What changed in this filing

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Item 1. Financial Statements

2026-08-13 compared with 2026-05-14 · 529 added, 434 removed, 467 unchanged (67% of the section changed)

3 unchanged sentences

(Amounts in thousands, except par value amounts)

March 31, 2026

June 30, 2026

December 31, 2025

18 unchanged sentences

Related party borrowings

Revolving lines of credit

Current maturities of debt

10 unchanged sentences

1,000,000 shares authorized;

32,653 issued and 31,435 outstanding as of March 31, 2026 and 32,594 issued and 31,376 outstanding as of December 31, 2025

32,773 issued and 31,555 outstanding as of June 30, 2026 and 32,594 issued and 31,376 outstanding as of December 31, 2025

Additional paid-in capital

Treasury shares, 1,218 shares as of March 31, 2026 and December 31, 2025

Treasury shares, 1,218 shares as of June 30, 2026 and December 31, 2025

Accumulated other comprehensive income

5 unchanged sentences

Consolidated Statements of Operations

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(Amounts in thousands, except per share amounts)

5 unchanged sentences

Total operating expenses

Loss from operations

Income (loss) from operations

Other income (expense):

Interest income (expense), net

Other (expense) income, net

Gain on extinguishment of debt

Other income (expense), net

Total other income

Loss before income tax benefit (expense)

Income tax benefit (expense)

Net loss per share – basic and diluted

Weighted-average number of shares of common stock used in computing net loss per share, basic and diluted

Income (loss) before income tax expense

Income tax expense

Net (loss) income

Net (loss) income per share – basic

Net (loss) income per share – diluted

Weighted-average number of shares of common stock used in computing net (loss) income per share, basic

Weighted-average number of shares of common stock used in computing net (loss) income per share, diluted

accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Comprehensive (loss) Income

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(Amounts in thousands)

Net (loss) income

Other comprehensive (loss) income:

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(Amounts in thousands)

Balance as of January 1, 2026

Balance as of April 1, 2026

$ ( 226,010 )

1 unchanged sentence

Foreign currency translation adjustment

Balance as of March 31, 2026

Balance as of June 30, 2026

$ ( 228,004 )

Comprehensive Income

Stockholders’

(Amounts in thousands)

Balance as of April 1, 2025

$ ( 208,426 )

Conversion of Coastal Defense promissory note

Conversion of Aspen Bridge Notes

Conversion of Jaunt Carter debt

Issuance of investor note interest shares

Conversion of Airo Drone debt

Conversion of Agile Defense debt

Conversion of Aspen Contingent Debt

Conversion of Jaunt deferred compensation

Reclassification of Libertas Warrants

Exercise of Libertas Warrants

Issuance of Underwriter Warrants

Sale of common stock in initial public offering, including over-allotment, net of $ 12,686 offering costs

Shares issued to NGA

Shares issued to Dangroup

Stock-based compensation

Foreign currency translation adjustment

Balance as of June 30, 2025

$ ( 202,555 )

Additional Paid-In

Accumulated Other Comprehensive

Treasury Stock

Accumulated Other Comprehensive Income

Total Stockholders’

4 unchanged sentences

Foreign currency translation adjustment

Balance as of March 31, 2025

Balance as of June 30, 2026

$ ( 228,004 )

Comprehensive Income

Stockholders’

(Amounts in thousands)

Balance as of January 1, 2025

$ ( 206,453 )

Conversion of Coastal Defense promissory note

Conversion of Aspen Bridge notes

Conversion of Jaunt Carter debt

Issuance of investor note interest shares

Conversion of Airo Drone debt

Conversion of Agile Defense debt

Conversion of Aspen Contingent Debt

Conversion of Jaunt deferred compensation

Reclassification of Libertas Warrants

Exercise of Libertas Warrants

Issuance of Underwriter Warrants

Sale of common stock in initial public offering, including over-allotment, net of $ 12,686 offering costs

Shares issued to NGA

Shares issued to Dangroup

Stock-based compensation

Foreign currency translation adjustment

Net income (Loss)

Balance as of June 30, 2025

$ ( 202,555 )

accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three months ended March 31,

Six months ended June 30,

(Amounts in thousands)

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Stock-based compensation

Non-cash gain on IPO transactions

Note issuance for legal settlement

Provision for credit losses

1 unchanged sentence

Non-cash investor note interest

Non-cash gain on debt extinguishment

Change in investor notes at fair value

Depreciation and amortization

1 unchanged sentence

Change in fair value of contingent consideration

Change in fair value of warrant liability

Changes in operating assets and liabilities:

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Cash flows from financing activities:

Proceeds from the sale of common stock, net

Change in lines of credit

4 unchanged sentences

Debt issuance costs paid

Net cash (used in) provided by financing activities

Proceeds from the exercise of warrants

Payment of contingent consideration

Cash paid to seller

Net cash provided by financing activities

Effect of exchange rate changes

Net decrease in cash and restricted cash

Net (decrease) increase in cash and restricted cash

Cash and restricted cash as of beginning of period

1 unchanged sentence

Supplemental disclosures of non-cash information:

Financing of insurance premiums

Right-of-use assets obtained in exchange for operating lease liabilities

Purchases of property and equipment included in accounts payable

Deferred compensation settled in common stock

Reclass between accrued expenses and notes payable

Reclass between accrued expenses and contingent consideration

Initial recognition of warrant liability

Deferred consideration for licensing arrangement

Reclass of warrants to equity

Deferred offering cost in accounts payable

Reclass between related party payables and related party borrowings

Debt settled in common stock

Contingent consideration settled in common stock

accompanying notes are an integral part of these condensed consolidated financial statements.

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to Unaudited Condensed Consolidated Financial Statements

Company and Summary of Significant Accounting Policies

The Company and Summary of Significant Accounting

of Operations

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four operating segments:

(i) Drones, (ii) Avionics, (iii) Training, and (iv) Electric Air Mobility.

The Drones segment develops, manufactures,

and sells drones and expects to provide drone services, such as Drone as a Service (“DaaS”), for military and commercial

The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and electric

vertical takeoff and landing (“eVTOL”) aircraft.

The Training segment currently provides military pilot training.

The Electric Air Mobility segment is developing autonomous eVTOL platforms for defense, government, cargo logistics, and remote operations applications.

(i) Avionics, (ii) Drones, (iii) Electric Air Mobility, and (iv) Training.

The Avionics segment develops, manufactures,

and sells avionics for military and general aviation aircraft, drones, and electric vertical takeoff and landing (“eVTOL”)

The Drones segment develops, manufactures, and sells drones and expects to provide drone services, such as Drone as a Service

(“DaaS”), for military and commercial end users.

The Electric Air Mobility segment is developing autonomous eVTOL platforms

for defense, government, cargo logistics, and remote operations applications.

