Aptera Motors Corp Form 1-K Filed 2023-04-28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-K

REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

For the fiscal year ended December 31, 2022

Aptera Motors Corp.

(Exact name of issuer as specified in its charter)

Delaware

83-4079594

State or other jurisdiction

of incorporation or organization

(I.R.S. Employer

Identification No.)

Aptera Motors Corp., 5818 El Camino Real Carlsbad, CA 92008

(Full mailing address of principal executive offices)

(858) 371-3151

(Issuer’s telephone number, including area code)

Common Stock

(Title of each class of securities issued pursuant to Regulation A)

TABLE OF CONTENTS


Cautionary Statement Regarding Forward-Looking Statements		3
Item 1.	Business	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 3.	Directors and Officers	11
Item 4.	Security Ownership of Management and Certain Securityholders	14
Item 5.	Interests of Management and Others in Certain Transactions	15
Item 6.	Other Information	15
Item 7.	Financial Statements	F-1
Item 8.	Exhibits
Signatures

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 1-K of Aptera Motors Corp., a Delaware corporation, contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “outlook,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth or anticipated in our forward-looking statements. Factors that could have a material adverse effect on our forward-looking statements and upon our business, results of operations, financial condition, funds derived from operations, cash flows, liquidity and prospects include, but are not limited to, the factors referenced in the Aptera Motors Corp. Offering Circular filed pursuant to Regulation A.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this report. Readers are cautioned not to place undue reliance on any of these forward-looking statements, which reflect our views as of the date of this report. The matters summarized below and elsewhere in this report could cause our actual results and performance to differ materially from those set forth or anticipated in forward-looking statements. Accordingly, we cannot guarantee future results or performance. Furthermore, except as required by law, we are under no duty to, and we do not intend to, update any of our forward-looking statements after the date of this report, whether as a result of new information, future events or otherwise.

As used in this Annual Report, the terms “we”, “us”, “our”, “Aptera”, and the “Company”, means Aptera Motors Corp., unless otherwise indicated or unless the content indicates otherwise. Aptera is not legally related to Aptera Motors Inc.

ITEM 1.

BUSINESS.

Aptera Motors Corp. was formed on March 4, 2019 under the laws of the state of Delaware, and is headquartered in Carlsbad, California. The Company’s principal business is the development, production, and distribution of energy efficient solar-powered vehicles. An Aptera vehicle can be driven up to 40 miles a day and up to 11,000 miles a year just on solar power. To collect this power, each vehicle has over three square meters of solar panels. If a vehicle owner needs more power, a charge from a standard 110-volt outlet will give each vehicle a range of 1,000 miles.

Our mission is to build efficient transportation. Science drives our approach to building better vehicles and the result is something that can travel up to 1,000 miles on a single charge. We believe our focus on efficiency will benefit the planet by using our resources more wisely.

Throughout the year our testing and validation will help us launch into production with a reliable version of the Aptera. We are targeting to begin our earliest deliveries in 2024 and ramp production in 2025.

Our Advantages

At Aptera, our vision is to create a new way to move through the world as we aim to modernize vehicle design and manufacturing. Steel stamping, the common method for manufacturing vehicles, makes the manufacturing process inefficient and is significantly more expensive. With additive manufacturing, the Company can scale production and launch new models quicker. We use artificial intelligence to optimize parts for the greatest strength with the least amount of material and weight. And our composite body construction produces lightweight composite structures.

We believe that due to our different processes we can:

•

Lower manufacturing costs: We believe that we can lower manufacturing costs. This will allow us to use:

•

Cost efficient and simple tooling

•

Fewer robots

•

Fewer people

•

No welding

•

Rapid & inexpensive scaling: Aptera’s additive manufacturing strategy gives us the advantages of 3D printed tooling versus milled and finished metal tools.

•

Reduced part weights and count: Allows for humans to easily position parts making things easy and cheap to assemble.

•

Less labor and less space: Our modularized build and human positionable parts requires less labor and less space than traditional steel vehicle manufacturing.

Furthermore, solar power will be an integral part of our platform. Our unique diamond shaped solar panels are designed with the aim of maximizing the energy you get from the sun. This gives fully equipped vehicles ~700 Watts of continuous charging power — whether the vehicle is being driven or parked. With minimal energy loss, Aptera’s automotive-grade solar represents a way for EVs to minimize their reliance on the grid for charging.

Product

Our launch edition vehicle will have the following technical specifications:

•

400-mile range

•

0-60 mph as fast as 4 seconds

•

~700 watts of solar technology

•

Three in-wheel motors

•

Level 3 charging

•

Seats two passengers

•

Driver and passenger airbags

•

32.5 cubic feet of rear storage

•

Recyclable body

Distribution Plan

Aptera’s strategy leverages lessons from Tesla

•

Direct-to-consumer sales

•

Online promotion/test-drive scheduling & events in key markets

•

Regional pre-delivery warehousing in leased facility requires little CAPEX

•

Southern California rollout initially with Major Metro Areas soon after

•

Mobile service house calls (a model proven globally by Tesla)

Our Market

Electric vehicles are growing. According to analysis by IHS Markit, 40–45 percent of new car sales could be electric by 2035. Reuters estimates that by 2050 more than half of the vehicles on U.S. roads could be EVs. Fortune Business Insights projects the market will grow from $287.36 billion in 2021 to $1,318.22 billion in 2028 at a CAGR of 24.3%. We believe that this increase is attributable to the market’s growth and demand, environmental impact of gas-powered vehicles, and the upsurge in gas prices.

Suppliers

Aptera is working on developing relationship with suppliers with an aim to producing vehicles, the company has entered into the following agreements:

•

Two separate agreements with Chery New Energy Automobile Co. Ltd. (“Chery”):

•

a Technical Services Agreement (the “TSA”). Pursuant to the TSA, Chery will assist the Company with feasibility studies and technical services related to certain components we will use in our vehicles. The Company will pay Chery fixed, hourly rates for Chery’s personnel.

•

a License Agreement, pursuant to which the Company is licensing from Chery certain technology to be used in the production of the Company’s vehicles.

•

License agreement with Elaphe Propulsion Technologies Lt. under which the Company is licensing certain proprietary technology and information relating to the design and production of electric powertrain in wheel motors and related products and technology. The agreement only goes into effect when the Company purchases 20,000 motors.

In addition, the Company has entered into non-binding agreements with RedViking, an AGVs (automated guided vehicles) supplier, and with Yazaki, an engineering service supplier and line prototype and production part supplier. Both these agreements are non-binding and until they are binding the terms and/or the agreement may be amended at any time by either party. The Company intends to enter into various agreements as it gears up to the production of its vehicles.

Our Subsidiary

On April 1, 2022, the Company entered into a Plan of Merger (the “AI Merger Agreement”) with Andromeda Interfaces, Inc., a California corporation (“AI”). Upon completion of the AI Acquisition, (“AI Acquisition”) AI became a wholly-owned subsidiary of the Company. During 2022 Aptera discovered a low-cost and high-quality alternative for the in-vehicle infotainment system through an external supplier. As a result, the Company re-evaluated the need to support the AI business’s required research and development costs to support the display systems it sold. In April of 2023 the Company began the process of selling AI back to its original owners.

Environmental Impact

If one out of every 20 ICE vehicles on the road were replaced with an Aptera, Americans would save 18 million gallons of gasoline every day or six billion gallons per year (assuming 20mpg ICE vehicle).

Competition

The automotive business is competitive.

We face competition from a variety of automobile manufacturers, many of whom have significantly more resources than we do. These competitors include Tesla, BMW, Toyota, and Rivian. Traditional automobile manufacturers are increasingly devoting more resources to developing hybrid and electric vehicles. As a result of this competition, the Company may be unable to acquire significant market share. There can be no assurance that additional capital or other types of financing will be available or, if available, the terms of such financing will be favorable to the Company.

Legal and Regulatory Environment

Various aspects of our business and service areas are subject to U.S. federal, state, and local regulation, as well as regulation outside the United States. We are not aware of any pending or threatened legal actions that we believe would have a material impact on our business.

Employees/Consultants

We have 55 full-time employees. We currently have an employee stock option plan (Note 11) but no pension, annuity, profit sharing, or similar employee benefit plans, although we may choose to adopt such plans in the future.

We plan to engage contractors from time to time on an as-needed basis to consult with us on specific corporate affairs, or to perform specific tasks in connection with our business development activities.

Intellectual Property

Aptera is dependent on the following intellectual property:

We have been granted 2 design patents, have 32 patents pending, and our patenting process is ongoing. Pending patent applications include nine design, eight provisional, and thirteen non-provisional patent applications, with eight pending in the United States and four applications pending worldwide via the Patent Cooperation Treaty. These patents cover our electrical CAM/LIN Bus system, aerodynamic shape, solar integration, suspension, battery, HVAC, body, and manufacturing techniques.. To date, we have relied on copyright, trademark and trade secret laws, as well as confidentiality procedures and licensing arrangements, to establish and protect intellectual property rights to our vehicle cooling method(s), process technologies and vehicle designs. We typically enter into confidentiality or license agreements with employees, consultants, consumers and vendors to control access to and distribution of technology, software, documentation and other information. Policing unauthorized use of this technology is difficult and the steps taken may not prevent misappropriation of the technology. In addition, effective protection may be unavailable or limited in some jurisdictions outside the United States, Canada and the United Kingdom. Litigation may be necessary in the future to enforce or protect our rights or to determine the validity and scope of the rights of others. Such litigation could cause us to incur substantial costs and divert resources away from daily business, which in turn could materially adversely affect the business.

THE COMPANY’S PROPERTY

The Company leases two facilities for its operations. One is located in Carlsbad, California and spans approximately 77,000 square feet, intended for final vehicle assembly. The other facility in Vista, California, covers approximately 120,000 square feet, and is dedicated to the production of solar panels. Refer to Note 6 in the financial statements below for specific lease details concerning our reassessment of our need for production facility space, that resulted in impairment charges recognized on our operating lease assets at year-end.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes included in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

General

We were formed as a Delaware corporation on March 4, 2019. The Company was formed to engage in the production of energy-efficient, solar powered vehicles. The Company first began receiving orders for its product in pre-sales in December 2020. We have not delivered any products, and to date we have not recognized any vehicle revenue .

Operating Expenses

Operating expenses are classified as general, selling and administrative and research and development.

General, Selling and Administrative

General, selling and administrative expenses consist of administrative, compliance, legal, investor relations, financial operations, and information technology services. They include related department salaries, office expenses, meals and entertainment costs, software/applications for operational use, and other general and administrative expenses, including but not limited to technology subscriptions and travel expenses. These expenses account for a significant portion of our operating expenses. We anticipate that our general and administrative expenses will increase in the future to support our continued growth and the costs associated with increased reporting requirements.

Research and Development

The Company spends significant money on engineering expenses to further its product design and capabilities. Research and development expenses consist primarily of personnel costs for our teams in engineering and research, supply chain, quality, and manufacturing engineering.

Results of Operations

Comparison of the results of operations for the years ended December 31, 2022, and 2021

General, Selling and Administrative Expenses

Growth in internal processes and systems required us to increase spending on our operational departments, the result was a $13.4 million (or 181%) increase in general, selling and administrative expenses related to:

•

An increase in stock-based compensation of $4.1 million due to the hiring of key management and executive positions as well as executives meeting performance-based milestone vesting on their stock options

•

An increase in salary, wages and benefits of $2.5 million due to increased headcount for a significant portion of the year to meet operational needs

•

An overall increase in marketing expenses of $1.6 million due to additional costs associated with marketing our vehicle and Regulation A offering

•

An increase in outside services including legal and professional fees $2.5 million as a result of outsourced legal, accounting, business development and information technology services to operate and expand the business.

•

An increase of $1.3 million of asset impairment expense for beginning to vacate the Vista building lease (Note 6)

•

An increase of $0.8 million in office equipment, supplies, membership fees and subscriptions as we moved into a new space and hired more staff during certain parts of the year.

Research and Development Expenses

As we near mass production of our vehicle there has been an increase in research and development costs related to moving from gamma prototype level to final delta design for production and design for manufacturing, the result was a $29.2 million (or 254%) increase in research and development costs specifically related to:

•

An increase in stock-based compensation of $2.6 million due to the hiring of key management and positions as well as stock options for the increase in headcount for the engineering department

•

An increase in salary, wages and benefits of $7.7 million due to increased headcount during a significant portion of the year

•

An increase in outside services $6.6 million due to significant increase in engineering services

•

An increase in technology licensing fees $6.9 million due to technology licensing agreement

•

An increase in equipment materials of $2.7 million to further develop the vehicle and its capabilities

•

An increase of $2.1 million for facilities costs due to additional leased space and

•

An increase of $0.2 million in supplies and logistics costs

Change in Fair Value of SAFE Liability

On August 25, 2022, the Company converted all outstanding SAFE agreements into preferred stock. Prior to the conversion there was an adjustment of the fair value of the SAFE liability to the increase in the fair value of the Company’s stock that was used in estimating the fair value of the SAFE liabilities. This adjustment accounted for $20.4 million in overall net loss for the year. Like many early-stage companies, the Company used SAFEs as an investment vehicle for early investors.

Loss from Discontinued Operations

During the first quarter of 2023, the Company determined that the infotainment display subsidiary AI met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the held-for-sale assets and liabilities and the operating results of AI in discontinued operations for all periods presented.

Net Loss

As a result of the foregoing, the Company’s net loss for the year ended December 31, 2022, was $82.3 million compared to $96.5 million for the year ended December 31, 2021.

Liquidity and Capital Resources

As of December 31, 2022, the Company had $39.9 million in total assets, including $10.8 million in cash and cash equivalents, $0.7 million in prepaids and others, which relates to software and refunds due from vendors, $86 thousand in merchant receivables, which relates to amounts receivable from pre-orders received through the Company’s merchant processor, $11.4 million in property and equipment, net of accumulated depreciation, $11.8 million in operating lease assets for the Company’s two facilities and $135 thousand in current assets held-for-sale – discontinued operations.

As of December 31, 2022, the Company had $23 million in total liabilities including $2.3 million in accounts payable, $2.8 million in accrued liabilities, $3.3 million in unearned reservation fees, $14.4 million in lease liabilities and $192,000 current liabilities held-for-sale – discontinued operations.

Our history of recurring operating losses, and negative cash flows from operating activities give rise to substantial doubt regarding our ability to continue as a going concern. We believe the proceeds from the offering, together with our cash and cash equivalent balances will be adequate to meet our liquidity and capital expenditure requirements for the next 12 months. We anticipate that we will need at least $50 million, in addition to the amounts previously raised, to reach the vehicle production stage. Fluctuations in our fundraising may require modifying our use of proceeds to extend our operations. If these sources are not sufficient to meet our cash requirements, we will need to seek additional capital, potentially through private placements of equity or debt, to fund our plan of operations. The Company has no bank lines or other financing arranged and if we are unsuccessful raising funds through this offering, we may not be able to continue our operations.

To date, the Company has primarily been funded from the sale of our common stock as well as the sale of SAFE agreements.

Equity Issuances

During the year ended December 31, 2022, the Company issued:

•

1,410,179 shares of our Class A common stock at a weighted average price of $8.87 per share for total proceeds of $10.2 million;

•

3,599,588 shares of its Class B Common Stock at a weighted average price of $9.16 per share for total proceeds of $29.0 million;

•

77,079 shares of its Series B-1-A Preferred Stock at a weighted average price of $9.20 per share for total proceeds of $.7 million; 379,774 shares of its Series B-1-B Preferred Stock, 4,234,991 shares of its Series B-1-C Preferred Stock, 772,597 shares of its Series B-1-D Preferred Stock, 4,618,667 shares of its Series B-1-E Preferred Stock, 1,071,984 shares of its Series B-1-F Preferred Stock, and 9,091 shares of its Series B-1-G- Preferred Stock due to the conversion of the Company’s SAFE notes, the conversion was triggered by the sale of the B-1-A Preferred Stock.

•

SAFE agreements in exchange for services totaling $80 thousand.

On October 24, 2022, the Company entered into a non-binding term sheet with a potential investor. Under the terms of the term sheet the investor agrees to purchase 2,000,000 shares of a yet-to-be-formed class of preferred stock of the Company for $10.50 per share, with total consideration of $21 million. The terms of the preferred stock include granting the investor the opportunity to appoint one director as well as board observer rights. In addition, upon the achievement of certain milestones by the Company, the shares of preferred stock will be converted on a 1:1 basis into the Company’s Class A Common Stock. This financing is contingent on the completion of financial and legal due diligence and both parties agreeing on the final terms. There is no assurance that this financing will occur. If the financing does occur, the earliest it will occur will be in Q3 2023.

In February of 2023, Aptera Motors was approved for a $21.9 million grant from the California Energy Commission “CEC” to add critical capacity to accelerate scaled manufacturing. The grant has limits on the use of funds. The CEC grant is part of the state’s ongoing effort to promote clean energy and reduce greenhouse gas emissions. The funding will be provided through the CEC’s Clean Transportation Program which aims to accelerate the development and deployment of advanced vehicle technologies. The grant is contingent on the Company achieving certain milestones, including having matching funds, as well as providing updates. Though management is working diligently to meet the requirements of the grant, there is no guarantee it will be able to do so.

Commitment and Contingencies

For the years ending December 31, 2022 and December 31, 2023, the lease payments will be $697,546 and $1,108,782. Further information on the leases can be found in Note 6 of the Financial Statements.

License Agreement

On January 13, 2022, the Company entered into a Technology License Agreement (“TLA”). This enables the company to obtain a non-transferable license to use Chery’s automobile parts technology, related technological know-how, and data.

In consideration, the Company will pay license fee in two parts: 1) fixed fee of $2 million in cash paid in four installments of $0.5 million each upon execution of TLA and Parts Supply Agreement (“PSA”) after delivery of first batch; and 2) fixed amount royalties based on wholesale unit of vehicles containing parts sourced from Chery.

Further, the Company agreed to issue shares of Class B Non-Voting Common Stock in an amount equivalent to $8.0 million, in four installments corresponding with the milestones set out in the TLA. The Company has the right of first refusal to repurchase shares on the same terms.

Through December 31, 2022, the Company paid $1.0M of the fixed license fee and issued 434,782 shares of Class B Common stock equivalent to $4.0 million to Chery. Subsequent to December 31, 2022, this agreement was amended to a fixed fee of the $1 million in cash, the amount already paid) and issue shares of Class B Non-Voting Common Stock in an amount equivalent to $5.0 million, in two remaining installments corresponding with the milestones set out in the TLA. The Company has the right of first refusal to repurchase shares on the same terms.

Trend Information

Our focus in 2022 was completing a production intent vehicle design by the end of the year. In 2023, we intend to engage with many new partners to supply validated production parts. We will also engage with validation and durability testing partners to assure the reliability of our production intent design. Our marketing team will be actively engaging with the public to educate them on our brand proposition and to garner as many vehicle orders as possible. These orders help us determine our production mix and the speed at which we need to ramp our production numbers. As a result of the above, the company will experience increased spending across the organization including general, selling, and administrative as well as research and development expenses.

We operate in an industry that is sensitive to political and regulatory uncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures, rising energy prices, increases in interest rates and any future global impact from the COVID-19 pandemic. For example, in the earlier part of 2022, the automotive industry in general experienced part shortages and supplier disruptions. As the year progressed, inflationary pressures increased across the markets in which we operate. In an effort to curb this trend, central banks in developed countries raised interest rates rapidly and substantially, impacting the capital markets and the ability of electric vehicle companies to raise necessary funding. Further, sales of vehicles in the automotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand and adjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainable transportation, we will have to adjust and continue to execute well to maintain our momentum. These macroeconomic and industry trends will likely to have an impact on the pricing of, and order rate for our vehicles, and we will continue to adjust accordingly to such developments.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in in financial condition, revenue or expenses, results of operations, liquidity, capital expenditure or capital resources that are material to investors.

ITEM 3.

DIRECTORS AND OFFICERS

The Company’s officers and directors are as follows:


Name	Position	Age	Term of Office	Approximate hours per week for part-time employees
Executive Officers:
Chris Anthony	Co-Chief Executive Officer; Interim Chief Financial Officer	47	March 2019 –Present	Full-time
Steve Fambro	Co-Chief Executive Officer & Secretary	55	March 2019 – Present	Full-time
Sarah Hardwick	Chief Marketing Officer	45	July 2021 – Present	Full-time
Directors:
Chris Anthony	Director	47	March 2019 – Present	N/A
Steve Fambro	Director	55	March 2019 – Present	N/A
Brian W. Snow	Director	48	January 2022 – Present	N/A
Doug Lui	Director	49	May 2022 – Present	N/A

Chris Anthony, Co-Chief Executive Officer, Interim Chief Financial Officer, and Director:

Chris Anthony is our Co-CEO and Interim Chief Financial Officer. Chris was also a founder and former CEO of Flux Power, an advanced lithium-battery technology company from October 2009 – December 2019. He was also the founder and CEO of Epic boats, a technology leader in the pleasure boat market, between July 2002 and December 2018. Chris has raised more than $100m in private equity, DPO, and grant funding for technology ventures. Chris holds a BS in Finance from the Cameron School of Business at UNC.

Steve Fambro, Co-Chief Executive Officer and Director:

Steve Fambro is currently our Co-CEO. Steve was a venture partner and COO of Ocean Holding, an investment and development company dedicated to advancing the use of clean, renewable energy from July 2015 to August 2017. He was also the founder of Famgro; which built a superefficient pesticide/herbicide-free indoor food-production system from January 2010 to March of 2015. Steve holds a BSEE from University of Utah with an emphasis in electromagnetics and antenna design.

Brian W. Snow, Director:

In January 2022, Brian W. Snow joined the Company as a director. Brian is currently the Managing General Partner in Impala Ventures, a venture capital firm focused on the disruptive commercial real estate technology sectors. He advises, mentors and invests in founders that he believes have the ability to build companies of scale and that are transforming the built environment. From 2011 to 2017, Brian was the Co-Founder and CEO of Pristine Environments, an Integrated Facility Management and Building Intelligence technology company.

Doug Lui, Director:

Doug joined the Board of Aptera in June 2022. He is currently Venture Partner of Vine Ventures Corp., actively involved in several portfolio companies as strategic advisor and resident executive roles, in addition to overseeing due diligence on prospective companies he has been in that position since October 2020.

From 2016-2020, he was Chief Audit Executive of Sand China Ltd., the world’s largest gaming company, developer, owner and operator of multi-use integrated resorts, listed on Hong Kong Stock Exchange and key subsidiary of Las Vegas Sands listed on the New York Stock Exchange. In 2010-2015, he was the Group General Manager of Audit & Risk Management of Hongkong & Shanghai Hotels, operator of the famed Peninsula Hotel group, listed on the Hong Kong Stock Exchange.

In 2001-2010, he held multiple executive global and regional roles in the Universal Studios and Music Groups based in LA and New York, SAP AG North Asia division based in Hong Kong, and other international conglomerates.

He is an EY alumni, an active member of the Chartered Professional Accountants of Canada, and a Board Governor for Institute of Internal Audit (to 2020).

Sarah Hardwick, Chief Marketing Officer:

Sarah Hardwick is our CMO and one of the original Aptera team members. Founder of award-winning agency Zenzi where she had worked from 2002 to 2021, she has a history of success collaborating with high-profile brands including Nestle, Chiquita, Crystal Geyser, AOL, DirecTV, and more. Sarah holds a BA in Communications from the University of Denver. She is a savvy digital marketer, passionate community builder, driver of revenue and growth.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ending December 31, 2022, we compensated our executive officers and directors as follows (in thousands):


	Cash Compensation		Option Awards			Total Compensation
Chris Anthony (CEO/Director)	$	262	$			$	262
Steve Fambro (CEO/Director)	$	257	$			$	257
Brian Snow (Director)	$	135	$	3,936	(1)(2)	$	4,071
Doug Lui (Director)	$	—	$	4,233	(1)(3)(4)	$	4,233
Sarah Hardwick (CMO)	$	231	$			$	231
Jannies Burlingame (5)	$	314	$			$	314

(1)	Amounts reflect the aggregate grant date fair value of the options granted in 2022, computed in accordance with Financial Accounting Standards Board ASC Topic 718 (ASC 718). This amount does not reflect the actual economic value realized by the director.

(2)

On February 12, 2022, options to purchase 297,369 base shares and 297,368 performance bonus shares for an exercise price of $8.80 per share were granted to Mr. Snow under the 2021 Stock Option and Incentive Plan. One-fourth of the base shares will vest on February 24, 2023, and the remaining options will vest annually over the following three years. The performance bonus shares will vest upon completion of performance metrics, see the Stock Option Grant attached as Exhibit 6.9.

(3)	On January 3, 2022, options for 100,000 shares for an exercise price of $8.80 per share of Class B Stock were granted to Mr. Lui under the 2021 Stock Option and Incentive Plan.

(4)

On May 24, 2022, options to purchase 300,000 base shares and 200,000 performance bonus shares for an exercise price of $9.20 per share were granted to Mr. Lui under the 2021 Stock Option and Incentive Plan. One-fourth of the base shares will vest on May 24, 2023, and the remaining options will vest annually over the following three years. The performance bonus shares will vest upon completion of performance metrics, see the Stock Option Grant attached as Exhibit 6.10.

(5)	Ms. Burlingame is no longer with the Company.

We compensated two of the directors in their capacity as directors in aggregate as follows: $135 thousand in cash compensation and options worth $8.2 million in aggregate based on the grant date fair value of the options granted in 2022, computed in accordance with Financial Accounting Standards Board ASC Topic 718 (ASC 718), see the chart above for additional details. This value attributable to the options does not reflect the actual economic value realized by the director.

ITEM 4.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets out, as of December 31, 2022, the securities of the Company that are owned by executive officers and directors, and other persons holding more than 10% of the Company’s voting securities or having the right to acquire those securities. The table assumes that all options have vested.


Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership	Amount and nature of beneficial ownership acquirable (2)		Percent of Class (3)(4)(5)
Michael Johnson Properties, Ltd.	15,249,750 shares of Class A Common Stock		0		27.38	%
Chris Anthony	15,000,000 shares of Class A Common Stock		0		26.92	%
Steve Fambro	15,000,000 shares of Class A Common Stock		0		26.92	%
Patrick H Quilter Trust	5,724,000 shares of Class A Common Stock		0		10.27	%
All executive officers and directors as a group	30,000,000 shares of Class A Common Stock		0		53.85	%

(1)	The address for all the executive officers, directors, and beneficial owners is c/o Aptera Motors Corp., 5818 El Camino Real Carlsbad, CA 92008.

(2)	Options are not vested.

(3)	Based on 55,714,810 shares of Class A Common Stock outstanding.

(4)	No individual owns more than 10% of the Series B Preferred Stock.

(5)

This calculation is the amount the person owns now, plus the amount that person is entitled to acquire. That amount is then shown as a percentage of the outstanding amount of securities in that class if no other person exercised their rights to acquire those securities. The result is a calculation of the maximum amount that person could ever own based on their current and acquirable ownership, which is why the amounts in this column may not add up to 100% for each class.

ITEM 5.

INTERESTS OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

For the year ended December 31, 2021, the Company paid $0.3 million in marketing services provided by a vendor controlled by Sarah Hardwick, our Chief Marketing Officer. The fees relate to consulting services performed by Ms. Hardwick prior employment at the Company.

ITEM 6.

OTHER INFORMATION

None.

ITEM 7.

FINANCIAL STATEMENTS

LOGO

APTERA MOTORS

CORP. FINANCIAL

STATEMENTS

As of December 31, 2022, and 2021 and for the Years then

Ended

APTERA MOTORS

CORP.

Index to Financial Statements


	Pages
Report of Independent Registered Public Accounting Firm (PCAOB) Firm ID #3501)		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Stockholders’ Equity (Deficit)		F-4
Consolidated Statements of Cash Flows		F-5
Notes to the Consolidated Financial Statements		F-6 – F-28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Aptera Motors Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Aptera Motors Corp. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows, for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and negative net cash used in operating activities, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ dbbmckennon

San Diego, California

April 28, 2023

We have served as the Company’s auditor since 2019.

