What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-05-15 compared with 2024-11-14 · 237 added, 447 removed, 450 unchanged (60% of the section changed)

1 unchanged sentence

AIRSHIP AI HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

As of September 30, 2024 and December 31, 2023

September 30,

12/31/2023 (1)

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2025 and December 31, 2024

March 31, 2025

CURRENT ASSETS:

2 unchanged sentences

Prepaid expenses and other

Income tax receivable

Total current assets

PROPERTY AND EQUIPMENT, NET

Operating lease right of use asset

4 unchanged sentences

Accrued expenses

Senior Secured Convertible Promissory Notes

Current portion of operating lease liability

9 unchanged sentences

STOCKHOLDERS' DEFICIT:

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2024 and December 31, 2023

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 26,954,871 and 22,812,048 shares issued and outstanding as of September 30, 2024 and December 31, 2023

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 31,844,471 and 30,588,413 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Additional paid in capital

8 unchanged sentences

Derived from the audited consolidated balance sheet.

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

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

AIRSHIP AI HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)

For the three and nine months ended September 30, 2024 and 2023

Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the three months ended March 31, 2025 and 2024

Three Months Ended

Nine Months Ended

September 30,

March 31, 2025

March 31, 2024

NET REVENUES:

Post contract support

Other services

COST OF NET REVENUES:

1 unchanged sentence

Post contract support

Other services

RESEARCH AND DEVELOPMENT EXPENSES

4 unchanged sentences

( 1,402,533 )

( 2,013,702 )

( 6,015,886 )

OTHER INCOME (EXPENSE) :

3 unchanged sentences

( 6,847,091 )

Gain (loss) from change in fair value of convertible debt

Loss from change in fair value of convertible debt

( 2,039,377 )

Loss on note conversion

Interest expense, net

Other income (expense)

Interest income (expense), net

Total other income (expense), net

2 unchanged sentences

( 31,964,469 )

( 7,288,520 )

( 6,482,062 )

Provision for income taxes

1 unchanged sentence

( 31,964,469 )

( 7,288,520 )

( 6,482,062 )

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation income (loss), net

OTHER COMPREHENSIVE (LOSS) INCOME

Foreign currency translation (loss) income, net

TOTAL COMPREHENSIVE INCOME (LOSS)

$ ( 31,961,230 )

$ ( 7,279,182 )

$ ( 6,441,921 )

NET INCOME (LOSS) PER SHARE:

Weighted average shares of common stock outstanding

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

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

AIRSHIP AI HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Comprehensive

5 unchanged sentences

Stock-based compensation

( 1,712,176 )

Balance as of March 31, 2023

( 12,026,489 )

( 9,933,878 )

Stock-based compensation

Stock based compensation- warrants

Foreign currency translation gain

( 3,103,279 )

Balance as of June 30, 2023

( 15,129,768 )

( 10,721,782 )

Stock-based compensation- stock option grants

Foreign currency translation gain

( 1,666,607 )

Balance as of September 30, 2023

( 16,796,375 )

( 12,226,689 )

Balance as of January 1, 2024

( 17,476,700 )

( 17,487,227 )

Stock-based compensation

Issuance of common stock for prior period services

7 unchanged sentences

( 48,050,609 )

Stock-based compensation

Issuance of common stock for services

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

Issuance of common stock for debt interest payment

Foreign currency translation gain

Balance as of June 30, 2024

Balance as of January 1, 2025

( 74,941,590 )

1 unchanged sentence

Stock-based compensation

Stock based compensation- warrants

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

Issuance of common stock for conversion of debt

Issuance of common stock and warrants for offering, net

Foreign currency translation gain

Balance as of September 30, 2024

Issuance of common stock for earnout shares

Foreign currency translation loss

Balance as of March 31, 2025

( 51,233,605 )

( 23,509,549 )

The shares of the Company’s common stock, prior to the merger, have been retroactively restated as shares

reflecting the exchange ratio of approximately 1.7581 established in the merger described in Note 1.

