Arrive AI Inc(ARAI) - 2025 Q2 - Quarterly Report

Form 10-Q Filing Information This section provides the basic filing information for Arrive AI Inc.'s Quarterly Report on Form 10-Q for the period ended June 30, 2025, including company identification, filer status, and stock details - Arrive AI Inc. is a non-accelerated filer, a smaller reporting company, and an emerging growth company[5][6] Title of each class, Trading Symbol(s), and Name of each exchange on which registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common stock, par value $0.0002 per share | ARAI | The Nasdaq Stock Market LLC | - The number of shares of common stock outstanding as of August 14, 2025, was 33,025,649[8] PART I. FINANCIAL INFORMATION This part presents Arrive AI Inc.'s unaudited condensed financial statements for the quarter ended June 30, 2025, along with management's discussion and analysis of financial condition and results of operations, disclosures about market risk, and controls and procedures Item 1. Financial Statements (unaudited) This section includes the unaudited condensed balance sheets, statements of operations, statements of changes in stockholders' equity (deficit), statements of cash flows, and accompanying notes, providing a detailed view of the company's financial position and performance Condensed Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | ASSETS | | | | Total current assets | $8,079,532 | $617,262 | | Total assets | $8,480,767 | $987,788 | | LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | | | | Total current liabilities | $5,001,800 | $1,960,405 | | Total liabilities | $5,007,868 | $1,970,963 | | Total stockholders' equity (deficit) | $3,472,899 | $(983,175) | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $8,480,767 | $987,788 | - Total assets increased significantly from $987,788 at December 31, 2024, to $8,480,767 at June 30, 2025, primarily driven by deferred offering costs and cash[13] - Stockholders' equity shifted from a deficit of $(983,175) at December 31, 2024, to a positive $3,472,899 at June 30, 2025, largely due to increased additional paid-in capital[13] Condensed Statements of Operations This section details the company's revenues, expenses, and net loss over specific reporting periods, reflecting operational performance | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $90,725 | $- | $90,725 | $- | | Total operating expenses | $4,629,628 | $1,482,138 | $6,623,531 | $2,397,927 | | Net loss before taxes | $(4,689,964) | $(1,459,102) | $(6,668,129) | $(2,375,855) | | Net loss | $(4,689,964) | $(1,459,102) | $(6,668,129) | $(2,375,855) | | Net loss per share (Basic and diluted) | $(0.15) | $(0.05) | $(0.22) | $(0.08) | | Weighted-average common shares outstanding (Basic and diluted) | 31,543,921 | 28,950,088 | 30,637,620 | 28,903,132 | - The company recognized its first revenue of $90,725 for both the three and six months ended June 30, 2025, compared to no revenue in the prior year periods[16] - Net loss significantly increased to $(4,689,964) for the three months and $(6,668,129) for the six months ended June 30, 2025, primarily due to a substantial rise in operating expenses, particularly general and administrative costs[16] Condensed Statements of Changes in Stockholders' Equity (Deficit) This section outlines the changes in the company's equity or deficit, including stock issuances, compensation, and net loss, over specific periods | Metric | January 1, 2025 | March 31, 2025 | June 30, 2025 | | :-------------------------------- | :-------------- | :------------- | :------------ | | Total Stockholders' Equity (Deficit) | $(983,175) | $6,032,402 | $3,472,899 | | Issuance of common stock for deferred offering costs | - | $6,927,869 | - | | Stock-based compensation | - | $1,348,245 | $1,488,008 | | Net loss | - | $(1,978,165) | $(4,689,964) | - Total stockholders' equity (deficit) improved from a deficit of $(983,175) at January 1, 2025, to a positive $3,472,899 by June 30, 2025, driven by significant issuances of common stock and stock-based compensation, despite ongoing net losses[19][22] - Key activities contributing to equity changes include the issuance of common stock for deferred offering costs ($6,927,869) and substantial stock-based compensation ($1,348,245 in Q1 and $1,488,008 in Q2)[19][21] Condensed Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,799,494) | $(1,353,985) | | Net cash used in investing activities | $(47,827) | $- | | Net cash provided by financing activities | $4,325,499 | $1,197,328 | | Net increase (decrease) in cash | $478,178 | $(156,657) | | Cash, end of period | $607,496 | $168,815 | - Net cash used in operating activities increased significantly to $(3,799,494) for the six months ended June 30, 2025, from $(1,353,985) in the prior year, indicating higher operational cash burn[25] - Net cash provided by financing activities surged to $4,325,499 in 2025, primarily due to proceeds from a convertible note ($4,010,000) and common stock sales, leading to a net increase in cash of $478,178[25] Condensed Notes to Unaudited Financial Statements This section provides detailed explanations and additional information supporting the unaudited condensed financial statements Note 1. Nature of Operations This note describes Arrive AI Inc.'s business, its focus on smart mailbox technology, and the inherent risks of its developmental stage - Arrive AI Inc. (formerly Dronedek Corporation and Arrive Technology Inc.) is a developmental technology company focused on designing and implementing a commercially viable smart mailbox for drone, robotic, and human package receiving and storage[26] - The company faces risks typical of its industry, including the need for successful product development, additional capital, competition, protection of proprietary technology, and dependence on key individuals[27] Note 2. Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and stock-based compensation - Revenue is recognized in accordance with ASC 606, derived from consulting, installation, and recurring subscription services for the Arrive Point network, with the first revenue generated in 2025[42][43] - Deferred offering costs of $7,626,439 were recognized for the six months ended June 30, 2025, primarily for legal, advisory, and professional service fees related to capital raising activities[52] - Stock-based compensation is measured at fair value, with the fair value of common stock determined by Nasdaq daily closing price post-IPO (May 15, 2025) and by the prior company transaction method pre-IPO[57][58][59] Note 3. Segment Reporting This note clarifies that the company operates as a single segment, with all net sales generated within the United States and identifies major customers - The Company operates in a single operating and reportable segment, with the Chief Financial Officer serving as the chief operating decision maker[67] - For both the three and six months ended June 30, 2025, 100% of the Company's net sales were generated in the United States[72] - The Company has one major customer that accounted for 10% or more of total revenue[72] Note 4. Going Concern This note addresses the company's ability to continue operations, highlighting its accumulated deficit and reliance on future financing - As of June 30, 2025, the Company had an accumulated deficit of $22,588,684 and a net loss of $(6,668,129) for the current period, raising substantial doubt about its ability to continue as a going concern[71] - The Company's continued existence is dependent upon its ability to execute its operating plan and obtain additional debt or equity financing[72] Note 5. Fair Value Measurements This note explains the company's methodology for measuring the fair value of financial instruments using a three-level hierarchy - The Company measures the fair value of financial assets and liabilities based on ASC 820, which defines fair value as the exchange price in the principal or most advantageous market[73][74] - A three-level fair value hierarchy is used: Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/observable inputs), and Level 3 (unobservable inputs)[74] Note 6. Property and Equipment This note details the company's tangible assets, including vehicles, equipment, and construction in progress, along with accumulated depreciation | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Vehicle | $58,443 | $58,443 | | Equipment | $69,905 | $50,000 | | Construction in progress | $66,077 | $38,155 | | Total property and equipment | $194,425 | $146,598 | | Less: accumulated depreciation | $(67,839) | $(51,173) | | TOTAL PROPERTY AND EQUIPMENT, NET | $126,586 | $95,425 | - Total property and equipment, net, increased to $126,586 at June 30, 2025, from $95,425 at December 31, 2024, with construction in progress rising to $66,077[75] - Total depreciation expense for the six months ended June 30, 2025, was $16,666, up from $14,126 in the prior year period[75] Note 7. Prepaid Expenses This note provides a breakdown of the company's prepaid expenses, including payroll, insurance, and software, at specific reporting dates | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Prepaid payroll wages | $38,271 | $38,271 | | Prepaid insurance | $79,509 | $10,017 | | Prepaid software and other | $79,518 | $7,579 | | TOTAL PREPAID EXPENSES | $197,298 | $55,867 | - Total prepaid expenses increased significantly to $197,298 at June 30, 2025, from $55,867 at December 31, 2024, primarily due to increases in prepaid insurance and prepaid software and other expenses[77] Note 8. Deferred Offering Costs This note explains the deferred costs incurred for capital raising activities, including those paid in common stock, and their treatment upon public listing - The Company recognized $7,626,439 in deferred offering costs for the six months ended June 30, 2025, related to ongoing capital raising activities, including $6,927,869 for investment banking advisory services paid in common stock[78] - Upon completion of the public listing, $871,882 of deferred offering costs were recorded as a reduction of proceeds[78] Note 9. Patents, Net This note details the company's intellectual property, specifically patents, their amortization, and the increase in issued international patents | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Patents | $274,700 | $274,700 | | Less: accumulated amortization | $(1,551) | $(1,099) | | TOTAL