F-1

APTERA MOTORS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


	December 31, 2022			December 31, 2021
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	10,775		$	19,335
Merchant receivable		86			19
Prepaids and other		640			805
Current assets held-for-sale - discontinued operations¹		135			—

Total current assets		11,636			20,159
Deposits and other long-term assets		2,743			2,743
Property and equipment, net		11,411			358
Operating lease assets, net		11,765			—
Long-term assets held-for-sale - discontinued operations¹		2,364			—

Total assets	$	39,919		$	23,260

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	2,312		$	1,407
Accrued liabilities		2,787			550
Unearned reservation fees		3,307			1,243
Debt, short term		—			60
Current portion of lease liabilities and other current liabilities		1,640			—
Current liabilities held-for-sale - discontinued operations¹		192			—

Total current liabilities		10,238			3,260
Simple agreements for future equity (“SAFE”)		—			81,512
Long-term lease liabilities, net		12,708			—
Other long-term liabilities		15			—

Total liabilities		22,961			84,772
Commitments and contingencies (Note 8)
Stockholders’ Equity (Deficit)
Preferred stock, par value $0.0001; 31,304,495 and 0 shares authorized as of December 31, 2022 and 2021, respectively; 11,164,183 and 0 shares issued and outstanding, respectively (Note 10)		1			—
Class A Common Stock, $0.0001 par value, 190,000,000 shares authorized, 55,714,810 and 54,304,631 shares issued and outstanding, respectively		6			5
Class B Common Stock, $0.0001 par value, 115,000,000 shares authorized, 8,862,872 and 5,298,157 shares issued and outstanding, respectively		1			1
Additional paid-in capital		200,163			40,404
Subscription receivable		—			(985	)
Accumulated deficit		(183,213	)		(100,937	)

Total stockholders’ equity (deficit)		16,958			(61,512	)

Total liabilities and stockholders’ equity (deficit)	$	39,919		$	23,260

See accompanying notes to the consolidated financial statements.

F-2

APTERA MOTORS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


	Year Ended December 31, 2022			Year Ended December 31, 2021
Revenues	$	—		$	—
Operating Expenses:
General, selling, and administrative		20,845			7,408
Research and development		40,631			11,472

Total operating expenses		61,476			18,880

Operating loss		(61,476	)		(18,880	)

Other income		104			16
Change in fair value of SAFE liability		(20,356	)		(77,660	)

Loss before income taxes		(81,728	)		(96,524	)
Loss from discontinued operations, net of tax (Note 3)		(548	)		—

Net loss attributable to Aptera common shareholders		(82,276	)		(96,524	)

Continuing operations weighted average loss per share of Class A and Class B common stock - basic and diluted	$	(1.30	)	$	—

Discontinued operations weighted average loss per share of Class A and Class B common stock - basic and diluted	$	(0.01	)	$	(1.74	)

Weighted average shares outstanding of Class A and B common stock - basic and diluted		62,906,411			55,449,555

See accompanying notes to the consolidated financial statements.

F-3

APTERA MOTORS CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share and per share data)


													Additional									Total
	Preferred Stock				Class A Common Stock				Class B Common Stock				Paid-In			Subscriptions’			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Receivable			Deficit			Deficit
December 31, 2020		—	$	—		51,198,750	$	5		—	$	—	$	3,395		$	—		$	(4,413	)	$	(1,013	)
Sale of common stock		—		—		3,105,881		—		5,271,841		1		33,458			(985	)		—			32,474
Stock issuance costs		—		—		—		—		—		—		(1,648	)		—			—			(1,648	)
Shares issued for services		—		—		—		—		26,316		—		100			—			—			100
Stock based compensation		—		—		—		—		—		—		5,099			—			—			5,099
Net loss		—		—		—		—		—		—		—			—			(96,524	)		(96,524	)

December 31, 2021		—	$	—		54,304,631	$	5		5,298,157	$	1	$	40,404		$	(985	)	$	(100,937	)	$	(61,512	)

Sale of common stock		—		—		1,159,092		1		3,116,400		—		38,943			985			—			39,929
Conversion of SAFEs		11,087,104		1		—		—		—		—		102,000			—			—			102,001
Sale of preferred stock		77,079		—		—		—		—		—		709			—			—			709
Stock issuance costs		—		—		—		—		—		—		(2,027	)		—			—			(2,027	)
Shares issued for services		—		—		—		—		448,315		—		5,981			—			—			5,981
Shares for Andromeda acquisition		—		—		251,087		—		—		—		2,310			—			—			2,310
Stock based compensation		—		—		—		—		—		—		11,843			—			—			11,843
Net loss		—		—		—		—		—		—		—			—			(82,276	)		(82,276	)

December 31, 2022		11,164,183	$	1		55,714,810	$	6		8,862,872	$	1	$	200,163		$	—		$	(183,213	)	$	16,958

See accompanying notes to the consolidated financial statements.

F-4

APTERA MOTORS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Year Ended December 31, 2022			Year Ended December 31, 2021
Operating Activities From Continuing Operations
Net loss from continuing operations	$	(81,728	)	$	(96,524	)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities from continued operations:
Depreciation and amortization		252			15
Operating lease asset impairment		1,272
SAFE issuance costs		—			41
SAFEs issued for services		80			—
Change in fair value of SAFE liability		20,356			77,660
Stock based compensation		11,843			5,100
Common stock issued for services		5,981			100
Changes in operating assets and liabilities:
Merchant receivable		(67	)		417
Prepaids		165			(758	)
Deferred offering costs		—			58
Deposits and other long-term assets		—			(2,743	)
Accounts payable		905			1,407
Accrued expenses		2,237			417
Unearned reservation fees		2,064			791
Operating lease assets and liability, net		1,311			—
Other long-term liabilities		15			—

Net cash used in operating activities from continuing operations		(35,314	)		(14,019	)
Investing Activities from Continuing Operations
Purchase of property and equipment		(11,305	)		(307	)

Net cash used in investing activities from continuing operations		(11,305	)		(307	)
Financing activities from Continuing Operations
Payments on debt instruments		(60	)		—
Proceeds from SAFE agreements		53			2,181
Proceeds from sale of series B preferred		709			—
Proceeds from sale of common stock		39,929			32,474
Common stock issuance costs		(2,027	)		(1,648	)

Net cash provided by financing activities from continuing operations		38,604			33,007
Discontinued Operations¹
Total used by operating activities		(545	)		—
Total used by investing activities		—			—
Total used by financing activities		—			—

Decrease in cash from discontinued operations		(545	)		—
Increase (decrease) in cash and cash equivalents		(8,560	)		18,681
Cash, cash equivalents and restricted cash, beginning of year		19,335			654

Cash, cash equivalents and restricted cash, end of year	$	10,775		$	19,335

Supplemental disclosures of cash flow information:
Cash paid for interest	$	—		$	—

Cash paid for income taxes	$	—		$	—

Non cash investing and financing activities:
Subscriptions’ receivable		—			985

Common stock issued for acquisition	$	2,310		$	—

Conversion of SAFE’s into preferred stock	$	102,001		$	—

Issuance of contractor SAFEs	$	80		$	—

See accompanying notes to the consolidated financial statements

F-5

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—ORGANIZATION AND BUSINESS

The Company is developing an electric vehicle focused on efficiency. We began designing the production vehicle while collecting pre-orders for its sale in 2022, this manifested in our Beta and Gamma prototypes show in 2021 and 2022 respectively. We intend to enter into production of this vehicle in 2024, subject to many variables.

Aptera Motors Corp. was incorporated on March 4, 2019 (‘Inception”) in the State of Delaware. On April 1, 2022, the Company entered into a Plan of Merger (the “AI Merger Agreement”) with Andromeda Interfaces, Inc., a California corporation (“AI”). Upon completion of the AI Acquisition, (“AI Acquisition”) AI became a wholly-owned subsidiary of the Company. Throughout the notes to the consolidated financial statements, unless otherwise noted, the “Company,” “we,” “us” or “our” and similar terms refer to Aptera Motors Corp. and its subsidiaries.

Risks and Uncertainties

The Company’s business and operations are sensitive to general business and economic conditions in the U.S. and worldwide along with local, state, and federal governmental policy decisions. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include: our limited operating history, changes in our small management and development team, the capital-intensive nature of vehicle manufacturing, barriers to market entry, competing technologies, regulatory conditions, volatility in demand, and inflation of production and shipping costs. These adverse conditions could affect the Company’s financial condition and the results of its operations. The Company may also be adversely affected by the impact of COVID-19 on our global supply chain.

Going Concern and Management’s Plans

We will rely on external financings to operate in the Company’s early stages. We will incur significant additional costs before achieving revenue. The Company invests heavily in research and development to bring the vehicle to production and will incur losses from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. During the next 12 months, the Company intends to fund its operations with funds received from our ongoing Regulation A offering, and additional debt and/or equity financing as determined to be necessary. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business, financial condition and operating results. The financial statements do not include any adjustments that might result from these uncertainties.

F-6

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements included herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Discontinued Operations

In February 2023, we determined that our infotainment display business AI met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of AI in discontinued operations for all periods presented throughout this Annual Report on Form 1-K. Unless otherwise indicated, amounts and activity in this Annual Report are presented on a continuing operations basis. See Note 3, “Discontinued Operations,” in the Notes to Consolidated Financial Statements for further information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting periods. Management uses historical and other pertinent information to determine those estimates. Actual results could materially differ from these estimates. The most significant estimates made in preparing the accompanying financial statements, for which it is reasonably possible that changes in estimates will occur in the near term, include the following:

•

Fair value measurement of SAFE contracts

•

Recoverability of long-lived assets

•

Stock-based compensation

F-7

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access.

Level 2—Observable inputs other than prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Fair-value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2022, and 2021.

As of December 31, 2022, and 2021, the respective carrying value of cash and cash equivalents, receivables, other current assets, accounts payable, unearned reservation fees and short-term debt approximated their fair values.

F-8

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following are the classes of assets and liabilities measured at fair value at December 31, 2022 and 2021, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).


	Fair Value Hierarchy as of December 31, 2022
Description	Level 1		Level 2		Level 3		Total
Assets:
Money market fund	$	7,214	$	—	$	—	$	7,214

Total Assets	$	7,214	$	—	$	—	$	7,214

Liabilities:
SAFE agreements	$	—	$	—	$	—	$	—

Total liabilities	$	—	$	—	$	—	$	—


	Fair Value Hierarchy as of December 31, 2021
Description	Level 1		Level 2		Level 3		Total
Assets:
Money market fund	$	—	$	—	$	—	$	—

Total Assets	$	—	$	—	$	—	$	—

Liabilities:
SAFE agreements	$	—	$	—	$	81,512	$	81,512

Total liabilities	$	—	$	—	$	81,512	$	81,512

The Company measures the fair value of the Simple Agreements for Future Equity (“SAFE”) at their fair value on a recurring basis (see Note 7). The fair value of the SAFEs was determined based on Level 3 inputs as there are no observable direct or indirect inputs. The Company estimated the fair value of the SAFE liability based on the weighted probability of settling the SAFEs under the different settlement scenarios. The valuation employed the estimated fair value of the Company’s Common Stock, then applied a backsolve method, which utilizes the option pricing method (the Black-Sholes option pricing model), to calculate the implied enterprise value of the Company. The option pricing method treats classes of stock, including the SAFE instruments, having the attributes of common stock and preferred stock securities, as call options on the value of the Company’s equity, with exercise prices based on the liquidation preferences of preferred stockholders and SAFE holders. Significant inputs to the valuation of the SAFEs included the value of the Company’s common stock, estimated volatility of the Company’s common stock, estimated life and management’s estimate of the probability of settling the SAFEs under the possible settlement alternatives.

F-9

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The following is a reconciliation of the opening and closing balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2022, and 2021 (in thousands):


	Level 3 Liabilities
SAFEs, December 31, 2020	$	1,630
Additions		2,222
Changes in fair value		77,660

SAFEs, December 31, 2021	$	81,512
Additions		80
Changes in fair value		20,356
SAFE Conversion		(101,948	)

SAFEs, December 31, 2022	$	—

F-10

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Cash, Cash Equivalents and Restricted Cash

For purpose of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. In connection with the lease due that commences on July 1, 2022 a security deposit in the form of an unconditional and irrevocable letter of credit for $0.9 million was entered into. This amount is included in the Company’s cash, cash equivalents and restricted cash balance as of December 31, 2022.

Merchant Receivable

Merchant receivable is related to amounts receivable from pre-orders received through the Company’s merchant processor. Merchant receivable is shown net of fees charged by the merchant processor.

Trade Accounts Receivable

The Company records trade accounts receivable at the invoiced amount and they do not bear interest. The Company has a policy to review outstanding receivables on a periodic basis for collectability and does not maintain an allowance for doubtful accounts as of December 31, 2022 and 2021. The entirety of the trade accounts receivable as of December 31, 2022 is aggregated in current assets held-for-sale - discontinued operations (Note 3).

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful life of the assets. The estimated useful life of research and development equipment, other equipment, and construction in progress is five years, see Note 5.

Long-Lived Assets

Long-lived assets, such as property, plant and equipment and operating lease assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for potential impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

We recorded impairment charges totaling $1.3 million during the year ended December 31, 2022 related to operating lease assets as discussed further in Note 6 to our consolidated financial statements.

F-11

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Capitalization of Software Costs

We capitalize costs incurred in the development of internal use software, during the application development stage to Property, plant and equipment, net on the consolidated balance sheets. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Such costs are amortized on a straight-line basis over its estimated useful life of three years.

Software development costs incurred in development of software to be sold, leased, or otherwise marketed, incurred subsequent to the establishment of technological feasibility and prior to the general availability of the software are capitalized when they are expected to become significant. Such costs are amortized over the estimated useful life of the applicable software once it is made generally available to our customers.

We evaluate the useful lives of these assets on an annual basis, and we test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. For the years ended December 31, 2022 and 2021 we have recognized no material impairments of capitalized software costs.

Unearned Reservation Fees

Unearned reservation fee liabilities are recorded as a gross amount including the merchant processor fees charged on each transaction. The Company reserves all fees collected for customer reservations in a separate money market account.

Leases

The Financial Accounting Standards Board’s Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) requires the recognition of assets and liabilities for leases that are not short-term. The Company adopted the provisions of the ASU, along with the provisions of all other issued ASUs containing related amendments, on January 1, 2022. The Company had no existing leases with terms of more than 12 months as of January 1, 2022. As such, amounts in the consolidated financial statements and accompanying notes prior to January 1, 2022 have not been restated and continue to be reported in accordance with the legacy accounting requirements in Accounting Standards Codification (“ASC”) Topic 840, Leases.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount within a range of loss can be reasonably estimated. When no amount within the range is a better estimate than any other amount, the Company accrues for the minimum amount within the range. Legal costs incurred in connection with loss contingencies are expensed as incurred.

The Company may enter into purchase obligations with certain vendors. They represent expected payments to third party service providers and other commitments entered into during the normal course of our business. These purchase obligations are generally cancellable with or without notice without penalty, although certain vendor agreements provide for cancellation fees or penalties depending on the terms of the contract.

Goodwill

In accordance with FASB ASC Topic 350, Intangibles—Goodwill and Other (ASC 350), goodwill and other identifiable intangible assets acquired in a business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. ASC 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values and reviewed for impairment in accordance with FASB ASC Topic 360, Property, Plant, and Equipment (ASC 360).

F-12

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Goodwill

In accordance with ASC 360, long-lived assets such as property and equipment and intangible assets with estimable useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized on long-lived assets when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of the assets. In such cases, the carrying values of these assets are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less estimated selling expenses.

In accordance with ASC 350, goodwill should be tested for impairment when a triggering event occurs that indicates that the fair value of an entity or a reporting unit may be below its carrying amount. This determination consists of an optional qualitative assessment to determine whether the quantitative impairment test is necessary. If the qualitative assessment indicates that it is not more likely than not that goodwill is impaired, further testing is unnecessary. If the qualitative assessment indicates that it is more likely than not that goodwill is impaired, the entity must perform the following quantitative test. First, the entity determines the fair value of a reporting unit and compares it with its carrying amount. Second, if the carrying amount of reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to the purchase price allocation, in accordance with ASC 805. The residual fair value after this allocation is the implied fair value of the reporting unit’s goodwill.

ASU 2014-02 further simplifies goodwill impairment by eliminating step two of the current impairment test, which requires the hypothetical application of the acquisition method to calculate the goodwill impairment amount. If elected, the accounting alternative in ASU 2014-02 must be applied prospectively to (I) goodwill existing as of the beginning of the period of adoption and (2) all new goodwill recognized in annual periods beginning after December 15, 2014, and in interim periods within annual periods thereafter. The Company has elected this simplified goodwill impairment test.

No impairment losses of goodwill were recognized for the year ended December 31, 2022. The entirety of the goodwill as of December 31, 2022 is aggregated in Long-term assets held-for-sale - discontinued operations (Note 3).

Debt – Economic Injury Disaster Loan Program (EIDL)

In the acquisition of Andromeda Interfaces, Inc., “AI”, the Company assumed an unsecured loan in the amount of $100,500 through its new wholly owned subsidiary under the Economic Injury Disaster Loan program or the “EIDL”. EIDL loans provide the necessary working capital to help small businesses survive until normal operations resume after a disaster. The entirety of the Debt balance as of December 31, 2022 is aggregated in Current liabilities held-for-sale - discontinued operations (Note 3).

Simple Agreements for Future Equity (SAFE)

The Company has issued SAFE instruments in exchange for cash financing with outside investors. The Company has also issued SAFEs in exchange for work performed by independent contractors. The Company converted its SAFEs into preferred stock on August 25, 2022 see Note 7.

Prior to conversion, the Company had accounted for its SAFE investments as liability derivatives under the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging. If any changes in the fair value of the SAFEs occur, the Company records such changes through earnings.

F-13

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

ASC Topic 606, “Revenue from Contracts with Customers” establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements: 1) identify the contract with a customer; 2) identify the performance obligations in the contract; 3) determine the transaction price; 4) allocate the transaction price to performance obligations in the contract; and 5) recognize revenue as the performance obligation is satisfied.

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

Each product sold to a customer typically represents a distinct performance obligation. The Company satisfies its performance obligation and revenue is recorded at the point in time when products are delivered as the Company has determined that this is the point that control transfers to the customer. The Company invoices customers upon delivery of the products, and payments from such customers are due upon invoicing.

96% of revenue came from two customers during the year ended December 31, 2022. All revenue recorded for the year ended December 31, 2022 were for sales through the subsidiary and are included in Loss from discontinued operations, net of tax (Note 3).

Income Taxes

The Company applies ASC 740 Income Taxes. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial statement reported amounts at each period end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities.

ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. A tax benefit from an uncertain position is recognized only if it is “more likely than not” that the position is sustainable upon examination by the relevant taxing authority based on its technical merit.

The Company is subject to tax in the United States (“U.S.”) and files tax returns in the U.S. Federal jurisdiction and California state jurisdiction. The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities for all periods since Inception. The Company has elected a year-end of December 31 and has yet to file any tax filings; all periods remain open to examination.

F-14

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718 Compensation – Stock Compensation (“ASC 718”), which establishes accounting for equity instruments exchanged for employee services. Under such provisions, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense, under the straight-line method, over the employee’s requisite service period (generally the vesting period of the equity grant).

The Company accounts for equity instruments, including stock options, issued to non-employees in accordance with authoritative guidance for equity- based payments to non-employees. Stock options issued to non-employees are accounted for at their calculated fair value of the award.

Research and Development

The Company incurs research and development costs during the process of researching and developing new technologies to further its product design and capabilities. Such costs are expensed as incurred.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, and restricted cash. The Company places its cash with domestic financial institutions that are federally insured within statutory limits, but at times its deposits may exceed federally insured limits.

Loss Per Share

We compute net loss per share of Class A and Class B common stock using the two-class method. Basic net loss per share is computed using the weighted-average number of shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of shares and the effect of potentially dilutive securities outstanding during the period. For periods in which we incur a net loss, the effects of potentially dilutive securities would be antidilutive and would be excluded from diluted calculations. Dilutive securities consist of options under the Company’s 2021 Stock Option and Incentive Plan (Note 11).

For the years ended December 31, 2022 and 2021, the loss per share was $1.30 and $1.74, respectively, based on weighted average shares outstanding of Class A common stock of 55,420,037 and 53,511,467, Class B common stock of 7,486,374 and 1,938,088 respectively. Additionally, there are 11,164,183 shares of Preferred Series B stock that are convertible into Class B common stock (Note 7). The outstanding dilutive securities as of December 31, 2022 and 2021 consists of outstanding options of 10,997,794 and 10,622,944, respectively. For the years ended December 31, 2022 and 2021, we incurred a net loss for which the effects of our dilutive securities would be antidilutive and are excluded from diluted EPS calculations.

Recent Accounting Pronouncements

The FASB issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the ASC. There have been a number of ASUs to date that amend the original text of ASC. The Company believes those issued to date, other than the update noted below, either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to the Company or (iv) are not expected to have a significant impact on the Company.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires lessees to recognize right-of-use assets and corresponding lease liabilities for all leases not considered short-term leases. Recognition, measurement, and presentation of expenses will depend on classification as either a finance or operating lease. ASU 2016-02 also requires certain quantitative and qualitative disclosures. ASU 2020-05 deferred the effective date of the adoption of ASU 2016-02 for the Company until January 1, 2022. The Company adopted ASC 842 as of January 1, 2022 using the modified retrospective approach (“adoption of the new lease standard”). This approach allows entities to either apply the new lease standard to the beginning of the earliest period presented or only to the consolidated financial statements in the period of adoption without restating prior periods. The Company has elected to apply the new guidance at the date of adoption without restating prior periods.

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the later of ASC 842 adoption date or lease commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at adoption date or lease commencement date in determining the present value of lease payments.

F-15

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating some exceptions to the general approach in Topic 740, Income Taxes in order to reduce cost and complexity of its application. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. For nonpublic entities, the guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The Company adopted the new standard as of January 1, 2022, and there was an immaterial impact to the consolidated financials and related disclosures.

NOTE 3 – DISCONTINUED OPERATIONS

Acquisition of Andromeda Interfaces, Inc.

The Company completed the AI Acquisition on April 1, 2022 (“AI Closing Date”) and acquired all issued and outstanding shares of AI. In accordance with the agreement: (A) AI stock was converted into rights to receive 251,087 Class A Common Stock for a total fair value of $2.2 million, (B) MergerSub equity units issued and outstanding converted into 100 common shares, no par value of AI, (C) 100 common shares of AI were issued to the Company, (D) each unexercised AI option to purchase AI Stock (whether or not vested) were automatically cancelled, and (E) former AI stockholders were awarded stock options under the Company’s 2021 Stock Option and Incentive Plan.

The Merger is intended to be a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Merger Agreement is a “plan of reorganization” within the meaning of the regulations under Section 368(a) of the Code and for the purpose of qualifying as a tax-free transaction for federal income tax purposes.

The acquisition was accounted for as a business combination. As of December 31, 2022, goodwill was recorded to the extent that the purchase price exceeded the fair value of the assets acquired. The company allocated the purchase price in regard to the acquisition related to the assets acquired and liabilities assumed as of the purchase date. The following table summarizes the purchase price allocation:


	Preliminary Purchase Price Allocation
Cash and cash equivalents	$	28
Trade accounts receivable		23
Other assets		2
Goodwill		2,362
Accounts payable		(1	)
Debt		(104	)

Purchase price consideration	$	2,310

A business is classified as held-for-sale when management having the authority to approve the action commits to a plan to sell the business, the sale is probable to occur during the next 12 months at a price that is reasonable in relation to its current fair value, and certain other criteria of ASC 360 are met. A business classified as held-for-sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. When the carrying amount of the business exceeds its estimated fair value less costs to sell, a loss is recognized and updated each reporting period as appropriate. A business held-for-sale is classified as discontinued operations if the disposal group is a component of an entity; the component of an entity meets the held-for-sale criteria of ASC 360; and disposal of the component of an entity represents a strategic shift that will have a major effect on the entity’s operations and financial results.

F-16

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – MERCHANT RECEIVABLE AND UNEARNED RESERVATION FEES

In December 2020, the Company launched its pre-orders using a third-party merchant processor. As of December 31, 2022, the Company has recorded unearned reservation fees of $3.2 million as the gross amount due to customers, should they require a refund. The fees charged by the merchant processor of $96 thousand and $27 thousand for the years ended December 31, 2022 and 2021, respectively were recorded to general and administrative expenses. As of December 31, 2022 and 2021, the Company has a net amount receivable of $86 thousand and $19 thousand, respectively, from the merchant processor which is recorded as a merchant receivable.

NOTE 5 – PROPERTY AND EQUIPMENT, NET

Property and equipment, net as of December 31, 2022 and 2021 consisted of the following:


	December 31, 2022			December 31, 2021
Leasehold improvements	$	686		$	—
Computers, hardware & software		95			—
Research and development equipment		787			272
Other equipment		544			44
Construction in progress		9,568			59

		11,680			375
Less accumulated depreciation and amortization		(269	)		(17	)

Total property and equipment, net	$	11,411		$	358

Depreciation of property and equipment held for use amounted to $0.3 million and $14.5 thousand for the years ended December 31, 2022 and 2021, respectively.

F-17

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – LEASES

The Company has entered into operating leases for certain of the Company’s offices, manufacturing, equipment and vehicles in Carlsbad, California and Vista, California. The Company has determined if an arrangement is a lease, or contains a lease, including embedded leases, at inception and records the leases in the Company’s financial statements upon later of ASC 842 adoption date of January 1, 2022, or lease commencement, which is the date when the underlying asset is made available for use by the lessor.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Our assessed lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

The balances for the operating lease where the Company is the lessee are presented as follows within the Company’s consolidated balance sheet (in thousands):


	As of December 31, 2022
Operating lease assets, net		11,765
Current portion of lease liabilities and other current liabilities		1,640
Long-term lease liabilities		12,708

	$	14,348

The following table summarizes the contractual maturities of operating lease liabilities (in thousands):


	As of December 31, 2022
2023	$	2,760
2024		3,106
2025		3,213
2026		3,322
2027		2,481
Thereafter		3,375
Total minimum lease payments		18,257
Imputed interest		(3,909	)

Total minimum lease payments	$	14,348

F-18

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Total lease cost for the year ended December 31, 2021 was not material. Total least cost of $2.3 million for the year ended December 31, 2022 was comprised of operating lease cost and was allocated between “General, selling, and administrative” and “Research and development” line items in the Consolidated Statements of Operations.

Other information related to leases where the Company is the lessee is as follows:


	As of December 31, 2022
Supplemental lease information
Weighted average remaining lease term (in years)		5.89
Weighted average discount rate		8.30	%


	As of December 31, 2022
Supplemental lease information
Weighted average remaining lease term (in years)		5.89
Weighted average discount rate		8.30	%

Supplemental cash flow information related to leases where the Company is the lessee is as follows (in thousands):


	As of December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,065
Leased assets obtained in exchange for new operating lease liabilities	$	11,765

Operating Lease Asset Impairment Charges

In December of 2022, we reassessed our production facility needs and began looking for sublease tenants for our Vista building lease. In determining whether our operating lease assets were impaired, we considered the intended future use of the assets, including whether we expect to be able to sublease the related facilities. In both cases, we expected to eventually be able to sublease the facilities. Our projected future cash inflows from potential sublease income reflected this expectation. In order to determine whether an impairment existed, we compared all future cash outflows related to the lease for the underlying operating lease asset and compared this with our projected future cash inflows based on a letter of intent from an interested sublessor. We developed a scenario to model the expected timing and amount of sublease income we expect to receive. In this scenario, the future cash outflows exceeded the expected future cash inflows, resulting in the conclusion that the operating lease assets were impaired. We then discounted the projected deficit in each scenario using our estimated cost of capital to determine the amount of the impairment charge to record. We recorded charges for non-cash impairments related to certain of our operating lease assets for $1.3 million. The operating lease asset impairment charge is included in general, selling, and administrative expenses. There were no operating lease asset impairment charges in 2021. We have not been legally released from our primary obligations under the original lease and therefore we continue to account for the original lease separately.

F-19

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – SIMPLE AGREEMENT FOR FUTURE EQUITY (“SAFE”)

During the year ended December 31, 2022 and the period from Inception to December 31, 2021, the Company entered into SAFE agreements with various investors in exchange for cash proceeds totaling $52.5 thousand and $2.5 million, respectively. Also, during the year ended December 31, 2022, the Company entered into a SAFE agreement with certain independent contractor as compensation for the services performed by them, in the amount of $80 thousand. The agreements provide the investors (and independent contractors) certain rights to future equity in the Company under the terms of the SAFE agreements. The SAFE agreements have no maturity date and bear no interest. The terms of the SAFE agreements have materially consistent terms, except for differences in the “Valuation Cap” (as defined in the SAFE agreement) and discount rate.

The SAFE Agreements must be settled primarily upon the following events: (a) a qualified equity financing, as defined in the SAFE agreements (a “QEF”), (b) a change of control or initial public offering (a “Liquidity Event”), or (c) any other liquidation, dissolution or winding up of the Company (a “Dissolution Event”).

