorial Energy Inc.

Previous wording

The following discussion and analysis of the financial condition and results of operations of Factorial Energy Inc. (“Factorial Energy,” “Factorial,” ”Company,” “we” “our” or “us”) should be read together with the audited annual financial statements of Factorial Inc. (“Legacy Factorial”), our predecessor reporting entity, for the years ended December 31, 2025 and 2024 which are included in the proxy statement/prospectus dated as of, and filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) on, May 6, 2026 (the “Proxy Statement/Prospectus”) beginning on Page F-25, and Factorial Energy’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 and 2025, and related notes included in this Quarterly Report on Form 10-Q (“Quarterly Report”). This discussion contains forward-looking statements reflecting our current expectations, estimates, and assumptions concerning events and financial trends that may affect our future operating results or financial position. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included in this Quarterly Report.

Current wording

The following discussion and analysis of the financial condition and results of operations of Factorial Energy Inc. (“Factorial Energy,” “Factorial,” ”Company,” “we” “our” or “us”) should be read together with the audited annual financial statements of Factorial Inc. (“Legacy Factorial”), our predecessor reporting entity, for the years ended December 31, 2025 and 2024 which are included in the proxy statement/prospectus dated as of, and filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) on, May 6, 2026 (the “Proxy Statement/Prospectus”) beginning on Page F-25, and Factorial Energy’s unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2026 and 2025, and related notes included in this Quarterly Report on Form 10-Q (“Quarterly Report”). This discussion contains forward-looking statements reflecting our current expectations, estimates, and assumptions concerning events and financial trends that may affect our future operating results or financial position. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included in this Quarterly Report.

Previous wording

Factorial, a US-based leader in solid-state battery technology, develops next generation battery technology for planned use by drone, mobile robots, roadgoing vehicles, energy storage, and other demanding applications. Our FEST® cells are designed to meet the demands of the high-power market and, relative to conventional Li-ion batteries, deliver lighter weight, smaller size, longer life, and faster charging, in each case meeting or exceeding conventional batteries in each of these key parameters we believe are valued by end users. In addition, for some of our customers whose applications do not need all of the benefits of our solid-state technology, we develop batteries that combine a lithium metal anode and a liquid electrolyte. Such batteries provide some of the improved size, weight and duration of our solid-state battery technology at a lower cost and faster timeline to production.

Current wording

Factorial, a US-based leader in solid-state battery technology, develops next generation battery technology for planned use by drone, roadgoing vehicles, mobile robots, energy storage, and other demanding applications. Our FEST® cells are designed to meet the demands of the high-power market and, relative to conventional Li-ion batteries, deliver lighter weight, smaller size, longer life, and faster charging, in each case meeting or exceeding conventional batteries in each of these key parameters we believe are valued by end users. In addition, for some of our customers whose applications do not need all of the benefits of our solid-state technology, we develop batteries that combine a lithium metal anode and a liquid electrolyte. Such batteries provide some of the improved size, weight and duration of our solid-state battery technology at a lower cost and faster timeline to production.

Previous wording

Factorial is a development stage company with no revenue to date that has incurred a net loss of approximately $11.3 million and $19.9 million, with cash used in operations of $0.5 million and $11.4 million, for the three and six months ended June 30, 2026, respectively, and an accumulated deficit of approximately $275.5 million as of June 30, 2026.

Current wording

Factorial is a development stage company that has not generated material revenue to date. For the three and nine months ended September 30, 2026, Factorial had net income of approximately $8.8 million and a net loss of $11.1 million, with cash used in operations of $14.7 million and $26.1 million, respectively, and an accumulated deficit of approximately $266.7 million as of September 30, 2026.

Previous wording

Factorial currently conducts its business through one operating segment. As a pre-revenue company with no commercial operations, Factorial’s activities to date have been limited and were conducted primarily in the United States and Korea and its historical results are reported under U.S. GAAP and in U.S. dollars. Factorial’s Korean subsidiary’s functional currency is the Korean Won. Upon commencement of commercial operations, Factorial expects to expand its global operations substantially, including in the United States, Asia, and the European Union, and as a result Factorial expects its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements. As a result, Factorial expects that the financial results it reports for periods after it begins commercial operations will not be comparable to the financial results included in this Quarterly Report.