The Training segment currently provides military pilot

Consolidation

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Old AGI, Inc.

f/k/a AIRO Group, Inc., AIRO Drone, LLC (“AIRO Drone”), Agile Defense, LLC (“Agile

Defense”), Coastal Defense, Inc.

(“Coastal Defense”), Jaunt Air Mobility, LLC (“Jaunt”), Sky-Watch A/S

(“Sky-Watch”) and Aspen Avionics, Inc.

f/k/a AIRO Group, Inc., AIRO Drone, LLC (“AIRO Drone”), Agile Defense, LLC (“Agile Defense”), Coastal

Defense, Inc.

(“Coastal Defense”), Jaunt Air Mobility, LLC (“Jaunt”), Sky-Watch A/S (“Sky-Watch”)

and Aspen Avionics, Inc.

(“Aspen Avionics”).

All intercompany accounts and transactions have been

eliminated in consolidation.

accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting

principles generally accepted in the United States of America (“U.S.

All intercompany accounts and transactions have been eliminated in consolidation.

accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States of America (“U.S.

GAAP”) for interim financial information.

opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments,

consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results.

information and disclosures normally included in unaudited condensed consolidated financial statements prepared in accordance with

In the opinion of management,

the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring

adjustments, considered necessary for a fair presentation of such interim results.

Certain information and disclosures normally included

in unaudited condensed consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

Accordingly, the unaudited condensed consolidated financial statements should be read in

conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on

Form 10-K for the year ended December 31, 2025 (“Form 10-K”) as filed with the Securities and Exchange Commission

The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated

financial statements as of that date.

the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements

and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (“Form 10-K”)

as filed with the Securities and Exchange Commission (“SEC”).

The condensed consolidated balance sheet as of December 31,

2025 has been derived from the audited consolidated financial statements as of that date.

results for the unaudited interim condensed consolidated statements of operations are not necessarily indicative of results to be expected

for the year ending December 31, 2026 or for any future interim period.

accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization

of assets and satisfaction of liabilities in the normal course of business.

As of March 31, 2026, the Company had cash and restricted

cash of $ 54.4 million of which $ 0.2 million was either restricted or was designated to only being used for Sky-Watch operations and working

capital of $ 62.5 million.

accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the

realization of assets and satisfaction of liabilities in the normal course of business.

As of June 30, 2026, the Company had cash

and restricted cash of $ 26.0 million,

of which $ 0.2 million

was either restricted or was designated to only being used for Sky-Watch operations.

Working capital was $ 61.5 million.

In July 2026, the Company collected $ 43.2

million from the outstanding receivables as of June 30, 2026 strengthening its liquidity position.

believes that the existing cash on hand is sufficient to meet its obligations and fund planned operations for at least the next twelve

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material changes have been made to the Company’s significant accounting policies disclosed in Note 1.

The Company and

Summary of Significant Accounting Policies , of its audited consolidated financial statements included in the Form 10-K.

The Company and Summary

of Significant Accounting Policies , of its audited consolidated financial statements included in the Form 10-K.

Adopted Accounting Standards

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the impact of ASU 2025-12 on its consolidated financial statements and related disclosures.

Loss Per Share

net loss per share is determined using the weighted average number of common shares outstanding during the period.

Diluted net loss per

share is based on the treasury stock method and computed by dividing net loss available to common stockholders by the diluted weighted-average

shares of common stock outstanding during each period.

The potentially dilutive shares are considered to be common stock equivalents

and are only included in the calculation of diluted net loss per share when the effect is dilutive.

potentially dilutive shares of common stock that have been excluded from the calculation of net loss per share because of the

anti-dilutive effect are as follows as of March 31, 2026:

million warrants, 0.2

million stock options, and 0.5

million unsettled restricted stock units (“RSUs”).

The potentially dilutive shares of common stock that have been

excluded from the calculation of net loss per share because of the anti-dilutive effect are as follows as of March 31, 2025:

million warrants, 0.3

million stock options, and 0.3

million contingent restricted stock awards, 2.2

million potential shares issuable under debt conversion agreements, 0.6

million potential shares issuable for contingent interest payments, and 0.1

million shares potentially issuable under unsecured promissory notes in the event that the Company’s initial public offering

was not completed by May 31, 2025.

The number of potentially dilutive shares is based on the maximum number of

shares issuable on exercise or conversion of the related securities as of the period end.

Such amounts have not been adjusted for

the treasury stock method or weighted-average outstanding calculations as required if the securities were dilutive.

Warrants and Equity Incentive Plan

The Company’s authorized

capital stock consists of 1.0 billion shares of common stock, par value $ 0.000001 per share, and 10.0 million shares of preferred stock,

par value $ 0.000001 per share.

All of the authorized preferred stock is undesignated.

Company has reserved the following shares of authorized but unissued common stock as of March 31, 2026:

million shares for stock options, 0.4

Net (Loss) Income Per Share

net (loss) income per share is determined using the weighted average number of common shares outstanding during the period.

(loss) income per share is determined using the weighted average number of common shares and potential common shares (representing the

hypothetical number of incremental shares issuable under the assumed exercise of outstanding stock options and vesting of outstanding

restricted stock units (“RSUs”) during the period using the treasury stock method.

The calculation of dilutive shares outstanding

excludes securities that would have an antidilutive effect on net income per share.

net (loss) income per share is based on the treasury stock method and computed by dividing net (loss) income available to

common stockholders by the diluted weighted-average shares of common stock outstanding during each period.

The potentially dilutive

shares are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when the

effect is dilutive.

following table presents the computation of basic and diluted net (loss) income per share:

Schedule of Basic and Diluted Net Income (Loss)

Three Months ended June 30,

Six Months ended June 30,

Net (loss) income

Basic weighted average shares outstanding

Dilutive effect of common equivalent shares outstanding

Diluted weighted average shares outstanding

Net (loss) income per share – basic

Net (loss) income per share - diluted

potentially dilutive shares of common stock that have been excluded from the calculation of net loss per share because of the anti-dilutive

effect are as follows as of June 30, 2026:

0.4 million warrants, 0.2 million stock options, and 0.5 million unsettled RSUs.

of potentially dilutive shares is based on the maximum number of shares issuable on exercise or conversion of the related securities

as of the period end.

Such amounts have not been adjusted for the treasury stock method or weighted-average outstanding calculations

as required if the securities were dilutive.

Stock, Warrants, and Equity Incentive Plan

Company’s authorized capital stock consists of 1.0 billion shares of common stock, par value $ 0.000001 per share, and 10.0 million

shares of preferred stock, par value $ 0.000001 per share.

All authorized preferred stock is undesignated.

Company has reserved the following shares of authorized but unissued common stock as of June 30, 2026:

0.4 million shares for warrants,

million shares for RSUs, and 2.0 million shares available for issuance under the Equity Incentive Plan described below.