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

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

AIRSHIP AI HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2024 and 2023

Nine Months Ended

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2025 and 2024

Three Months Ended

March 31, 2025

March 31, 2024

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 7,288,520 )

Net income (loss)

$ ( 31,964,469 )

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

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

Depreciation and amortization

Stock-based compensation

Stock-based compensation- warrants

Amortization of operating lease right of use asset

Accelerated amortization of ROU asset - lease termination

Gain from lease termination

Issuance of common stock for services

Noncash interest expense

Loss from change in fair value of warrant liability

Loss from change in fair value of earnout liability

(Gain) loss from change in fair value of warrant liability

( 15,521,183 )

(Gain) loss from change in fair value of earnout liability

( 9,823,605 )

Loss from change in fair value of convertible note

Loss on note conversions

Loss on note conversion

Changes in operating assets and liabilities:

Accounts receivable

( 1,555,893 )

Prepaid expenses and other

2 unchanged sentences

Accounts payable - trade and accrued expenses

( 2,261,087 )

Accrued income tax expense

Deferred revenue

( 2,058,893 )

NET CASH USED IN OPERATING ACTIVITIES

2 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of common stock and warrants for offering, net

Proceeds from convertible promissory note

Proceeds from warrant exercise

Advances from founders, net

Proceeds from warrant exercise, net

Repayment of advances from founders

Proceeds from stock option exercises

Repayment of small business loan and line of credit

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE IN CASH AND CASH EQUIVALENTS

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET DECREASE IN CASH AND CASH EQUIVALENTS

( 2,595,243 )

( 1,401,835 )

Effect from exchange rate on cash

4 unchanged sentences

Noncash investing and financing

Elimination of advances to founders in connection with contribution of Zeppelin by shareholders

Elimination of payables to founders in connection with contribution of Zeppelin by shareholders

Issuance of common stock for debt interest payment

Issuance of common stock for debt conversion

Recognition of warrant liability

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

Issuance of common stock for earnout shares

Recognition of operating right-of-use asset

Recognition of operating lease liability

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

AIRSHIP AI HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Airship AI Holdings, Inc.

10 unchanged sentences

was incorporated under the laws of the State of Washington on June 30, 2003.

On December 21, 2023, the Company completed the merger contemplated by the Merger Agreement, dated as of June 27, 2023 and amended on September 22, 2023, by and among BYTE Acquisition Corp.

On December 21, 2023, the Company completed the merger (“the Merger”) contemplated by the merger agreement (the “Merger Agreement”) dated as of June 27, 2023 and amended on September 22, 2023, by and among BYTE Acquisition Corp.

(“BYTS”), BYTE Merger Sub, Inc., a Washington corporation and a direct, wholly-owned subsidiary of BYTS (“Merger Sub”), and Airship AI.

1 unchanged sentence

Thus, Airship AI became a wholly-owned subsidiary of the Company.

In connection with the merger, Airship AI changed its name from “Airship AI Holdings, Inc.” to “Airship AI, Inc.” See Note 11 —Reverse Recapitalization for additional information.

Fair Value Transactions

In connection with the Merger, Airship AI changed its name from “Airship AI Holdings, Inc.” to “Airship AI, Inc.”

Fair Value Transactions in Connection with Merger

As a result of the Merger, the Company entered into the following transactions that were measured at fair value and vary quarterly with the share price and other items.

1 unchanged sentence

See Note 13– Fair Value Measurements for more information.

Liability as of

September 30, 2024

December 31, 2023

Earnout liability

Senior Secured Convertible Promissory Notes

Warrant liability (Public Warrants)

1 unchanged sentence

Total liabilities measured at fair value

Other loss related to instruments recorded at fair value during the nine months ended September 30, 2024 and 2023

$ ( 4,071,156 )

Other income (expense) related to instruments recorded at fair value during the three months ended March 31, 2025 and 2024

$ ( 30,371,318 )

Common Stock and Warrant Offering

On September 3, 2024, the Company closed an $ 8 million public offering with net proceeds of approximately $ 7.3 million, after deducting the estimated offering expenses payable by the Company, including the placement agent fees.