Upon a QEF, these SAFE agreements become convertible into shares of a special class of the Company’s preferred stock. The number of shares the SAFE agreements are convertible into is determined by the amount received from investors (or the value of services rendered by independent contractors) in the SAFE (the “SAFE Amount”), divided by the lower of (1) QEF, and (2) the price at which the Company issues shares in the QEF, multiplied by a discount rate (as stated in the SAFE agreement), which varies per agreement from 90% to 100%.

In the case of a Liquidity Event, SAFE holders are repaid, at their option, either (a) cash equal to their SAFE Amount, or (b) the number of common shares equal to the SAFE Amount divided by the price per share equal to the Valuation Cap divided by the number of shares of capital stock outstanding immediately prior to the Liquidity Event.

In the case of a Dissolution Event, the Company will first pay senior preferred stockholders any amounts due and payable to them in accordance with the Company’s certificate of incorporation, and then pay SAFE holders an amount to the SAFE Amount.

In addition, under certain SAFE agreements, the Company has the option to repurchase the SAFEs if it determines that it is likely that within six months from the date of determination that the securities of the Company will be held of record by a number of persons that would require the Company to register a class of its equity securities under the Securities Exchange Act of 1934, at the greater of: a) SAFE Amount or b) the fair market value of the SAFE instrument as determined by a third-party valuation.

The SAFE agreements issued to investors and independent contractors are recorded as “SAFE liability” on the balance sheet, measured at fair value on a recurring basis. The change in the fair value of the SAFEs during the period is recorded as “change in fair value of SAFE liability” in the statement of operations.

The valuation of the SAFE liability as of December 31, 2021, which was performed by a third-party with the assistance of management, relied upon the fair market value of common stock as of December 31st, 2021 of $8.80 based on the Regulation A offering price on that date. The fair market value of common stock serves as an input for the Black-Scholes method, which utilizes the Option Pricing Method (OPM) to calculate the implied value of each security based on the recent transaction price.

This valuation method estimated the fair value of the SAFEs within the OPM, which treats classes of stock, including the SAFE instruments, having the attributes of common stock and preferred stock securities as call options on the value of the company equity, with exercise prices based on the liquidation preferences of preferred stockholders and SAFE holders. The OPM considers the various terms of the stockholder and SAFE holders upon liquidation of the enterprise, including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations. In addition, the method implicitly considers the effect of liquidation preferences as of the future liquidation date, not as of the valuation date.

An input to the OPM is volatility. To estimate volatility for the Company’s valuation specialist used the historical volatility of guideline public companies. A median volatility from the peer group was selected. Another input to the OPM is the Company’s expected time to exit. Lastly, each of the conversion events was probability-weighted based on management’s expectation for the probability of each outcome occurring as of the valuation date.

F-20

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

On August 18th, 2022, the Company filed a Restated Certificate of Incorporation and completed the Sale and Issuance of Series B-1 Preferred Stock (the “Series B-1 Preferred Stock Sale”). This was a qualified equity financing event as defined in the SAFE agreements in NOTE 5 and all SAFE agreements were converted into shares of Series B-1 Preferred Stock. The number of shares the SAFE agreements converted into was determined by the “SAFE Amount”, divided by the “Original Issue Price” as described below in the Liquidation Preference section.

Prior to the closing of the “Series B-1 Preferred Stock Sale”, the Company authorized the sale and issuance to the Investors of shares of its Series B-1-A Preferred Stock (the “Series B-1-A Preferred Stock”), Series B-1-B Preferred Stock (the “Series B-1-B Preferred Stock”), Series B-1-C Preferred Stock (the “Series B-1-C Preferred Stock”), Series B-1-D Preferred Stock (the “Series B-1-D Preferred Stock”), Series B-1-E Preferred Stock (the “Series B-1- E Preferred Stock”), Series B-1-F Preferred Stock (the “Series B-1-F Preferred Stock”), and Series B-1-G Preferred Stock (the “Series B-1-G Preferred Stock”, and together with the Series B-1-A Preferred Stock, the Series B-1-B Preferred Stock, the Series B-1-C Preferred Stock, the Series B-1-D Preferred Stock, the Series B-1-E Preferred Stock, and the Series B-1-F Preferred Stock, the “Shares”) and (ii) the issuance of the shares of Common Stock to be issued upon conversion of the Shares (the “Conversion Shares”). The Shares and the Conversion Shares shall have the rights, preferences, privileges, and restrictions set forth in the Restated Certificate.

The aggregate amount of the SAFE liability was $0 and $81.5 million as of December 31, 2022, and 2021, respectively. During the years ended December 31, 2022, and 2021, the change in the fair value of the SAFE liability was $20.4 million and $77.7 million, respectively.

During the years ended December 31, 2021, the Company paid commissions to a crowdfunding provider in the amount of $41.3 thousand representing approximately 1.9% of the gross SAFE proceeds issued to investors for originating the SAFE agreements with investors.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company is subject to legal proceedings which arise in the ordinary course of business.

License Agreement

Through December 31, 2022, the Company paid $1.0M of the fixed license fee and issued 434,782 shares of Class B Common stock equivalent to $4.0 million to Chery. Subsequent to December 31, 2022, this agreement was amended to a fixed fee of the $1 million in cash and issue shares of Class B Non-Voting Common Stock in an amount equivalent to $5.0 million, in two remaining installments corresponding with the milestones set out in the TLA. As of December 31, 2022 the Company recorded $6.9 million of licensing fee expenses related to this agreement using estimated dates of completion for each of the four installment payments. The Company has the right of first refusal to repurchase shares on the same terms.

F-21

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – INCOME TAXES

The Company is capitalizing its startup costs and research and development (R&D) costs until it begins to generate revenue. The Company maintains a 100% valuation allowance against the U.S federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized. During the years ended December 31, 2022 and 2021, the valuation allowance increased by approximately $18.1 million and $5.6 million respectively.

A reconciliation of the U.S federal statutory income tax rate of 21% to the Company’s effective income tax rate from continuing operations is as follows:


	December 31, 2022			December 31, 2021
Expected tax expense (benefit)		(17.2	)		(21.0	)
State Income tax expense (benefit)		(4.3	)		(3.6	)
SAFE liability change in FMV		4.3			11.2
Deferred true up		(0.9	)		(1.0	)
Deferred compensation		—			7.6
Change in valuation allowance		18.1			6.8

Effective income tax rate		0			0

Approximate deferred tax assets resulting from timing differences between financial and tax bases were associated with the following items (in thousands):


	December 31, 2022			December 31, 2021
Deferred tax assets
Start up cost	$	4,538		$	926
Research and development credit		14,435			4,165
Stock compensation		4,741			1,427
Other		—			—
Tax credit carryforward		939			—

Total deferred tax assets		24,653			6,519

Valuation allowance	$	(24,653	)	$	(6,519	)

Net deferred tax assets		—			—

F-22

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

The Company is subject to tax in U.S. federal and state jurisdictions. No net operating losses (NOL) have been generated due to capitalization of start up and research and development costs until the Company begins to generate revenue. As of December 31, 2022, the Company had federal and state research tax credit carryforwards of $0.4 million and $0.5 million, respectively. The federal research credit carryforward will expire in 2041 if unutilized, while the state carryforwards have no expiration. A detailed study of the research tax credit has not been complete for period ended December 31, 2022, and a valuation allowance is expected for the full amount generated. At December 31, 2022 and 2021, the Company had gross deferred tax assets of $24.7 million and $6.5 million respectively. Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the gross deferred tax asset.

The Company’s tax years from 2019 and forward are subject to examination by U.S. federal and state tax authorities. The Company has not been, nor is currently, under examination by any jurisdiction.

NOTE 10 – STOCKHOLDERS’ EQUITY (DEFICIT)

Stock Split

During the year ended December 31, 2021, the Company filed its Certificate of Amendment to the Certificate of Incorporation with the state of Delaware to effect a stock split for its Common Stock at a ratio of 1-for-30 (the “Stock Split”). The stock split converted each share of Class A Common Stock outstanding into thirty (30) shares of Class A Common Stock and each share of Class B Common Stock outstanding into thirty (30) shares of Class B Common Stock, without any further action on the part of the holders. The number of issued and outstanding shares as of December 31, 2020 was increased from 1,706,625 to 51,198,750. The financial statements have been adjusted to reflect the stock split.

Preferred Stock

This corporation has used its authority to issue two classes of stock to be designated, respectively, common stock and preferred stock. The total number of shares of common stock authorized to be issued is 305,000,000, par value $0.0001 per share (the “Common Stock”), 190,000,000 of which shares are designated as “Class A Common Stock” and 115,000,000 of which shares are designated as “Class B Common Stock”. The total number of shares of preferred stock authorized to be issued is 31,304,495, par value $0.0001 per share (the “Preferred Stock”), 217,391 of which shares are designated as “Series B-1-A Preferred Stock,” 379,774 of which shares are designated as “Series B-1-B Preferred Stock,” 4,234,991 of which shares are designated as “Series B-1-C Preferred Stock,” 772,597 of which shares are designated as “Series B-1-D Preferred Stock,” 4,618,667 of which shares are designated as “Series B-1-E Preferred Stock,” 1,071,984 of which shares are designated as “Series B-1-F Preferred Stock,” and 9,091 of which shares are designated as “Series B-1-G Preferred Stock,” (the Series B-1-A Preferred Stock, Series B-1-B Preferred Stock, Series B-1-C Preferred Stock, Series B-1-D Preferred Stock, Series B-1-E Preferred Stock, Series B-1-F Preferred Stock, and Series B-1-G Preferred Stock, collectively, the “Series B-1 Preferred Stock”) and 20,000,000 may be issued from time to time in in order or more series.

The Company created these seven series of Series B-1 Preferred Stock with varying original issue prices that correspond to the Series B-1-A or Cash Shares and six different conversion prices of the Company’s outstanding SAFEs so that the Company could convert all of their outstanding SAFEs into Series B-1 Preferred Stock with the appropriate original issue price as described below.

Voting Rights

The holder of each share of Series B-1 Preferred Stock shall have the right to one vote for each share of Class B Common Stock into which such Series B-1 Preferred Stock could then be converted, and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of Class B Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of this corporation, and except as provided by law or with respect to the election of directors by the separate class vote of the holders of Common Stock, shall be entitled to vote, together with holders of Class B Common Stock, with respect to any question upon which holders of Class B Common Stock have the right to vote. Fractional votes shall not, however, be permitted and any fractional voting rights available on an as converted basis (after aggregating all shares into which shares of Series B-1 Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half (1/2) being rounded upward).

F-23

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Liquidation Preference

In the event of any Liquidation Event (as defined below), either voluntary or involuntary, the holders of each series of Series B-1 Preferred Stock shall be entitled to receive out of the proceeds or assets of this corporation available for distribution to its stockholders (the “Proceeds”), prior and in preference to any distribution of the Proceeds of such Liquidation Event to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of the applicable Original Issue Price (as defined below) for such series of Series B-1 Preferred Stock, plus declared but unpaid dividends on such share. If, upon the occurrence of such event, the Proceeds thus distributed among the holders of the Series B-1 Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then the entire Proceeds legally available for distribution shall be distributed ratably among the holders of the Series B-1 Preferred Stock in proportion to the full preferential amount that each such holder is otherwise entitled to receive under this subsection (a). For purposes of this Restated Certificate of Incorporation, “Original Issue Price” shall mean (i) $9.2000 per share for each share of the Series B-1-A Preferred Stock, (ii) $0.2185 per share for each share of the Series B-1-B Preferred Stock, (iii) $0.2427 per share for each share of the Series B-1-C Preferred Stock, (iv) $0.3851 per share for each share of the Series B-1-D Preferred Stock, (v) $0.4279 per share for each share of the Series B-1-E Preferred Stock, (v) $0.4855 per share for each share of the Series B-1-F Preferred Stock, and (vi) $8.8000 per share for each share of the Series B-1-G Preferred Stock (each as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like with respect to such series of Series B-1 Preferred Stock).

The following table summarizes Series B Preferred Stock liquidation preferences as of December 31, 2022 (dollar amounts in thousands):


	Shares Authorized		Shares Issued and Outstanding		Liquidation Preference Balance
Series B-1-A Preferred Stock		217,391		77,079	$	709
Series B-1-B Preferred Stock		379,774		379,774		83
Series B-1-C Preferred Stock		4,234,991		4,234,991		1,028
Series B-1-D Preferred Stock		772,597		772,597		298
Series B-1-E Preferred Stock		4,618,667		4,618,667		1,976
Series B-1-F Preferred Stock		1,071,984		1,071,984		520
Series B-1-G Preferred Stock		9,091		9,091		80
Series B-1 Preferred Stock		20,000,000		—		—

Total Series B Preferred Stock as of December 31, 2022		31,304,495		11,164,183	$	4,694

Dividend Provisions

The corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate of Incorporation) the holders of the Series B-1 Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B-1 Preferred Stock in an amount at least equal to the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock. After payment of such dividends, any additional dividends or distributions shall be distributed among all holders of Common Stock and Series B-1 Preferred Stock in proportion to the number of shares of Common Stock that would be held by each such holder if all shares of Series B-1 Preferred Stock were converted to Common Stock at the then-effective Conversion Rate.

F-24

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Right to Convert

Each share of Series B-1 Preferred Stock shall be convertible, at the option of the holder thereof, at any time after the date of issuance of such share, and without the payment of additional consideration by the holder thereof, at the office of this corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Class B Common Stock as is determined by dividing the applicable Original Issue Price for such series by the applicable Conversion Price (as defined below) for such series (the conversion rate for a series of Series B-1 Preferred Stock into Class B Common Stock is referred to herein as the “Conversion Rate” for such series), determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The initial “Conversion Price” per share for each series of Series B-1 Preferred Stock shall be the Original Issue Price applicable to such series; provided, however, that the Conversion Price for the Series B-1 Preferred Stock shall be subject to adjustment as set forth in subsection 4(d).

Automatic Conversion

Each share of Series B-1 Preferred Stock shall automatically be converted into shares of Class B Common Stock at the Conversion Rate at the time in effect for such series of Series B-1 Preferred Stock immediately upon the earlier of (i) the closing of this corporation’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, that results in at least $75,000,000 of gross proceeds to this corporation (a “Qualified Public Offering”), following which, this corporation’s shares are listed for trading on the New York Stock Exchange, Nasdaq Global Select Market or Nasdaq Global Market or (ii) the date, or the occurrence of an event, specified by vote or written consent or agreement of the holders of a majority of the then outstanding shares of Series B-1 Preferred Stock (voting together as a single class and not as separate series, and on an as-converted basis).

Class A Common Stock

We have authorized the issuance of 190,000,000 shares of our Class A common stock with $0.0001 par value. During the year ended December 31, 2022, the Company issued 1,410,179 shares of our Class A common stock at a weighted average price of approximately $8.87 per share for total proceeds of $10.2 million. During the year ended December 31, 2021, the Company issued 3,105,881 shares of our Class A common stock at price of approximately $1.75 per share for net proceeds of $5.4 million.

Class B Common Stock

We have authorized the issuance of 115,000,000 shares of our Class B common stock with $0.0001 par value. These shares do not have voting rights. During the year ended December 31, 2022, the Company issued 3,564,715 shares of our Class B common stock at a weighted average price of $9.16 per share for net proceeds of $29.0 million. During the year ended December 31, 2021, the Company issued 5,298,157 shares of our Class B common stock at a weighted average price of $5.31 per share for net proceeds of $29.0 million.

The Company has engaged Dalmore Group, LLC, member FINRA/SIPC (“Dalmore”), to perform administrative and technology related functions in connection with its 1-A offering, but not for underwriting or placement agent services. This agreement includes a 1% commission. As of December 31, 2022, the Company has also engaged Issuance, Inc. to perform marketing services in relation to its 1-A offering. Fees paid to and accrued as of December 31, 2022, for Issuance, Inc. have been offset against additional paid-in capital as of December 31, 2022.

In addition, The Company is also listing our securities on the “Republic Platform”, a platform operated for the benefit of OpenDeal Broker LLC (“OpenDeal”). Dalmore and OpenDeal will each be referred to as the “Broker” as context permits. For sales on the Republic Platform, in addition to the fee paid to Dalmore, we will pay OpenDeal a cash commission equal to 4.75% of the value of the Class B Common Stock sold on the Republic Platform and a non-cash commission in Class B Common Stock equal to 2% of the total number of Class B Common Stock sold in the Offering. The fee amounts are based on the maximum fees that broker-dealers could receive in this Offering. Fees paid to Republic as of December 31, 2022 will be offset against additional paid-in capital in the future.

F-25

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – STOCK-BASED COMPENSATION

Stock Option Plan

In June 2021, the Company adopted a Stock Option and Incentive Plan known as the Company’s “2021 Stock Option and Incentive Plan” (the “Plan”). The Plan allows the Company and any future subsidiaries to grant securities of the Company to employees, directors, and consultants. The objective of the issuance of options and awards is to promote the growth and profitability of the Company because the grantees will be provided with an additional incentive to achieve the Company’s objectives through participation in its success and growth and by encouraging their continued association with or service to the Company.

The Plan is administered by the Company’s Committee as defined in the Plan. The maximum aggregate number of common stock shares that may be granted under the Plan is 19,000,000. The Plan generally provides for the grant of incentive stock options, non-incentive stock options and restricted stock. The Committee has full discretion to set the vesting criteria. The exercise price of the stock option may not be less than 100% of the fair market value of the Company’s common stock on the date of grant. The Plan prohibits the repricing of outstanding stock options without prior shareholder approval. The term of stock options granted under the Plan may not exceed ten years. The Board may amend, alter, or discontinue the Plan, but shall obtain shareholder approval of any amendment as required by applicable law.

The number of shares of common stock that remain available for issuance under the Plan, was 8,002,206 and 8,937,056 as of December 31, 2022 and 2021, respectively.

The Company’s outstanding stock options generally expire 10 years from the date of grant and are exercisable when the options vest. Stock options generally vest over four years, one-quarter of such shares vesting on each year anniversary of the vesting commencement date. A summary of stock option activity is as follows (aggregate intrinsic values in thousands):


	Options			Weighted average exercise price		Aggregate Intrinsic value		Weighted average grant date fair value		Weighted average remaining contractual term
Balance at December 31, 2020		—		$	—	$	—	$	—
Granted		10,062,944			3.87				3.21
Exercised		—			—
Cancelled		—			4.85
Balance at December 31, 2021		10,062,944		$	3.87	$	49,586	$	3.21		9.5

Granted		2,928,643			9.11				7.04		9.3
Exercised		—			—				—		—
Cancelled		(1,993,793	)		4.85				3.75
Outstanding and expected to vest at December 31, 2022		10,997,794		$	5.15	$	58,823	$	4.28		8.8

Vested and exercisable at December 31, 2022		3,173,708		$	3.93	$	20,855	$	3.25		8.6

F-26

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to December 31, 2022, the Company issued 965,180 options to employees and consultants and accelerated the vesting of 3,150,227 new hire stock options for employees, directors and consultants.

The total fair value of stock options granted during the years ended December 31, 2022 and 2021, respectively was approximately $20.5 million and $32.3 million, respectively, which is recognized over the respective vesting periods. The total fair value of stock options vested during the years ended December 31, 2022 and 2021 was approximately $9.2 million and $1.1 million, respectively.

The Company estimates the fair value of the options utilizing the Black-Scholes option pricing model, which is dependent upon several variables, including expected option term, expected volatility of the Company’s share price over the expected term, expected risk-free interest.


	Year Ended December 31, 2022			Year Ended December 31, 2021
Weighted average risk-free interest rate		2.61	%		1.03	%
Weighted average expected volatility		95.6	%		93.7	%
Weighted average expected term (in years)		6.19			6.95
Expected dividend yield		0.0	%		0.0	%
Exercise price	$	5.15		$	3.87

The allocation of stock-based compensation expense for the years ended December 31, 2022 and 2021, was as follows (in thousands):


	Year Ended December 31, 2022		Year Ended December 31, 2021
General, selling, and administrative	$	7,910	$	3,773
Research and development		3,933		1,327

Total stock-based compensation	$	11,843	$	5,100

The number of stock options granted to officers for the years ended December 31, 2022 and 2021, was as follows:


	Year Ended December 31, 2022		Year Ended December 31, 2021
Chris Anthony (CEO/Director)		—		540,000
Steve Fambro (CEO/Director)		—		540,000
Brian Snow (Director)		594,737		—
Doug Lui (Director)		600,000		—

As of December 31, 2022 and 2021, the total unrecognized compensation cost related to outstanding time-based options was $27.4 million and $27.2 million, respectively, which is expected to be recognized over a weighted-average period of 2.78 and 3.6 years, respectively.

F-27

APTERA MOTORS CORP.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – RELATED PARTY TRANSACTIONS

For the year ended December 31, 2022, the Company paid $0.3 million in design services provided by a vendor controlled by the Head of Design and $0.1 million for investment advisory services provided by a director of the company.

NOTE 13 – SUBSEQUENT EVENTS

Regulation A Investment

Subsequent to December 31, 2022, the Company has closed 1,292,489 shares of Class B common stock for $13.6 million of investment through the Regulation A offering.

Stock Options

In April of 2023, the board of directors voted to issue annual option grants under the Plan to existing employees and consultants in the amount of 965,180. Additionally, there was a vote to accelerate vesting on 3,150,227 new hire stock options for employees, directors and consultants.

Common Stock Issued for Services

In January of 2023 the Company issued 201,004 shares of Class B common stock for consulting services and an employee bonus.

California Energy Commission Grant

Andromeda Sale

In April of 2023 the Company signed a settlement agreement where Aptera agrees to assign all of its right, title and interest in and to the capital stock of AI to each of the Andromeda Interfaces Founders (“AI Founders”) and in return agree to assign all of their right, title and interest in and to their Aptera Shares to Aptera, specifically, 251,087 shares of Aptera common stock, which represents the entire share consideration received under the Merger Agreement.

Aptera shall own all right, title, and interest in and to any Intellectual Property made, invented, developed, created, conceived or reduced to practice as a result of work conducted pursuant the AI Founders employment by, and services to or on behalf of, Aptera since April 1, 2022, or otherwise created jointly with Aptera or Andromeda since such date, through April 2023. Each AI Founder will assign and otherwise transfer to Aptera all such right, title, and interest in and to such Intellectual Property as is necessary to fully effect the foregoing. AI Founders will retain ownership of the design and intellectual property to certain products it had prior to being acquired.

The Company has evaluated subsequent events that have occurred through April 28, 2023, which is the date that the financial statements were available to be issued and determined that there were no subsequent events or transactions that required recognition or disclosure in the financial statements.

F-28

ITEM 8.

EXHIBITS

The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this report, in each case as indicated below.

2.1 Restated Certificate of Incorporation (5)

2.2 Bylaws (2)

4.1 Form of Subscription Agreement (1)

5.1 Form of Voting Agreement (4)

6.1 2021 Stock Option and Incentive Plan (3)

6.2 Andromeda Interfaces Inc. Agreement and Plan of Merger and Settlement Agreement*

6.3 Chery Supply Agreement as amended

6.4 Option Agreement with Chris Anthony (3)

6.5 Option Agreement with Jannies Burlingame (3)

6.6 Option Agreement with Steve Fambro (3)

6.7 Single Tenant Lease – Net between the Company and EV 2340, LLC (4)

6.8 Lease between the Company and H.G. Fenton Property Company (4)

8.1 Escrow Agreement (6)

(1)	Incorporated by reference to the Company’s Form 1-A filed with the SEC on March 9, 2021.

(2)	Incorporated by reference to the Company’s Form 1-A/A filed with the SEC on April 30, 2021.

(3)	Incorporated by reference to the Company’s Form 1-K filed with the SEC on May 2, 2022.

(4)	Incorporated by reference to the Company’s Form 1-A POS filed with the SEC on July 13, 2022.

(5)	Incorporated by reference to the Company’s Form 1-U filed with the SEC on August 25, 2022.

(6)	Incorporated by reference to the Company’s Form 1-U filed with the SEC on December 9, 2022.

*	Portions of this exhibit have been omitted

SIGNATURES

Pursuant to the requirements of Regulation A, the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

/s/ Chris Anthony

Co-Chief Executive Officer

Date: April 28, 2023

Pursuant to the requirements of Regulation A, this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.

/s/ Chris Anthony

Co-Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer, Director

Date: April 28, 2023

/s/ Steve Fambro

Steve Fambro, Co-Chief Executive Officer, Director

Date: April 28, 2023

/s/ Doug Lui

Doug Lui, Director

Date: April 28, 2023

/s/ Brian W. Snow

Brian W. Snow, Director

Date: April 28, 2023

Exhibit 6.2

Execution Version

AGREEMENT AND PLAN OF MERGER

by and among

ANDROMEDA INTERFACES INC.

(“Company”)

Brian Gallagher and Kevin Coelho

(“Sellers”)

THE REPRESENTATIVE NAMED HEREIN

(“Sellers Representative”)

APTERA MOTORS CORP.

(“Parent”)

And

APTERA MERGERCO, LLC

(“Merger Sub”)

April 1, 2022

TABLE OF CONTENTS


		Page
ARTICLE 1 THE MERGER			1
1A.	The Merger		1
1B.	Consummation of the Merger		1
1C.	Effect of the Merger		2
1D.	Further Assurances		2

ARTICLE 2 SURVIVING COMPANY			2
2A.	Articles of Incorporation		2
2B.	Bylaws		2
2C.	Name		2
2D.	Directors		2
2E.	Officers		2

ARTICLE 3 CONVERSION OF SECURITIES			3
3A.	Conversion of Merger Sub Equity Unit		3
3B.	Conversion of Company Stock		3

ARTICLE 4 CLOSING; PAYMENT OF MERGER CONSIDERATION			3
4A.	Closing		3
4B.	Closing Merger Consideration		3
4C.	Closing of Transfer Books		3
4D.	Additional Earnout Amount		3
4F.	Options		5

ARTICLE 5 CLOSING DELIVERABLES			5
5A.	Conditions to Parent’s and Merger Sub’s Obligations		5
5B.	Conditions to Sellers’ and Company’s Obligations		6

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF COMPANY			7
6A.	Organization and Corporate Power		7
6B.	Company Stock		8
6C.	Subsidiaries		8
6D.	Authorization; No Breach		8
6E.	Financial Statements; Undisclosed Liabilities; Accounts Receivable		9
6F.	Absence of Certain Developments		10
6G.	Good Title to Assets		10
6H.	Tax Matters		10
6I.	Company Major Contracts		12
6J.	Intellectual Property		12
6K.	Legal Proceedings		12
6L.	Brokerage		12
6M.	Employee Benefit Plans		12
6N.	Insurance		13
6O.	Compliance with Applicable Laws		13
6P.	Employees		13
6Q.	Affiliate Transactions		13
6R.	Bank Accounts; Names and Locations		14


6S.	No Restrictions on the Merger	14
6T.	Common Shares of Parent	14

ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		15
7A.	Organization and Corporate Power	15
7B.	Authorization; No Violation	15
7C.	Consents	15
7D.	Vote Required	15
7E.	Brokerage	16
7F.	Tax Representations	16
7G.	Common Shares	16

ARTICLE 8 ADDITIONAL AGREEMENTS		16
8A.	Survival of Representations and Warranties	16
8B.	Indemnification by Sellers	17
8C.	Indemnification by Parent Parties	18
8D.	Indemnification Payments	18
8E.	Indemnification Procedures	18
8F.	Certain Tax Matters	20
8G.	Press Release and Announcements	21
8H.	Mutual Assistance	21
8I.	Designation of the Sellers Representative	22
8J.	Authority and Rights of the Sellers Representative	22
8K.	Expenses	22
8L.	General Release	22
8M.	Confidentiality	23

ARTICLE 9 MISCELLANEOUS		23
9A.	Definitions	23
9B.	Amendment and Waiver	23
9C.	Notices	24
9D.	Assignment	25
9E.	Severability	25
9F.	Third-Party Beneficiaries and Obligations	25
9G.	No Strict Construction	25
9H.	Interpretation	25
9I.	The Disclosure Schedule	26
9J.	Complete Agreement	26
9K.	Counterparts	26
9L.	Governing Law	26
9M.	Dispute Resolution; Consent to Jurisdiction; Waiver of Jury Trial	26

LIST OF EXHIBITS


Exhibit A		Definitions
Exhibit B		Certificate of Merger
Exhibit C		Letter of Transmittal
Exhibit D		Allocations

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”) is entered into as of April 1, 2022, by and among each of Brian Gallagher, an individual and Kevin Coelho, an individual (the “Sellers”), Brian Gallagher, solely in his capacity as representative as set forth in this Agreement (the “Sellers Representative”), Andromeda Interfaces Inc., a California corporation (the “Company”), Aptera Motors Corp., a Delaware corporation (“Parent”), and Aptera Mergerco, LLC, a Delaware limited liability company (“Merger Sub”), which is a wholly-owned Subsidiary of Parent.