0.2 million shares for stock options, 0.5 million shares for RSUs, and 1.9 million shares available for issuance under the Equity Incentive

Plan described below.

Company assumed warrants to purchase 0.1 million shares of the Company’s common stock as part of the merger with Jaunt.

These warrants

expire ten years from the date of issuance, March 10, 2022, have an exercise price of $ 16.83 per share and were outstanding as of March

expire ten years from the date of issuance, March 10, 2022, have an exercise price of $ 16.83 per share and were outstanding as of June

30, 2026 and December 31, 2025.

The Company determined that these warrants are equity classified.

In September 2024, the Company executed a

financing advisor agreement with Cantor Fitzgerald & Co.

as compensation for assistance with the initial public offering

(“IPO”), pursuant to which the Company agreed to issue warrants to certain of the underwriters upon the closing of the

IPO (the “Underwriter Warrants”) exercisable for the number of shares of common stock equal

to 5 % of the total number of shares of common stock sold in such IPO.

In conjunction with the IPO, the Company issued the

Underwriter Warrants, which are exercisable into 345,000 shares of common stock.

The Company determined the fair value of

the Underwriter Warrants at the grant date on June 12, 2025 to be $ 2.0 million which was recorded as an issuance cost against

IPO proceeds during the year ended December 31, 2025.

The Underwriter Warrants have an exercise price of $ 11.00 and can be

exercised between December 12, 2025 and June 12, 2030.

The Underwriter Warrants remain outstanding as of March 31, 2026 and December

September 2024, the Company executed a financing advisor agreement with Cantor Fitzgerald & Co.

as compensation for assistance with

the initial public offering (“IPO”), pursuant to which the Company agreed to issue warrants to certain of the underwriters

upon the closing of the IPO (the “Underwriter Warrants”) exercisable for the number of shares of common stock equal to 5 %

of the total number of shares of common stock sold in such IPO.

In conjunction with the IPO, the Company issued the Underwriter Warrants,

which are exercisable into 345,000 shares of common stock.

The Company determined the fair value of the Underwriter Warrants at the grant

date on June 12, 2025 to be $ 2.0 million which was recorded as an issuance cost against IPO proceeds during the year ended December 31,

The Underwriter Warrants have an exercise price of $ 11.00 and can be exercised between December 12, 2025 and June 12, 2030.

Underwriter Warrants remain outstanding as of June 30, 2026 and December 31, 2025.

Incentive Plan

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The initial share reserve of the Company’s common stock authorized for issuance under the 2025

million shares.

Effective January 1, 2026, the share reserve

automatically increased by 0.9

million shares pursuant to the plan’s “evergreen”

Plan was 1.9 million shares.

Effective January 1, 2026, the share reserve automatically increased by 0.9 million shares pursuant to the

plan’s “evergreen” provision.

share reserve will continue to increase annually through January 1, 2035 by 3% of the outstanding shares of common stock or a lesser

amount approved by the Board of Directors.

The maximum number of shares issuable upon exercise of ISOs under the 2025 Plan is 5.7

the three months ended March 31, 2026, the Company granted 0.3

million RSUs under the 2025 Plan and recognized $ 1.5

million of stock-based compensation expense related to these RSUs.

The weighted-average grant date fair value per share of RSUs

granted during the period was $ 10.63 .

As of March 31, 2026, there were 0.3

million unvested RSUs outstanding under the 2025 Plan.

Total unrecognized compensation expense related to unvested RSUs

million as of March 31, 2026, which is expected to be recognized over a weighted average period of 2.7

changes in the carrying value of goodwill were as follows:

The maximum number of shares issuable upon exercise of ISOs under the 2025 Plan is 5.7 million.

the three and six months ended June 30, 2026, the Company granted 0.1 million and 0.5 million RSUs under the 2025 Plan and recognized

$ 1.1 million and $ 2.6 million of stock-based compensation expense related to these RSUs, respectively.

The weighted-average grant date

fair value per share of RSUs granted during the three and six months ended June 30, 2026 was $ 8.42 and $ 9.99 , respectively.

30, 2026, there were 0.3 million unvested RSUs outstanding under the 2025 Plan.

Total unrecognized compensation expense related to unvested

RSUs was $ 3.2 million as of June 30, 2026, which is expected to be recognized over a weighted average period of 2.3 years.

following table presents the changes in the carrying value of goodwill for the periods indicated:

(In thousands)

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Effect of exchange rate

Balance as of March 31, 2026

Balance as of June 30, 2026

Balance as of January 1, 2025

Effect of exchange rate

Balance as of March 31, 2025

Company evaluates goodwill for impairment as of October 1 each year, and more frequently if events or circumstances indicate that

there may be impairment.

The Company completed its most recent annual goodwill impairment test as of October 1, 2025

and determined that no goodwill impairment existed.

No triggering events were identified during the three months ended

March 31, 2026 that would require an interim impairment assessment.

Balance as of June 30, 2025

Company evaluates goodwill for impairment as of October 1 each year, and more frequently if events or circumstances indicate that there

may be impairment.

The Company completed its most recent annual goodwill impairment test as of October 1, 2025 and determined that no

goodwill impairment existed.

No triggering events were identified during the six months ended June 30, 2026 that would require an interim

impairment assessment.

Intangible Assets, Net

assets, net, consist primarily of intangible assets acquired through business combinations.

During the three months ended March 31, 2026,

During the six months ended June 30, 2026,

the Company also capitalized $ 1.3 million related to a manufacturing license agreement that provides rights to intellectual property,

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asset and is amortized on a straight-line basis over its five-year contractual term.

assets, net consisted of the following as of March 31, 2026 and December 31, 2025:

following table presents the details of intangible assets, net, as of the dates indicated:

of Intangible Assets, Net

As of March 31, 2026

As of June 30, 2026

(In thousands)

Weighted Average Remaining Life (Years)

Accumulated Amortization

Carrying Value

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Remaining Life (Years)

Accumulated Amortization

Carrying Value

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Intangible assets net

expense is reported on the condensed consolidated statements of operations line items as shown in the table below for the three months

ended March 31:

expense is reported within the following line items in the condensed consolidated statements of operations line items for the periods

of Amortization Expense

(In thousands)

Three months ended

Six months ended

(In thousands)

Cost of revenue

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Amortization expense

estimated future amortization expense as of March 31, 2026 is as follows:

following table presents the total estimated future amortization expense as of the date indicated:

of Estimated Future Amortization Expense

(In thousands)

June 30, 2026

2026 (remaining)

Amortization expense

consisted of the following as of March 31, 2026 and December 31, 2025:

estimated future amortization expense presented above excludes indefinite lived intangible assets, which are not subject to amortization.

following table presents inventory as of the dates indicated:

(In thousands)

March 31, 2026

June 30, 2026

December 31, 2025

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Finished goods

increased by $ 10.9 million as of March 31, 2026 compared to December 31, 2025, primarily due to increased inventory levels in the Drones

segment to support anticipated shipments during the remainder of 2026.