Current wording

Factorial currently conducts its business through one operating segment. As a development stage company with nominal commercial operations, Factorial’s activities to date have been limited and were conducted primarily in the United States and Korea and its historical results are reported under U.S. GAAP and in U.S. dollars. Factorial’s Korean subsidiary’s functional currency is the Korean Won. Upon commencement of material commercial operations, Factorial expects to expand its global operations substantially, including in the United States, Asia, and the European Union, and as a result Factorial expects its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements.

Previous wording

To date, Factorial’s research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering facility in the United States and Cheonan, South Korea, including the material and supplies to support the product development and process engineering efforts. As Factorial ramps up its engineering operations to complete the development of its solid-state, lithium-metal batteries and required process engineering to meet automotive cost targets, Factorial anticipates that research and development expenses will increase significantly for the foreseeable future as Factorial expands its hiring of scientists, engineers, and technicians and continues to invest in additional plant and equipment for product development (e.g. multi-layer cell stacking, packaging and engineering), building prototypes, and testing of battery cells as the team works to meet the full set of Original Equipment Manufacturers (“OEMs”) product requirements.

Current wording

To date, Factorial’s research and development expenses have consisted primarily of personnel-related expenses for scientists, engineers and technicians as well as costs associated with the expansion and ramp up of our engineering facility in the United States and South Korea, including the material and supplies to support the product development and process engineering efforts. As Factorial ramps up its engineering operations to complete the development of its battery technology and required process engineering to meet cost targets, Factorial anticipates that research and development expenses will increase significantly for the foreseeable future as Factorial expands its hiring of scientists, engineers, and technicians and continues to invest in additional plant and equipment for product development (e.g. multi-layer cell stacking, packaging and engineering), building prototypes, and testing of battery cells as the team works to meet the full set of Original Equipment Manufacturers (“OEMs”) product requirements.

Previous wording

General and administrative expenses consist mainly of personnel-related expenses for Factorial’s executive, sales and marketing and other administrative functions and expenses for outside professional services, including legal, accounting and other advisory services. Factorial is expanding its headcount in anticipation of planning for and ramping up commercial manufacturing operations and to meet public company financial and compliance requirements. Accordingly, in addition to the non-recurring transaction costs discussed above, Factorial expects its general and administrative expenses to increase significantly in the near term and for the foreseeable future. Upon commencement of commercial operations, Factorial also expects general and administrative expenses to include sales, marketing and advertising costs.

Current wording

General and administrative expenses consist mainly of personnel-related expenses for Factorial’s executive, sales and marketing and other administrative functions and expenses for outside professional services, including legal, accounting and other advisory services. Factorial is expanding its headcount in anticipation of planning for and ramping up commercial manufacturing operations and to meet public company financial and compliance requirements. Accordingly, in addition to the non-recurring transaction costs discussed above, Factorial expects its general and administrative expenses to increase significantly in the near term and for the foreseeable future.

Previous wording

Comparison of the Three and Six Months Ended June 30, 2026 to the Three and Six Months Ended June 30, 2025

Current wording

Comparison of the Three and Nine Months Ended September 30, 2026 to the Three and Nine Months Ended September 30, 2025

Previous wording

Research and development expenses decreased by $5.0 million, or 36.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decline primarily resulted from the recognition of $3.6 million of expense reimbursements from joint development partners for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025. The decrease is also attributed to lower facility costs from the closing of our Methuen facility.

Current wording

Research and development expenses decreased by $6.8 million, or 35.0%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. The decline primarily resulted from the recognition of $6.2 million of expense reimbursements from joint development partners for the nine months ended September 30, 2026 compared to $0.3 million for the nine months ended September 30, 2025, as well as lower facility costs from the exit of our Methuen facility in October 2025.