WHEREAS, the boards of directors and/or managers, respectively, of Company, Parent, and Merger Sub, and the Sellers have approved this Agreement and the merger of Company with and into Merger Sub upon the terms and conditions set forth in this Agreement and in accordance with Delaware Limited Liability Company Act and the California Corporation Code (the “Merger”). Merger Sub and Company are hereinafter sometimes referred to collectively as the “Constituent Corporations.”

WHEREAS, each of Parent and the Sellers have approved this Agreement and the Merger.

WHEREAS, all of the capital stock in Company (the “Company Stock”) are owned by the Sellers.

WHEREAS, the entire membership interest in Merger Sub (the “Merger Sub Equity Units”) is owned by Parent.

WHEREAS, upon consummation of the Merger, the Sellers will subscribe for 251,087 class A common shares (“Common Shares”) of Parent.

WHEREAS, the parties hereto intend that the Merger qualify as a “reorganization” described in Section 368(a)(2)(E) of the Code and that this Agreement (and any associated documents) constitute a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g).

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties and covenants herein contained, and intending to be legally bound, the parties hereto hereby agree as follows:

ARTICLE 1

THE MERGER

1A. The Merger. On and subject to the terms and conditions contained herein, at the Effective Time, Merger Sub shall be merged with and into the Company, with the Company being the surviving company in the Merger (the Company, as the surviving company after the Merger, is sometimes referred to herein as the “Surviving Company”).

1B. Consummation of the Merger. On the Closing Date, subject to satisfaction or waiver of the conditions specified in Article 5 hereof, Company and Merger Sub shall execute certificate of mergers, each in the forms of Exhibit B attached hereto (each a “Certificate of Merger”) in accordance with the relevant provisions of the Delaware Act and the California Act and cause each Certificate of Merger to be filed with the Secretary of State for each of the State of Delaware and the State of California. The Merger shall be effective at such time as the Certificate of Merger is duly filed with the Secretary of State of each of the State of Delaware and the State of California or such later date and time as may be specified in the Certificate of Merger by mutual agreement of Company and Merger Sub (the “Effective Time”).

1C. Effect of the Merger. The Merger shall have the effect as provided in the Delaware Act and the California Act, including that, upon the effectiveness of the Merger, (i) the separate existence of Merger Sub shall cease (except as may be continued by operation of law), (ii) Company shall be Surviving Company of the Merger, (iii) Surviving Company shall possess all of the rights, privileges, powers and franchises of each of the Constituent Corporations, and all property (real, personal and mixed) and all debts due to any of the Constituent Corporations in whatever amount, as well as all other things in action or belonging to each of the Constituent Corporations, shall be vested in Surviving Company, (iv) all property, rights, privileges, powers and franchises and each and every other interest shall be thereafter as effectually the property of Surviving Company as they were of the Constituent Corporations, and the title to any real estate vested by deed or otherwise in any of the Constituent Corporations shall not revert or be in any way impaired by reason of the Merger, and (v) all rights of creditors and all liens upon any property of any of the Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall henceforth attach to Surviving Company and may be enforced against it to the same extent as if such debts, liabilities and duties had been incurred or contracted by it and Surviving Company shall timely pay such debts, liabilities and duties.

1D. Further Assurances. If, at any time after the Effective Time, Surviving Company shall consider or be advised that any further deeds, assignments or assurances in Law or any other acts are necessary, desirable or proper to vest, perfect or confirm, of record or otherwise, in Surviving Company the title to any property or right of the Constituent Corporations acquired or to be acquired by reason of, or as a result of, the Merger or to otherwise carry out the purposes of this Agreement or effect the Merger, Sellers and Parent shall, and Parent shall cause Surviving Company and its officers and directors to, execute and deliver all such deeds, assignments and assurances in Law and do all acts necessary, desirable or proper to vest, perfect or confirm title to such property or right in Surviving Company, and Sellers and Parent and the officers and directors of Surviving Company are fully authorized in the name of the Constituent Corporations or otherwise to take any and all such action solely for the purposes set forth in this Section 1D.

ARTICLE 2

SURVIVING COMPANY

2A. Articles of Incorporation. The Certificate of Merger shall provide that the articles of incorporation of Surviving Company as in effect immediately prior to the Effective Time shall be the articles of incorporation as in effect immediately after the Effective Time.

2B. Bylaws. The Bylaws of the Company, as in effect at the Effective Time, shall be the Bylaws of Surviving Company.

2C. Name. The name of the Company shall be the name of the Surviving Company.

2D. Directors. The directors of the Company, as of the Effective Time and until their respective successors are duly elected and qualified in the manner provided in the Articles of Incorporation and Bylaws of Surviving Company or until their earlier death, resignation or removal as otherwise provided by applicable Law, shall be the following: Chris Anthony and Steve Fambro.

2E. Officers. The officers of Company, as of the Effective Time and until their successors are duly elected and qualified in the manner provided in the Articles of Incorporation and Bylaws of Surviving Company or until their earlier death, resignation or removal as otherwise provided by applicable Law, shall be the following: Chris Anthony as President and Steve Fambro as Secretary.

ARTICLE 3

CONVERSION OF SECURITIES

3A. Conversion of Merger Sub Equity Unit. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, Sellers or Company, the Merger Sub Equity Units issued and outstanding immediately prior to the Effective Time shall be converted into fully paid and non-assessable common shares, no par value per unit, of Surviving Company.

3B. Conversion of Company Stock. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, Sellers or Company, each share Company Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive validly issued, fully paid and non-assessable Common Shares of Parent in such amounts as are set forth herein. Parent shall cause the Company’s transfer agent to register on the Company’s books and records such Shares in the name of each Seller as set forth in the Letter of Transmittal, substantially in the form attached hereto as Exhibit C. Each unexercised Company option to purchase Company Stock (whether or not vested) that are then outstanding shall automatically be cancelled and retired and shall cease to exist. Prior to the Effective Time, Company shall take such steps as is necessary so that at the Effective Time all Company options then outstanding shall be cancelled. As of the Effective Time, Sellers shall cease to have any rights with respect to the Company Stock except the right to receive the Common Shares in accordance with the foregoing.

ARTICLE 4

CLOSING; PAYMENT OF MERGER CONSIDERATION

4A. Closing. On the terms and subject to the conditions set forth in this Agreement, the closing of the Merger and the transactions contemplated by this Agreement (the “Closing”) shall be consummated immediately prior to the Effective Time by the exchange of signatures by PDF or other electronic transmission or, if such exchange is not practicable, at the offices of Eversheds Sutherland (US) LLP, 999 Peachtree Street, NE, Atlanta, Georgia 30309, at 10:00 a.m. local time, on the second Business Day following the satisfaction or waiver of the conditions set forth in Article 5 hereof (other than conditions which by their terms are to be performed at the Closing, provided that such conditions are satisfied at the Closing); provided that in no event shall the Closing take place prior to the fifth Business Day following the date hereof unless otherwise agreed in writing by Parent and Sellers Representative. The date on which the Closing shall occur is referred to herein as the “Closing Date.” On the Business Day immediately prior to the Closing Date, Parent and Company shall conduct a pre-Closing at the same location as the Closing, commencing at 10:00 a.m. local time, at which each party shall present for review by the other parties copies in execution form of all documents required to be delivered by such party at the Closing. At the Closing, (i) Parent and Merger Sub shall deliver to Sellers and Company all of the certificates, instruments and documents required to be delivered by such Person under Section 5B in order for the conditions of Sellers and Company to be satisfied, (ii) Sellers and Company shall deliver to Parent and Merger Sub all of the certificates, instruments and documents required to be delivered by such Person under Section 5A in order for the conditions of Parent and Merger Sub to be satisfied.

4B. Closing Merger Consideration. The “Company Closing Merger Consideration” shall be payable to Sellers and equal to the sum 251,087 Common Shares.

4C. Closing of Transfer Books. At the Effective Time, the equity transfer books of Company shall be closed, and no transfer of Company Stock shall be made thereafter.

4D. Additional Earnout Amount. In addition to the Company Closing Merger Consideration, Sellers shall be eligible to receive an additional Earnout Amount as contemplated by this Section 4D.

(i) Definitions.

(a) “Actual Revenue” means all gross revenues generated in the ordinary course of business by the Company, which shall be recognized upon receipt of invoiced monies from customers.

(b) “Additional Earnout Amount” means the amount paid to Sellers for each Measurement Year, being $60,000 for the first Measurement Year, and $90,000 for the second Measurement Year.

(d) “Target Revenue” means with respect to the first Measurement Year, $500,000 and with respect to the second Measurement Year, $750,000.

(ii) Calculation. The Sellers will collectively earn an Additional Earnout Amount with respect to each Measurement Year to the extent the Actual Revenue for such Measurement Year is greater than the Target Revenue. Within ninety (90) days after the end of each Measurement Year, Parent shall prepare and provide to Sellers a written report (the “Revenue Report”) that sets forth the Actual Revenue for such Measurement Year and the calculation of the Additional Earnout Amount earned with respect to such Measurement Year together with supporting detail. Parent shall cause its Chief Financial Officer to be reasonably available to discuss the Revenue Report with Sellers after its delivery. If Sellers object to the calculation of Actual Revenue and/or the Additional Earnout Amount for such Measurement Year, they shall give notice of their objection in writing no later than the forty-fifth (45^th) day after delivery of the Revenue Report. If the parties are unable to agree as to all disputed aspects of the Revenue Report within thirty (30) days after notice of the good faith objection is given, then the aspects unresolved will be submitted to arbitration as provided in Section 9M below to resolve the dispute and make a determination that will be binding on the parties (it being expressly understood and agreed that if such objections cannot be resolved by mutual agreement, it is the intention of the parties that any such claim will be resolved by arbitration).

(iii) Payment. With respect to each Measurement Year in which Sellers earn Additional Earnout Amount, Parent shall pay such Additional Earnout Amount to Sellers no later than twenty (20) days following the final determination of the Additional Earnout Amount for such Measurement Year.

(iv) Acceleration Provision. If at any time prior to the second anniversary of the Closing Date, Parent sells all or substantially all of the assets used by the Company, or the Company undergoes a Change of Control (as defined below), Parent shall, no later than thirty (30) days following any such sale or Change of Control, pay to Sellers the Additional Earnout Amount for each remaining Measurement Year whether or not the Target Revenue has been achieved. For purposes of this subsection, a “Change of Control” of the Company shall occur if there is a merger, consolidation, transaction or series of transactions in which the shareholders of the Company immediately prior thereto own less than 50% of the capital stock of the surviving company immediately following such transaction. In addition, if the Additional Earnout Amount becomes payable as a result of a Change of Control or in the event a Seller is terminated without Cause (as defined below) or such Seller resigns with Good Reason (as defined below) (any such event, an “Acceleration Event”), such Additional Earnout Amount shall be increased in respect of each of the accelerated Measurement Years by an amount equal to the difference between (x) $360,000 and (y) the number of months in such Measurement Year that have elapsed multiplied by $30,000, and then divided by two as needed to apply to each Seller who experiences an Acceleration Event.

4F. Options. In addition to the Company Closing Merger Consideration, the Sellers shall also be awarded such amount of stock options of Parent, as more particularly described in each Seller’s stock option agreement. In the event of any Acceleration Event, up to two (2) years’ worth of stock options so awarded shall accelerate and become fully vested without further action. For purposes of this subsection, “Cause” means Employee’s (i) conviction of, or the entry of a plea of guilty or no contest to, a felony; (ii) gross negligence or willful misconduct with respect to the Company, including, without limitation fraud, embezzlement, or theft in the course of Employee’s employment; (iii) refusal to perform any lawful written instruction from the management of the Company and/or the Parent, which is reasonable and consistent with Employee’s position and scope of duties or a refusal to perform a material duty Employee has to the Company (other than due to a disability, as determined by Employee’s doctor) following written notice from the Company detailing such refusal; and (iv) material breach of any applicable employment agreement between the Seller and the Company and/or the Parent, or other legal duty owed to the Company hereunder and failure to cure any refusal specified in clause (iii) or breach specified in clause (iv) within fifteen (15) days after written notice from the Company specifying such failure or breach in reasonable detail. For purposes of this subsection, “Good Reason” means any one of the following: (i) the reduction of Employee’s base salary, target annual performance bonus or material reduction in employee benefits, (ii) the assignment to Employee of any duties materially and negatively inconsistent in any respect of Employee’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or any other action by the Company that results in a material diminution in the Employee’s position, authority, duties or responsibilities; or (iii) the Company’s material breach of this Agreement

4H. Other Agreements.

(i) At or prior to Closing, Sellers shall be entitled to withdraw from the Company all cash, which is in excess of $30,000, from the Company’s bank accounts for the sole benefit of Sellers.

(ii) At closing, Parent agrees to pay on behalf of and for the benefit of Sellers, Sellers’ legal fees in an amount not to exceed $15,000, directly to Sellers’ legal counsel by wire transfer in immediately available funds.

ARTICLE 5

CLOSING DELIVERABLES

5A. Conditions to Parent’s and Merger Sub’s Obligations. The obligation of Parent and Merger Sub to consummate the Merger is subject to the satisfaction, or waiver by Parent, of each of the following conditions as of immediately prior to the Effective Time:

(i) Simultaneously with Closing, Company shall have delivered to Parent (a) certified copies of the resolutions or consents of Company’s board of directors authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and thereby; (b) the resignations, effective as of the Closing, of each member of the board of directors of Company; and (c) a good standing certificate for Company from its jurisdiction of incorporation, in each case dated not more than twenty (20) days prior to the Closing Date;

(ii) Simultaneously with Closing, each Seller shall have delivered to Parent (a) a Letter of Transmittal in the form attached hereto as Exhibit C; (b) to the extent a Seller is an entity, (I) certified copies of the resolutions or consents of each such Seller’s managers or board of directors authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and thereby; and (II) a good standing certificate for such Seller from its jurisdiction of organization, dated not more than twenty (20) days prior to the Closing Date; and (c) such other documents or instruments as are required to be delivered by Sellers at the Closing pursuant to the terms hereof;

(iii) Simultaneously with Closing, each Seller shall have delivered to Parent a properly completed IRS Form W-9 or IRS Form W-8, as applicable, and such other tax certifications as reasonably determined by the Parent to be necessary or appropriate.

(iv) Parent, Merger Sub, Sellers and Company, shall have received or obtained all governmental and regulatory consents, novations, approvals, licenses and authorizations listed on Schedule 5A(vi);

(v) Except as disclosed on Schedule 5A(vii), no Action shall be pending or overtly threatened in writing by or before any Governmental Entity or any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would reasonably be expected to (a) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby, (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (c) affect adversely the right of Parent to operate the businesses of or control Surviving Company, (d) affect adversely the right of Surviving Company to own their respective assets or control their respective businesses or (e) result in any material damages being assessed against Surviving Company, and no such injunction, judgment, order, decree or ruling shall have been entered or be in effect;

(vi) Company shall have submitted to Parent (a) documentation reasonably satisfactory to Parent from all advisors, investment bankers, lawyers, accountants and other professional advisors to Company in connection with the transactions contemplated by this Agreement evidencing which Company Expenses have been paid by Company in cash prior to the Closing, and (b) documentation reasonably satisfactory to Parent setting forth all Company Expenses that remain unpaid as of the Closing, including payoff instructions therefor; and

(vii) Company shall have given all required notices to third parties and obtained all required third party consents in connection with Company’s execution and performance of this Agreement, including, but not limited to, the written consent of the United States Small Business Administration and Guardian Piazza D’Oro LLC (as the Company’s landlord).

Unless otherwise specifically provided herein, all proceedings to be taken by Company or the Sellers Representative in connection with the consummation of the transactions contemplated hereby, and all agreements, certificates, instruments and other documents required to be delivered by Company or the Sellers Representative to effect the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to Parent. Any condition specified in this Section 5A may be waived by Parent if such waiver is set forth in a writing duly executed and delivered by Parent to the Sellers Representative.

5B. Conditions to Sellers’ and Company’s Obligations. The obligation of Sellers and Company to consummate the Merger is subject to the satisfaction, or waiver by each Sellers, of each of the following conditions as of immediately prior to the Effective Time:

(i) Simultaneously with Closing, Parent shall have delivered to Company and each Seller (a) certified copies of the resolutions or consents of Parent’s board of directors authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and thereby; (b) a good standing certificate for Parent from the Secretary of State of the State of Delaware dated not more than twenty (20) days prior to the Closing Date; and (c) certified copies of the unanimous written consent of Parent, as the sole member of Merger Sub, authorizing the execution, delivery and performance of this Agreement and the other agreements contemplated hereby and thereby;

(ii) No Action shall be pending before any Governmental Entity or any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would reasonably be expected to (a) prevent the performance of this Agreement or the consummation of any of the transactions contemplated hereby or declare unlawful any of the transactions contemplated hereby or (b) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such injunction, judgment, order, decree or ruling shall be in effect;

(iii) Parent, Merger Sub, Sellers and Company, shall have received or obtained all governmental and regulatory consents, novations, approvals, licenses and authorizations listed on Schedule 5A(vi);

(iv) Sellers shall have received or obtained from Parent or Company, employment agreements executed by Parent or Company; and

(v) If the Common Shares are certificated, then Sellers shall have received stock certificates representing the number of Common Shares equal to the Company Closing Merger Consideration.

Unless otherwise specifically provided herein, all proceedings to be taken by Parent and Merger Sub in connection with the consummation of the transactions contemplated hereby, and all agreements, certificates, instruments and other documents required to be delivered by Parent and Merger Sub to effect the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to Sellers. Any condition specified in this Section 5B may be waived by each Seller and Company if such waiver is set forth in a writing duly executed and delivered by Sellers Representative to Parent.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF COMPANY

As an inducement to Parent and Merger Sub to enter into this Agreement, each of the Sellers hereby represents and warrant as of the date of this Agreement and as of the Closing Date as follows:

6A. Organization and Corporate Power. Company is a corporation duly incorporated validly existing and in good standing under the Laws of the State of California. To the extent that a failure to do so would cause a Material Adverse Effect on Company, Company is qualified to do business as a foreign entity and is in good standing in each jurisdiction in which its conduct of business or ownership of property requires it to qualify. Company has all requisite corporate power and authority necessary to own and operate its properties and to carry on its businesses as now conducted and presently proposed to be conducted and to execute and consummate the transactions contemplated by this Agreement. The copies of Company’s Organizational Documents, which have been each made available to Parent, reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete in all material respects. The minute books and record books of Company are correct and complete in all material respects. Company is not in default under or in violation of any provision of its articles of organization or operating agreement. Schedule 6A of the Disclosure Schedule sets forth a list all of the officers and directors of Company.

6B. Company Stock.

(i) The authorized equity of Company consists of the Company Stock which are issued and outstanding and owned beneficially and of record by all of the Sellers. Company has not violated any securities Laws in connection with the offer, sale or issuance of the Company Stock. All of the Company Stock have been duly authorized and validly issued, and such Company Stock are owned free and clear of all Encumbrances (other than any Permitted Equity Liens) and are not subject to, nor were they issued in violation of, any purchase option, call option, right of first refusal or offer, co-sale or participation right, preemptive right, subscription right or similar right. There are no declared or accrued but unpaid dividends with respect to the Company Stock.

(ii) There are no outstanding securities, options, warrants, calls, rights, convertible or exchangeable securities or contracts or obligations of any kind (contingent or otherwise) to which Company is a party or by which it is bound obligating Company, directly or indirectly, to issue, deliver or sell, or cause to be issued, delivered or sold, additional Company stock or other securities of Company or obligating Company to issue, grant, extend or enter into any such security, option, warrant, call, right, contract or obligation. There are no outstanding obligations of Company (contingent or otherwise) to repurchase, redeem or otherwise acquire, directly or indirectly, any portion of the Company Stock (or options or warrants to acquire any such units), and there are no outstanding rights to cause Company to register its securities or which otherwise relate to the registration of any securities of Company. There are no outstanding unit-appreciation rights, unit-based performance units, “phantom” unit rights or other contracts or obligations of any character (contingent or otherwise) pursuant to which any Person is or may be entitled to receive any payment or other value based on the revenues, earnings or financial performance, unit price performance or other attribute of Company or its businesses or assets or calculated in accordance therewith (other than payments or commissions to sales representatives of Company based upon revenues generated by it without augmentation as a result of the transactions contemplated hereby, in each case in the ordinary course of business consistent with past practice). Except for Company’s Organizational Documents, there are no agreements between the Sellers, on the one hand, and any other Person, on the other hand, with respect to the voting or transfer of the Company Stock or with respect to any other aspect of Company’s affairs. Except as set forth on Schedule 6E of the Disclosure Schedule, there are no bonds, debentures, notes or other indebtedness of Company outstanding, whether convertible into any membership or equity interest of the Company or not.

6C. Subsidiaries. The Company does not have any Subsidiaries, and the Company has never had any prior Subsidiaries. Company does not own or hold the right to acquire any shares of stock or any other equity security in any other Person.

6D. Authorization; No Breach.

(i) The board of directors or managers of the Company and the Sellers (to the extent a Seller is an entity), by resolutions duly adopted at a meeting duly called and held, or by written consent in lieu of a meeting of the board of directors or managers of the Company and the Sellers, have unanimously (a) approved and authorized the execution and delivery of this Agreement, (b) approved the consummation of the transactions contemplated hereby, including the Merger, and (c) determined that the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby are advisable. No other act (corporate or otherwise), other than the execution by Sellers of this Agreement, or other proceeding on the part of Company is necessary to authorize the execution, delivery or performance of this Agreement or the other agreements contemplated hereby and the consummation of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by Company and constitutes a valid and

binding obligation of Company enforceable in accordance with its terms. Each of the agreements contemplated hereby, when executed and delivered, shall have been duly executed and delivered by Company and constitute the valid and binding obligation of Company, enforceable in accordance with its terms. The consent of the board of directors of the Company and the Sellers are the only votes, consents, approval or other corporate actions of the holders of the Company Stock necessary to approve, authorize and adopt this Agreement, the Merger, the other agreements contemplated hereby and the other transactions contemplated hereby and thereby and to consummate the Merger and the other transactions contemplated hereby and thereby. The Sellers owns (beneficially and of record) 100% of the Company Stock.

(ii) Except as set forth on Schedule 6D(ii), the execution and delivery of this Agreement by Company and the consummation of the transactions contemplated hereby do not (a) conflict with or result in any breach of any of the provisions of, (b) constitute a default under (whether with or without the passage of time, the giving of notice or both), (c) give any third party the right to modify, terminate or accelerate any obligation under, (d) result in the creation of any Encumbrances upon any portion of the Company Stock or any assets of Company pursuant to or (e) require any authorization, consent, approval, exemption or other action by or notice to any Governmental Entity pursuant to (I) the provisions of the articles of incorporation or bylaws of Company, (II) any agreement, instrument, license, permit, judgment, order or decree to which Company is subject, or (III) any Law to which Company is subject. Company is not a party to or bound by any Contract with respect to a Company Transaction other than this Agreement, and each such Person has terminated all discussion with third parties (other than with Parent and its Affiliates) regarding Company Transactions.

6E. Financial Statements; Undisclosed Liabilities; Accounts Receivable.

(i) Complete copies of the Company’s unaudited financial statements consisting of the balance sheet of the Company as at December 31 in each of the years 2020 and 2021 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “Financial Statements”), have been delivered to Parent. The Financial Statements are based on the books and records of the Company, and fairly present in all material respects the financial condition of the Company as of the respective dates they were prepared and the results of the operations of the Company for the periods indicated. The balance sheet of the Company as of December 31, 2021 is referred to herein as the “Balance Sheet Date”.

(ii) The Company has not received any written complaint, allegation, assertion or claim regarding the accounting or auditing practices, procedures, methodologies or methods of Company or its internal accounting controls, including any written complaint, allegation, assertion or claim that Company has engaged in questionable accounting or auditing practices.

(iii) The Company does not and will not have any liabilities or obligations whatsoever (whether accrued, absolute, matured or unmatured, known or unknown, fixed or contingent or otherwise, and whether due or to become due and regardless of when or by whom asserted), other than those incurred in the ordinary course of business.

(iv) Except as set forth on Schedule 6E of the Disclosure Schedule, the Company does not have any Indebtedness.

6F. Absence of Certain Developments. Since the Balance Sheet Date, Company has conducted its business only in the ordinary course of business consistent with past practice. Except as set forth in Schedule 6F of the Disclosure Schedule, since the Balance Sheet Date, Company has not:

(i) amended its articles of incorporation, bylaws or other Organizational Documents;

(ii) issued or sold any of its capital stock or equity securities, securities convertible into its capital stock or equity securities, or warrants, options or other rights to purchase its capital stock or equity securities;

(iii) entered into, amended or terminated any Company Major Contract, entered into any other material transaction, whether or not in the ordinary course of business or consistent with past practice, or changed in any significant respect any business practice (in anticipation of the transactions contemplated hereby or otherwise);

(iv) acquired (by merger, consolidation, acquisition of stock or assets or otherwise) or organized any Person, (a) acquired any rights, assets or properties other than in the ordinary course of business consistent with past practice or (b) acquired any equity interest or other securities of any Person;

(v) sold, assigned, transferred, leased, licensed or otherwise encumbered any of its material tangible assets, or canceled any material debts or claims;

(vi) made any change in any method of accounting or accounting policies;

(vii) made or changed any Tax election or change any method of tax accounting, (a) settled or compromised any federal, state, local or foreign Tax liability, (b) filed any amended Tax return, (c) entered into any closing agreement relating to any Tax, (d) agreed to an extension of a statute of limitations or (e) surrendered any right to claim a Tax refund; or

(viii) agreed, whether orally or in writing, to do any of the foregoing.

6G. Good Title to Assets. Company has good and valid title to, or a valid leasehold interest in, all of its Assets. All such Assets (including the Leased Real Property) are free and clear of all Encumbrances and except as set forth on Schedule 6G of the Disclosure Schedule. The Companies’ Assets are sufficient in all material respects for the Companies to continue the conduct of the Business in the same manner as currently conducted.

6H. Tax Matters.

(i) The Company has timely filed all Tax Returns required to be filed by it, each such Tax Return has been prepared in compliance with all applicable Laws, and all such Tax Returns are true, correct and complete. All Taxes required to have been paid by Company have been paid. Company has withheld and paid over to the appropriate taxing authority all Taxes which they are required to withhold from amounts paid or owing to any employee, independent contractor, stockholder, creditor, or other third party.

(ii) Except as set forth in Schedule 6H(ii) of the Disclosure Schedule:

(a) the Company has not requested or been granted an extension of the time for filing any Tax Return which has not yet been filed;

(b) the Company has not waived any statute of limitation in respect of Taxes or consented to extend the time in which any Tax may be assessed or collected by any taxing authority;

(c) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Tax has been proposed, asserted or assessed by any taxing authority against Company;

(d) there is no action, suit, taxing authority proceeding or audit with respect to Taxes now in progress, or to Sellers’ knowledge, pending or threatened against or with respect to Company;

(e) no written claim has ever been made by a taxing authority in a jurisdiction where Company does not file Tax Returns that Company is or may be subject to taxation by that jurisdiction;

(f) Company is not a party to or bound by any Tax allocation or Tax sharing agreement other than a lease, license or loan agreement or similar agreement the principal subject matter of which is not Taxes;

(g) Company (A) has not been a member of an Affiliated Group filing a consolidated federal income Tax Return and (B) has no liability for the Taxes of any Person under Treasury Regulation § 1.1502-6 (or any similar provision of Law), or as a transferee or successor, by contract, or otherwise;

(h) the Company has not constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock intended to qualify for tax-free treatment under Section 355 of the Code;

(i) the Company has been a validly electing S corporation within the meaning of Sections 1361 and 1362 of the Code at all times during its existence, and the Company will be an S corporation up to and including the day before the Closing Date;

(j) The Company is not subject to any tax under Section 1374 of the Code;

(k) the Company has not disposed of, and has no intention to dispose of, any assets outside the ordinary course of business in connection with the transactions contemplated hereby;

(l) the Company has not engaged in a “reportable transaction” within the meaning of Section 1.6011-4(b) of the Treasury Regulations; and

(m) the Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:

(1) change in method of accounting for a taxable period ending on or prior to the Closing Date;

(2) use of an improper method of accounting for a taxable period ending on or prior to the Closing Date;

(3) ‘‘closing agreement’’ as described in Section 7121 of the Code (or any corresponding or similar provision of state, local, or non-U.S. income Tax law) executed on or prior to the Closing Date;

(4) intercompany transaction or excess loss account described in Treasury Regulations under Section 1502 of the Code (or any corresponding or similar provision of state, local, or non-U.S. income Tax law);

(5) installment sale or open transaction disposition made on or prior to the Closing Date;

(6) prepaid amount received on or prior to the Closing Date; or

(7) election under Section 108(i) of the Code.