Sheet Details

expenses and other current assets consisted of the following as of March 31, 2026 and December 31, 2025:

Prepaid Expenses and Other Current Assets and Accrued Expenses

following table presents prepaid expenses and other current assets as of the dates indicated:

of Prepaid expenses and other current assets

(In thousands)

March 31, 2026

June 30, 2026

December 31, 2025

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expenses and other current assets

expenses consisted of the following as of March 31, 2026 and December 31, 2025:

following table presents accrued expenses as of the dates indicated:

of Accrued expenses

(In thousands)

March 31, 2026

June 30, 2026

December 31, 2025

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Accrued expenses

Lines of Credit

May 26, 2026, the Company entered into a revolving overdraft credit facility with Danske Bank providing borrowing capacity of up to

million, or $ 9.2

million with a foreign exchange rate as of June 30, 2026, to support the working capital needs of Sky-Watch.

Borrowings under the

facility bear interest at a variable rate equal to the applicable overnight reference rate (Danish Overnight Index Short-Term Rate, Euro Short-Term Rate, and Secured

Overnight Financing Rate, as

applicable) plus 1.75 %,

are subject to annual renewal, and were classified as revolving lines of credit as of June 30, 2026 in the accompanying condensed

consolidated balance sheets.

As of June 30, 2026, the outstanding balance under the revolving overdraft credit facility was

Maturities of Debt and Long-Term Debt

maturities of debt and long-term debt consist of the following as of June 30, 2026 and December 31, 2025:

Schedule of Current Maturities of Debt and Long Term Debt

June 30, 2026

December 31, 2025

SBA COVID-19 Economic Injury Disaster Loan

Perrin Legal Settlement

Financed Insurance Premiums

current maturities of long-term debt

Long-term debt, net of current maturities

of June 30, 2026, the Company has repaid in full its outstanding balance under the U.S.

Small Business Administration COVID-19 Economic

Injury Disaster Loan.

of June 30, 2026, all outstanding debt is scheduled to mature within the next twelve months and are therefore classified as current liabilities

in the accompanying condensed consolidated balance sheets.

and Contingencies

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Unless revised, the JV Agreement (as amended) will terminate and the JV will not

be consummated if closing does not occur on June 30, 2026.

be consummated if closing does not occur on or before September 30, 2026.

can be no assurance that closing conditions under the JV Agreement will be satisfied or when or that the JV will be consummated on the

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regarding foreign defense partnerships.

civil action was filed against Old AGI, Inc.

in the Circuit Court of Cook County, State of Illinois in February 2022 (the “2022

The claimant alleged that an agreement for certain services entered into in March 2020 was breached and resulted in

damages to claimant.

This case was dismissed on July 5, 2022.

However, the court allowed the claimant to amend its complaint.

5, 2022, the claimant filed its amended complaint, and the Company filed its response on October 12, 2022.

The parties have engaged in

discovery and mandatory arbitration.

The arbitration resulted in an award in favor of the Company, which was contested by the claimant.

On December 19, 2024, the Circuit Court denied the Company’s motion for summary judgment.

In February 2026, the Company and the

claimant filed documents to request that the 2022 Lawsuit be dismissed in its entirety, and the matter was subsequently dismissed without prejudice.

from the above matter, the Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims.

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business

Legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss or the

measurement of a loss can be complex.

Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims.

From time to time, the

Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

Legal contingencies

are subject to significant uncertainties and, therefore, determining the likelihood of a loss or the measurement of a loss can be complex.

The Company will accrue losses that are both probable and reasonably estimable.

Segment Information

Company reports segment information based on the “management” approach.

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chief operating decision maker has been identified as the chief executive officer.

The Company periodically

reevaluates its reportable and operating segments.

The Company periodically reevaluates its reportable

and operating segments.

The Company manages its business primarily based upon four operating segments:

Drones, Electric Air Mobility and Training.

In accordance with the segment reporting accounting standard, the Company evaluated the economic

similarity of its operating segments and determined that each of these operating segments represents a reportable segment.

This segment develops, manufactures, and sells avionics and GPS sensors for general aviation (“GA”), unmanned aircraft

systems (“UAS”) and eVTOL applications.

The Company’s avionics products are focused on GA aftermarket, original

equipment manufacturer (“OEM”) display, integration and connected panel solutions.

This segment offers direct operation of drones and drone systems, provision of drone-derived information, and the development of

drone-optimized communication services.

Additionally, it consists of development and commercialization of market leading mini unmanned

aircraft systems (“mUAS”) for professional users, primarily in the defense and security markets.

The mUAS includes internally

developed software, hardware, and mechanical system components.

Operations cover sourcing, manufacturing, assembly, quality assurance

testing activities and logistics.

Air Mobility:

This segment is designing and developing dual-use electric and hybrid-electric

compound rotorcraft aircraft, with a near-term focus on cargo-configured and multi-role autonomous platforms supporting middle-mile logistics,

tactical resupply, emergency medical delivery, law enforcement, intelligence, surveillance and reconnaissance (“ISR”), and

other commercial and government missions.

Avionics, Drones, Electric Air

Mobility and Training.

In accordance with the segment reporting accounting standard, the Company evaluated the economic similarity of

its operating segments and determined that each of these operating segments represents a reportable segment.

This segment develops, manufactures, and sells avionics and GPS (“Global Positioning System”) sensors for general aviation

(“GA”), unmanned aircraft systems (“UAS”) and eVTOL applications.

The Company’s avionics products are

focused on GA aftermarket, original equipment manufacturer (“OEM”) display, integration and connected panel solutions.

segment offers direct operation of drones and drone systems, provision of drone-derived information, and the development of drone-optimized

communication services.

Additionally, it consists of development and commercialization of market leading mini unmanned aircraft systems

(“mUAS”) for professional users, primarily in the defense and security markets.

The mUAS includes internally developed

software, hardware, and mechanical system components.

Operations cover sourcing, manufacturing, assembly, quality assurance testing

activities and logistics.

Electric Air Mobility:

This segment is designing and developing dual-use electric and hybrid-electric compound rotorcraft aircraft, with a near-term focus

on cargo-configured and multi-role autonomous platforms supporting middle-mile logistics, tactical resupply, emergency medical delivery,

law enforcement, intelligence, surveillance and reconnaissance (“ISR”), and other commercial and government missions.

segment provides and operates military aircraft for U.S.

military services and Department of War (“DoW”) (formerly

referred to as the U.S.

military services and Department of War (“DoW”) (formerly referred

to as the U.S.

Department of Defense) contractors.

Segment revenues are earned from (1) flying training missions as part of

armed forces training groups, and (2) providing aircraft and support services to DoW contractors.