PATENTS | $273,149 | $273,601 | - As of June 30, 2025, six of the Company's fifty-seven international patents were issued and began being amortized over twenty years, compared to five of forty-four patents issued as of June 30, 2024[79] - Amortization expense for patents was $452 for the six months ended June 30, 2025, an increase from $343 in the prior year period[79] Note 10. Note Payable This note describes the company's vehicle note payable, including its balance, interest rate, maturity, and related interest expense | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Vehicle note payable | $14,895 | $19,082 | | Less current portion | $(8,827) | $(8,524) | | LONG-TERM PORTION | $6,068 | $10,558 | - The vehicle note payable has a balance of $14,895 as of June 30, 2025, with an interest rate of 6.99% per annum, maturing in February 2027[81] - Interest expense related to this note was $607 for the six months ended June 30, 2025, compared to $888 in the prior year period[81] Note 11. Convertible Note Payable This note details the convertible promissory note issued to Streeterville Capital LLC, including its face amount, interest, and unamortized discount - On March 21, 2025, the Company issued a convertible promissory note with a face amount of $4,330,000 to Streeterville Capital LLC, bearing 8% interest per annum and maturing in August 2025[82] | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total convertible note payable | $4,330,000 | $- | | Less: unamortized discount | $(128,000) | $- | | TOTAL, NET OF DISCOUNT | $4,202,000 | $- | - The Company charged $192,000 to interest expense for the six months ended June 30, 2025, in connection with the amortization of the discount on this note[84] Note 12. Commitments and Contingencies This note outlines the company's lease obligations for office and warehouse space, along with ongoing legal proceedings and trademark disputes - The Company has lease obligations for office space ($3,600 per month) and a warehouse from an officer/shareholder ($2,250 per month), electing not to recognize right-of-use assets and lease liabilities for short-term leases[85][86] - The Company is involved in an employment action (Byfield Management, Inc. and Ohrn II, Richard B v. Dronedek Corporation) and a trademark dispute with Arrive Logistics, but management believes the employment allegations lack merit[152][153] Note 13. Related-Party Transactions This note discloses agreements and transactions with related parties, including an exclusive patent license agreement with a stockholder - The Company has an exclusive patent license agreement with a stockholder, incurring a monthly license fee of $10,000, totaling $60,000 for the six months ended June 30, 2025[88] - A second amendment to the license agreement on March 10, 2025, extended the license to perpetuity and removed prior restrictions on the Company's use, sale, or commercialization of the technology post-termination[89] Note 14. Stockholders' Equity This note details changes in the company's common stock, including authorized shares, issuances through various means, and the impact of a reverse stock split - The Company has 200,000,000 authorized shares of common stock with a par value of $0.0002, following a 1-for-4 reverse stock split effective November 25, 2024[90][91] - During the six months ended June 30, 2025, the Company issued 3,902,480 shares of common stock through various means, including cash sales, warrant exercises, crowdfunding, and as compensation or settlement of expenses[92][93][96] - Significant issuances include 2,937,500 shares to an accredited investor for $588 under the Streeterville Purchase Agreement and 532,913 shares for investment banking advisory services valued at $6,927,869[93][96] Note 15. Warrants This note provides information on outstanding warrants, including their number, weighted-average exercise price, and aggregate intrinsic value | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :------------ | | Warrants Outstanding | 227,549 | 107,741 | | Weighted Average Exercise Price | $10.08 | $10.80 | | Weighted Average Remaining Contractual Term (years) | 0.97 | 1.52 | | Aggregate Intrinsic Value | $598,996 | $102,511 | - The number of warrants outstanding decreased from 227,549 at December 31, 2024, to 107,741 at June 30, 2025, primarily due to 120,820 warrants being exercised[95] - The aggregate intrinsic value of outstanding warrants decreased from $598,996 to $102,511 during the six-month period[95] Note 16. Equity Incentive Plan This note describes the company's equity incentive plan, including available shares for grant, outstanding options, and related compensation expense - As of June 30, 2025, 886,799 shares were available for grant under the 2023 Equity Incentive Plan, which is designed to attract, retain, and motivate key employees[97] | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :------------ | | Share Options Outstanding | 614,704 | 612,107 | | Weighted Average Exercise Price | $0.80 | $0.80 | | Aggregate Intrinsic Value | $7,322,656 | $6,661,152 | | Nonvested Share Options | 452,875 | 406,894 | - Total compensation expense related to stock options for the six months ended