The offering consisted of 2,882,883 shares of its common stock and warrants to purchase up to an aggregate of 2,882,883 shares of its common stock at a combined public offering price of $ 2.775 per share and associated common stock warrant.

The warrants have an exercise price of $ 2.65 per share, are exercisable immediately upon issuance, and will expire five years following the date of issuance.

The warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed numbers of shares of common stock upon exercise.

The Company intends to use the net proceeds from the offering for working capital and general corporate purposes, including cost of goods sold purchases, personnel and product development.

Private Placement and Public Warrants

At the merger closing, the Company assumed 515,000 private placement warrants and 16,184,612 public warrants.

On June 3, 2024, the Company permanently reduced the exercise price of such warrants from $ 11.50 per share to an exercise price of $ 7.80 per share.

The purpose of this reduced exercise price was to potentially raise proceeds received from the exercise of such warrants, if any, for working capital and general corporate purposes.

As of September 30, 2024, there were 515,000 private placement warrants and 16,159,012 public warrants outstanding.

See Note 12– Private Placement and Public Warrants for more information.

The Company is a robust AI-driven data management platform that solves complex data challenges for large institutions operating in dynamic and mission-critical environments with rapidly increasing volumes of data being ingested from a similarly rapidly growing number of data sources.

17 unchanged sentences

Its offerings allow customers to manage their data across the full data lifecycle, when and where they need it, using a highly secure permissioned based architecture.

The Company employed fifty one employees as of September 30, 2024.

The Company employed fifty two employees as of March 31, 2025.

The employees are headquartered in Redmond, WA and are supported by a growing team at its Customer Center of Excellence located in Charlotte, NC.

The Company employed eight research and development personnel in Taiwan as of September 30, 2024.

The Company employed eight research and development personnel in Taiwan as of March 31, 2025.

Summary of Significant Accounting Policies

2 unchanged sentences

Intercompany accounts and transactions have been eliminated.

The preparation of these consolidated financial statements were prepared in conformity with U.S.

generally accepted accounting principles (“GAAP”).

For periods prior to the merger, the reported share and per share amounts have been retroactively converted by the applicable exchange ratio with the exception of the authorized shares and shares reserved for issuance.

See Note 11—Reverse Recapitalization for additional information.

The Company has prepared the condensed consolidated financial statements included herein pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance U.S.

generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

However, the Company believes that the disclosures herein are adequate to ensure the information presented is not misleading.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The Company believes that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying financial statements to present fairly the results of the interim periods.

The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year ending December 31, 2025.

Functional Currency

6 unchanged sentences

At each period end, Zeppelin’s balance sheet is translated into U.S.

Dollars based upon the period end exchange rate, while their statements of operations and comprehensive loss and statements of cash flows are translated into U.S.

Dollars based upon the period end exchange rate, while their statements of operations and comprehensive income (loss) and statements of cash flows are translated into U.S.

Dollars based upon an average exchange rate during the period.

13 unchanged sentences

(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, and (5) recognize revenue when or as the Company satisfies a performance obligation, as further described below.

The Company generally provides a warranty to its customers for its software products and services.

In the event that there is a failure of warranties in such agreements, the Company is generally obligated to correct the product or service to conform to the warranty provision as set forth in the applicable agreement, or, if the Company is unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term).

For the three months ended March 31, 2025 and 2024, the Company did not incur any significant warranty expenses and as such a warranty reserve was not considered necessary as of March 31, 2025 and December 31, 2024.

Product Revenue

5 unchanged sentences

The Company allocates a portion of the transaction price to the PCS performance obligation based on a cost-plus methodology and recognizes the associated revenue on a straight-line basis over the estimated term of the support period.

The Company’s support contracts are typically one to five years with an average of four years, payment is due within 30 to 90 calendars days of the invoice date and may include options to renew.

For the three months ended September 30, 2024 and 2023, the Company recognized revenue of $ 95,120 and $ 60,367 , respectively, related to one-year support contracts.