Segment revenues are earned from (1) flying training missions as part of armed

forces training groups, and (2) providing aircraft and support services to DoW contractors.

Company evaluates the performance of its reportable segments based on the net income (loss) for each reporting segment.

Presented below

are reconciliations of the reportable segment total revenues to the condensed consolidated revenues and the reportable segment total

net income (loss) to the condensed consolidated net loss for the three months ended March 31, 2026 and 2025:

The following

table presents the reconciliations of the reportable segment total revenues to the condensed consolidated revenues and the reportable

segment total net income (loss) to the condensed consolidated net loss for the periods indicated:

of Segment Information

Three months ended June 30, 2026

(In thousands)

Electric Air Mobility

Three months ended March 31, 2026

Cost of revenue

Research and development

Sales and marketing

General and administrative

Interest expense

Interest income

Gain on extinguishment of

Other expense, net

Income tax expense

Segment (loss) income

Unallocated amounts:

Corporate expenses

Interest income, net

Other income, net

(In thousands)

Electric Air Mobility

Three months ended June 30, 2025

(In thousands)

Electric Air Mobility

Cost of revenue

4 unchanged sentences

Interest income

Gain on extinguishment of debt, net

Other expense (income), net

Income tax benefit

Income tax expense

Segment income (loss)

Unallocated amounts:

Corporate expenses

Interest expense, net

Gain on extinguishment of debt, net

Other income, net

(In thousands)

Electric Air Mobility

Six months ended June 30, 2026

(In thousands)

Electric Air Mobility

Cost of revenue

Research and development

Sales and marketing

General and administrative

Interest expense

Interest income

Other expense (income), net

Income tax expense

Segment (loss) income

Unallocated amounts:

Corporate expenses

Interest income, net

Other expense, net

Income tax expense

(In thousands)

Electric Air Mobility

Three months ended March 31, 2025

Six months ended June 30, 2025

(In thousands)

6 unchanged sentences

Interest income

Gain on extinguishment of debt, net

Other expense (income), net

1 unchanged sentence

Segment income (loss)

Segment (loss) income

Unallocated amounts:

1 unchanged sentence

Interest expense, net

Other expense, net

following table presents revenue by geographic area for the three months ended March 31, 2026 and 2025:

Gain on extinguishment of debt, net

Other income, net

following table presents revenue by geographic area for the periods indicated:

of Revenue by Geographic Area

Electric Air Mobility

Three months ended March 31, 2026

(In thousands)

Electric Air Mobility

Three months ended June 30, 2026

(In thousands)

United States

Electric Air Mobility

Three months ended March 31, 2025

(In thousands)

Electric Air Mobility

Three months ended June 30, 2025

(In thousands)

United States

following table presents revenue by products and services for the three months ended March 31, 2026 and 2025:

(In thousands)

Six months ended June 30, 2026

(In thousands)

United States

(In thousands)

Six months ended June 30, 2025

(In thousands)

United States

following table presents revenue by products and services for the periods indicated:

of Revenue by Products and Services

Electric Air Mobility

Three months ended March 31, 2026

(In thousands)

Electric Air Mobility

Three months ended March 31, 2025

Three months ended June 30, 2026

(In thousands)

Three months ended June 30, 2025

(In thousands)

Six months ended June 30, 2026

(In thousands)

Six months ended June 30, 2025

(In thousands)

following table presents capital expenditures, depreciation and amortization, stock-based compensation and contingent consideration fair

value adjustments for the three months ended March 31, 2026 and 2025:

value adjustments for the periods indicated:

of Capital Expenditures, Depreciation and Amortization

Electric Air Mobility

Three months ended March 31, 2026

(In thousands)

Electric Air Mobility

Three months ended June 30, 2026

(In thousands)

Depreciation and amortization

1 unchanged sentence

Capital expenditures

totals above exclude corporate amounts, including $ 0.02 million of depreciation and amortization,

$ 0.3 million of stock-based compensation, and $ 0.3 million of capital expenditures.

Electric Air Mobility

Three months ended March 31, 2025

totals above exclude corporate amounts, including $ 0.06

million of depreciation and amortization, $ 1.0 million

of stock-based compensation, and $ 0.05 million of capital expenditures.

(In thousands)

Electric Air Mobility

Three months ended June 30, 2025

(In thousands)

Depreciation and amortization

2 unchanged sentences

Capital expenditures

following table presents tangible long-lived assets by geographic area as of March 31, 2026 and December 31, 2025:

total above excludes corporate amount of $ 6.8 million in stock-based compensation.

(In thousands)

Six months ended June 30, 2026

(In thousands)

Depreciation and amortization

Stock-based compensation

Capital expenditures

The totals above exclude

corporate amounts, including $ 0.08 million of depreciation and amortization, $ 1.2 million of stock-based compensation, and $ 0.4 million

of capital expenditures.

(In thousands)

Six months ended June 30, 2025

(In thousands)

Depreciation and amortization

Stock-based compensation

Contingent consideration fair value adjustments

Capital expenditures

total above excludes corporate amount of $ 6.8 million in stock-based compensation.

following table presents tangible long-lived assets by geographic area as of the dates indicated:

of Tangible Long Lived Assets by Geographic Area

Electric Air Mobility

March 31, 2026

(In thousands)

Electric Air Mobility

June 30, 2026

(In thousands)

United States

(In thousands)

December 31, 2025

1 unchanged sentence

United States

segment assets reconciled to condensed consolidated amounts are as follows as of March 31, 2026 and December 31, 2025:

following table presents the reconciliation of total segment assets to the condensed consolidated amounts as of the dates indicated:

of Segment Assets

1 unchanged sentence

(In thousands)

Electric Air Mobility

March 31, 2026

June 30, 2026

December 31, 2025

Company is subject to various local, state, federal and international laws and regulations relating to the development, manufacturing,

sale and distribution of its products, systems and services, and it is the Company’s policy to comply with the applicable laws

in each jurisdiction in which it conducts business.

Regulations include but are not limited to those related to import and export controls,

corruption, bribery, environment, government procurement, wireless communications, competition, product safety, workplace health and

safety, employment, labor and data privacy.

it contracts with the DoW and other agencies of the U.S.

government—and, for certain of those contracts, requires access to classified

information—the Company’s Drones segment is subject to extensive federal statutes and regulations, including the Federal

Acquisition Regulation, the Defense Federal Acquisition Regulation Supplement, the Truthful Cost and Pricing statute, the Foreign Corrupt

Practices Act, the False Claims Act, and the regulations implementing the National Industrial Security Program Operating Manual (“NISPOM”).

The NISPOM regulations establish the security requirements applicable to classified contracts and programs, facility security clearances,

and personnel security clearances.

The federal government audits and reviews contractors’ performance on contracts, pricing practices,

cost accounting systems and practices, and compliance with applicable laws, regulations and standards.

