NOTE 11 – SHARE-BASED COMPENSATION

The Company has an equity incentive plan that is a part of annual discretionary share-based compensation program for consultants, employees, directors, and officers. The Company has been issuing new shares of common stock under the share-based compensation programs, and cash has not been used to settle equity instruments granted under share-based payment arrangements. The remaining number of shares reserved for awards equity instruments under the Equity Incentives Plan to both employees and consultants on March 31, 2025, was approximately 19 million shares of common stock (not subject to reverse stock splits).

Employees of the Company

Employees of the Company, including officers, are entitled to a number of shares of common stock specified in relevant offer letters and employment contracts and subject to the approval of our Board of Directors Compensation Committee. The total expense of share awards to employees represents the grant date fair value of the relevant number of shares to be issued. It is recognized in correspondence with additional paid-in capital over the service period (normally, in general and administrative expenses). The majority of awards to employees are equity classified. The liability related to liability classified stock-based compensation contracts with employees amounts to $0.2 million on March 31, 2025. The Company has also accrued a liability (presented within "Accrued expenses and other current liabilities" in the consolidated balance sheets) in an amount of $0.2 million to compensate employees for delay with the issuance of common stock per relevant offer letters and employment contracts.

Consultants

From time to time, the Company also issues share-based compensation to external consultants providing consulting, marketing, R&D, legal, and other services. The number of shares specified within individual agreements, or the monetary value of those shares, if applicable, is usually negotiated by our Chief Executive Officer and approved by the Compensation Committee of the Board of Directors. These costs are generally presented as professional fees within general and administrative expenses, and certain qualifying costs may be presented as part of research and development expenses ($2.5 million and $3.1 million over the three and six months ended March 31, 2025, respectively).

A part of these share-based awards is classified as equity and accounted for, similar to stock-based compensation to employees. Another part of the Company’s share-based awards to consultants is classified as liabilities, mainly if the number of shares a consultant is entitled to is predominantly based on monetary value fixed in the contract. An accrued part of liability, in this case, is revalued each period based on the part of the services performed and the market price of the shares of common stock of the Company until a sufficient number of shares is issued. The liability to consultants as of March 31, 2025 amounted to $0.3 million. The Company generally practices prepayment for future services of the consultants by unrestricted shares of common stock. In this case, a prepaid asset is recognized on the balance sheet and is amortized over the period the consultant is delivering their services to the Company. These prepaid costs amounted to $2.8 million as of March 31, 2025.

CEO Award Incentive Plans

The Company entered into a CEO Performance Stock Award Agreement, approved by stockholders in 2022 (“2022 PSA Agreement”) and a CEO Performance Stock Award Agreement, approved in 2023 (“2023 PSA Agreement”). Under these plans, the Chief Executive Officer is entitled to share-based awards generally calculated as 1-3% of the outstanding number of shares of common stock, issuable upon achievement of specific financial and operational targets (milestones).

In March 2025, stockholders approved amendments to the 2022 PSA Agreement (extending the deadlines for the Capital Benchmark Milestone for 2 years) and amendments to the 2023 PSA Agreement (extending the deadlines for the Vehicle Completion for 1 year, Revenue Benchmark for 2 years, Battery Development for 1 year, and JV Acquisition Milestone for 1 year).

The losses/(income) recognized within the line item "CEO share based performance award liability revaluation and stock issuance" in the table above represent both actual issuances of common stock under PSA Agreements ($0.2 million during the three and six months ended March 31, 2025) and revaluation of these provisions for future probable awards. This share-based compensation is accrued as part of general and administrative expenses over the service term when it is probable that the milestone will be achieved. Decline of the provision (and relevant income) was mainly attributable to decrease in market capitalization of the Company over relevant period.

The liability to issue stock (presented within non-current liabilities if the achievement is expected later than 12 months after the balance sheet date) is revalued on every balance sheet date based on the length of the service period, the current market price of the common stock, and on the number of shares of common stock outstanding - until the shares have been issued or until the fulfillment of the milestone requirements is no longer probable. As of March 31, 2025, the accrual for future awards under 2022 and 2023 PSA Agreements amounted to approximately $0.8 million.