June 30, 2025, was $489,766, and $4,427,738 in unrecognized compensation expense remains[100] Note 17. Research and Development Tax Credits This note explains the company's qualification for R&D tax credits and their application against payroll taxes, along with unused credit balances - The Company qualifies as a small business under Internal Revenue Code Section 41(h) and has elected to apply a portion of its federal R&D credit against the employer portion of Social Security payroll taxes[101] - As of June 30, 2025, the Company had $166,499 of unused payroll tax credits, which are recognized as a reduction of payroll tax expense when the benefit is realized[102] Note 18. Subsequent Events This note discloses significant events occurring after the reporting period, including tax law changes, a resale registration statement, and a new purchase agreement - On July 2, 2025, the Taxpayer Fairness and Growth Act of 2025 was enacted, reducing the federal corporate income tax rate to 19% (effective Jan 1, 2026) and modifying certain deductions; the Company is evaluating its impact[103][107] - On July 28, 2025, the Company's resale registration statement on Form S-1 was declared effective, registering up to 8,125,779 shares of common stock for resale by selling shareholders[105] - On August 11, 2025, the Company entered into a Pre-Paid Purchase No. 2 with Streeterville, receiving $4,000,000 for an unsecured promissory note with a $4,320,000 principal balance[106] Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations This section provides management's perspective on Arrive AI Inc.'s financial condition, results of operations, and liquidity for the periods presented, along with an overview of its business, recent developments, and future outlook Company Overview This section introduces Arrive AI's business model, focusing on its Autonomous Last Mile (ALM) network and platform for secure package exchanges - Arrive AI is transforming last-mile logistics by enabling secure, seamless exchanges between drones, robots, and people through a universal Autonomous Last Mile (ALM) network of Arrive Points™ (smart lockers and mini-cross-docks) powered by an AI-driven ALM platform[109][110] - The company expects three primary revenue streams: subscription services for Arrive Points, data monetization via ML/AI models, and operational platform fees (e.g., automated delivery marketplace)[111][112][113][114] - Arrive AI differentiates itself through universal compatibility of its multi-generational Arrive Points, an end-to-end solution combining hardware and software/AI/ML, and early market penetration with pilot programs[115][116] Recent Developments This section highlights key business milestones and strategic partnerships, including new deployments, customer agreements, and patent issuances - Arrive AI announced a two-year agreement to deploy Arrive Points at Hancock Health for biospecimen exchange, with initial revenue recorded in Q2 2025 and recurring subscriptions starting August 2025[117] - A partnership with Go2 Delivery was announced to autonomously deliver specialty pharmacy products, with revenue recognized from installation and subscription services beginning April 2025[118] - The company secured a new global customer, Skye Air Mobility, for the deployment of up to 500 Arrive Points in India by the end of 2025[120] - A new U.S. patent (US12304671B2) was issued for the Arrive Points' ability to heat and cool items on demand, bringing the total issued U.S. patents to eight[119] Results of Operations This section analyzes the company's financial performance, detailing changes in revenues, operating expenses, and other income/expenses for the reporting periods Revenues (Three Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :------- | :--- | :--------- | :--------- | | Consulting services | $89,000 | $- | $89,000 | NM | | Installation | $1,500 | $- | $1,500 | NM | | Subscription | $225 | $- | $225 | NM | | Total Revenues | $90,725 | $- | $90,725 | NM | Operating Expenses (Three Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :--------- | :--------- | :----------- | :----------- | | General and administrative | $4,286,558 | $803,311 | $3,483,247 | 434% | | Research and development | $293,468 | $452,538 | $(159,070) | (35)% | | Sales and marketing | $49,602 | $226,289 | $(176,687) | (78)% | | Total Operating Expenses | $4,629,628 | $1,482,138 | $3,147,490 | 212% | - General and administrative expenses increased by $3,483,247 (434%) for the three months ended June 30, 2025, primarily due to $1,866,531 in one-time success bonuses and higher stock-based compensation ($1,496,978)[127] - Research and development expenses decreased by $159,070 (35%) for the three months ended June 30, 2025, mainly due to the timing of vendor engineering projects[128] Other Income (Expenses) (Six Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Other income | $60,066 | $24,089 | $35,977 | 149% | | Interest expense and bank charges | $(195,389) | $(2,017) | $(193,372) | 9,587% | | Total other income (expenses) | $(135,323) | $22,072 | $(157,395) | (713)% | Liquidity and Capital Resources This section discusses the company's ability to meet its financial obligations, detailing cash position, sources of liquidity, and cash flow activities - As of June 30, 2025, cash on hand was $607,496, an increase of $478,178 from the prior fiscal year-end, with primary liquidity sources being cash and the Streeterville Purchase Agreement[139] Cash Flow Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net cash used in operating activities | $(3,799,494) | $(1,353,985) | $(2,445,509) | (181)% | | Net cash used in investing activities | $(47,827) | $- | $(47,827) | - | | Net cash provided by financing activities | $4,325,499 | $1,197,328 | $3,128,171 | 261% | | Net increase (decrease) in cash | $478,178 | $(156,657) | $634,835 | (405)% | - Net cash provided by financing activities increased significantly by $3,128,171 (261%) in 2025, primarily from the $4,010,000 convertible note and proceeds from common stock sales and warrant exercises[140][146] - Net cash used in operating activities increased by $2,445,509 (181%) due to the net loss, partially offset by non-cash items like stock-based compensation and amortization of convertible debt discount[140][142] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Arrive AI Inc. is not required to provide specific quantitative and qualitative disclosures about market risk in this report, referring readers to its Form S-1 for relevant risk factors - The Company is not required to provide quantitative and qualitative disclosures about market risk because it is a 'smaller reporting company'[148] - For current risk factors relating to operations, readers are directed to the 'Risk Factors' section in the Registration Statement on Form S-1[155] Item 4. Controls and Procedures Management, including the Chief Executive Officer and Chief Financial Officer, concluded that Arrive AI Inc.'s disclosure controls and procedures were effective as of June 30, 2025, and reported no material changes in internal controls over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[149] - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025[150] PART II. OTHER INFORMATION This part details other non-financial information, including legal proceedings, risk factors, equity sales, defaults, subsequent events, and a list of exhibits filed with the Form 10-Q Item 1. Legal Proceedings Arrive AI Inc. is involved in an employment action and a trademark dispute, but management believes these proceedings will not have a Material Adverse Effect on the company's business or financial condition - The Company is a party to an employment action, 'Byfield Management, Inc. and Ohrn II, Richard B v. Dronedek Corporation,' alleging breach of employment and stock purchase agreements, with potential damages of approximately $29 million, though management believes the allegations lack merit[152] - An initial Cease and Desist letter regarding Arrive AI's trademark was received from Arrive Logistics, with ongoing positive discussions between counsel[153] - Management and litigation counsel do not expect current legal proceedings to have a Material Adverse Effect on the Company's business, operating results, cash flows, or financial condition[152] Item 1A. Risk Factors As a smaller reporting company, Arrive AI Inc. is not required to provide risk factors in this report and refers to its Registration Statement on Form S-1 for a comprehensive discussion of risks - As a smaller reporting company, Arrive AI Inc. is not required to provide risk factors in this Form 10-Q[155] - For current risk factors, readers should refer to the 'Risk Factors' section in the Company's Registration Statement on Form S-1[155] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported for the period[157] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were reported for the period[158] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to Arrive AI Inc.'s operations - Mine safety disclosures are not applicable to the Company[159] Item 5. Other Information This section discloses a subsequent Pre-Paid Purchase No. 2 agreement with Streeterville Capital LLC, detailing the terms of the unsecured promissory note, including purchase price, interest, share purchase options, and conditions for prepayment or acceleration - On August 11, 2025, the Company entered into a Pre-Paid Purchase No. 2 with Streeterville Capital LLC, receiving $4,000,000 for an unsecured promissory note with an original principal balance of $4,320,000 (including a $320,000 original issue discount)[160] - The note bears 8% interest per annum and permits the investor to purchase common shares at a discount to market price, subject to a $0.25 floor and beneficial ownership limitations[160] - The agreement includes provisions for Company prepayment at 115% of principal and investor acceleration upon certain events of default, with Maxim Group LLC receiving a 6.0% cash fee as placement agent[160][161] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including key agreements, equity plans, certifications, and interactive data files - Key exhibits include the 2023 Equity Incentive Plan, the Securities Purchase Agreement with Streeterville Capital LLC, the Pre-Paid Purchase No. 2, Section 302 and 906 Certifications, and various XBRL documents[164]