Like most government contractors,

the Drones segment’s contracts are audited and reviewed regularly by federal agencies, including the Defense Counterintelligence

and Security Agency, the Defense Contract Management Agency and the Defense Contract Audit Agency.

addition, the Drones segment is subject to industry-specific regulations due to the nature of the products and services it provides.

For example, certain aspects of its business are subject to further regulation by additional U.S.

government authorities, including:

(i) the Federal Aviation Administration (“FAA”), which regulates airspace for all aircraft in the U.S.

National Airspace

(ii) the National Telecommunications and Information Administration and the Federal Communications Commission,

which regulate the wireless communications upon which its UAS depend in the U.S.

and also regulate any device that emits radiofrequency

emissions as a result of its operations;

(iii) the Directorate of Defense Trade Controls of the U.S.

Department of State, which administers

the International Traffic in Arms Regulations that regulate the export of controlled technical data, defense articles and defense services

and (iv) the Bureau of Industry and Security of the U.S.

Department of Commerce, which regulates matters relating to U.S.

national security

and technology.

transport category type certification is the highest level in safety provided by the Civil Aviation Authorities.

Jaunt intends to certify

under CAR 529, single pilot (instrument flight rules and comply with Category Enhanced of European Union Aviation Safety Agency (“EASA”)

SC-VTOL-01 by:

System Safety Assessment processes (Aerospace Recommended Practice (“ARP”) 4761 with ARP 4754A) that are industry standard

for commercial transport aircraft (Exposure Draft 79A);

flight critical systems to meet the requirements of a probability of catastrophic failure of less than 10-9 per flight hour (less

than once every billion flight hours);

robust software design processes to meet Development Assurance Level A for functions that could exhibit catastrophic failures;

requirements for bird strike, fatigue and damage tolerance, lightning strike, fire protection, and designing and incorporating elements

for crashworthiness right from conceptual stage.

In the near-term, the efforts of the Electric Air Mobility segment will

focus on cargo logistics, ISR, remote operations, and other commercial and

government applications, including obtaining FAA certification and advancing the development and commercialization of autonomous cargo

and multi-role eVTOL platforms.

The segment is currently focused on autonomous aircraft platforms, including the JC250 and JX250 variants,

designed to support middle-mile logistics, tactical resupply, ISR, emergency medical delivery, law enforcement, and related missions.

Passenger applications may represent a longer-term opportunity.

Its aircraft will be required to comply with regulations governing aircraft

design, production, and airworthiness, and its operations will be required to comply with regulations governing, among other things, operational

safety and citizenship.

In the United States, this primarily includes regulations put forth by the FAA and the Department of Transportation.

Outside the United States, similar requirements are generally administered by the national civil aviation and transportation authorities

of each country.

Avionics designs and manufactures equipment under worldwide aviation regulatory agency approvals.

These include but are not limited to

FAA, EASA, Transport Canada Civil Aviation, and National Civil Aviation Agency of Brazil regulations.

These govern the design, test,

certification, installation, and manufacturing of Aspen’s equipment.

FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States.

Its regulations

are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation

of the aircraft.

Similar rules apply in other countries.

All aircraft must be maintained under a continuous condition monitoring program

and must periodically undergo thorough inspection and maintenance.

The inspection, maintenance and repair procedures for the various

types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing

certified technicians.

Certification and conformance are required prior to installation of a part on an aircraft.

Aircraft operators

must maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes.

the FAA requires that various maintenance routines be performed on aircraft engines, some engine parts, and airframes at regular intervals

based on cycles or flight time.

Engine maintenance must also be performed upon the occurrence of certain events, such as foreign object

damage in an aircraft engine or the replacement of life-limited engine parts.

Such maintenance usually requires that an aircraft engine

be taken out of service.

Aspen Avionics’ operations may in the future be subject to new and more stringent regulatory requirements.

In that regard, Aspen Avionics closely monitors the FAA and industry trade groups to understand how potential future regulations

might impact it.

The Company’s businesses that sell defense products directly to the U.S.

government or for use in systems delivered

government can be subject to various laws and regulations that govern pricing and other factors.

Company generates revenue from (i) product sales, including avionics, Global Navigation Satellite System (“GNSS”)

technologies, and mUAS/commercial drones;

Company generates revenue from (i) product sales, including avionics, Global Navigation Satellite System (“GNSS”) technologies,

and mUAS/commercial drones;

(ii) services, including training, support, and drone services;

research and development (“R&D”) contracts;

(iii) research and development (“R&D”)

and (iv) sales-based royalties.

6 unchanged sentences

Sales-based royalties are recognized at a point in time as underlying sales occur.

following table summarizes revenue recognized at a point in time and over time for the three months ended March 31, 2026 and 2025:

following table summarizes revenue recognized at a point in time and over time for the periods indicated:

of Revenue Recognition based on Time Periods

(In thousands)

Three Months ended March 31,

Three Months ended June 30,

Six Months ended June 30,

(In thousands)

Point in time

Contract liabilities as of March 31, 2026 and December 31, 2025 were $ 3.6 million and $ 4.5 million, respectively.

The majority of contract

liabilities are expected to be recognized as revenue during 2026.

The Company had no significant contract assets as of March 31, 2026

and December 31, 2025.

During the three months ended March 31, 2026, the Company recognized $ 1.0 million in revenue previously included

in contract liabilities as of December 31, 2025.

liabilities as of June 30, 2026 and December 31, 2025 were $ 7.2 million and $ 4.5 million, respectively.

The majority of contract liabilities

are expected to be recognized as revenue during 2026.

The Company had no significant contract assets as of June 30, 2026 and December

During the three and six months ended June 30, 2026, the Company recognized $ 0.9 million and $ 1.9 million in revenue previously

included in contract liabilities as of December 31, 2025.

is also disaggregated by segment and geography.

Segment Information .

Party Transactions

Related Party Transactions

party transactions include the following:

Avionics has a Commercialization Agreement with Centro Italiano Richerche Aerospaziali S.c.p.A (“CIRA”), a stockholder

of Aspen Avionics, whereby CIRA licensed certain technology to Aspen Avionics.

As consideration for the license, CIRA will receive

a royalty based on each unit sold by Aspen Avionics.

In March 2020, Aspen Avionics entered into an agreement with CIRA to settle

unpaid royalty amounts due under a development agreement.

The Company owed $ 0.6 million to CIRA as of March 31, 2026 and December

Avionics owed $ 0.4 million to Accord Global, a stockholder, as of March 31, 2025, which was fully settled during the year ended December

Sales to Accord Global were zero and $ 0.4 million during the three months ended March 31, 2026 and 2025, respectively.