Previous wording

General and administrative expenses increased by $1.7 million, or 37.0%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by:

Current wording

General and administrative expenses increased by $1.8 million, or 11.8%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. This was primarily due to:

Previous wording

•an increase in professional fees, including legal, audit, and advisory services; and

Current wording

•an increase in professional fees, including legal, audit, investment banking, and advisory services; and

Previous wording

General and administrative expenses decreased by $0.1 million, or 0.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This was primarily due to a decrease in stock-based compensation expense. This was offset by:

Current wording

This was offset by a decrease in stock-based compensation expense.

Previous wording

The change in fair value of our Series B-1 and Series D warrant liabilities increased by $0.3 million and $0.4 million for the three and six months ended June 30, 2026, respectively. There was no change in fair value of our warrant liabilities for the three and six months ended June 30, 2025. Changes in fair value of warrant liabilities are non-cash and are included in net loss. Upon the consummation of the Merger, the Series B-1 and Series D warrants were exercised cashless for shares of Series A Common Stock.

Current wording

For the nine months ended September 30, 2026, we recognized a loss of $0.4 million from the change in fair value of these warrant liabilities, compared to none for the nine months ended September 30, 2025. Upon the consummation of the Merger, the Series B-1 and Series D warrants were exercised cashless for shares of Series A Common Stock.

Previous wording

Other income, net decreased by $0.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to fluctuations in the effects of foreign exchange.

Current wording

Other income, net increased by $1.4 million for the three months ended September 30, 2026, compared to the three months ended September 30, 2025, primarily due to fluctuations in the effects of foreign exchange offset by interest incurred on the legal judgment.

Previous wording

Other income, net decreased by $0.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to fluctuations in the effects of foreign exchange offset by a reduction of interest income.

Current wording

Other income, net increased by $0.6 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, due to fluctuations in the effects of foreign exchange offset by a reduction of interest income.

Previous wording

Since inception, we have financed our operations primarily from the sales of preferred and convertible preferred stock, equity-linked securities, and capital raised through our de-SPAC Transaction and PIPE Financing. As of June 30, 2026, our principal sources of liquidity were our cash and cash equivalents in the amount of $112.8 million. Our cash equivalents are invested primarily in U.S. Treasury money market funds.

Current wording

Since inception, we have financed our operations primarily from the sales of preferred and convertible preferred stock, equity-linked securities, and capital raised through our de-SPAC Transaction and PIPE Financing. As of September 30, 2026, our principal sources of liquidity were our cash and cash equivalents in the amount of $95.4 million. Our cash equivalents are invested primarily in U.S. Treasury money market funds.

Previous wording

As of the date of this filing, Factorial has yet to generate any revenue from its business operations. To date, Factorial has funded its capital expenditure and working capital requirements primarily through equity as further discussed below. Factorial’s ability to successfully develop its products, commence commercial operations and expand its business will depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.

Current wording

As of the date of this filing, Factorial has yet to generate any substantive revenue from its business operations. To date, Factorial has funded its capital expenditure and working capital requirements primarily through equity as further discussed below. Factorial’s ability to successfully develop its products, scale commercial operations and expand its business will depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations.

Previous wording

As of June 30, 2026, Factorial’s cash and cash equivalents amounted to $112.8 million. Factorial received net proceeds of approximately $92.0 million in connection with the Merger. In connection with the Merger, the holders of 23,051,313 CGC Class A Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.42 per share, for an aggregate redemption amount of approximately $240.1 million.

Current wording

As of September 30, 2026, Factorial’s cash and cash equivalents amounted to $95.4 million. Factorial received net proceeds of approximately $92.0 million in connection with the Merger. In connection with the Merger, the holders of 23,051,313 CGC Class A Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.42 per share, for an aggregate redemption amount of approximately $240.1 million.

Previous wording

Factorial expects its capital expenditures and working capital requirements to increase materially in the near future, as it seeks to accelerate its research and development efforts and scale up the production operations with its OEM partners. Factorial expects to satisfy early demand for its solid-state battery products by expanding its existing fabrication line operations in South Korea and the United States, to support initial commercial production. During the six months ended June 30, 2026, Factorial paid capital expenditures for such expansion of approximately $0.6 million and expects to incur capital expenditures of approximately $12.0 million during the remainder of 2026. The expansion is expected to be completed by the end of 2027. Beyond the initial investment to expand our existing fabrication line operations in South Korea and the United States, we do not plan to build or acquire additional manufacturing facilities or incur substantial capital expenditures for the expansion of our existing facilities. Instead, as demand grows, including incremental high spec applications and gigawatt-scale ramp-up in the automotive market, we expect to scale primarily through a partner manufacturing approach.