6I. Company Major Contracts. Schedule 6I of the Disclosure Schedule lists each of the following Contracts of the Company (such Contracts, together with all Contracts concerning the occupancy, management or operation of any Real Property (including without limitation, brokerage contracts), being “Major Contracts”).

6J. Intellectual Property. The Company does not own, and has never owned, any Intellectual Property Rights.

6K. Legal Proceedings. Except as set forth in Schedule 6K of the Disclosure Schedule, there are no (and, during the five years preceding the date hereof, there have not been any) Actions pending or, to the knowledge of Company, threatened in writing against Company (or to the knowledge of Company, pending or threatened in writing against any of the officers, directors or employees of Company with respect to their business activities relating the Company), or pending or threatened in writing by Company against any Person, at law or in equity, or before or by any Governmental Entity. Company is not subject to any judgment, order or decree of any Governmental Entity. There are no Actions pending or, to the knowledge of Company, threatened in writing against or affecting Sellers or Company that seek to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated hereby.

6L. Brokerage. There are no claims for brokerage commissions, finders fees, or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Company.

6M. Employee Benefit Plans. The Company does not have and has never had any “employee benefit plan” (as such term is defined under Section 3(3) of ERISA, each employee bonus, deferred compensation, retirement, severance, sick leave, health, welfare, profit sharing, vacation or paid-time-off, stock purchase, stock option, equity incentive or other employee benefit plan, program, agreement or arrangement, maintained, sponsored, or contributed to by Company, or with respect to which Company has any liability or potential liability) (“Employee Benefit Plans”).

(i) Company does not have any liability or obligation to contribute to any “multiemployer plan” (as defined in Section 3(37) of ERISA) or other plan subject to Title IV of ERISA.

(ii) Company has no obligation under any Employee Benefit Plan or otherwise to provide medical, health, life insurance or other welfare type benefits to current or future retired or terminated employees (except for limited continued medical benefit coverage required to be provided under Section 4980B of the Code or other applicable Law for which the covered individual pays the full cost of coverage).

(iii) For purposes of this Section 6M, the term “Company” includes any Person that, at any relevant time, would be treated as a single employer with Company pursuant to Section 414 of the Code.

6N. Insurance. Schedule 6N of the Disclosure Schedule contains a true and complete list of all insurance policies to which Company is a party or which provide coverage to or for the benefit of or with respect to Company or any director or employee of Company in his or her capacity as such (the “Insurance Policies”), indicating in each case the type of coverage, name of the insured, the insurer, the premium, the expiration date of each policy and the amount of coverage. Company has delivered to Parent true and complete copies of all such Insurance Policies. Schedule 6N of the Disclosure Schedule also describes any self-insurance or co insurance arrangements by or affecting Company including any reserves established thereunder. Each Insurance Policy is in full force and effect and shall remain in full force and effect in accordance with its terms following the Closing, and Company is not in default with respect to its obligations under any of such Insurance Policies. Company is current in all premiums or other payments due under the Insurance Policies and has otherwise complied in all material respects with all of their obligations under each Insurance Policy. Company has given timely notice to the insurer of all material claims that may be insured thereby. To the knowledge of Company, no Insurance Policy provides for any retrospective premium adjustment or other experience-based liability on the part of Company. The Company has received no written notice from an insurance carrier of Company that such insurance carrier is insolvent. The Company has not received any reservation of rights letters from its insurance carriers.

6O. Compliance with Applicable Laws.

(i) Company has complied in all material respects with all Laws of any Governmental Entity applicable to Company. Company has not received any written communication from a Governmental Entity that alleges that Company is not in compliance with any Law, and to the knowledge of Company, Company has not been subject to any adverse inspection, audit, finding, investigation, penalty assessment, or other compliance or enforcement action. Company has not made any bribes, kickback payments or other similar improper payments of cash or other consideration, including payments to customers or clients or employees of customers or clients for purposes of doing business with such Persons.

(ii) Company holds and is in compliance in all material respects with all permits, licenses, bonds, approvals, certificates, registrations, accreditations and other authorizations of all Governmental Entities required for the conduct of its business and the ownership of its properties (collectively, the “Permits”), and Schedule 6O(ii) of the Disclosure Schedule sets forth a list of all of such Permits.

6P. Employees. The Company does not have, and it has never had, any employees other than the Sellers.

6Q. Affiliate Transactions. No officer, member, manager or Affiliate of Company or, to Company’s knowledge, any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with Company (other than Company’s Organizational Documents) or has any interest in any assets or property used by Company. Except as set forth and described in Schedule 6Q of the Disclosure Schedule, none of the assets, tangible or intangible, or properties that are used by Company are owned by Sellers or their Affiliates (other than Company).

6R. Bank Accounts; Names and Locations. Schedule 6R of the Disclosure Schedule lists all of Company’s bank accounts (designating each authorized signatory and the level of each signatory’s authorization). Except as set forth in Schedule 6R of the Disclosure Schedule, during the five-year period prior to the execution and delivery of this Agreement, neither Company nor its predecessors has used any name or names under which it has invoiced account debtors, maintained records concerning its assets or otherwise conducted business. All of the depository and investment accounts of Company are located at the locations set forth in Schedule 6R of the Disclosure Schedule.

6S. No Restrictions on the Merger. No provision of Company’s Organizational Documents (i) would or would purport to impose restrictions which might adversely affect or delay the consummation of the transactions contemplated by this Agreement or (ii) as a result of the consummation of the transactions contemplated by this Agreement or the acquisition of securities of Company or Surviving Company by Parent (A) would or would purport to restrict or impair the ability of Parent to vote or otherwise exercise the rights of a member with respect to securities of Company that may be acquired or controlled by Parent or (B) would or would purport to entitle any Person to acquire securities of Company.

6T. Common Shares of Parent.

(i) Sellers understand and acknowledge that (a) the Common Shares of the Parent have not been registered under the Securities Act and, therefore, cannot be resold unless it is registered under the Securities Act, or unless an exemption from registration is available, (b) there is no existing U.S. public market for the Common Shares, and there can be no assurance that Sellers will be able to sell or dispose of the Common Shares, and (c) Sellers are knowledgeable, sophisticated and experienced in business and financial matters, are experienced in evaluating investments in companies such as Parent and each qualifies as an “accredited investor” as defined in Rule 501(a) of Regulation D under the Securities Act;

(ii) the Common Shares to be acquired pursuant to this Agreement by each of the Sellers are being acquired for each such Sellers’ own account, for investment purposes, and without a view to any distribution thereof that violates the Securities Act or the securities laws of any State of the United States or other applicable jurisdiction;

(iii) Sellers have been afforded access to information about Parent and the financial condition, results of operations, business, property and management of Parent that is sufficient to enable Sellers to evaluate their investment in the Common Shares. Sellers have reviewed the financial statements of the Parent and such other documents as Sellers or have reasonably deemed advisable. Sellers and their advisors, if any, have been afforded the opportunity to ask questions of Parent. Sellers have sought such accounting, legal and tax advice as Sellers considered necessary to make an informed investment decision with respect to its acquisition of the Common Shares; and

(iv) Sellers understand that an investment in the Common Shares involves a high degree of risk and such Common Shares are, therefore, a speculative investment. Sellers are able to bear the economic risk of its investment in the Common Shares for an indefinite period of time, and are presently able to afford the complete loss of such investment.

ARTICLE 7

REPRESENTATIONS AND WARRANTIES

OF PARENT AND MERGER SUB

As an inducement to Sellers and Company to enter into this Agreement, Parent and Merger Sub hereby represent and warrant as of the date of this Agreement and as of the Closing Date as follows:

7A. Organization and Corporate Power. Parent is a corporation validly existing and in good standing under the Laws of the State of Delaware. Parent has all requisite power and authority to execute and deliver this Agreement and to perform its respective obligations hereunder. Merger Sub is a limited liability company validly existing and in good standing under the Laws of the State of Delaware. Merger Sub is a newly-formed entity that has been formed solely for the purposes of the Merger and has not carried on any business or engaged in any activities other than those reasonably related to the Merger.

7B. Authorization; No Violation.

(i) The execution, delivery and performance by Parent and Merger Sub of this Agreement and all of the other agreements and instruments contemplated hereby to which Parent or Merger Sub is a party and the consummation of the transactions contemplated hereby have been duly and validly authorized by Parent and Merger Sub, as applicable, and no other act or proceeding on the part of Parent or Merger Sub, their respective boards of directors or managers or equity holders is necessary to authorize the execution, delivery or performance of this Agreement and all of the other agreements and instruments contemplated hereby to which Parent or Merger Sub is a party and the consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes a valid and binding obligation of Parent and Merger Sub, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors’ rights generally and the discretion of courts in granting or denying equitable remedies, and each of the other agreements and instruments contemplated hereby to which Parent or Merger Sub is a party, when executed and delivered by Parent or Merger Sub, as applicable, in accordance with the terms hereof, shall each constitute a valid and binding obligation of Parent or Merger Sub, as applicable, enforceable with its respective terms, subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors’ rights generally and the discretion of courts in granting equitable relief.

(ii) Neither Parent nor Merger Sub is subject to or obligated under its Organizational Documents, or any applicable Law of any Governmental Entity, or any agreement, instrument, license or permit, or subject to any order, writ, injunction or decree, which would be breached or violated by its execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby.

7C. Consents. No permit, consent, approval or authorization of, or declaration to or filing with, any Governmental Entity or any other Person is required in connection with the execution, delivery or performance of this Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub of the transactions contemplated hereby.

7D. Vote Required. Parent, as the sole member and member-manager of Merger Sub, has approved and adopted this Agreement. Additionally, the Parent’s board of directors have approved this Agreement and approved the transactions contemplated hereby.

7E. Brokerage. There are no claims for brokerage commissions, finders fees, or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Parent or Merger Sub.

7F. Tax Representations. Parent is a corporation organized under the laws of the State of Delaware. Merger Sub is a limited liability company organized under the laws of the State of Delaware. For the taxable period of Parent that includes the Closing, Parent will file its U.S. federal income tax return on the basis that (i) Parent is as a U.S. corporation for U.S. tax purposes and (ii) Merger Sub has made an election effective prior to the Closing Date to be taxable as a corporation for U.S. federal income tax purposes pursuant to Treasury Regulation 301.7701-3(c).

7G. Common Shares. The Common Shares, when issued, will be validly issued, fully paid and nonassessable. The Common Shares will not be subject to any restrictions on transfer other than as set forth in the Organizational Documents of the Parent or as required pursuant to applicable securities Laws. Parent has a total authorized capitalization consisting of (i) 190,000,000 shares of common stock, of which 57,959,259 shares are issued and outstanding, and (ii) 7,044,709 shares of common stock are subject to SAFE conversions and no other options, warrants, subscriptions or purchase rights of any nature to acquire from the Company shares of capital stock or other securities are authorized, issued or outstanding, nor is the Company obligated in any other manner to issue shares of its capital stock or other securities except as contemplated by this Agreement.

7H. Litigation. There is no pending action, suit, proceeding, arbitration, mediation, complaint, claim, charge or investigation before any court, arbitrator, mediator or governmental body or, to the Parent’s knowledge, currently threatened in writing (i) against the Parent or (ii) against any consultant, officer, director or key employee of the Parent arising out of his or her consulting, employment or board relationship with the Company or that could otherwise materially impact the Company.

7I. Accuracy of Information Furnished. None of the documents and none of the other certificates, statements or information furnished to Sellers by or on behalf of the Parent in connection with this Agreement or the transactions contemplated thereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

ARTICLE 8

ADDITIONAL AGREEMENTS

8A. Survival of Representations and Warranties. The representations and warranties in this Agreement and the Schedules and Exhibits attached hereto shall survive the Closing as follows:

(i) the representations and warranties in Section 6H (Tax Issues) and Section 6M (Employee Benefit Plans) shall terminate ninety (90) days after the date upon which the applicable statute of limitations with respect to the liabilities in question expires (after giving effect to any extensions, mitigation or waivers thereof);

(ii) the following representations and warranties shall survive indefinitely after the Closing Date: (a) Section 6A (Corporate Organization and Corporate Power), Section 6B (Company Membership Units), Section 6D(i) (Authorization), Section 6L (Brokerage) (and together with the representations and warranties set forth in Section 6H (Tax Issues) collectively the “Company Fundamental Representations and Warranties”); (b) Section 7A (i) (Corporate Organization and Corporate Power), Section 7B(i) (Authorization), Section 7E (Brokerage), and Section 7G (Common Shares of Parent) (collectively the “Parent Fundamental Representations and Warranties”; and together with Company Fundamental Representations and Warranties the “Fundamental Representations and Warranties”); and

(iii) all other representations and warranties in this Agreement shall terminate on the date that is twenty-four (24) month anniversary following the Closing Date.

(iv) The parties acknowledge that the time periods set forth in this Section 8A for the assertion of claims under this Agreement are the result of arms’-length negotiation among the parties and that they intend for the time periods to be enforced as agreed by the parties; provided that any representation or warranty in respect of which indemnity may be sought under this Section 8A, and the indemnity with respect thereto, shall survive the time at which it would otherwise terminate pursuant to this Section 8A if notice of the inaccuracy or breach or potential inaccuracy or breach thereof giving rise to such right or potential right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time (regardless of when the Losses in respect thereof may actually be incurred). The representations and warranties in this Agreement or in the certificates and documents furnished pursuant to this Agreement shall survive for the periods set forth in this Section 8A and shall in no event be affected by any investigation, inquiry or examination made for or on behalf of any party, or the knowledge of any party’s officers, directors, members, stockholders, employees or agents or the acceptance by any party of any certificate or opinion hereunder.

8B. Indemnification by Sellers.

(i) Sellers (severally and jointly) (the “Seller Indemnifying Parties”) shall indemnify the Parent Parties and save and hold each of them harmless against and pay on behalf of or reimburse the Parent Parties for any Losses that are the responsibility of Sellers under Section 8F and for any Losses as and when incurred which any such Parent Party sustain or become subject to as a result or by virtue of: (a) any breach by a Seller or Company of any representation or warranty made by a Seller or Company in this Agreement or any of the certificates furnished by Sellers or Company pursuant to this Agreement (other than any Company Fundamental Representation and Warranty); (b) any breach by a Seller or Company of any the Company Fundamental Representations and Warranties; (c) any breach of any covenant by a Seller or Company in this Agreement or any of the certificates furnished by Sellers or Company pursuant to this Agreement; (d) the amount of all Company Expenses or Indebtedness that has not been paid at or prior to Closing and that are not reflected on Schedule 6E); or (e) any of the matters set forth on Schedule 8B(e) attached hereto.

(ii) The obligations and liabilities of each Seller under this Agreement are joint and several. No Seller shall have any liability under Section 8B(i) for, nor shall any Seller have any liability for, another Seller’s breach of representation or warranty or for another Seller’s breach of any covenant in this Agreement or any of the certificates furnished pursuant to this Agreement. The aggregate liability of each Seller under this Agreement shall be limited to $240,000, except in the case of fraud or willful misconduct.

(iii) To the extent reasonably curable within thirty (30) days, prior to seeking indemnification with respect to any matter subject to Section 8B, the Parent Parties shall give the Seller Indemnifying Parties at least thirty (30) days prior written notice of such matter and the opportunity to cure during such thirty (30)-day period.

8C. Indemnification by Parent Parties.

Parent Parties agree to and shall indemnify Seller Parties and save and hold each of them harmless against and pay on behalf of or reimburse each Seller Party for any Losses as and when incurred which any such Seller Party may suffer, sustain or become subject to as a result or by virtue of: (a) any breach by Parent or Merger Sub of any representation or warranty made by Parent or Merger Sub in this Agreement or any of the certificates furnished by Parent or Merger Sub pursuant to this Agreement or (b) any breach of any covenant by Parent or Merger Sub in this Agreement or any of the certificates furnished by Parent or Merger Sub pursuant to this Agreement. The aggregate liability of the Parent Parties under clause (a) of this Section 8C (other than with respect to the Parent Fundamental Representations and Warranties, for which no such following limitation shall apply) shall in no event exceed $1,000,000. For the avoidance of doubt, the limitation in the previous sentence shall not apply to and shall not limit any of the Seller Parties’ remedies with respect to any Parent Fundamental Representations and Warranties, any liability under clause (b) of this Section 8C, or any fraud or willful misconduct of any Parent Party.

8D. Indemnification Payments.

(i) Any amounts owing from Sellers pursuant to this Article 8B shall first be satisfied by setoff against the Common Shares, and, to the extent any amounts are still outstanding after such setoff, shall thereafter be paid by wire transfer of immediately available funds from Sellers, as the case may be, to an account designated by the applicable party entitled to indemnification, within ten (10) days after the determination of amounts owing hereunder. The Parent Parties shall provide written notice to set forth the amount of the setoff, the manner in which such setoff was calculated, and the specific payments due Sellers to which the setoff was applied. Sellers hereby grant Parent a power of attorney, couple with an interest, to facilitate such actions as are necessary to complete and document any such setoff against the Common Shares so issued to Sellers.

(ii) Any amounts owing from Parent Parties pursuant to this Article 8 shall be effected by wire transfer of immediately available funds from Parent to an account designated by the applicable party entitled to indemnification, within ten (10) days after the determination thereof.

(iii) All indemnification payments under this Article 8C shall be deemed adjustments to the Company Closing Merger Consideration to which Sellers are entitled hereunder, except as otherwise required by applicable law, as determined by Parent.

8E. Indemnification Procedures.

(i) During any applicable survival period as set forth herein, any Person may make a claim for indemnification under this Section 8E (an “Indemnified Party”) by notifying the indemnifying party (an “Indemnifying Party”) of the claim in writing promptly after receiving written notice of any action, lawsuit, proceeding, investigation or other claim against it (if by a third party), describing the claim, the amount thereof (if known and quantifiable and, if not known and quantifiable, a good faith estimate thereof) and the basis thereof; provided that the failure to so notify an Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that (and only to the extent that) the Indemnifying Party has been materially prejudiced thereby. The Indemnifying Party shall be entitled to participate in the defense of such

action, lawsuit, proceeding, investigation or other claim giving rise to an Indemnified Party’s claim for indemnification at such Indemnifying Party’s expense, and at its option (subject to the limitations set forth below) shall be entitled to assume the defense thereof by appointing a nationally recognized and reputable counsel reasonably acceptable to the Indemnified Party to be the lead counsel in connection with such defense; provided that, prior to the Indemnifying Party assuming control of such defense it shall first (a) verify to the Indemnified Party in writing that such Indemnifying Party shall be fully responsible (with no reservation of any rights) for all liabilities and obligations relating to such claim for indemnification and that (without regard to any dollar limitations otherwise set forth herein) it shall provide full indemnification (whether or not otherwise required hereunder) to the Indemnified Party with respect to such action, lawsuit, proceeding, investigation or other claim giving rise to such claim for indemnification hereunder and (b) enter into an agreement with the Indemnified Party in form and substance satisfactory to the Indemnified Party that unconditionally guarantees the payment and performance of any liability or obligation which may arise with respect to such action, lawsuit, proceeding, investigation or facts giving rise to such claim for indemnification hereunder; and provided, further, that:

(a) the Indemnified Party shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose; provided that the fees and expenses of such separate counsel shall be borne by the Indemnified Party (other than any fees and expenses of such separate counsel that are incurred prior to the date the Indemnifying Party effectively assumes control of such defense which, notwithstanding the foregoing, shall be borne by the Indemnifying Party to the extent such underlying claim is indemnifiable under this Article 8, and except that the Indemnifying Party shall pay all of the fees and expenses of such separate counsel to the extent such underlying claim is indemnifiable under this Article 8 if the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party);

(b) the Indemnifying Party shall not be entitled to assume control of such defense (unless otherwise agreed to in writing by the Indemnified Party) and shall pay the fees and expenses of counsel retained by the Indemnified Party to the extent such underlying claim is indemnifiable under this Article 8 if (1) the claim for indemnification relates to or arises in connection with any criminal or quasi criminal proceeding, action, indictment, allegation or investigation; (2) the Indemnified Party reasonably believes an adverse determination with respect to the action, lawsuit, investigation, proceeding or other claim giving rise to such claim for indemnification would be detrimental to or injure the Indemnified Party’s reputation or future business prospects or have any adverse tax consequence on any Indemnified Party; (3) the claim seeks an injunction or equitable or other non-monetary relief against the Indemnified Party; (4) the Indemnified Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party; (5) upon petition by the Indemnified Party, the appropriate court rules that the Indemnifying Party failed or is failing to vigorously prosecute or defend such claim or (6) the Indemnified Party reasonably believes that the Loss relating to the claim would exceed the maximum amount that such Indemnified Party would then be entitled to recover under the applicable provisions of Article 8; and

(c) if the Indemnifying Party shall control the defense of any such claim, the Indemnifying Party shall obtain the prior written consent of the Indemnified Party before entering into any settlement of a claim or ceasing to defend such claim if, pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief will be imposed against the Indemnified Party or if such settlement does not expressly and unconditionally release the Indemnified Party from all liabilities and obligations with respect to such claim, without prejudice.

(ii) Notwithstanding anything herein to the contrary, any claim by an Indemnified Party for indemnification not involving a third party claim may be asserted by giving the Indemnifying Party written notice thereof (“Indemnification Notice”) setting forth the amount of such claim for indemnification (to the extent the amount of such claim is known and quantifiable as of such date and, if not, a good faith estimate thereof) and setting forth the nature and the basis for such claim (an “Indemnification Claim”). If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days following its receipt of an Indemnification Notice that the Indemnifying Party disputes its liability to the Indemnified Party, the applicable Indemnification Claim specified by the Indemnified Party in such Indemnification Notice shall be conclusively deemed an obligation of the Indemnifying Party hereunder, and the Indemnifying Party shall pay the Indemnified Party an amount equal to the amount of such Indemnification Claim on demand and in accordance with Section 8D.

8F. Certain Tax Matters.

(i) Sellers (severally and jointly) shall indemnify the Parent Parties and hold each of them harmless from and against Losses arising from or attributable to (a) any and all Taxes (or the non-payment thereof) of each of the Sellers, (b) any and all Taxes (or the non-payment thereof) of or imposed on the Company for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax Period”), and (c) any and all Taxes of any Person imposed on Company as a transferee successor, by contract, or otherwise, which Taxes relate to an event or transaction occurring (or deemed to occur) before the Closing. Sellers shall reimburse the Parent Parties for any Taxes which are the responsibility of Sellers pursuant to this Section 8F(i) within twenty (20) Business Days prior to the payment of such Taxes by Parent or Surviving Company. The parties to this Agreement intend for the Merger to qualify as a “reorganization” described in Section 368(a)(2)(E) of the Code and that this Agreement (and any associated documents) constitute a “plan of reorganization” within the meaning of Treasury Regulation 1.368-2(g).

(ii) In the case of any Taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date, and the amount of other Taxes for a Straddle Period which relate to the Pre Closing Tax Period shall be deemed to be the amount of such Tax for the entire Taxable period, multiplied by a fraction, the numerator of which is the number of days in the Taxable period ending on the Closing Date, and the denominator of which is the number of days in such Straddle Period.

(iii) All Tax sharing agreements or similar agreements (other than agreements the principal subject matter of which is not Taxes) with respect to or involving Company shall be terminated as of the Closing Date and, after the Closing Date, Surviving Company shall not be bound thereby or have any liability thereunder. In no event will any of the Parent Parties be liable to any Seller Party for any Taxes or related obligations of any Seller Party. Parent (or its designee) will prepare and file or cause to be prepared and filed all Tax Returns of Company for taxable periods ending on, before or after the Closing Date that are filed after the Closing Date. To the extent permitted by applicable law, Sellers shall include any income, gain, loss, deduction or other tax items for such periods on their Tax Returns in a manner consistent with the Schedule K-1s furnished to Sellers for such periods. Sellers shall be solely liable for the payment of any Taxes due or payable with respect to such Tax Returns of the Company to the extent such Taxes are the responsibility of Sellers pursuant to Section 8F(i).

(iv) Cooperation on Tax Matters.

(a) The parties shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information reasonably relevant to any such audit, litigation, or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The parties agree (A) to retain all books and records with respect to Tax matters pertinent to Target and its Subsidiaries relating to any taxable period beginning before the Closing Date until expiration of the statute of limitations (and, to the extent notified. any extensions thereof) of the respective taxable periods, and to abide by all record retention agreements entered into with any taxing authority, and (B) to give the other party reasonable written notice prior to transferring, destroying or discarding any such books and records and, if the other party so requests, the Company and its Subsidiaries or Sellers, as the case may be, shall allow the other party to take possession of such books and records.

(b) The parties further agree, upon request, to use their best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including with respect to the transactions contemplated hereby).

(v) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by Sellers when due, and the party required by applicable law shall file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable law, the other parties shall, and shall cause their affiliates to, join in the execution of any such Tax Returns and other documentation. The expense of such filings shall be paid by Sellers.

8G. Press Release and Announcements. Unless required by Law (in which case each of the Sellers, Company, Parent, and Merger Sub agrees to use reasonable efforts to consult with the other parties hereto prior to any such disclosure as to the form and content of such disclosure), after the date hereof and through and including the Closing Date, no press releases, announcements to the employees, customers or suppliers of Company or other releases of information related to this Agreement or the transactions contemplated hereby will be issued or released without the consent of each of Sellers, Company, Parent, and Merger Sub. After the Closing, Parent and its Affiliates may issue any such releases of information without the consent of any other party hereto.

8H. Mutual Assistance. Without limiting any other provision set forth herein, Parent and Company agree that they will mutually cooperate in the expeditious filing of all notice, reports and other filings with any Governmental Entity required to be submitted jointly by such Persons in connection with the execution and delivery of this Agreement and/or the other agreements contemplated hereby and the consummation of the transactions contemplated hereby or thereby.

8I. Designation of the Sellers Representative. The parties have agreed that it is desirable to designate the Sellers Representative to act on behalf of the Sellers for certain limited purposes, as specified herein. The parties have designated Brian Gallagher as the initial Sellers Representative, and approval of this Agreement by the Sellers shall, to the maximum extent permitted under applicable law, constitute irrevocable ratification and approval of such designation by the Sellers and authorization of the Sellers Representative to serve in such capacity (including to settle any and all disputes with Parent and/or Merger Sub under this Agreement). The Sellers Representative may resign at any time and the Sellers Representative may be removed only by the vote of the Sellers which collectively owned a majority of Company as of immediately prior to the Effective Time (“Majority Holders”). The designation of the Sellers Representative is coupled with an interest, and, except as set forth in the immediately preceding sentence, such designation is irrevocable and shall not be affected by the death, incapacity, illness, bankruptcy, dissolution or other inability to act of any of the Sellers. In the event that a Sellers Representative has resigned or been removed, a new Sellers Representative shall be appointed by a vote of Majority Holders, such appointment to become effective upon the written acceptance thereof by the new Sellers Representative. Written notice of any such resignation, removal or appointment of a Sellers Representative shall be delivered by the Sellers Representative to Parent promptly after such action is taken. Each Seller agrees that Sellers Representative shall have no obligation or liability to any Person for any action or omission taken or omitted by Sellers Representative in good faith hereunder, and each Seller shall indemnify and hold Sellers Representative harmless from and against any and all Losses which Sellers Representative may sustain as a result of any such action or omission by Sellers Representative hereunder.

8J. Authority and Rights of the Sellers Representative. The Sellers Representative shall have such powers and authority as are necessary or appropriate to carry out the functions assigned to it under this Agreement and in any other document delivered in connection herewith. Sellers, Parent, and Surviving Company shall be entitled to rely on the actions taken by the Sellers Representative without independent inquiry into the capacity of the Sellers Representative to so act. All actions, notices, communications and determinations by the Sellers Representative to carry out such functions shall conclusively be deemed to have been authorized by, and shall be binding upon, the Sellers. Neither the Sellers Representative nor any of its officers, directors, employees, agents or representatives shall have any liability to the Parent, Surviving Company, the Sellers with respect to actions taken or omitted to be taken by the Sellers Representative in such capacity (or any of its officers, directors, employees, agents or representatives in connection therewith), except with respect to the Sellers Representative’s gross negligence or willful misconduct.