There were no amounts due from Accord Global as of March 31, 2026 or December 31, 2025.

of December 31, 2025, Coastal Defense had net receivables of $ 0.4 million due from Failor Services, Inc.

which is owned by a stockholder of the Company, included in “Related party receivables” on the condensed consolidated

balance sheets.

This balance was fully settled during the three months ended March 31, 2026, with no amounts outstanding as of that

No purchases were made from Failor during the three months ended March 31, 2026 or 2025.

Coastal Defense also pays for certain

expenses on Failor’s behalf, which are reimbursable.

Defense entered into unsecured due on demand notes with two stockholders (the “Stockholder Notes”).

Interest is charged

As of March 31, 2026 and December 31, 2025, the total outstanding balance of the Stockholder Notes was $ 1.0 million and

$ 1.1 million, respectively.

Aspen Avionics has a Commercialization

Agreement with Centro Italiano Richerche Aerospaziali S.c.p.A (“CIRA”), a stockholder of Aspen Avionics, whereby CIRA

licensed certain technology to Aspen Avionics.

As consideration for the license, CIRA will receive a royalty based on each unit sold

by Aspen Avionics.

In March 2020, Aspen Avionics entered into an agreement with CIRA to settle unpaid royalty amounts due under a

development agreement.

The Company owed $ 0.6 million to CIRA as of June 30, 2026 and December 31, 2025.

Coastal Defense entered

into unsecured due on demand notes with two stockholders (the “Stockholder Notes”).

Interest is charged at 7.00 % per

As of December 31, 2025, the outstanding balance of the Stockholder Notes was $ 1.1 million.

2025, the Company engaged in settlement discussions with one counterparty, Jeffrey F.

Parker as executor of the estate of Kenneth Parker,

and received a proposed settlement pursuant to which the Company is expected to pay the counterparty $ 1.0 million in full satisfaction

of the obligations.

The proposed settlement reflects a comprehensive resolution that includes offsets for amounts owed by Failor and

Coastal Restaurant Group (“CRG”) to Coastal Defense.

As of December 31, 2025, Coastal Defense’s recorded balances relating

to these items were as follows:

(i) amount due to Jeffrey F.

Parker related to the Stockholder Notes of $ 1.0 million, (ii) amount due

from Failor of $ 0.4 million, and (iii) an immaterial amount due from CRG, resulting in a net amount due of $ 0.6 million.

settlement payment of $ 1.0 million exceeds the net recorded balance by $ 0.4 million, which was accrued at December 31, 2025 and included

in “Related party payables” on the condensed consolidated balance sheets.

January 2026, the Company made a payment of $ 0.1 million to one of the stockholders.

In March 2026, the Company finalized the settlement

with Jeffrey F.

The remaining $ 1.0 million was paid in April 2026.

Defense uses West Run LLC (“West Run”) as a subcontractor for its military exercises.

West Run is owned by both a Coastal

Defense employee and a shareholder of the Company and the wife of Coastal Defense’s former President.

The Company owed $ 0.2

million to West Run as of March 31, 2026 and December 31, 2025, respectively.

Per Erik Svehag, a member of the Company’s Board of Directors, is a director of Dangroup ApS (“Dangroup”) and indirectly

beneficially owns approximately 60 % of Dangroup.

Parker as executor of the estate of Kenneth

Parker, and received a proposed settlement pursuant to which the Company is expected to pay the counterparty $ 1.0

million in full satisfaction of the obligations.

The proposed settlement reflects a comprehensive resolution that includes offsets

for amounts owed by Failor Services, Inc.

(“Failor”) and Coastal Restaurant Group (“CRG”) to Coastal Defense.

As of December 31, 2025, Coastal Defense’s recorded balances relating to these items were as follows:

(i) amount due to

Parker related to the Stockholder Notes of $ 1.0

million, (ii) amount due from Failor of $ 0.4

million, and (iii) an immaterial amount due from CRG, resulting in a net amount due of $ 0.6

The proposed settlement payment of $ 1.0 million

exceeds the net recorded balance by $ 0.4

million, which was accrued at December 31, 2025 and included in “Related party payables” on the condensed consolidated

balance sheets.

In January 2026, the Company

made a payment of $ 0.1 million to one of the stockholders.

In April 2026, the Company also finalized the settlement with Jeffrey

Parker and fully repaid the remaining Stockholder Note.

No amounts remained outstanding under the Stockholder Notes as of June

Edvard Per Erik Svehag,

a member of the Company’s Board of Directors, is a director of Dangroup ApS (“Dangroup”) and indirectly beneficially

owns approximately 60 % of Dangroup.

Dangroup was also a former shareholder of Sky-Watch, which the Company acquired in March 2022.

June 28, 2024, the Company signed an Incentive Agreement whereby the Company will pay Dangroup 20 % of

Sky-Watch’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) as an incentive bonus for

their continued involvement in Sky-Watch’s governance, management and/or other operations commencing on January 1, 2025 for

an initial term of five years.

June 28, 2024, the Company signed a Consulting Agreement whereby the Company will pay a Mr.

June 28, 2024, the Company signed an Incentive Agreement whereby the Company will pay Dangroup 20 %

of Sky-Watch’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) as an incentive bonus for

their continued involvement in Sky-Watch’s governance, management and/or other operations commencing on January 1, 2025 for an

initial term of five years.

agreement was amended in December 2024 and June 2026.

In connection with the

June 2026 amendment, the Company also agreed to pay Dangroup DKK 1.3 million, or $0.2 million with a foreign exchange rate as of

June 30, 2026, on or before December 15, 2026.

The incentive bonus related to fiscal year 2025 of $6.1 million was paid in June 2026.

June 28, 2024, the Company signed a Consulting Agreement whereby the Company will pay Mr.

of Sky-Watch’s EBITDA as a consulting fee for his assistance with branding and rolling out products and services into new and

3 unchanged sentences

Consulting Agreement.

The amounts owed under this agreement are included in “Accrued expenses” on the condensed consolidated

balance sheet as of March 31, 2026 but were included in “Related party payables” on the condensed consolidated balance sheet as of

December 31, 2025.

the three months ended March 31, 2026 and 2025, the Company recorded $ 0.6 million and $ 0.5 million of expense, respectively, within general and

administrative expense related to these agreements.

April 2026, the Company paid the remaining $1.0 million to Jeffrey F.

Parker, which fully settled the Stockholder Notes as described

The amounts owed under this agreement are included in “Accrued expenses” on the condensed

consolidated balance sheet as of June 30, 2026 but were included in “Related party payables” on the condensed

consolidated balance sheet as of December 31, 2025.