Current wording

Factorial expects its capital expenditures and working capital requirements to increase materially in the near future, as it seeks to accelerate its research and development efforts and scale up the production operations with its OEM partners. Factorial expects to satisfy early demand for its solid-state battery products by expanding its existing fabrication line operations in South Korea and the United States, to support initial commercial production. During the nine months ended September 30, 2026, Factorial paid capital expenditures for such expansion of approximately $3.4 million and expects to incur a total of capital expenditures in a range of $10.0 million to $12.0 million for the fiscal year ending 2026. The expansion is expected to be completed in phases by 2028. Beyond the initial investment to expand our existing fabrication line operations in South Korea and the United States, we do not plan to build or acquire additional manufacturing facilities or incur substantial capital expenditures for the expansion of our existing facilities. Instead, as demand grows, including incremental high spec applications and gigawatt-scale ramp-up in the automotive market, we expect to scale primarily through a partner manufacturing approach.

Previous wording

Factorial believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this filing and sufficient to fund its operations until it commences commercial production of the Factorial solid-state battery, assuming Factorial is able to do so as currently contemplated. Factorial may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, competitive pressures, and regulatory or permitting developments, among other developments. To the extent that Factorial’s current resources are insufficient to satisfy its cash requirements, Factorial may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than Factorial expects, Factorial may be forced to decrease its level of investment in product development or scale back its operations, which could have an adverse impact on its business and financial prospects.

Current wording

Factorial believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this filing. Factorial may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply chain challenges, competitive pressures, regulatory or permitting developments, and increases in demand for Factorial’s battery cells that accelerate its cash requirements, as Factorial’s costs associated with such products currently exceed the related revenue, among other developments. To the extent that Factorial’s current resources are insufficient to satisfy its cash requirements, Factorial will need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than Factorial expects, Factorial will be forced to decrease its level of investment in product development or scale back its operations, which could have an adverse impact on its business and financial prospects.

Previous wording

Based on its current operating plan, the Company estimates that its cash and cash equivalents as of the date of this filing will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2028. The Company has based this estimate on assumptions that may prove to be wrong and could deplete its liquid resources sooner than it currently expects.

Current wording

Based on its current operating plan, the Company estimates that its cash and cash equivalents as of the date of this filing will be sufficient to fund its operating expenses and capital expenditure requirements into the first half of 2028. The Company has based this estimate on assumptions that may prove to be wrong and could deplete its liquid resources sooner than it currently expects.

Previous wording

Factorial’s cash flows used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, and professional services related to research and development and general and administrative activities. As Factorial continues to ramp up hiring for technical headcounts to accelerate its developmental efforts, Factorial expects its cash used in operating activities to increase significantly before it starts to generate any material cash flows from its business.

Current wording

Factorial’s cash flows used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, inventory purchases, and professional services related to research and development and general and administrative activities. As Factorial continues to ramp up hiring for technical headcounts to accelerate its developmental efforts, Factorial expects its cash used in operating activities to increase significantly before it starts to generate any material cash flows from its business.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2026 was $11.4 million, and was driven primarily by the net loss of $19.9 million. This was offset by:

Current wording

Net cash used in operating activities for the nine months ended September 30, 2026 was $26.1 million, and was driven primarily by:

Previous wording

•non-cash expenses of $6.3 million, which primarily consisted of:

Current wording

•net non-cash gain of $14.6 million, which primarily consisted of:

Previous wording

◦changes in fair value of our promissory notes (including related parties) of $5.1 million;

Current wording

◦a $5.1 million increase in fair value of our promissory notes (including related parties);

Previous wording

•a $1.0 million decrease in receivables under collaboration agreements; and

Current wording

•a $1.0 million decrease in operating lease liabilities.