8K. Expenses. Surviving Company shall pay all of its and Parent’s third party fees, costs and expenses incurred in connection with the negotiation of this Agreement, the performance of their obligations hereunder and the consummation of the transactions contemplated hereby. Except as set forth in Section 4H(ii), Sellers shall pay all of the Company Expenses and all their own fees, costs and expenses incurred in connection with the negotiation of this Agreement, the performance of their obligations hereunder and the consummation of the transactions contemplated hereby.

8L. General Release. Each of the Sellers does hereby, and each such Seller agrees to cause his or its Affiliates, successors and assigns and any other person or entity claiming by, through or under any of the foregoing to (and on behalf of each of them does hereby), effective as of, and contingent upon, the Closing, unconditionally and irrevocably release, waive and forever discharge Parent, Merger Sub, Company and each of their past and current directors, managers, officers, and employees from any and all claims, demands, judgments, causes of action and liabilities of any nature whatsoever, whether or not known, suspected or claimed, arising directly or indirectly from any act, omission, event or transaction occurring on or prior to the Effective Time, which, for the avoidance of doubt, includes (without limitation) any and all claims of breach and causes of action based on alleged breach and associated liabilities arising out of or relating to any commercial arrangement or agreement between Company and such Seller and/or such Seller’s Affiliates entered into prior to the Effective Time, but excludes and shall not apply to the rights of any such Seller and/or such Seller’s Affiliates (i) set forth in this Agreement or any other agreement

or document executed or delivered in connection with this Agreement, (ii) set forth in any of the 2018 Transaction Documents, or (iii) under any contract of insurance covering directors, managers, and officers of Company. WITHOUT LIMITING THE FOREGOING, EACH SELLER (ON HIS, HER OR ITS OWN BEHALF AND ON BEHALF OF HIS, HER OR ITS AFFILIATES, SUCCESSORS AND ASSIGNS) EXPRESSLY WAIVES AND RELINQUISHES ALL RIGHTS AND BENEFITS AFFORDED BY ANY APPLICABLE STATUTE IN THE CONTEXT OF A GENERAL RELEASE, WHICH STATUTE GENERALLY PROVIDES FOR THE FOLLOWING: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS, HER OR ITS FAVOR AT THE TIME OF EXECUTING THIS RELEASE, WHICH IF KNOWN BY HIM, HER OR IT MAY HAVE MATERIALLY AFFECTED HIS, HER OR ITS SETTLEMENT WITH THE DEBTOR.” EACH SELLER ACKNOWLEDGES THAT HE, SHE OR IT HAS CAREFULLY READ THE FOREGOING WAIVER AND GENERAL RELEASE AND UNDERSTANDS ITS CONTENTS. Sellers represent and warrant that (x) there are no liens, or claims of lien, or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein, (y) the Sellers have not transferred or otherwise alienated any such claims or causes of action, and (z) Sellers are fully authorized and entitled to give the releases specified herein.

8M. Confidentiality. Each of the Sellers, Parent, Merger Sub, and Company hereby covenants and agrees not to, and to cause his or its Affiliates not to, at any time (i) retain or use for the benefit, purposes or account of such party or any other Person; or (ii) disclose, divulge, reveal, communicate, share, transfer or provide access to any Person outside Parent, Company, Sellers, Surviving Company and their respective Subsidiaries any non-public, proprietary or confidential information, including trade secrets, “know-how”, profitability margins relative to any customers of Company (the release of which would cause substantial harm to Company), research and development, software, databases, inventions, processes, formulae, technology, designs and other intellectual property, information concerning finances, investments, profits, pricing, costs, products, services, vendors, customers, clients, partners, investors, personnel, compensation, recruiting, training, advertising, sales, marketing, promotions, government and regulatory activities and approvals, in each case, concerning the past, current or future business, activities and operations of Parent, Sellers, Company, Surviving Company or their Subsidiaries, as applicable (“Confidential Information”) without the prior written authorization of the Person to which such Confidential Information relates (which authorization may be withheld in such Person’s sole and absolute discretion); provided, however, “Confidential Information” shall not be deemed to include any information that is (i) generally known to the public other than as a result of party’s breach of this section or any breach of other confidentiality obligations by third parties or (ii) required by law to be disclosed; provided that a party shall give prior written notice to Parent of such requirement, disclose no more information than is so required, and cooperate with any attempts by Parent to obtain a protective order or similar treatment.

ARTICLE 9

MISCELLANEOUS

9A. Definitions. The terms defined in Exhibit A hereto, whenever used herein, shall have meanings set forth on Exhibit A for all purposes of this Agreement. The definitions on Exhibit A are incorporated into this Agreement as if fully set forth at length herein and all references to a section in such Exhibit A are references to such section of this Agreement.

9B. Amendment and Waiver. This Agreement may be amended, and any provision of this Agreement may be waived; provided that (i) any such amendment or waiver will be binding upon Company (prior to the Closing), Sellers and the Sellers Representative only if such amendment or waiver is set forth in a writing executed by Company (prior to the Closing), Sellers and the Sellers Representative, and (ii) any such amendment or waiver will be binding upon Parent, Merger Sub and Surviving Company only if such amendment or waiver is set forth in a writing executed by Parent. No course of dealing between or

among any Persons having any interest in this Agreement shall be deemed effective to modify, amend or waive any part of this Agreement or any rights or obligations of any Person under or by reason of this Agreement. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver.

9C. Notices. All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given (i) if personally delivered, on the date of delivery, (ii) if delivered by express courier service of national standing (with charges prepaid), on the Business Day following the date of delivery to such courier service, (iii) if deposited in the United States mail, first-class postage prepaid, on the fifth Business Day following the date of such deposit, (iv) if delivered by fax, provided the relevant transmission report indicates a full and successful transmission, (x) on the date of such transmission, if such transmission is completed at or prior to 5:00 p.m., local time of the recipient party, on the date of such transmission, and (y) on the next Business Day following the date of transmission, if such transmission is completed after 5:00 p.m., local time of the recipient party, on the date of such transmission, or (v) if delivered by Internet mail, provided the relevant sender requests and receives a receipt read response from recipient (x) on the date of such transmission, if such transmission is completed at or prior to 5:00 p.m., local time of the recipient party, on the date of such transmission, and (y) on the next Business Day following the date of transmission, if such transmission and receipt read response is completed after 5:00 p.m., local time of the recipient party, on the date of such transmission. Notices, demands and communications to Company, the Sellers Representative, Parent, Merger Sub or Surviving Company shall, unless another address is specified in writing pursuant to the provisions hereof, be sent to the address indicated below:

Notices to the Sellers Representative:

Brian Gallaher

3402 Piazza De Oro Way, Suite 100

Oceanside, CA 92056

Phone: [***]

Email: [***]

with a copy to:

Monroe Law PC

4225 Executive Square, Suite 600

La Jolla, CA 92037

Attn: Patrick Monroe

Phone: [***]

Email: [***]

Notices to Parent, Merger Sub and/or Surviving Company:

Aptera Motors Corp.

5818 El Camino Real

Carlsbad, CA 92008

Attn: [***]

Phone: [***]

with a copy to:

Eversheds Sutherland (US) LLP

999 Peachtree Street, N.E.

Atlanta, GA 30338

Attn: Michael J. Voynich

Phone: [***]

Email: [***]

9D. Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns, except that neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by Sellers or, prior to Closing, Company in each case without the prior written consent of Parent. Each of Parent and Merger Sub may assign its rights and obligations hereunder, in whole or in part, to any of its Affiliates or in connection with any disposition or transfer of all or any portion of the equity of Surviving Company or any of its Subsidiaries, in each case without the consent of any other Person; provided, however, any such assigning Person shall remain fully liable under this Agreement for such Person’s obligations and responsibilities hereunder

9E. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

9F. Third-Party Beneficiaries and Obligations. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. Other than as set forth in Section 8B, Section 8C, Section 8F, nothing in this Agreement, express or implied, is intended to or shall confer upon any Person other than the parties hereto or their respective successors and permitted assigns, any rights, remedies or liabilities under or by reason of this Agreement.

9G. No Strict Construction. Notwithstanding the fact that this Agreement has been drafted or prepared by one of the parties, each of Parent, Merger Sub, Sellers, Company and the Sellers Representative, confirm that they and their respective counsel have reviewed, negotiated and adopted this Agreement as the joint agreement and understanding of the parties hereto and the language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any Person.

9H. Interpretation. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Words denoting any gender shall include all genders. Where a word is defined herein, references to the singular shall include references to the plural and vice versa. A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns. All references to “$” and dollars shall be deemed to refer to United States currency unless otherwise specifically provided. All references to a day or days shall be deemed to refer to a calendar day or calendar days, as applicable, unless otherwise specifically provided. Any reference to any agreement or contract referenced herein or in the Disclosure Schedule shall be a reference to such agreement or contract, as amended, modified, supplemented or waived. The captions used in this Agreement and descriptions of the Disclosure Schedule are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no caption or description of the Disclosure Schedule had been used in this Agreement.

9I. The Disclosure Schedule. Any matter disclosed in one section of the Disclosure Schedule shall also be deemed to constitute an exception to each other representation, warranty, covenant or agreement of Sellers or Company in the Agreement to which such matter relates, but only to the extent such matter is apparent, on its face, to be applicable to such other representation, warranty covenant or agreement of Sellers or Company. The parties acknowledge and agree that any appendices or exhibits attached to the Disclosure Schedule form an integral part of the sections or subsections of the Disclosure Schedule into which they are incorporated by reference for all purposes as if fully set forth in the Disclosure Schedule, including for purposes of cross-application to other sections or subsections of the Disclosure Schedule in accordance with the immediately preceding sentence. The inclusion of any item in the Disclosure Schedule shall not be deemed an admission that such item is a material fact, event, or circumstance or that such item has had or would be reasonably likely to have a Material Adverse Effect.

9J. Complete Agreement. This Agreement, together with any other agreements referred to herein or therein executed and delivered on or after the date hereof, contain the complete agreement among the parties hereto and supersede any prior understandings, agreements or representations by or between such parties, written or oral, which may have related to the subject matter hereof in any way.

9K. Counterparts. This Agreement may be executed in multiple counterparts (including by means of fax or electronically transmitted signature pages), all of which taken together shall constitute one and the same Agreement.

9L. Governing Law. The internal Law (and not the Law of conflicts) of the State of California shall govern all questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement.

9M. Dispute Resolution; Consent to Jurisdiction; Waiver of Jury Trial.

(i) If any dispute, controversy or claim arises between the parties hereto with respect to whether any such party is in breach or default of its respective obligations hereunder, then the dispute shall be settled by binding arbitration in San Diego County, California or at such other location as may be mutually agreed by the parties involved in such dispute. Such arbitration shall be administered by the American Arbitration Association (“AAA”) and shall be conducted in accordance with the Commercial Arbitration Rules (the “Rules”) of AAA then in effect, or such other arbitral body as the parties may jointly select.

(ii) The award of the arbitrator shall be binding upon the parties and each party hereby consents to the entry of judgment by any court of competent jurisdiction in accordance with the decision of the arbitrator.

(iii) The prevailing party in any such arbitration shall be entitled to recover, in addition to any other relief awarded, its reasonable costs of preparation for and participation in the arbitration, including reasonable attorneys’ fees. The arbitrator shall have no power to award punitive, treble or other multiple damages, as a result of this Section 9M, and the arbitrator’s jurisdiction is limited accordingly, and no arbitration award issued pursuant to this Section 9M shall grant such damages.

(iv) The Parties hereby agree to make a good faith effort to resolve any dispute, controversy or claim arising between them prior to electing to arbitrate such matter.

(v) Any such arbitration proceedings shall include by consolidation, joinder or joint filing, any additional Person not a party to this Agreement to the extent necessary to the final resolution of the matter in controversy.

SUBJECT TO THE FOREGOING, THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF CALIFORNIA. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. THE PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT OR ANY ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR PROCEEDING.

* * * *

IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of Merger as of the date first written above.


ANDROMEDA INTERFACES INC.

By:		/s/ Brian Gallagher
Name: Brian Gallagher
Title: President

SELLERS:

/s/ Brian Gallagher

Name: Brian Gallagher

/s/ Kevin Coelho

Name: Kevin Coelho

SELLERS REPRESENTATIVE:

/s/ Brian Gallagher

Name: Bria Gallagher (solely in his capacity as the Sellers Representative)


APTERA MOTORS CORP.

By:		/s/ Chris Anthony
Name: Chris Anthony
Title: President

APTERA MERGERCO, LLC

By: Aptera Motors Corp., its sole member

By:		/s/ Chris Anthony
Name: Chris Anthony
Title: President

Exhibit A

Definitions

“Action” means any claim, complaint, charge, action, suit, audit, inquiry, investigation or other proceeding (including any arbitration proceeding).

“Affiliate” means any Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the party specified.

“Affiliated Group” means with respect to Company, any affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law) of which Company or any Predecessor is or has been a member.

“Agreement” shall have the meaning set forth in the preamble.

“Assets” means all of the Companies’ assets, properties, and rights, including Owned Intellectual Property Rights, Leased Real Property, inventory, Company Contracts, and accounts receivable.

“Business” means the business of Company (as of the Closing).

“Business Day” means any day, other than a Saturday, Sunday, or any other date in which banks located in any of New York, New York or Atlanta, Georgia are closed for business as a result of federal, state or local holiday.

“California Act” means the California Corporation Code, as amended from time to time.

“Certificate” means a certificate which immediately prior to the Effective Time represented any Company stock.

“Certificate of Merger” shall have the meaning set forth in Section 1B.

“Closing” shall have the meaning set forth in Section 4A.

“Closing Date” shall have the meaning set forth in Section 4A.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” shall have the meaning set forth in the preamble.

“Company Closing Merger Consideration” shall have the meaning set forth in Section 4B.

“Company Expenses” means all costs, fees and expenses incurred prior to the Effective Time (whether or not invoiced) by Company in connection with this Agreement and the transactions contemplated hereby, and any other fees and expenses of Company’s advisors, investment bankers, lawyers and accountants arising out of, relating to or incidental to the discussion, evaluation, financing, negotiation and documentation of the transactions contemplated hereby.

“Company Fundamental Representations and Warranties” shall have the meaning set forth in Section 10A.

“Company Stock” shall have the meaning set forth in the preamble.

“Company Transaction” means any (a) reorganization, liquidation, dissolution or recapitalization of Company, (b) merger or consolidation involving Company, (c) purchase or sale of any assets of Company or Company Stock (or any rights to acquire, or securities convertible into or exchangeable for, any portion of the Company Stock) (other than the purchase and sale of inventory and the purchase of capital equipment in the ordinary course of business consistent with past custom and practice), or (d) similar transaction or business combination involving Company or its business or assets.

“Contract” means, with respect to any person, any legally binding written, oral, implied, or other agreement, contract, instrument, note, mortgage, bond, loan, indenture, guaranty, option, indemnity, representation, warranty, deed, assignment, power of attorney, certificate, sale or purchase order, work order, insurance policy, lease, license, commitment, covenant, assurance, indemnity, or undertaking, understanding, or arrangement of any kind or nature to which such person is a party, by which it or its assets are bound or subject and under which it has or may reasonably be expected to have any current or future liability.

“Constituent Corporations” shall have the meaning set forth in the preamble.

“Delaware Act” means Title 6, Chapter 18 of the Delaware Code, as amended from time to time, known as the Delaware Limited Liability Company Act.

“Disclosure Schedule” means the Disclosure Schedules delivered by the Company to Parent concurrently with the execution and delivery of this Agreement.

“Effective Time” shall have the meaning set forth in Section 1B.

“Employee Benefit Plan” shall have meaning set forth in Section 6M(i).

“Encumbrance” means any Lien (other than restrictions on transfer under the Securities Act and applicable state securities Laws).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder

“Fraud” means actual intentional fraud and not constructive or negligent fraud.

“GAAP” means United States generally accepted accounting principles applied on a basis consistent with the accounting principles and policies of Company.

“Governmental Entity” means any government, governmental agency, department, bureau, office, commission, authority or instrumentality, or court of competent jurisdiction, whether international, foreign, provincial, domestic, federal, state or local.

“Indebtedness” means, with respect to Company at any applicable time of determination, without duplication, (i) all obligations and amounts due of Company with respect to borrowed money, (ii) all notes payable, (iii) the principal amount of capital leases, long-term vendor financing, interest rate protection agreements and any prepayment penalties, (iv) letters of credit, premiums, or make-whole amounts, (v) deferred compensation arrangements, severance, pension plans, accrued bonuses and any change of control payments resulting from the consummation of the Merger or the discharge of any obligation described above or similar arrangements payable as a result of the consummation of the transactions contemplated hereby (regardless of whether any additional event, in addition to the consummation of the transactions contemplated hereby, is required to give rise to such obligations, but expressly excluding any severance

obligations that are due and payable upon the termination of Company employees following the Closing), (vi) all costs and expenses of any lender payable in connection with the foregoing (other than accrued expenses and trade accounts payable incurred in the ordinary course of business to the extent accounted for in the working capital adjustment), (vii) all liabilities classified as non-current liabilities in accordance with GAAP as of the date of determination of such Indebtedness (other than “deferred revenue” incurred in the ordinary course of business consistent with past practice) and (viii) all accrued interest, prepayment premiums, fees, penalties, expenses or other amounts payable in respect of any of the foregoing.

“Intellectual Property Rights” means any and all intellectual and industrial proprietary rights and rights in confidential information of every kind and description anywhere in the world, including (i) patents and patent applications, and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, (ii) trademarks, service marks, trade dress, trade names, logos, slogans, corporate names and other indicia of source, and registrations and applications for registration thereof together with all of the goodwill associated therewith, (iii) copyrights and copyrightable works, and registrations and applications for registration thereof, (iv) Software, (v) internet domain names, websites, universal resource locators and other names and locators associated with the internet, (vi) trade secrets and other confidential information (including ideas, formulae, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice)), know how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, non-public data and databases, financial and marketing plans and customer and supplier lists and information (vii) moral and economic rights of authors and inventors, however denominated, and (viii) all other intellectual property.

“knowledge” means, when referring to the “knowledge of Company,” “Seller’s knowledge” or any similar phrase or qualification based on knowledge of Company, the actual knowledge of any of Brian Gallagher and Kevin Coelho, and, when referring to the “knowledge of Parent” or any similar phrase or qualification based on knowledge of Parent, the actual knowledge of any of Chris Anthony.

“Law” means any federal, state, local or foreign statute, law, ordinance, regulation, rule, order, requirement or rule of law.

“Lien” means all mortgages, security interests, charges, easements, rights, options, claims, restrictions, encumbrances, or other liens of any kind.

“Leased Real Property” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures, or other interest in real or immovable property that is used in Company’s business.

“Leases” means all leases, subleases, licenses, concessions and other agreements (written or oral), including all amendments, extensions, renewals, guaranties and other agreements with respect thereto, pursuant to which Company holds any Leased Real Property.

“Losses” means, with respect to any person at the time of determination, any and all payments, recoveries, fines, penalties, interest, assessments, judgments, settlements, demands, Taxes, claims, damages, liabilities, actual and reasonable costs and expenses suffered or incurred by the indemnified party, including reasonable attorney fees and reasonable expenses for investigation and defense; but shall exclude punitive damages (other than any such damages that are part of any judgment against the indemnified person in connection with a third-party claim that are based on any willful misconduct by the indemnifying person).

“Merger” shall have the meaning set forth in the preamble.

“Merger Sub” shall have the meaning set forth in the preamble.

“Merger Sub Equity Units” shall have the meaning set forth in the preamble.

“Multiemployer Plan” shall have the meaning set forth in Section 3(37) of ERISA.

“Organizational Documents” means (i) the certificate or articles of incorporation and the bylaws, the partnership agreement or operating agreement (as applicable), (ii) any other agreements, documents, or instruments relating to the organization, management, or operation of any Person that is an entity or relating to the rights, duties, and obligations of the equity holders of any such Person, including any equity holders’ agreements, voting agreements, voting trusts, joint venture agreements, registration rights agreements, or similar agreements, and (iii) any documents comparable to those described in clauses (i) and (ii) as may be applicable pursuant to any applicable Law.

“Owned Intellectual Property Rights” means all Intellectual Property Rights owned or purportedly owned by Company, including all Intellectual Property Rights set forth, or required to be set forth, in Schedule 7J(i) of the Disclosure Schedule.

“Parent” shall have the meaning set forth in the preamble.

“Parent Parties” means Parent and its Affiliates (including Merger Sub, and including, after the Closing, Surviving Company, but excluding Sellers and their Affiliates) and their respective stockholders, officers, directors, employees, agents, partners, members, successors and assigns.

“Permitted Equity Liens” means with respect to any equity securities at issue, (i) the provisions of the Organizational Documents of such entity to which the equity securities at issue relate, and (ii) the restrictions on the sale, transfer, pledge, or other disposition of securities provided in the Securities Act and any state or “blue sky” securities laws.

“Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a Governmental Entity.

“Plan” shall have the meaning set forth in Section 6H(v).

“Pre-Closing Tax Period” shall have the meaning set forth in Section 8F(i).

“Securities Act” means the Securities Act of 1933, as amended from time to time.

“Seller Parties” means the Sellers, Company (prior to Closing) and their respective stockholders, officers, directors, employees, agents, partners, members, successors and assigns.

“Sellers Representative” shall have the meaning set forth in the preamble.

“Software” means, in any form or format, any and all (i) computer programs, libraries and middleware, including applications, assemblers, applets, compilers, development tools, design tools, diagnostics, utilities, user interfaces and any and all software implementations of algorithms, models and methodologies, whether in source, interpreted code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow charts and other work product used to design, plan, organize and develop any of the foregoing and (iv) all programmer and user documentation, including user manuals and training materials, related to any of the foregoing.

“Subsidiary” means, with respect to any Person, any corporation, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a partnership, association or other business entity if such Person or Persons shall be allocated a majority of partnership, association or other business entity gains or losses or shall be or control the managing director or general partner of such partnership, association or other business entity.

“Surviving Company” shall have the meaning set forth in Section 1A.

“Tax” or “Taxes” means (A) any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, property or windfall profits taxes, environmental taxes, customs duties, franchise, employees’ income withholding, foreign or domestic withholding, social security, unemployment, unclaimed property, disability, real property, personal property, sales, use, transfer, value added, goods and services, alternative or add-on minimum, imputed underpayment, or other tax, fee, assessment or charge of any kind whatsoever including any interest, penalties or additions to Tax or additional amounts in respect of the foregoing; (B) liability for the payment of any amounts of the type described in clause (A) arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto); and (C) liability for the payment of any amounts of the type described in clause (A) as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other person, or as a transferee or successor, by contract, or otherwise.

“Tax Matter” means any inquiry, assessment, Action or other similar event relating to the Taxes.

“Tax Return” means any Tax return, declaration, report, claim for refund, or information return or statement filed or required to be filed with any Governmental Authority.

“Title IV Plan” means any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA, other than a Multiemployer Plan.

List of Additional Exhibits:

Exhibit B: Certificate of Merger

Exhibit C: Letter of Transmittal

Exhibit D: Sellers’ Share Allocations

The Company agrees to furnish supplementally a copy of any omitted exhibit to the U.S. Securities and Exchange Commission upon request.

Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS

THIS SETTLEMENT AGREEMENT AND RELEASE OF CLAIMS (this “Agreement”), effective as of the 27^th day of April, 2023 (the “Effective Date”), is entered into by and among each of Brian Gallagher and Kevin Coelho (each a “Founder”, collectively the “Founders”) and Aptera Motor Corp., a Delaware corporation (“Aptera” and together with the Founders, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties and those other parties named therein, entered into that certain Agreement and Plan of Merger, dated April 1, 2022 (the “Merger Agreement”), pursuant to which Aptera acquired by way of a reverse triangular merger all of the outstanding capital stock of Andromeda Interfaces Inc., a California corporation (“Andromeda”) from the Founders in exchange for the issuance of 251,087 class A common shares of Aptera (the “Aptera Shares”). Capitalized terms not defined herein shall have their respective meanings as defined in the Merger Agreement;

WHEREAS, in connection with the Merger Agreement, each of the Founders became employees of Aptera while continuing to operate Andromeda, which as a result of the Merger Agreement, became a wholly-owned subsidiary of Aptera;

WHEREAS the Parties now mutually and collectively desire to avoid the further expense, inconvenience, and distraction of continued discussions and negotiations to resolve such differing views, to compromise and settle their differences, and to effect a mutual release of all actual and known claims arising in connection with the relationships upon the terms and conditions set forth herein; and

NOW, THEREFORE, upon these premises, and for and in consideration of the mutual covenants, promises, representations, and agreements contained herein, the receipt, adequacy, fair value, and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

Return of Andromeda Stock

1. It is specifically understood and agreed that by execution of this Agreement, Aptera agrees to assign all of its right, title and interest in and to the capital stock of Andromeda to each of the Founders as specified herein. Specifically as of the Effective Date, Aptera agrees to assign 5,100 shares of Andromeda common stock to Brian Gallagher and 4,900 shares of Andromeda common stock to Kevin Coelho, free and clear of all debts, liens and encumbrances of any kind, each of which collectively represents all of the outstanding shares of Andromeda (collectively, the “Andromeda Shares”). Aptera does hereby irrevocably constitute and appoint an officer of Aptera as its attorney to transfer the Andromeda Shares on its books maintained for that purpose, with full power of substitution in the premises.

Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

Redemption of Aptera Shares and Related Matters

2. It is specifically understood and agreed that by execution of this Agreement and subject to its full performance, the Founders agree to assign all of their right, title and interest in and to the Aptera Shares to Aptera. Specifically, Brian Gallagher agrees to assign 128,054 shares of Aptera common stock to Aptera, and Kevin Coelho agrees to assign 123,033 shares of Aptera common stock to Aptera, which represents the entire share consideration received under the Merger Agreement. Each of the Founders hereby represent and warrant that they are still the record owner of such Aptera Shares and have not transferred, assigned, pledged or otherwise encumbered such Aptera Shares since their initial issuance pursuant to the Merger Agreement. Each of the Founders do hereby irrevocably constitute and appoint an officer of Aptera as its attorney to transfer the said Andromeda shares on its books maintained for that purpose, with full power of substitution in the premises.

Subject to the full performance of this Agreement, each of the Founders hereby acknowledge and agree that in connection with the earlier termination of their employment with Aptera (a) all stock options for Aptera stock have terminated and are no longer exercisable and (b) all rights to Additional Earnout Amounts as contemplated in the Merger Agreement have also terminated.

Aptera-Andromeda Separation of Assets

3. The Founders will return any Aptera assets it possesses.

Ownership of Jointly Developed Intellectual Property, Assets, and Orbity Rights

4. As between the Founders and Aptera, Aptera shall own all right, title, and interest in and to any Intellectual Property made, invented, developed, created, conceived or reduced to practice as a result of work conducted pursuant the Founders employment by, and services to or on behalf of, Aptera since April 1, 2022, or otherwise created jointly with Aptera or Andromeda since such date, through the Effective Date. Each Founder will, and hereby does, assign and otherwise transfer to Aptera all such right, title, and interest in and to such Intellectual Property as is necessary to fully effect the foregoing. Notwithstanding the foregoing, the Founders shall retain all right, title, and interest to the Intellectual Property and assets set forth on Exhibit A hereto (collectively the “Andromeda Assets”). Founders acknowledge that Andromeda has a disaster relief loan and credit card debt. For purposes of the foregoing, “Intellectual Property” means all (i) patents, (ii) trademarks, service marks, trade dress, trade names, slogans, logos, internet domain names, and corporate names (and all translations, adaptations, derivations, and combinations of the foregoing), together with all of the goodwill associated therewith, (iii) copyrights and copyrightable works (including mask works), (iv) registrations, applications and renewals for any of the foregoing, (v) computer software (including source code and object code), data, data bases and documentation thereof, and (vi) trade secrets, including ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, business and marketing plans and customer and supplier lists and related information.

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Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

5. Andromeda will retain ownership of the design and intellectual property contained in the products it had prior to being acquired. These include Intelli- gauge, EVIC, Studio Interface Kit, and related hardware and software.

6. Following the Effective Date, to the extent Andromeda continues to use in any of its customer products an Orbity Unit that was built by the Founders and/or Andromeda before the Effective Date, then Andromeda shall pay Aptera a royalty fee of $50.00 per Orbity Unit, which shall be paid each year on May 1. This will be covered in a separate Royalty Agreement. Andromeda also agrees to return to Aptera promptly after the Effective Date two (2) functional Orbity Units, which as of the date hereof remain under development, and such returned Orbity Units are to be used by Aptera for its internal testing. For purposes of the foregoing, an “Orbity Unit” refers to that certain piece of computer equipment which runs an Aptera display system which is intended to be incorporated into the motor vehicles developed by Aptera.