Consulting fees related to fiscal year 2025 of $ 0.9 million were paid in June

During the three and six

months ended June 30, 2026, the Company recorded $ 2.9 million and $ 3.5 million, respectively, and $ 2.0 million and $ 2.6 million of

expense in the three and six months ended June 30, 2025, respectively, within general and administrative expense related to these

Regarding Forward-Looking Statements

5 unchanged sentences

on Form 10-Q are forward-looking statements, including statements about:

ability to grow and manage growth profitably;

financial and business performance and business metrics;

strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

implementation, market acceptance and success of our business model;

market opportunity and the potential growth of that market;

ability to compete effectively in a competitive industry;

ability to protect and enhance our corporate reputation and brand;

impact from future regulatory, judicial, and legislative changes in our industry;

ability to effect our growth strategies, acquisitions or investments successfully;

future capital requirements and sources and uses of cash.

our ability to grow and manage growth profitably;

our financial and business performance and business

our strategy, future operations, financial position,

estimated revenues and losses, projected costs, prospects and plans;

the implementation, market acceptance and success of

our business model;

our market opportunity and the potential growth of

our ability to compete effectively in a competitive

our ability to protect and enhance our corporate reputation

the impact from future regulatory, judicial, and legislative

changes in our industry;

our ability to effect our growth strategies, acquisitions

or investments successfully;

our future capital requirements and sources and uses

statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially

2 unchanged sentences

to differ materially from those expressed or implied in our forward-looking statements:

dependence on a limited number of customers for most of our revenue;

lack of long-term commitments from our customers;

ability to successfully integrate the businesses and personnel of acquired companies, including AIRO Drone, LLC (“AIRO Drone”), Agile Defense, LLC (“Agile

Defense”), Coastal Defense, Inc.

(“Coastal Defense”), Jaunt Air Mobility, LLC (“Jaunt”), Sky-Watch A/S (“Sky-Watch”)

and Aspen Avionics, Inc.

(“Aspen Avionics”), and our ability to realize the

anticipated synergies and benefits of such acquisitions;

ability to keep pace with technological advances and our dependence on advances in technology by other companies, many of which have

substantially greater resources than we do;

ability to acquire additional aircraft to support our Training segment on acceptable terms or at all;

impact that our customers may experience from service failures or interruptions due to defects in the software, infrastructure, components

or engineering system that comprise our products and services, or due to errors in product installation;

dependence on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior

have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability

of our condensed consolidated financial statements;

failure to comply with applicable government regulations;

disruptions or threatened disruptions to our relationships with our distributors, suppliers, customers and employees, including shortages

in components for our products;

sales to the U.S.

government, particularly to agencies of the DoW, and a decline in government

budgets, funding, changes in spending or budgetary priorities, or delays in contract awards;

uncertainty, the risk of future budget cuts, the impact of continuing resolution funding mechanisms, the debt ceiling and government

shutdowns, and changing funding and acquisition priorities;

in the supply, demand and/or prices for our products and services and our ability to perform under existing contracts and obtain

new contracts;

complexities and uncertainty of obtaining and conducting international business, including export compliance and other reporting

and compliance requirements;

impact of potential security and cyber threats or the risk of unauthorized access to our, our customers’ and/or our suppliers’

information and systems;

ability to respond and adapt to changes in economic, capital market, and political conditions in the U.S.

and globally, such as from

the global sanctions and export controls with respect to Russia, and any changes therein, and including changes related to financial

market conditions, banking industry disruptions, fluctuations in commodity prices or supply (including energy supply), inflation,

interest rates and foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks,

including in the Middle East and Ukraine;

failure to develop new products or integrate new technology into current products;

results in legal proceedings;

accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

expectations regarding the period during which we will qualify as an emerging growth company and smaller reporting company.

our dependence on a limited

number of customers for most of our revenue;

our lack of long-term commitments

from our customers;

our ability to successfully

integrate the businesses and personnel of acquired companies, including AIRO Drone, LLC (“AIRO Drone”), Agile Defense,

LLC (“Agile Defense”), Coastal Defense, Inc.

(“Coastal Defense”), Jaunt Air Mobility, LLC (“Jaunt”),

Sky-Watch A/S (“Sky-Watch”) and Aspen Avionics, Inc.

(“Aspen Avionics”), and our ability to realize the anticipated

synergies and benefits of such acquisitions;

our ability to keep pace

with technological advances and our dependence on advances in technology by other companies, many of which have substantially greater

resources than we do;

our ability to acquire

additional aircraft to support our Training segment on acceptable terms or at all;

the impact that our customers

may experience from service failures or interruptions due to defects in the software, infrastructure, components or engineering system

that comprise our products and services, or due to errors in product installation;

our dependence on the continuing

efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management;

we have identified material

weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our condensed

consolidated financial statements;

our failure to comply with

applicable government regulations;

any disruptions or threatened

disruptions to our relationships with our distributors, suppliers, customers and employees, including shortages in components for

our products;

our sales to the U.S.

particularly to agencies of the DoW, and a decline in government budgets, funding, changes in spending or budgetary priorities, or

delays in contract awards;

budget uncertainty, the

risk of future budget cuts, the impact of continuing resolution funding mechanisms, the debt ceiling and government shutdowns, and

changing funding and acquisition priorities;

changes in the supply,

demand and/or prices for our products and services and our ability to perform under existing contracts and obtain new contracts;

the complexities and uncertainty

of obtaining and conducting international business, including export compliance and other reporting and compliance requirements;

the impact of potential

security and cyber threats or the risk of unauthorized access to our, our customers’ and/or our suppliers’ information

our ability to respond

and adapt to changes in economic, capital market, and political conditions in the U.S.

and globally, such as from the global sanctions

and export controls with respect to Russia, and any changes therein, and including changes related to financial market conditions,

banking industry disruptions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and

foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks, including in the Middle

East and Ukraine;

our failure to develop

new products or integrate new technology into current products;

unfavorable results in

legal proceedings;

the accuracy of our estimates

regarding expenses, future revenues, capital requirements and needs for additional financing;

our expectations regarding

the period during which we will qualify as an emerging growth company and smaller reporting company.

some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “continue,”

12 unchanged sentences

These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

should read the section titled “Risk Factors” included in our Annual Report on Form 10-K for a discussion of important

factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

Moreover, we operate in an evolving environment.

New risk factors and uncertainties may emerge from time to time, and it is not

possible for management to predict all risk factors and uncertainties.

As a result of these factors, we cannot assure you that the

forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate.

Except as required by applicable law,

we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new

information, future events, changed circumstances or otherwise.

should read the section titled “Risk Factors” included in our Annual Report on Form 10-K for a discussion of important factors

that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.

operate in an evolving environment.

New risk factors and uncertainties may emerge from time to time, and it is not possible for management

to predict all risk factors and uncertainties.

As a result of these factors, we cannot assure you that the forward-looking statements

in this Quarterly Report on Form 10-Q will prove to be accurate.

Except as required by applicable law, we do not plan to publicly update

or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances

or otherwise.

should read this Form 10-Q and the documents that we reference in this report and have filed as exhibits to the report, completely and

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements