v3.26.1
Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2026
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and the rules and regulations of the SEC applicable to interim financial information. Accordingly, they do not include all information and footnotes required by U.S. GAAP for annual financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

 

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary for a fair presentation, consisting of normal recurring adjustments and the non-recurring classification, reporting-currency, fair-value, discontinued-operations and financing-related adjustments described in these notes. Results for the three and six months ended June 30, 2026 are not necessarily indicative of results for the full fiscal year.

 

Certain prior-period amounts have been reclassified to conform to the current-period presentation. These reclassifications did not affect total assets, total liabilities, shareholders’ equity, net income (loss) or net decrease in cash and cash equivalents.

 

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Reporting currency and functional currency

 

Effective January 1, 2026, the Company changed its reporting currency from the euro to the U.S. dollar. Management made the change to better align the Company’s financial reporting with its U.S.-dollar denominated financing activities, U.S. capital-markets reporting environment, and the Treasury Strategy following the Company’s strategic transition. The Company has recast all prior-period financial information presented in these condensed consolidated financial statements into U.S. dollars as if the U.S. dollar had been the Company’s reporting currency since the earliest period presented. The change in reporting currency does not by itself change the underlying functional-currency determination for each distinct and separable operation.

 

Effective January 1, 2026, Sono Group N.V. determined that its functional currency is the U.S. dollar. Through the May 4, 2026 sale of Sono Motors GmbH, Sono Motors GmbH continued to have the euro as its functional currency. Assets and liabilities of euro-functional operations are translated into U.S. dollars at period-end exchange rates, and revenues, expenses, gains and losses are translated at transaction-date rates or appropriate weighted-average exchange rates. Translation effects are recognized as a component of accumulated other comprehensive income (loss) within shareholders’ equity.

 

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Significant estimates include going concern, held-for-sale and discontinued-operations classification and measurement, fair value measurements of digital assets and derivative liabilities, valuation of convertible notes and related debt discount, lease accounting assumptions, and income tax valuation allowances.

 

Digital Assets and Derivative Instruments [Policy Text Block]

Digital assets and derivative instruments

 

Digital assets consisting principally of Bitcoin are accounted for under ASC 350-60. The Company’s Bitcoin holdings are initially recognized at cost and subsequently measured at fair value in accordance with ASC 820, with changes in fair value recognized in net income each reporting period. Digital assets are presented as a separate line item in the condensed consolidated balance sheet. The Company does not present digital asset fair-value changes, realized digital asset gains or losses, written-call premiums, derivative settlements or related execution fees as revenue from contracts with customers because such activities do not arise from contracts with customers within the scope of ASC 606.

 

Written covered Bitcoin call options are accounted for as freestanding derivative liabilities under ASC 815 unless a specific scope exception applies. Premiums received are consideration for assuming a derivative obligation and are not recorded as revenue. Written-call liabilities are measured at fair value at inception and remeasured at fair value each reporting period, with changes recognized in earnings unless hedge accounting is formally designated and documented. The Company has not designated hedge accounting for the arrangements reflected in these condensed consolidated financial statements. The related economics are presented as digital asset treasury income or loss rather than revenue from contracts with customers.

 

Fair Value Measurement, Policy [Policy Text Block]

Convertible debt, warrants and fair value measurements

 

The Company accounts for convertible debentures by recognizing the debt host net of unamortized debt discount and separately recognizing embedded conversion features that require bifurcation as derivative liabilities. Embedded conversion derivative liabilities are measured at fair value at inception and at each reporting date, with changes in fair value recognized in earnings. Debt discount is amortized to interest expense over the expected term of the convertible debentures.

 

The Company classifies pre-funded warrants in additional paid-in capital when the instruments meet the applicable equity-classification criteria. Cash proceeds from convertible debentures and pre-funded warrants are presented as financing cash inflows in the statement of cash flows, and equity-classified pre-funded warrant amounts are presented within shareholders’ equity.