Releases

7. In consideration of the mutual covenants, agreements, representations, warranties, and releases set forth herein, and except for claims arising under or relating to this Agreement, upon timely return of the Andromeda Shares, the Andromeda Assets and the full performance by Aptera under the Consulting Agreement attached hereto as Exhibit B and incorporated herein by reference, each of the Founders, on behalf of themselves and their respective servants, successors, assigns, attorneys, agents, representatives, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest, do hereby forever fully, finally, and completely release and discharge Aptera and its respective current or former officers, directors, employees, servants, successors, assigns, attorneys, agents, representatives, parents, subsidiaries, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest, of and from all known claims, actions, causes of action, suits, obligations, promises, representations, warranties, covenants, controversies, expenses, judgments, executions, liabilities, damages, and demands whatsoever, in law or in equity, or otherwise, which either Founder ever had, now has or could have, from the beginning of time until the date this Agreement is executed, against Aptera, arising in connection with the Merger Agreement, their employment by Aptera and any other matter between the Parties. Each of the Founders, on behalf of themselves and their respective servants, successors, assigns, attorneys, agents, representatives, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest hereby covenant and agree never to institute or cause to be instituted or continue prosecution of any suit or other form of action or proceeding of any kind or nature whatsoever against Aptera by reason of or in connection with any of the foregoing matters, claims or causes of action.

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Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

8. Each of the Founders certifies that he has read the provisions of California Civil Code Section 1542 and has consulted his own counsel regarding that section. Each Founder waives any and all rights under California Civil Code Section 1542, which states:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.

9. For the avoidance of doubt, the Founders acknowledge and agree that the foregoing release and covenant not to sue does not apply to any action or claim not otherwise released and brought under this Agreement to enforce their rights with regard hereto.

10. In consideration of the mutual covenants, agreements, representations, warranties, and releases set forth herein, and except for claims arising under or relating to this Agreement, upon timely return of the Aptera Shares, Aptera, on behalf of itself and its respective officers, directors, employees, servants, successors, assigns, attorneys, agents, representatives, parents, subsidiaries, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest, do hereby forever fully, finally, and completely release and discharge each of the Founders and their respective servants, successors, assigns, attorneys, agents, representatives, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest, of and from all known claims, actions, causes of action, suits, obligations, promises, representations, warranties, covenants, controversies, expenses, judgments, executions, liabilities, damages, and demands whatsoever, in law or in equity, or otherwise, which Aptera ever had, now has or could have, from the beginning of time until the date this Agreement is executed, against either of the Founders, arising in connection with the Merger Agreement, their employment by Aptera and any other matter between the Parties. Aptera, on behalf of itself and its respective officers, directors, employees, servants, successors, assigns, attorneys, agents, representatives, parents, subsidiaries, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest hereby covenant and agree never to institute or cause to be instituted or continue prosecution of any suit or other form of action or proceeding of any kind or nature whatsoever against either of the Founders by reason of or in connection with any of the foregoing matters, claims or causes of action.

11. Aptera certifies that it has read the provisions of California Civil Code Section 1542 and has consulted its own counsel regarding that section. Aptera waives any and all rights under California Civil Code Section 1542, which states:

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type that the company treats as private or confidential

12. For the avoidance of doubt, Aptera acknowledges and agrees that the foregoing release and covenant not to sue does not apply to any action or claim not otherwise released and brought under this Agreement to enforce its rights with regard hereto.

Non-Disparagement

13. The Parties agree that, unless required to do so by legal process, they and their respective officers and directors will not make any disparaging statements or representations, either directly or indirectly, whether orally or in writing, by word or gesture, to any person whatsoever, about the other Party or any person or entity affiliated with the other Party. For purposes of this paragraph, a disparaging statement or representation is any communication which, if publicized to another, would cause or tend to cause the recipient of the communication to question the business condition, integrity, competence, good character, or product quality of the person or entity to whom the communication relates. This non-disparagement provision is material to this Agreement and its violation shall constitute a breach of this Agreement.

Further Assurances

14. The Parties will take any and all actions, including the signing and delivery of any and all documents and instruments, necessary or advisable to consummate the transactions contemplated hereby and in furtherance of the terms set forth herein. Additionally, if either (a) Aptera or (b) the Founders hold any asset in their possession that are owned by the other Party relating to Andromeda or Aptera, as applicable, such Party will promptly transfer (or cause to be transferred) such assets to the other Party, without further consideration from the other Party. Prior to any such transfer, the Party receiving or possessing any such asset will hold it in trust for such other Party.

Miscellaneous Terms, Conditions, Representations, and Warranties

15. Each Party represents and warrants that it has the authority to enter into this Agreement and that such Agreement is enforceable by its terms against such Party, and the execution delivery and performance of such Party’s obligations hereunder will not contravene any other obligation or agreement of such Party.

16. Nothing in this Agreement is, shall be construed as, or shall be deemed as an admission of liability or inadequacy of defenses by any of the Parties, it being expressly understood and agreed that all Parties deny any liability with respect to the matters resolved by this Agreement and that each of the Parties is entering into this Agreement solely to compromise disputed claims and to avoid the costs, risks, and distraction of further litigation.

17. Each of the Parties is entering into this Agreement freely and after opportunity for and actual consultation with attorneys of their choice. The Parties further acknowledge that there has been no coercion involved in the negotiation or execution of this Agreement nor has either Party relied on any oral or written statement by the other Party or any attorney or other agent of the other Party.

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type that the company treats as private or confidential

18. This Agreement shall be construed as if jointly prepared by all the Parties, and any uncertainty or ambiguity in this Agreement shall not be construed against any of the Parties.

19. This Agreement constitutes the entire agreement between the Parties with respect to the matters resolved herein and supersedes any and all prior or contemporaneous oral or written agreements, discussions, negotiations, correspondence, or undertakings pertaining to the matters resolved herein.

20. No alteration or attempted modification of any of the provisions of this Agreement shall be binding unless in writing and signed by the affected Parties or ordered by a court of competent jurisdiction.

21. This Agreement shall be binding on the Parties and upon their respective officers, directors, employees, servants, successors, assigns, attorneys, agents, representatives, parents, subsidiaries, and affiliates, and each of their respective heirs, executors, administrators, and successors in interest.

22. The individuals signing below on behalf of a Party have the complete, full, and lawful authority of such entities to enter into this Agreement.

Execution, Dispute Resolution, and Governing Law

23. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same valid and binding agreement. The transmission of signatures by facsimile or other electronic media shall be effective to the same extent as the transmission of original signatures.

24. Any dispute, claim or controversy arising out of or relating to this Agreement or the breach, termination, enforcement, interpretation or validity thereof, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration, before a single arbitrator, in San Diego County, California or such other location as may be mutually agreed by the parties. The arbitration shall be administered by the American Arbitration Association (“AAA”) and conducted in accordance with the Commercial Arbitration Rules of the AAA then in effect, or such other arbitral body as the Parties may jointly select. Judgment on the award made by the arbitrator may be entered in any court having jurisdiction. Except as otherwise awarded by the arbitrator, each Party shall pay the fees of their respective attorneys, the expenses of their witnesses and any other expenses connected with presenting their claim or defense. Except as otherwise awarded by the arbitrator, other costs of the arbitration, including the fees of the arbitrator, the cost of any record or transcript of the arbitration, administrative fees, and other fees and costs, shall be borne equally by the parties, one-half by the Founders, on the one hand, and one-half by Aptera,

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type that the company treats as private or confidential

on the other hand. The Prevailing Party in such arbitration shall be entitled to recover from the other Party all costs, expenses and attorneys’ fees incurred as a result of such action. For purposes of the foregoing: (i) “Prevailing Party” means (A) in the case of the Party initiating the enforcement of the rights or remedies, that it recovered substantially all of its claims; and (B) in the case of the Party defending against such enforcement, that it successfully defended substantially all of the claims made against it; and (ii) if no Party is a Prevailing Party within the meaning of the foregoing, then no Party will be entitled to recover its costs, expenses and attorneys’ fees pursuant to this Section 24.

25. This Agreement shall be construed and interpreted in accordance with the laws of the State of California without respect to its conflict of law principles.

[Signatures appear on following page.]

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Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have hereto made and executed this Agreement as of the Effective Date:

FOUNDERS:

/s/ Brian Gallagher

Brian Gallagher

/s/ Kevin Coelho

Kevin Coelho

APTERA:

Aptera Motors Corp.


By:		/s/ Chris Anthony
Name: Chris Anthony
Title: CEO

Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

Exhibit A

Founders Intellectual Property and Assets

[omitted]

Certain information has been excluded from this exhibit because it is both not material and it is the

type that the company treats as private or confidential

Exhibit B

Consulting Agreement

(attached)

[omitted]

Exhibit 6.3

TECHNOLOGY LICENSE AGREEMENT

dated

13 JANUARY 2022

CHERY NEW ENERGY AUTOMOBILE CO. LTD.,

Chery

and

APTERA MOTORS CORP.,

APTERA


Chery		Aptera

Table of Contents



TECHNOLOGY LICENSE AGREEMENT		1

Recitals		1

1.	INTERPRETATION	1

2.	LICENSE AND SCOPE OF USE	5

3.	DELIVERY AND TECHNICAL DOCUMENTATION	6

4.	PAYMENT TERMS	6

5.	WARRANTIES, INFRINGEMENT	8

6.	LIABILITY	8

7.	INDEMNIFICATION; INSURANCE; WAIVERS	9

8.	CONFIDENTIALITY	11

9.	ASSIGNMENT AND SUBCONTRACTING	11

10.	REGISTRATION AND EFFECTIVENESS	12

11.	TERM	12

12.	TERMINATION	12

13.	FORCE MAJEURE	13

14.	ADVERTISING; PUBLIC ANNOUNCEMENTS	14

15.	MISCELLANEOUS	14


Chery		Aptera

TECHNOLOGY LICENSE AGREEMENT

This Technology License Agreement (this “Agreement”) is made on 13 January 2022

Between

Chery New Energy Automobile Co. Ltd., a limited liability company duly incorporated and existing under the laws of People’s Republic of China and having its principal place of business at No. 226, Huajin South Road, High Tech Industrial Development Zone, Wuhu City, Anhui Province, PRC (“Chery”); and

Aptera Motors Corp., a corporation duly incorporated and existing under the laws of the State of Delaware, USA and having its principal place of business at 13393 Samantha Ave. San Diego, CA 92129 (“APTERA”)

(each of Chery and APTERA are hereinafter individually referred to as a “Party” and together referred to as the “Parties”).

Recitals

A.	Chery is the owner or authorised licensee of certain intellectual property rights, non-patented technological know-how and data, patents and patent applications relating to the Applicable Parts (as defined below).

B.	APTERA desires to obtain from Chery the right to use the Technology (as defined below) in respect of Applicable Parts in the Territory (as defined below), and Chery is willing to grant such right under the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the Parties hereto agree to enter into this Agreement, upon the following terms and conditions:

1.	INTERPRETATION

1.1	Definitions. In addition to any other defined terms contained elsewhere in this Agreement, the following capitalized terms shall have the following meanings:

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, grievance, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, judicial, regulatory or other, whether at law, in equity or otherwise.

“Affiliate” means, with respect to a specified Person, a Person that directly or indirectly Controls, is Controlled by or is under common Control with, the specified Person. In addition to the foregoing, if the specified Person is an individual, the term “Affiliate” also includes (a) the individual’s spouse, (b) the members of the immediate family (including parents, siblings and sons/daughters) of the individual or of the individual’s spouse, and (c) any legal entity, firm, company, corporation, association, partnership, trust, investment fund or entity that, directly or indirectly, is Controlled by or is created solely for the benefit of any of the foregoing individuals.

“Applicable Parts” means those parts and components selected from Chery’s electric vehicle models known as eQ1 and eQ5 and as listed in Schedule 1 and Schedule 2, which will be carried over or modified by APTERA for use in Aptera’s Solar Electrical Vehicles.

“Aptera Business Activities” means the design and development, homologation, manufacture, selling, and after-sales servicing of the Aptera’s Solar Electrical Vehicles by APTERA in the Territory.


Chery		Aptera

“Aptera’s Solar Electrical Vehicles” means the solar electrical vehicles with three wheels to be designed and developed by APTERA, which is scheduled to SOP on September 30, 2022 by APTERA.

“Authorised Activities” means the carrying over and modification of Applicable Parts for purposes of the Aptera Business Activities.

“Business Day” means a day (other than a Saturday, Sunday or public holiday) on which licensed banks are generally open for business in the PRC and the State of California, USA.

“Confidential Information” shall have the meaning ascribed in Section 8.1.

“Control” of a Person (including for purposes of references to the terms “Controlling,” “Controlled by” and “under common Control with”) means ownership of more than fifty percent (50%) of the voting stock or share capital of a Person or the power, directly or indirectly, through the ownership of voting securities or by agreement, either to: (i) vote a majority of the securities having ordinary voting power; (ii) determine the majority of the members of the board of directors or board of officers of such Person; or (iii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

“Dispute” shall have the meaning set forth in Section 15.9.

“Effective Date” means the date first written above in this Agreement.

“Force Majeure” shall have the meaning set forth in Section 13.2.

“Governmental Authority” means any national government, state, municipality, locality or other political subdivision thereof and any entity, body, agent, commission or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government and any executive official thereof.

“Insolvency Event” means, with respect to any Person, a Person is unable to pay its debts; enters into liquidation (except for the purposes of a solvent amalgamation or reconstruction); is subject to the appointment of an administrator, provisional liquidator, or receiver over all or a significant part of its assets or takes or is subject to any similar action in consequence of a debt; ceases or threatens to cease trading or is dissolved; or any procedure analogous to any of the preceding matters occurs in any other jurisdiction with respect to that Person.

“Intellectual Property Rights” means (i) all trade names, logos, domain names, URL’s, websites, addresses and other designations, inventions (whether or not patentable), works of authorship, technical data, technologies, trade secrets, formulas, algorithms, processes, methods, schematics, computer software (in source code and/or object code form), patents, copyright, design rights, registered designs, trademarks, service marks (registered and unregistered), know how, rights in relation to databases, rights in confidential information and all other intellectual property rights of any sort throughout the world including all registrations and pending applications for such registrations and all revisions, extensions and renewals of any such rights; and (ii) all related rights including patent rights, author’s rights, copyrights, sui generis database rights, trade secrets rights, moral rights, and all other intellectual and industrial property rights of any sort throughout the world and all applications, registrations, issuance and the like with respect thereto.

“Laws” means any applicable federal, national, regional, state, provincial, local or foreign constitution, law, statute, treaty, rule, regulation, ordinance, code, binding case law, judgement, decree, notice, approval, similar action or decision of the foregoing by any Governmental Authority (including those relating to antitrust and trade regulation, environmental protection, hazardous waste disposal, health and safety, labor, employment, capital market regulations and zoning and building codes), which applies to a Party or any of their respective assets, businesses, or activities, and any contract with any governmental authority relating to the compliance with any of the foregoing.


Chery		Aptera

“Losses” means losses, damages, liabilities, fines, penalties, costs, charges, and expenses of whatever kind (including attorneys’ or other fees, the costs of enforcing any right, and the cost of pursuing any insurance providers).

“Non-Patented Technology” means those non-patented trade secrets, know-how, databases, topography, mask works, processes, technical information, data, confidential information, specifications, drawings, records, documentation, works of authorship or other creative works, preventative maintenance schedules, algorithms, assembly processes, standards, logic diagrams, schematics and the like.

“Parts Development Agreement” means the parts development agreement to be entered into between APTERA and Chery (or its Affiliate) for the development of parts for the Aptera’s Solar Electrical Vehicles.

“Parts Supply Agreement” means the parts supply agreement to be entered into between APTERA and Chery for APTERA’s purchase from Chery (or its Affiliate) of parts for the assembly of Aptera’s Solar Electrical Vehicles.

“Patented Technology” means all inventions, utility models, products, methods, processes and other technology, which fall within any valid claim of any patent or patent application, whether filed before or after the Effective Date, along with any continuation, continuation-in- part, divisional, foreign counterpart or renewal or extension of any of the foregoing (Patent Filing), provided that such Patent Filing has not lapsed or been withdrawn, abandoned or finally rejected. For clarification and without limiting the foregoing, Patented Technology shall include inventions, utility models, products, methods, processes or other technology existing before or at the Effective Date, but for which a Patent Filing is made after the Effective Date.

“Person” means an individual, legal person or entity, corporation, company, firm, partnership, limited partnership, syndicate, trust, association or entity or Governmental Authority, political subdivision, agency of instrumentality of a Governmental Authority (whether or not having separate legal personality and irrespective of the jurisdiction in or under the law of which it was incorporated or exists).

“PRC” or “China” means the People’s Republic of China, and for the purpose of this Agreement only, excluding the province of Taiwan and the Hong Kong and Macau Special Administrative Region.

“Quarter” means each of the three-month periods ending on March 31, June 30, September 30 and December 31 of a calendar year.

“Quarterly Report” shall have the meaning set forth in Section 4.3.

“Representatives” means the employees, directors, officers, agents, subcontractors, shareholders, attorneys, advisors, successors and permitted assigns of a Party and its Affiliates respectively.

“SOP” means the start of production of the first Aptera’s Solar Electrical Vehicle to be sold.

“Technical Documentation” means the standards, specifications (including but not limited to DFMEA, DVP&R, SSTS, CTS, Native Catia Data and their equivalent), instructions, drawings, pictures, tapes and similar written material to be provided to APTERA relating to the Technology, which are listed in Schedule 1 and Schedule 2.


Chery		Aptera

“Technical Documentation Certificate of Receipt” shall have the meaning set forth in Section 3.3.

“Technological Know-how and Data” means all technical information (including the Technical Documentation) in whatever form (written, visual, electronic, magnetic or other media) or know-how, trade secrets and other information provided to APTERA in relation to the Applicable Parts or Technology.

“Technology” means the Patented Technology and Non-Patented Technology owned by or licensed to Chery (with the right to sublicense) which relate to the Applicable Parts, as set out in the Technical Documentation, as well as the Technological Know-how and Data that Chery agrees to include in the scope of license under this Agreement.

“Term” means the period specified in Section 11 or, if this Agreement shall be terminated prior to the expiration of such period, the period from the Effective Date to the date on which this Agreement is terminated (inclusive).

“Territory” means the North America, South America, European Union, South Africa, Australia and New Zealand.

“Third Party” shall mean any Person that is not a Party or an Affiliate of a Party.

“Wholesale Unit” means a unit of Aptera’s Solar Electrical Vehicle sold by APTERA to a distributor, dealer and/or end customer.

1.2	Interpretation. For purposes this Agreement, unless the specific context requires otherwise:

(a)

The singular includes the plural and the plural includes the singular; words importing any gender include all other genders.

(b)

References to any law, regulation or other statutory provision include reference to such law or regulation or provision as modified, amended, extended, replaced or re- enacted, whether before or after the date hereof.

(c)

References to any document (including this Agreement) are references to that document as amended, consolidated, supplemented, novated or replaced from time to time.

(d)

References to individuals, legal entities or parties include their respective permitted successors and assigns.

(e)

References to “Sections” or “Schedules” are references to Sections or Schedules which form part of this Agreement, except as otherwise specifically indicated.

(f)

The headings included in this Agreement and its Schedules are inserted for convenience only and shall not affect the construction of this Agreement.

(g)

The words “include” and “including” shall be deemed to include “without limitation”.

(h)

The words “herein hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section or other subdivision.

(i)

Where any word or phrase is given a defined meaning in this Agreement any other part of speech or other grammatical form of that word or phrase shall have a corresponding meaning.

(j)

The words “directly or indirectly” mean directly or indirectly through one or more intermediary Persons (including an Affiliate) or through contractual or other legal arrangements, and “direct or indirect” shall have correlative meanings.


Chery		Aptera

(k)

The Recitals and Schedules constitute an integral part of this Agreement. In case of conflict between the provisions of the body of this Agreement and any Schedule, the provisions of the body of this Agreement shall prevail.

(l)

Rights may be exercised or not, at their holder’s sole discretion.

(m)

Whenever this Agreement refers to a number of days (other than Business Days), such number shall refer to calendar days. All periods of time and terms shall be counted excluding the date of the event that causes such period or term to begin and including the last day on which such period or term ends.

2.	LICENSE AND SCOPE OF USE

2.1

Subject to APTERA’s full compliance with the terms and conditions set forth in this Agreement, Chery grants to APTERA, and APTERA hereby accepts, for the Term, a limited, non-transferable, non-sub licensable (except as provided in Section 2.2), and non-exclusive right and license to use the Technology only in connection with the Authorised Activities and only in the Territory.

2.2

APTERA may sublicense the Technology to suppliers of Applicable Parts of Aptera’s Solar Electrical Vehicles to the extent such suppliers require and solely for purposes of providing components or parts of Applicable Parts for Aptera’s Solar Electrical Vehicles, and authorized dealers of Aptera’s Solar Electrical Vehicles to the extent such dealers require and solely for purposes of providing after-sales services for Aptera’s Solar Electrical Vehicles. Except for the foregoing, APTERA may not sublicense the Technology or any of the rights provided in this Section 2 without Chery’s prior written consent.

2.3	Except as expressly set out in this Section 2 or permitted by Chery in writing, no other right or license is granted by Chery to APTERA by this Agreement and APTERA shall not use any other Intellectual Property Rights of Chery.

2.4

APTERA shall not make any representation or do any act which may be taken to indicate that it has any right, title or interest in or to the ownership or use of any of the Technology except under the terms of this Agreement, and APTERA hereby acknowledges that it acquires only the limited and temporary right to use the Technology and that it does not acquire any rights, title or interest, express or implied, in the Technology, but rather, Chery shall at all times retain all rights, title, interest, including the Intellectual Property Rights, in the Technology.

2.5	Chery reserves the right to use, sell or license any of the Technology at any time to other Persons, notwithstanding anything to the contrary herein.

2.6

APTERA shall not, and cause its Representatives not to, during the Term or any time after its expiration or termination for any reason, register or attempt or cause to be registered in any part of the world any of the Technology or any Intellectual Property Rights identical or substantially similar to any of the Technology.

2.7	APTERA shall not do or permit anything to be done in connection with its use of the Technology which would or could jeopardise or prejudice the right or title of Chery to the Technology. APTERA shall not assert any rights to or challenge Chery’s rights to the Technology.

2.8	APTERA shall be solely responsible and liable for the modification, development, change, improvement, enhancement or customization of the Applicable Parts.


Chery		Aptera

2.9

Each Party acknowledges that the Technology has great commercial value to Chery and that any breach of the restrictions referred to in this Section 2 may cause Chery irreparable damage for which a monetary indemnity may not be an adequate remedy. Accordingly, in addition to other remedies that may be available under this Agreement (including a right of termination and/or a claim for damages), Chery may seek and obtain injunctive relief against such a breach or threatened breach in any relevant country.

3.	DELIVERY AND TECHNICAL DOCUMENTATION

3.1

Provided that Chery receives the first instalment payment according to Section 4.2 of this Agreement, Chery shall deliver to APTERA via electronic data transfer and/or Team Center System, the relevant Technical Documentation, which are set out in Schedule 1. Upon the delivery of the relevant Technical Documentation set out in Schedule 1, Chery shall promptly issue a notification of delivery to Aptera. Chery may also provide hardcopies of the Technical Documentation on a case-by-case basis as reasonably requested by APTERA, at APTERA’s cost. Such Technical Documentation shall be subject at all times to the confidential and security policy of Chery.

3.2

Until the date of SOP, upon the request of Aptera, Chery will deliver to APTERA via electronic data transfer and/or Team Center System, the relevant Technical Documentation, which are set out in Schedule 2. For the avoidance of doubt, APTERA will not be entitled to withhold any payment of license fees under this Agreement for the reason due to the provision of Technical Documentation which are set out in Schedule 2.

3.3	All Technical Documentation is provided to APTERA with “as is” status, without any express or implied warranties, which is the same as used by Chery at the date of delivery of the Technical Documentation.

3.4

APTERA shall promptly issue a certificate of receipt (“Technical Documentation Certificate of Receipt”) to Chery within five (5) Business Days after receipt by APTERA of the Technical Documentation, which are set out in Schedule 1. Upon Chery’s receipt of the Technical Documentation Certificate of Receipt, or APTERA’s failure to issue such receipt within five (5) Business Days after receipt by APTERA of the Technical Documentation, Chery shall be deemed as having complied with its obligations under Section 3.1.

3.5

In the event that erroneous Technical Documentation is provided by Chery under this Agreement: (i) the Parties will meet to discuss remedies for erroneous information provided by Chery; and (ii) if Chery agrees that it provided erroneous information, Chery shall modify any such erroneous information and promptly inform APTERA in writing of such modification.

3.6

Each of Chery and APTERA shall appoint its liaison person who will be responsible for the delivery and receipt of the Technical Documentation respectively. The liaison person of Chery is Fu Fumei, and the liaison person of APTERA is Matt Bockman. A Party may change its liaison person by written notice to the other Party.

4.	PAYMENT TERMS

4.1	In consideration of the rights granted by Chery to APTERA under this Agreement in respect of the Technology, APTERA shall pay to Chery license fees in two parts: 1) Fixed Fee; and 2) Royalties.

4.2

It is agreed between the Parties that the total amount of the Fixed Fee to be paid by APTERA to Chery is USD 2,000,000 in cash (the “Fixed Fee”). The Fixed Fee shall be divided into four equivalent instalments, i.e. USD 500,000 in cash for each instalment. APTERA shall consummate the payment in cash as set out below:

within five Business Days after the execution of this Agreement by the Parties;


Chery		Aptera

within five Business Days after thirty days after the execution of this Agreement by the Parties, provided that the Technical Documentation Certificate of Receipt has been issued by APTERA (or APTERA has failed to issue such receipt within five (5) Business Days after receipt by APTERA of the Technical Documentation);

Within five Business Days after execution of the Parts Supply Agreement and Parts Development Agreement.

Within five Business Days after the delivery of first batch of parts under the Parts Supply Agreement.

4.3

APTERA shall pay to Chery a running royalty, being USD 258 per Wholesale Unit of Aptera’s Solar Electrical Vehicles containing Aptera sourced parts from Chery (or its Affiliate) or from global suppliers utilizing original Chery-licensed Technology (the “Royalties”). For purpose of calculating the Royalties, after the SOP, APTERA shall within [five (5)] Business Days following the end of each Quarter send a sales report to Chery setting out (a) the number of Wholesale Units of Aptera’s Solar Electrical Vehicles in respect of that Quarter, and (b) the total amount of Royalties payable by APTERA in respect of that Quarter (“Quarterly Report”). The Royalties shall be invoiceable by Chery based on the Quarterly Report. APTERA shall make payment to Chery against the relevant invoices within 10 Business Days of Chery’s issuing the invoice.

4.4

APTERA shall keep true and accurate records and books of account containing all data necessary for the determination of Royalties payable. Chery or its duly authorized representative or accountant, shall be entitled, on reasonable notice, to inspect the records and books during business hours for the purpose of verifying the accuracy of the Quarterly Reports. Where Chery detects any error in the accounting of APTERA, APTERA shall reimburse Chery’s costs of investigating APTERA’s books reasonably attributable to the investigation which uncovered such error and shall immediately remedy any underpayment.

4.5	The license fee to be paid by APTERA to Chery, pursuant to the clauses hereinabove, shall be due and payable, in the designated bank account of and specified in writing to APTERA by Chery, by wire transfer.

4.6	The taxes outside China in connection with the payments of license fees under this Section 4 shall be borne and paid by APTERA.

4.7

All costs and charges applied or levied by APTERA’s bank in relation to the wire transfers / payments to be effected into Chery’s bank account by APTERA shall be borne by APTERA, and all costs and charges applied or levied by Chery’s bank in China, in relation to the payments to be effected into Chery’s designated bank account shall be borne by Chery.


Chery		Aptera

5.	WARRANTIES, INFRINGEMENT

5.1	Chery represents and warrants to APTERA that it has the legal right, power and authority to enter into this Agreement and perform, assume and comply with all covenants and obligations undertaken by Chery hereunder.

5.2	APTERA represents and warrants to Chery that it has the legal right, power and authority to enter into this Agreement and perform, assume and comply with all covenants and obligations undertaken by APTERA hereunder.

5.3

APTERA shall notify Chery as soon as practicable in writing upon becoming aware of any Third Party infringing or appropriating Chery’s Technology in the Territory. Chery shall have the sole right to determine whether, and to what degree, to take Action regarding such infringement or appropriation of the Chery’s Technology. The cost of such Action shall be exclusively borne by APTERA and any recovery from such Action shall be payable solely to Chery, in the event of an infringement or appropriation of Chery’s Technology, and APTERA shall use its commercially reasonable efforts to co-operate with Chery in the taking of any such Action.

5.4

APTERA shall notify Chery as soon as practicable in writing if APTERA becomes aware that Chery’s Technology infringes a Third Party’s Intellectual Property Rights. APTERA and Chery shall use their commercially reasonable efforts to cooperate with each other to resolve such infringement, at APTERA’s cost.

5.5

If APTERA determines that it is possible to apply for or file for any Intellectual Property Rights in connection with the Technology licensed by Chery, APTERA shall notify Chery so that Chery may decide whether or not it wishes to apply for or file any such right. Under no circumstances shall APTERA be authorized to take any steps to apply for or file any such right in its own name. Applications for registration of rights relating to the Technology shall be at the sole cost of APTERA and made in the name of Chery.

5.6	Chery represents and warrants to APTERA, to the actual knowledge of Chery, as of the Effective Date of this Agreement, the Technology does not infringe the Intellectual Property Rights of any Third Party in the PRC.

6.	LIABILITY

6.1

For the purposes of this Section, “liability” means any liability, including under statute, tort (including liability for negligence, misrepresentation or misstatement), contract (including liability under any indemnity) or otherwise (save that any exclusions or limitations of liability shall not apply in respect of fraud), and “liable” and “liabilities” shall be construed accordingly.

6.2

The Parties shall not be liable under or in connection with this Agreement for any loss of profit, incidental or indirect loss, special loss, consequential loss, exemplary damages (excluding any damages arising from Actions subject to indemnification under this Agreement), diminution in value, business interruption, cost of capital, or loss of business reputation or opportunity including loss or deferral of revenue, additional or other financing costs, loss of use or any loss in respect of business interruption, damage to reputation and goodwill, or loss of expected future business.

6.3

The aggregate liability of Chery and its Representatives in respect of all claims under or in connection with this Agreement or arising out of or in connection with any act, omission, event or circumstance or series of acts, omissions, events or circumstances relating to this Agreement shall in no circumstances exceed the aggregate amount of the license fee received by Chery for the immediate preceding 12 months period according to this Agreement.


Chery		Aptera

6.4

EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, CHERY MAKES NO REPRESENTATION, WARRANTY, OR ASSURANCE OF ANY KIND WHATSOEVER, WHETHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, AS TO THE TECHNOLOGY, THE TECHNICAL DOCUMENTATION, OR AS TO ANY CONDITION, PERFORMANCE, SATISFACTORY QUALITY, NON INFRINGEMENT OF THIRD PARTY RIGHTS, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, AND ALL SUCH REPRESENTATIONS, WARRANTIES, AND CONDITIONS ARE SPECIFICALLY EXCLUDED AND DISCLAIMED, INCLUDING ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OF MERCHANTABILITY. Other than as stated in this Agreement, Chery shall have no liability in relation to any Applicable Parts carried over or modified using the Technology or Aptera’s Solar Electrical Vehicles whether in relation to the quantity or quality of such carried over or modified Applicable Parts or Aptera’s Solar Electrical Vehicles or otherwise.

7.	INDEMNIFICATION; INSURANCE; WAIVERS

7.1

APTERA agrees to indemnify and hold Chery and its Representatives harmless from and against all Losses actually incurred or suffered by Chery and its Representatives which arise from or in connection with (a) any breach by APTERA of its obligations under this Agreement, (b) any Action relating to any infringement or misuse of the Technology by APTERA or its Affiliates, (c) any Action brought against Chery for any use of any other technology by APTERA which was not previously authorized by Chery, or (d) any Action for bodily injury, property damage, product warranty, product liability or infringement of Intellectual Property Rights with respect to the Aptera Business Activities or any of Aptera’s Solar Electrical Vehicles.

7.2

In relation to any Action subject to indemnification under Section 7.1, Chery shall be entitled to assume and control the defence and settlement of the Action at the sole cost of APTERA and through counsel of Chery’s choice. APTERA shall cooperate with Chery in such defence and make available to Chery all witnesses, pertinent data, records, materials and information in APTERA’s possession or under APTERA’s control relating to the Action as is reasonably required by Chery.

7.3

In relation to any Action brought against APTERA, or jointly against APTERA and Chery, in relation to the Technology, APTERA shall inform Chery in writing and provide Chery with the claim letter or email, claim package, complaint, summons, disclosures, and any other documents included therewith, if available.

(a)

Chery may elect, in its sole discretion, to assume and control the defence at the cost of APTERA if it gives written notice of its intention to do so to APTERA within thirty (30) days after receiving APTERA’s notice of such Action. In that event, APTERA may appoint its own participating non-controlling counsel with respect to such Action, at its own expense. Chery will keep APTERA apprised of all material developments regarding the Action being defended by Chery, will instruct its counsel to cooperate and consult with APTERA’s counsel, and will act in good faith and give reasonable consideration to the views of APTERA and its counsel in connection with the defence of such Action. Before Chery settles or determines to forego any right of appeal in connection with the Action pursuant to this Section 7.3, however, Chery shall give APTERA advance written notice of any proposed settlement or the foregoing of such right, and a reasonable opportunity to consent in writing to the settlement or the foregoing of such right (which consent will not be unreasonably withheld, delayed or conditioned).


Chery		Aptera

(b)

In the event APTERA is controlling the defence against any such Action, Chery may appoint its own participating non-controlling counsel and will cooperate with APTERA in such defence and make available to APTERA all witnesses, pertinent data, records, materials and information in Chery’s possession or under Chery’s control relating to the Action as is reasonably required by APTERA. No such Action may be settled prior to a final judgment thereon and no appeal may be foregone by APTERA without the prior written consent of Chery (which consent will not be unreasonably withheld, delayed or conditioned), unless Chery is released in full in connection with such settlement.

(c)

Chery shall have no liability to APTERA for its defence of any Action or any actions taken or not taken by Chery in respect thereof.

7.4

APTERA shall maintain at all times, at its expense, adequate liability insurance relating to the Aptera Business Activities. APTERA shall name Chery and/or its Affiliates as an additional insured party on such policies. Upon a reasonable request by Chery, APTERA shall supply its relevant insurance certificates and policies showing the coverage required. Without limiting the generality of the foregoing, APTERA will maintain such insurance coverage at its own expense with insurance carriers rated A1 or better by Moody’s Insurance Financial Strength Rating or A.M. Best Company A – (VII) or better. APTERA shall maintain such insurance policies for the Term of this Agreement on terms and conditions that are satisfactory to Chery.

7.5	APTERA acknowledges and agrees that it is entering into this Agreement, and any transaction contemplated hereby, at its own risk, without any reliance on any representations, warranties, or undertakings by Chery.


Chery		Aptera

8.	CONFIDENTIALITY

8.1

APTERA shall not divulge or make use of any Technology or other proprietary confidential information of Chery that is provided or made available to APTERA or that are otherwise acquired by or come into the possession of APTERA pursuant to this Agreement (collectively, the “Confidential Information”) other than as expressly authorized under this Agreement. Confidential Information shall include all information that APTERA acquires from Chery or its Representatives or that comes into the possession of APTERA under the terms of this Agreement, whether developed by Chery or by others and whether patented or patentable, including the Technology and Technical Documentation.

8.2

The Parties agree and acknowledge that the Confidential Information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other Persons who can obtain economic value from its disclosure or use. APTERA shall use all reasonable best efforts to preserve the proprietary character of the Confidential Information and treat all information contained therein as confidential, and not remove or obscure Chery’s copyright or proprietary rights notices if any exist thereon. APTERA shall protect the Confidential Information from disclosure by using the same degree of care, but not less than reasonable best efforts, and security measures to prevent the unauthorized use, dissemination, or publication of the Confidential Information as APTERA uses to protect its own Confidential Information of a like nature.

8.3

Access to the use of the Confidential Information shall be restricted to those of APTERA’s Representatives who have a need to know information for the uses permitted hereunder and who agree to adhere to the obligations of confidentiality hereunder and are bound by legally enforceable written confidentiality agreements containing equivalent obligations. APTERA may disclose Confidential Information (i) pursuant to any request or order under applicable Laws and (ii) pursuant to a subpoena or other legal process, provided that APTERA shall notify Chery prior to such a disclosure so that Chery may seek a protective order. APTERA shall notify Chery of any actual or threatened breach of this confidentiality provision, and APTERA shall cooperate with Chery in enforcing such provisions.

8.4

If requested by Chery and upon expiration or termination of this Agreement, APTERA shall, subject to applicable Law, immediately return to Chery all Confidential Information, including materials, papers, records, documents, and the like of every kind, and any and all copies thereof, provided to APTERA in connection with this Agreement.

8.5

This Agreement imposes no obligation upon APTERA with respect to Confidential Information which (i) was in APTERA’s possession before receipt from Chery, (ii) is or becomes a matter of public knowledge through no fault of APTERA, (iii) is rightfully received by APTERA from a Third Party without a duty of confidentiality, or (iv) is disclosed by APTERA with Chery’s prior written approval.

8.6	Proprietary know-how will remain confidential in perpetuity and trade secrets shall remain confidential so long as they remain a trade secret

9.	ASSIGNMENT AND SUBCONTRACTING

9.1

Except as expressly provided otherwise in this Agreement, APTERA shall not, without the prior written consent of Chery, assign, mortgage, create a security interest in, charge or dispose of this Agreement or any of its rights hereunder, or otherwise delegate any of its obligations under this Agreement. In particular, APTERA shall not create or grant any security interest in the Technology, nor shall it lease, sub-contract or sublicense the Technology to any other Person, unless otherwise agreed by Chery in writing prior to such sub-contract or sub-license taking place.


Chery		Aptera

10.

REGISTRATION AND EFFECTIVENESS

10.1

If any authorisation or approval of, or filing, or completion of the performance of other procedures with a PRC governmental body are required, in connection with this Agreement, Chery shall use its reasonable efforts to obtain unconditional authorisations and approvals or to effect such filing or procedures. If any authorisation or approval of, or filing or completion of the performance of other procedures with a governmental body of the Territory are required in connection with this Agreement, APTERA shall use its reasonable efforts to obtain unconditional authorisations and approvals or to effect such filings or procedures. The Parties shall co-operate with each other in seeking all necessary government authorisations and approvals.

10.2

With respect to the authorisation or approval of the governmental bodies of the PRC or the Territory, if conditions are so imposed therewith that either Party believes that an amendment must be made to this Agreement that either party cannot accept, or if either or both of Chery and APTERA are ordered to make any such amendment, either party may immediately terminate this Agreement without any liability.

11.

TERM

After being signed by both Parties, this Agreement shall come into force on the Execution Date. This Agreement shall remain fully valid and effective unless and until earlier terminated as provided under this Agreement or required by applicable Laws.

12.

TERMINATION

12.1	Chery may terminate this Agreement by written notice to APTERA at any time if:

(a)

any payment due from APTERA remains unpaid for a period in excess of sixty (60) Business Days following the due date for payment of such amount, and APTERA fails to pay such amount within thirty (30) Business Days following receipt of written notice giving full particulars of the outstanding amount and requiring it to be paid;

(b)

an Insolvency Event occurs in respect of APTERA;

(c)

APTERA breaches:

(i)

any of its material obligations or restrictions under Section 2 in relation to the license grant; and/or

(ii)

any of its obligations under Section 8 in relation to confidentiality;

(d)

APTERA fails to meet the quality requirements in the Territory in respect of Aptera’s Solar Electrical Vehicles; or

(e)

APTERA commits a material breach of its obligations under this Agreement and (where the breach is capable of being remedied) that breach has not been remedied within thirty (30) Business Days following receipt of written notice giving full particulars of the breach and requiring it to be remedied.

12.2	Aptera has the right to claim direct losses suffered by written notice to Chery if:

(a)

Chery commits a material breach of its obligations under this Agreement and (where the breach is capable of being remedied) that breach has not been remedied within thirty (30) Business Days following receipt of written notice giving full particulars of the breach and requiring it to be remedied;


Chery		Aptera

(b)

Chery delays the delivery of the Technical Documentation as set out in Schedule 1 for more than 30 Business Days;

(c)

Chery maliciously refuses the request of Aptera to provide the Technical Documentation as set out in Schedule 2; or

(d)

Chery unilaterally cease the license of the Technology under this Agreement without any cause.

12.3	Any termination pursuant to Section 12.1 will become effective immediately upon notice of the termination to APTERA.

12.4	No termination of this Agreement will prejudice a Party’s right to recover any sums due under this Agreement at the effective date of termination or prejudice any cause of action or claim either Party may have by reason of the other Party’s failure to meet its obligations under this Agreement.

12.5	Following expiration or termination of this Agreement for any reason:

(a)

APTERA shall immediately cease any and all use of the Technology and Intellectual Property Rights of Chery, as well as cease carrying out the Authorised Activities,

(b)

APTERA shall pay any outstanding amount owed to Chery under this Agreement;

(c)

except for APTERA’s payment and confidentiality obligations under this Agreement and its indemnity under Section 7.1, all rights and obligations of the Parties with respect to each other hereunder shall cease;

(d)

the license granted hereunder shall terminate immediately and automatically, and APTERA shall consent to cancellation of any record, if any, of APTERA as licensee of the Technology;

(e)

all Technical Documentation and all other documents, including memoranda, pages and drawings, tapes, microfilm, computer diskettes or any electronic or other medium containing information on Chery’s Technological Know-how and Data and/or Technology together with any copies thereof, shall, as required by Chery in its sole discretion, be returned to Chery or destroyed by APTERA in the presence of Chery or its designee and a certificate of such destruction signed by the Chief Executive Officer (or equivalent) of APTERA shall be promptly provided to Chery;

12.6	The provisions of Sections 7.1, 7.2, 7.3, 8, 12, 14 and 15 shall survive the expiration or termination of this Agreement.

13.

FORCE MAJEURE

13.1

Each Party will be excused from performing its obligations under this Agreement when substantially prevented by Force Majeure, but only after the Party claiming Force Majeure has served notice thereof on the other Party and then for no longer than the Force Majeure exists. The Party whose performance of this Agreement is affected by any Force Majeure event (the “Affected Party”) shall provide the other with any evidence necessary to verify the occurrence of Force Majeure.

13.2

“Force Majeure” mean any event which: (i) is beyond the control of the Affected Party; (ii) is unforeseen or, if foreseen, is unavoidable; (iii) arises after the date of the execution of this Agreement; and (iv) prevents total or partial performance of this Agreement by any Party. Such events shall include, but not be limited to, floods, fires, droughts, typhoons, earthquakes or other natural disasters, transportation disasters, strikes, civil unrest or disturbance, acts of terrorism, riots and war (whether or not declared) provided that Force Majeure does not include any such Force Majeure event that is due to a Party’s wilful act, neglect or failure to take reasonable precautions against the relevant Force Majeure event.


Chery		Aptera

13.3	In the event of a Force Majeure, the Affected Party shall use all reasonable endeavours to avoid or mitigate the effects of the event in question and shall, upon the cessation of the Force Majeure, use all reasonable endeavours to make up for any delay, which has occurred.

13.4	It is expressly agreed that each Party may terminate this Agreement upon notice to the other Party without liability in case of a Force Majeure situation lasting more than six (6) months.

13.5	Nothing in this Section shall relieve a Party of its obligation to make payments when due hereunder.

14.

ADVERTISING; PUBLIC ANNOUNCEMENTS

14.1	Each Party shall not, and shall ensure that its Affiliates do not, use the other Party’s or any of its Affiliate’s name and logo for promoting their products in print and electronic media without prior written permission of the other Party.

14.2

No Party nor any of its Representatives shall (orally or in writing) publicly disclose, issue any press release or make any other public statement, or otherwise communicate with the media, concerning the existence of this Agreement or the subject matter hereof, without the prior written approval of the other Party, except if and to the extent that such Party (based upon the reasonable advice of counsel) is required to make any public disclosure or filing regarding the subject matter of this Agreement (a) by applicable Law or (b) in connection with enforcing its rights under this Agreement.

15.

MISCELLANEOUS

15.1	No Partnership

Nothing in this Agreement is or shall be deemed to constitute a partnership between the Parties nor, except as may be expressly set out in it, constitute any Party the agent of the other for any purpose.

15.2	Further Assurances

Each Party agrees (at its own cost) to perform (or procure the performance of) all further acts and things, and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by law or as the other Parties may reasonably require to implement and/or give effect to this Agreement and the transaction contemplated by this Agreement.

15.3	Variation, waiver and consent

(a)

No variation or waiver of any provision or condition of this Agreement shall be effective unless it is in writing and signed by or on behalf of each of the Parties (or, in the case of a waiver, by or on behalf of the Party waiving compliance).

(b)

Unless expressly agreed in writing, no variation or waiver of any provision or condition of this Agreement shall constitute a general variation or waiver of any provision or condition of this Agreement, nor shall it affect any rights, obligations or liabilities under or pursuant to this Agreement which have already accrued up to the date of variation or waiver, and the rights and obligations of the Parties under or pursuant to this Agreement shall remain in full force and effect, except and only to the extent that they are so varied or waived.

(c)

Any consent granted under this Agreement shall be effective only if given in writing and signed by the consenting Party and then only in the instance and for the purpose for which it was given.


Chery		Aptera

15.4	Entire Agreement

Subject to any terms implied by law, this Agreement represents the whole and only agreement between the Parties in relation to its subject matter and supersedes any previous agreement (whether written or oral) between all or any of the Parties in relation to the subject matter save that nothing in this Agreement shall exclude any liability for, or remedy in respect of, fraudulent misrepresentation.

15.5

Notices

(a)

Save as otherwise provided in this Agreement, any notice, demand or other communication to be given by any Party under, or in connection with, this Agreement shall be in writing in English and signed by or on behalf of the Party giving it. Any shall be served by sending it by email or fax to the number set out in Section 15.5(b), or delivering it by hand to the address set out in Section 15.5(b) and in each case marked for the attention of the relevant Party set out in Section 15.5(b) (or as otherwise notified from time to time in accordance with the provisions of this Section 15.5). Any notice so served by email, fax or hand shall be deemed to have been duly given or made as follows:

(i)

if sent by email, at the time of transmission by the sender (as recorded on the device from which the sender sent the e-mail);

(ii)

if sent by fax, at the time of transmission; or

(iii)

in the case of delivery by hand, when delivered,

provided that in each case where delivery by email, fax or by hand occurs after 6:00 p.m. on a Business Day or on a day which is not a Business Day, service shall be deemed to occur at 9:00 a.m. on the next following Business Day. References to time in this Section are to local time in the country of the addressee.

(b)

The addresses and fax numbers of the Parties for the purpose of this Section are as follows:

Chery

Address: [No. 226, Huajin South Road, High Tech Industrial Development Zone, Wuhu City, Anhui Province, PRC]

Email: [***]

Fax: [***]]

For the attention of: [Mr. Rong Shengge]

APTERA

Address: [13393 Samantha Ave. San Diego, CA 92129, USA]

Email: [***]

Fax: [●]

For the attention of: [Mr. Jim Chyou]


Chery		Aptera

(c)

A Party may notify the other Party of a change to its name, relevant addressee, address or fax number for the purposes of this Section, provided, that such notice shall only be effective on:

(i)

the date specified in the notification as the date on which the change is to take place; or

(ii)

if no date is specified or the date specified is less than five (5) Business Days after the date on which notice is given, the date following five (5) Business Days after notice of any change has been given.

(d)

In proving service it shall be sufficient to prove that the envelope containing the notice was properly addressed and delivered to the address shown thereon or that the facsimile transmission was made and a facsimile confirmation report was received, as the case may be.

15.6

Costs

Each of the Parties shall be responsible for its own legal, accountancy and other costs, charges and expenses incurred in connection with the negotiation, preparation and implementation of this Agreement and any other agreement incidental to or referred to in this Agreement.

15.7	Severability

If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable in any respect under the law of any jurisdiction, then such provision shall (so far as it is invalid or unenforceable) be given no effect and shall be deemed not to be included in this Agreement but without invalidating any of the remaining provisions of this Agreement. Any provision of this Agreement held invalid or unenforceable only in part or degree shall remain in full force and effect to the extent not held invalid or unenforceable. The Parties shall then use all reasonable endeavours to replace the invalid or unenforceable provision(s) by a valid and enforceable substitute provision the effect of which is as close as possible to the intended effect of the invalid or unenforceable provision.

15.8	Governing Law

This Agreement shall be governed, interpreted and enforced in accordance with the Laws of the PRC, without regard to its principles of conflicts of law.

15.9	Dispute Resolution

(a)

In the event of any dispute or claim arising out of or in connection with this Agreement, including any question regarding its existence, validity, interpretation, performance, breach or termination (the “Dispute”), the Parties shall attempt to resolve amicably and informally the Dispute. A Party may initiate informal negotiations to resolve the Dispute by giving written notice of such intent to the other Party.

(b)

If the Dispute is not resolved within thirty (30) days of a Party giving written notice to the other in accordance with Section 15.9(a), such Dispute shall be referred to and finally resolved by arbitration administered by Singapore International Arbitration Centre (“SIAC”) in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) for the time being in force, which rules are deemed to be incorporated by reference in this Section 15.9(b).

(i)

The law of this Section 15.9 shall be PRC law

(ii)

The seat of arbitration shall be Singapore.


Chery		Aptera

(i)

The language of arbitration shall be English.

(ii)

The arbitral tribunal shall consist of three arbitrators. Each Party shall appoint one arbitrator, and the Parties shall nominate a third arbitrator who shall act as the presiding arbitrator of the arbitral tribunal. Failing such nomination within fifteen (15) days from the appointment of the second arbitrator, the President of the Court of Arbitration of SIAC shall appoint the presiding arbitrator.

(iii)

Despite the arbitration, to the extent applicable and permissible, any Party shall be entitled to seek interim relief, including injunctive relief, from a court of competent judicial authority, and this shall not be considered to be or construed as incompatible with, or a waiver of, the agreement to arbitrate as set out in this Section 15.9(b).

(iv)

Judgment upon any award entered through arbitration may be entered in any court having jurisdiction or application may be made to any such court for judicial acceptance of the award and an order for enforcement, as the case may be. Each of the Parties hereby expressly and irrevocably waives any claim of immunity from jurisdiction or enforcement of the judgment which it may have on grounds of sovereign immunity or otherwise.

(v)

The Parties to the arbitration shall bear their own costs and expenses.

(vi)

The arbitration award shall be final, conclusive and binding on each Party and shall not be subject to any appeal and shall deal with the question of costs of arbitration and matters related thereto.

15.10

Copies

This Agreement may be executed in any number of copies and by the Parties on separate copies and each such copy shall constitute an original of this Agreement but all of which together constitute one and the same instrument. This Agreement shall not be effective until each Party has executed at least one copy.

[The remainder of this page is intentionally left blank.]


Chery		Aptera

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives.

Chery New Energy Automobile Co. Ltd.

Name:

Title: Authorized Representative

Aptera Motors Corp.

Name:

Title: Chairman & CEO


Chery		Aptera

List of Schedules

Schedule 1: Initial Part of Applicable Parts and Technical Documentation

Schedule 2: Additional Part of Applicable Parts and Technical Documentation

The Company agrees to furnish supplementally a copy of any omitted exhibit to the U.S. Securities and Exchange Commission upon request.


Chery		Aptera

SUPPLEMENTAL AGREEMENT

CLASS B COMMON STOCK ACQUISITION AGREEMENT

THIS SUPPLEMENTAL AGREEMENT TO CLASS B COMMON STOCK ACQUISITION AGREEMENT (this “Supplement”) dated April 10, 2023 is made between Aptera Motors Corp., a Delaware corporation (the “Company”), and Chery Automobile Hongkong Trade Co., Limited, a limited liability company organized under the laws of Hong Kong (“Investor”).

WHEREAS:

(1)	The Company and Chery New Energy Automobile Co., Ltd.(“Chery New Energy”) are parties to a Technology License Agreement (as defined below) dated JANUARY 13, 2022, pursuant to which Chery New Energy has agreed to license certain technology to the Company;

(2)

On the date of 13 January 2022, the Company and the Investor entered into a CLASS B COMMON STOCK ACQUISITION AGREEMENT (the “Agreement”), under which, among other things, the Company has agreed to issue certain Shares (as defined below) to Investor, and Investor has agreed to acquire such Shares from the Company, as a portion of the consideration payable for the technology licensed under the Technology License Agreement;

(3)	As of the date of this Supplement, the Company has issued to the Investor Shares with a total value of USO 4 million;

(4)

On the date of this Supplement, the Company and Chery New Energy also entered into a Supplemental Agreement to the Technology License Agreement, under which, among other things, the parties thereto agree to reduce the payment of a Fixed Fee (as defined under the Technology License Agreement) payable by the Company to the Investor from USO 2 million to USO 1 million;

(5)

In consideration of the changes under the Supplemental Agreement to the Technology License Agreement as set out in paragraph (4) above, the parties have agreed to increase the total amount of Shares to be issued by the Company to the Investor under the Agreement, which is a portion of the consideration payable for the technology licensed under the Technology License Agreement, from USO 8 million to USO 9 million; and

(6)	The Parties have agreed to amend the Agreement on the terms set out in this Supplement.

THEREFORE, IT IS AGREED AS FOLLOWS:

1.	Capitalized terms used but not defined in this Supplement shall have the meanings given to them under the Agreement.

2.	The second paragraph of the Agreement shall be replaced in its entirety with the following:

“The Company and Chery New Energy Automobile Co., Ltd.(“Chery New Energy”) are parties to a Technology License Agreement dated JANUARY 13, 2022 (the “Technology License Agreement”) pursuant to which Chery New Energy has agreed to license certain technology to the Company. A portion of the consideration payable for the technology licensed under the Technology License Agreement consists of shares of the Company’s Class B Non-Voting Common Stock equivalent to the total amount of USO 9 million. The Company has agreed to issue such shares to Investor, and Investor has agreed to acquire such shares from the Company, on the terms and subject to the conditions set


Chery		APTERA DC CA

forth in this Agreement.”

3.	Section 1 of the Agreement shall be replaced in its entirety with the following:

“1. Sale of Stock. Subject to the terms and conditions of this Agreement, the Company will issue to Investor, and Investor agrees to acquire from the Company, shares of the Company’s Class B Non-Voting Common Stock (the “Shares”) in four instalments. The due date for each such installment shall be referred to as “Payment Date”. As of the date of this Supplement, the Company has issued to the Investor Shares with a total value of USO 2 million on the Payment Date for each of first and second installment, respectively. The Payment Dates with respect to third and fourth instalment are as follows:

within five Business Days after execution of the Parts Supply Agreement and Parts Development Agreement; and

within five Business Days after the delivery of first batch of parts under the Parts Supply Agreement.

For the purpose of this Section 1, the terms “Parts Supply Agreement” and “Parts Development Agreement” shall have the meaning given to them in the Technology License Agreement. With respect to each of the third and fourth installment, the Company shall issue to the Investor Shares with a total value of USO 2.5 million. The term “Shares” refers to the issued Shares and all securities received in replacement of or in connection with the Shares pursuant to stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which Investor is entitled by reason of Investor’s ownership of the Shares.”

The amendments provided in this Supplement shall take effect immediately upon execution of this Supplement by both parties. With effect from the execution of this Supplement, the Agreement and this Supplement shall together be read and construed as one document, and references in the Agreement to “this Agreement” shall mean the Agreement as amended by this Supplement. In the event of any conflict or discrepancy between the provisions of the Agreement and the provisions of this Supplement, the provisions of this Supplement shall take precedence over the provisions of the Agreement.

5.	Each party represents and warrants to the other party that: (a) it has full power, authority and capacity to execute and perform this Supplement; and (b) this Supplement constitutes legal, valid and binding obligations on such party enforceable in accordance with its terms.

This Supplement may be executed in any number of copies and by the parties on separate copies and each such copy shall constitute an original of this Supplement but all of which together constitute one and the same instrument. This Supplement shall not be effective until each party has executed at least one copy.

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Chery		APTERA DC CA

The parties have executed this Supplement as of the date first set forth above.

THE COMPANY:


Aptera Motors Corp.

By:		/s/ Chris Anthony


Name:		Chris Anthony
Title:		CEO

Address:

5818 El Camino Real Carlsbad, CA 92008

Attn: Chief Executive Officer

email: *********@aptera.us

THE INVESTOR:

Chery Automobile Hongkong Trade Co., Limited

By (signatures): /s/ Qi Shilong

Name: Qi Shilong

Address: 14^th Floor, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong

email: ********@mychery.com