Previous wording

•a $2.9 million increase in accrued expenses;

Current wording

This was offset by a $5.5 million increase in accrued expenses.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2025 was $13.1 million, and was driven primarily by the net loss of $23.4 million and offset by non-cash expenses of $10.0 million, which primarily consisted of stock-based compensation of $5.6 million and depreciation expense of $4.4 million.

Current wording

Net cash used in operating activities for the nine months ended September 30, 2025 was $20.2 million, and was driven primarily by the net loss of $58.1 million and offset by non-cash expenses of $37.8 million, which primarily consisted of:

Previous wording

◦depreciation and amortization of non-cash lease expense of $2.4 million.

Current wording

•$6.6 million of depreciation expense and amortization of non-cash lease expense.

Previous wording

Net cash used in investing activities was $0.6 million for the six months ended June 30, 2026, was primarily the result of purchases of property and equipment.

Current wording

Net cash used in investing activities was $3.4 million for the nine months ended September 30, 2026, and was primarily the result of purchases of property and equipment.

Previous wording

Net cash used in investing activities was $0.2 million for the six months ended June 30, 2025, was primarily the result of purchases of property and equipment.

Current wording

Net cash used in investing activities was $0.3 million for the nine months ended September 30, 2025, and was primarily the result of purchases of property and equipment.

Previous wording

Net cash provided by financing activities was $96.1 million for the six months ended June 30, 2026 was primarily driven by:

Current wording

Net cash provided by financing activities was $96.1 million for the nine months ended September 30, 2026, and was primarily driven by:

Previous wording

Net cash used in financing activities was $0.4 million for the six months ended June 30, 2025 was primarily driven by the principal paid on the Methuen lease that terminated in October 2025.

Current wording

Net cash provided in financing activities was $9.3 million for the nine months ended September 30, 2025, and was primarily driven by the issuance of convertible notes offset by principal paid on the Methuen lease that terminated in October 2025.

Previous wording

Factorial leases its headquarters space in Billerica, Massachusetts (the “Billerica Sublease”) under a single sublease classified as an operating lease expiring on October 30, 2032. The Billerica Sublease does not contain any provision for an extension. Factorial also leased laboratory and office space in Tallahassee, Florida (the “Tallahassee Lease”) under a single lease classified as an operating lease that expired at the end of its term on February 28, 2025. Additionally, Factorial leases laboratory and storage space, which includes offices, in Woburn, Massachusetts (the “Woburn Lease”) under a single lease classified as an operating lease expiring on April 30, 2028. The Woburn Lease does not contain any provision for extension. Finally, Factorial leased laboratory and manufacturing space, which included offices, in Methuen, Massachusetts (the “Methuen Lease”) under a single lease classified as a financing lease. The Methuen Lease was terminated on October 18, 2025. Factorial has not commenced negotiations with respect to extending the Billerica Sublease or the related lease between the applicable sublessor from whom the Company subleases such property and the ultimate lessor, but intends to do so prior to the expiration thereof.

Current wording

Factorial leases its headquarters space in Billerica, Massachusetts (the “Billerica Sublease”) under a single sublease classified as an operating lease expiring on October 30, 2032. The Billerica Sublease does not contain any provision for an extension. Factorial also leased laboratory and office space in Tallahassee, Florida (the “Tallahassee Lease”) under a single lease classified as an operating lease that expired at the end of its term on February 28, 2025. Additionally, Factorial leases laboratory and storage space, which includes offices, in Woburn, Massachusetts (the “Woburn Lease”) under a single lease classified as an operating lease expiring on April 30, 2028. The Woburn Lease does not contain any provision for extension. In August 2026, Factorial’s Korean subsidiary entered into a lease for a facility in Asan, South Korea (the “Korea Lease”), under a single lease classified as an operating lease expiring on July 31, 2031. The Korea Lease contains an option to renew for one additional five-year term, subject to the lessor’s agreement on renewal terms. Finally, Factorial leased laboratory and manufacturing space, which included offices, in Methuen, Massachusetts (the “Methuen Lease”) under a single lease classified as a financing lease. The Methuen Lease was terminated on October 18, 2025. Factorial has not commenced negotiations with respect to extending the Billerica Sublease or the related lease between the applicable sublessor from whom the Company subleases such property and the ultimate lessor, but intends to do so prior to the expiration thereof.