 

Fair value measurements are categorized within the fair value hierarchy based on the observability of inputs. Bitcoin is measured using the BTC-USD spot price observed at 23:59:59 UTC on the reporting date from the market in which the Company transacts through Blockchain.com and is classified within Level 1. Written covered Bitcoin call options and embedded conversion derivative liabilities are classified within Level 3 when valuation uses significant unobservable inputs, including volatility, term, conversion or settlement assumptions, and probability-weighted outcomes.

 

The Company values written covered Bitcoin call options using a Black-Scholes option pricing model, with key inputs including the Bitcoin spot price, option strike price, contractual term, and implied volatility derived from observable Bitcoin options market data where available. The embedded conversion derivative liabilities are valued using a Monte Carlo simulation model, with key unobservable inputs including the Company's estimated credit-adjusted discount rate, probability-weighted conversion assumptions, and expected term. Changes in these inputs could result in materially different fair value measurements.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Credit risk and concentrations

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, digital assets, collateral arrangements and contractual rights arising from digital asset derivative activity. The Company maintains cash with financial institutions, holds Bitcoin and related rights through digital asset counterparties and custodial arrangements, and monitors counterparty and concentration risk; however, balances may exceed insured or protected limits and are subject to market, custody, liquidity and counterparty risks.

 

Lessee, Leases [Policy Text Block]

Leases

 

The Company accounts for leases under ASC 842, Leases. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Because the Company’s leases generally do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at commencement. Lease expense is recognized on a straight-line basis over the lease term. The Company determined its incremental borrowing rate at the commencement of the Munich lease on May 1, 2026 by reference to the rate at which the Company could borrow funds on a collateralized basis over a similar term and in a similar economic environment to the lease, taking into consideration the Company's credit profile, the EUR-denominated nature of the lease, the going concern conditions existing at the commencement date, and the terms of the Company's outstanding convertible debentures as a market reference point for the Company’s cost of borrowing. The Company has elected the short-term lease recognition exemption for leases with terms of twelve months or less. Through May 4, 2026, the Company’s lease balances, including right-of-use assets, related to Sono Motors GmbH and were included in discontinued operations and the disposal group classified as held for sale; effective May 1, 2026, the right-of-use asset and lease liability for the Munich lease were re-established within continuing operations.

 

Income Tax, Policy [Policy Text Block]

Income Taxes

 

The Company accounts for income taxes using the asset and liability method under ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax balances are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be settled or realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period in which the enactment date occurs. The Company establishes a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized. As of June 30, 2026 and December 31, 2025, the Company maintains full valuation allowances against its deferred tax assets, reflecting the uncertainty regarding their realizability given the Company's history of cumulative losses and going concern conditions. The Company does not currently have any unrecognized tax benefits. See Note 11 (Income Taxes) for additional information.

 

Reporting Operating Segment

 

The Company reports its segment information to reflect the manner in which the Company's Chief Operating Decision Maker ("CODM") reviews and assesses performance. The Company's Chief Executive Officer has the responsibility as the CODM to review and assess the performance of the Company as a whole. The primary financial measures used by the CODM to evaluate performance and allocate resources are net income (loss) and operating income (loss).

 

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Adopted and Recently Issued Pronouncements

 

Effective January 1, 2025, the Company adopted ASU 2023-08, Intangibles, Goodwill and Other, Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. The guidance requires in-scope crypto assets to be measured at fair value, with changes in fair value recognized in net income each reporting period and requires separate presentation and disclosure of crypto assets. The adoption did not have a material impact on the Company’s consolidated financial statements upon adoption because the Company did not hold material crypto assets at the adoption date. The guidance is applicable to the Company’s Bitcoin holdings acquired in connection with the Company’s digital asset treasury strategy (the “Treasury Strategy”).

 

In November 2024, the FASB issued ASU 2024-03, Income Statement, Reporting Comprehensive Income, Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. In January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The guidance requires additional note disclosures about specified categories of expenses included in certain expense captions. The guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is evaluating the effect of the guidance on its disclosures.

 

The Company has evaluated other recently issued accounting pronouncements and does not expect them to have a material effect on its condensed consolidated financial statements or related disclosures.