Previous wording

Factorial’s financial statements have been prepared in accordance with GAAP. In the preparation of these financial statements, Factorial is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Except for the addition of the critical accounting policy for Private Placement Warrants and critical accounting estimate related to the valuation of our warrant liability for the 6,800,000 redeemable private placement warrants for Series A Common Stock (the “Private Warrants”) described below, there have been no significant changes to our critical accounting policies in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus.

Current wording

Factorial’s financial statements have been prepared in accordance with GAAP. In the preparation of these financial statements, Factorial is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Except for the addition of the critical accounting policy for Private Placement Warrants and critical accounting estimate related to the valuation of our warrant liability for the 6,800,000 redeemable private placement warrants for Series A Common Stock (the “Private Warrants”) described below, there have been no significant changes to our critical accounting policies in the preparation of our condensed consolidated financial statements during the three and nine months ended September 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus.

Previous wording

Except for the addition of the critical accounting estimate related to the valuation of our warrant liability for Private Warrants described below, there have been no significant changes to our critical accounting estimates in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus. Our warrant liability for Series A Common Stock was recorded in connection with the Merger and did not exist as of December 31, 2025; accordingly, it was not identified as a critical accounting estimate in the Proxy Statement/Prospectus.

Current wording

Except for the addition of the critical accounting estimate related to the inventory valuation and the valuation of our warrant liability for Private Warrants described below, there have been no significant changes to our critical accounting estimates in the preparation of our condensed consolidated financial statements during the three and nine months ended September 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus. Our warrant liability for Series A Common Stock was recorded in connection with the Merger and did not exist as of December 31, 2025; accordingly, it was not identified as a critical accounting estimate in the Proxy Statement/Prospectus.

Previous wording

In connection with the Merger, we assumed 6,800,000 Private Warrants that are classified as liabilities and remeasured at fair value each reporting period, with changes recognized in change in fair value of warrant liabilities within other income (expense), net. The liability was $45 million as of June 30, 2026, and we recognized a gain of $4.7 million on remeasurement for the period then ended.

Current wording

In connection with the Merger, we assumed 6,800,000 Private Warrants that are classified as liabilities and remeasured at fair value each reporting period, with changes recognized in change in fair value of warrant liabilities within other income (expense), net. The liability was $20.6 million as of September 30, 2026, and we recognized a gain of $28.8 million on remeasurement for the period then ended.

Previous wording

Expected volatility was 68.5% at initial measurement and 68.7% as of June 30, 2026. Significant increases or decreases in expected volatility, in isolation, would result in significantly higher or lower fair value measurements, respectively. Holding all other inputs constant, an increase by 10% in the volatility input to 78.7% as of June 30, 2026 would increase the fair value of the Private Warrants by approximately $4.4 million and a decrease of 10% to 58.7% as of June 30, 2026 would decrease the fair value of the Private Warrants by approximately $4.7 million, in each case with a corresponding effect on other income (expense), net.

Current wording

Expected volatility was 68.5% at initial measurement and 71.2% as of September 30, 2026. Significant increases or decreases in expected volatility, in isolation, would result in significantly higher or lower fair value measurements, respectively. Holding all other inputs constant, an increase by 10% in the volatility input to 81.2% as of September 30, 2026 would increase the fair value of the Private Warrants by approximately $3.1 million and a decrease of 10% to 61.2% as of September 30, 2026 would decrease the fair value of the Private Warrants by approximately $3.3 million, in each case with a corresponding effect on other income (expense), net.

Previous wording

See Note 2 to the audited consolidated financial statements included elsewhere in the Proxy Statement/Prospectus for more information about recent accounting pronouncements, the timing of their adoption, and Factorial’s assessment, to the extent it has made one, of their potential impact on Factorial’s financial condition and its results of operations and cash flows.

Current wording

See Note 2 to the condensed consolidated financial statements included elsewhere in the Proxy Statement/Prospectus for more information about recent accounting pronouncements, the timing of their adoption, and Factorial’s assessment, to the extent it has made one, of their potential impact on Factorial’s financial condition and its results of operations and cash flows.