For the three months ended September 30, 2024 and 2023, the Company recognized revenue of $ 1,042,008 and $ 1,413,548 , respectively, related to multi-year support contracts.

For the nine months ended September 30, 2024 and 2023, the Company recognized revenue of $ 234,717 and $ 141,582 , respectively, related to one-year support contracts.

For the nine months ended September 30, 2024 and 2023, the Company recognized revenue of $ 3,083,464 and $ 3,536,003 respectively, related to multi-year support contracts.

The Company’s support contracts are typically one to five years with an average of four years;

payment is due within 30 to 90 calendars days of the invoice date and may include options to renew.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $101,599 and $59,361, respectively, related to one-year support contracts.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $ 896,452 and $ 1,116,893 respectively, related to multi-year support contracts.

Other Services

The Company earns other service revenues from installation services, training and licensing which are short-term in nature and revenue for these services are recognized at the time of performance when the service is provided.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $ 7,737 and $ 0 , respectively, related to other services.

Contracts with Multiple Performance Obligations

16 unchanged sentences

Transfer of control is evidenced upon passage of title and risk of loss to the customer unless the Company is required to provide additional services.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,326,543 and 3,585,344 as of September 30, 2024.

The Company’s short-term and long-term deferred revenue balances totaled $ 2,948,695 and $ 2,528,716 as of March 31, 2025.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,238,483 and $ 2,951,850 as of December 31, 2024.

Of the deferred revenue balance of $ 8,970,780 as of January 1, 2024, the Company recognized approximately $933,675 and $3,061,613 during the three and nine months ended September 30, 2024, respectively.

Of the deferred revenue balance of $ 6,190,333 and $ 8,970,780 as of January 1, 2025 and 2024, the Company recognized approximately $985,548 and $1,176,239 during the three months ended March 31, 2025 and 2024, respectively.

Accounts Receivable and Provision for Credit Losses

1 unchanged sentence

Accounts receivable are recorded at invoiced amounts and are non-interest bearing.

The Company adopted Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments — Credit Losses (codified as Accounting Standards Codification (“ASC”) 326) on January 1, 2023.

ASC 326 adds to U.S.

GAAP the current expected credit loss (“CECL”) model, a measurement model based on expected losses rather than incurred losses.

Prior to the adoption of ASC 326, the Company evaluated receivables regularly and adjusted the allowance for doubtful accounts accordingly.

The Company determined estimates of uncollectible accounts receivable based primarily on actual historical bad debt and sales return trends, customers financial condition and general economic conditions.

Under the application of ASC 326, the Company’s historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business conditions, and anticipated future economic events that may impact collectability.

The Company determines estimates of uncollectible accounts receivable based primarily on actual historical bad debt and sales return trends, customers financial condition and general economic conditions.

The Company’s historical credit loss experience provides the basis for the estimation of expected credit losses, as well as current economic and business conditions, and anticipated future economic events that may impact collectability.

In developing its expected credit loss estimate, the Company evaluated the appropriate grouping of financial assets based upon its evaluation of risk characteristics, including consideration of the types of products and services sold.

2 unchanged sentences

Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

As of September 30, 2024 and December 31, 2023, the Company did not have a reserve for credit losses as all accounts receivable are considered collectible.

Accounts receivable balances as of September 30, 2024 and December 31, 2023 were $ 1,121,862 and $ 1,648,904 , respectively.

As of March 31, 2025 and December 31, 2024, the Company did not have a reserve for credit losses as all accounts receivable are considered collectible.

Accounts receivable balances as of March 31, 2025, December 31, 2024 and January 1, 2024 were $ 2,782,650 , $ 1,226,757 and $ 1,648,904 , respectively.

Concentration of Credit and Sales Risk

The Company sells its product to commercial and government customers under agreements that are normally paid within 30 days of contract completion.

For the nine months ended September 30, 2024, the Company had revenue from sixty eight customers and one customer represented 63 % of total revenue, although such a high level of customer concentration is not typical.

The primary reason for the high level of customer concentration for the nine months ended September 30, 2024 was due to one large order received in late 2023 which was fulfilled in the nine months ended September 30, 2024.

As of September 30, 2024, five customers represent approximately 21 %, 20 %, 16 %, 12 % and 11 % of outstanding account receivables.

For the three months ended March 31, 2025, the Company had revenue from twenty customers and three customer represented 83 % of total revenue.

The primary reason for the high level of customer concentration for the three months ended March 31, 2025 was due to reliance on these three customers for the three months ended March 31, 2024.

As of March 31, 2025, two customers represent approximately 81 % and 13 % of outstanding account receivables.

Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is estimated to be minimal.

For the nine months ended September 30, 2023, two customers represent approximately 49 % and 16 % of total revenue.

As of December 31, 2023, three customers represent approximately 51 %, 26 % and 17 % of outstanding account receivables.

For the three months ended March 31, 2024, the Company had revenue from seventeen customers and one customer represented 78 % of total revenue, although such a high level of customer concentration is not typical.

The primary reason for the increase in reliance on a single customer for the three months ended March 31, 2024 was due to one large order received in late 2023 which was fulfilled in the three months ended March 31, 2024.

As of March 31, 2024, two customers represent approximately 52 % and 27 % of outstanding account receivables.

Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is estimated to be minimal.

1 unchanged sentence

Upon receipt of inventory, the Company generally configures the servers and loads proprietary software onto the servers before shipping out.

The Company holds inventory for a short period of time and as of September 30, 2024 and December 31, 2023, it had no inventory in stock.

The Company holds inventory for a short period of time and as of March 31, 2025 and December 31, 2024, it had no inventory in stock.

Inventory value is primarily material costs and is valued at the lower of cost (first in, first out method) or net realizable value.

4 unchanged sentences

To the extent carrying values exceed fair values, an impairment loss is recognized in operating results.

The Company recorded impairment losses of $ 0 for the nine months ended September 30, 2024 and 2023.

The Company recorded no impairment losses for the three months ended March 31, 2025 and 2024.

Research and Development Expenses

5 unchanged sentences

The Company believes that continued development of new and enhanced technologies is essential to the Company’s future success.

The Company incurred research and development expenses of $ 1,073,735 and $ 688,798 for the three months ended September 30, 2024 and 2023, respectively, on development activities.

The Company incurred research and development expenses of $ 2,471,872 and $ 2,028,081 for the nine months ended September 30, 2024 and 2023, respectively, on development activities.

The Company incurred research and development expenses of $ 719,382 and $ 695,366 for the three months ended March 31, 2025 and 2024, respectively, on development activities.

Software Development Costs

3 unchanged sentences

Capitalization of software costs ceases when the software is substantially complete and is ready for its intended use.

No software development costs have been capitalized as of September 30, 2024 and December 31, 2023.

No software development costs have been capitalized as of March 31, 2025 and December 31, 2024.

Cost of Net Revenues

1 unchanged sentence

Cost of net revenues for post contract support and other services includes primarily the cost of personnel and personnel-related expenses to conduct implementations and ongoing client support.

Advertising and Marketing

Advertising costs are charged to selling, general and administrative expenses as incurred.

Advertising and marketing costs for the three months ended September 30, 2024 and 2023 were $ 41,107 and $ 2,587 , respectively.

Advertising and marketing costs for the nine months ended September 30, 2024 and 2023 were $ 130,428 and $ 55,916 , respectively.

Advertising and marketing costs for the three months ended March 31, 2025 and 2024 were $ 169,221 and $ 22,458 , respectively.

Shipping and Handling of Products

9 unchanged sentences

Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of September 30, 2024 and December 31, 2023 are based upon the short-term nature of the assets and liabilities.

The Company recorded its Senior Secured Convertible Promissory Note, earnout liability (unvested earnout shares), and the warrants that were issued with the Convertible Promissory Note at fair value, remeasured on a recurring basis and considered them as Level 3 instruments.

The Company initially recorded its senior secured convertible promissory notes, earnout liability (unvested earnout shares), and the warrants that were issued with the notes at fair value, remeasured on a recurring basis and considered them as Level 3 instruments.

The public and private warrants were considered Level 1 and 2 instruments, respectively.

The fair value of the vested earnout shares was considered a Level 1 instrument.

The method of determining the fair value of the Senior Secured Convertible Promissory Note and attached warrants is described below.

The senior secured convertible promissory notes were converted to equity during the year ended December 31, 2024.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of March 31, 2025 and December 31, 2024 are based upon the short-term nature of the assets and liabilities.

The Company classifies as liabilities any contracts that (i) require net-cash settlement (including a requirement to net- cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

Accounting for Senior Secured Convertible Promissory Notes at Fair Value

The Company has elected the fair value option to account for the senior secured convertible note that was issued on June 22, 2023 and the convertible notes that were issued in October and November 2023 with changes in fair value recorded in the Consolidated Statements of Operations and Comprehensive Loss.

As a result of applying the fair value option, direct costs and fees related to the convertible notes are recognized in earnings as incurred and not deferred.

Values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability.

Considerable judgment is necessary to interpret market data and determine an estimated fair value.

The use of different market assumptions or valuation methods may have a material effect on the estimated fair values.

As of September 30, 2024, the Company has used a Monte Carlo simulation pricing model that factors in potential outcomes being consummated, such as the convertible notes being repaid in cash and the convertible notes being converted to common stock.

All of these scenarios take into consideration the terms and conditions of the underlying convertible notes plus potential changes in the underlying value of the common stock.

For the nine months ended September 30, 2024 and 2023, the Company recognized an unrealized loss of $ 141,636 and $ 400,921 for the change in fair value of the notes and is included in the Consolidated Statements of Operations and Comprehensive Loss.

The Company believes accounting for the convertible notes at fair value better aligns the measurement methodologies of assets and liabilities, which may mitigate certain earnings volatility.

Derivative Liabilities and Earnout Liabilities

4 unchanged sentences

At the Merger closing, the Company assumed 515,000 private placement warrants and 16,184,612 public warrants.

On June 3, 2024, the Company permanently reduced the exercise price of such warrants from $ 11.50 per share to an exercise price of $ 7.80 per share.

The purpose of this reduced exercise price was to potentially raise proceeds received from the exercise of such warrants, if any, for working capital and general corporate purposes.

As of September 30, 2024, there were 515,000 private placement warrants and 16,159,012 public warrants outstanding.

See Note 12– Private Placement and Public Warrants for more information.

As of March 31, 2025, there were 515,000 private placement warrants and 16,145,210 public warrants outstanding.

Upon consummation of the Merger, the Company evaluated the warrants and concluded that they did not meet the criteria to be classified within the stockholders’ deficit.

2 unchanged sentences

The subsequent estimated fair value of the public warrants is based on the listed price in an active market for such warrants while the fair value of the private placement warrants continues to be measured using a Monte Carlo simulation with the key inputs being directly or indirectly observable public warrants listed price.

Since the public and private warrants meet the definition of a derivative, the Company recorded the public and private warrants as liabilities on the consolidated balance sheet at fair value upon the merger closing, with subsequent changes in the fair value recognized in the consolidated statements of operations at each reporting date.

At the closing of the merger, the Airship AI securityholders that hold shares of common stock of Airship AI, Airship AI options, Airship AI earnout warrants or Airship AI SARs have the contingent right to receive up to 5.0 million additional shares of common stock, subject to certain contingencies.

At the closing of the Merger, the Airship AI securityholders that hold shares of common stock of Airship AI, Airship AI options, Airship AI earnout warrants or Airship AI SARs had the contingent right to receive up to 5.0 million additional shares of common stock, subject to certain contingencies.

These earnout shares have been categorized into two components:

4 unchanged sentences

The earnout shares were valued using a Monte Carlo analysis.

At the closing of the merger, the unvested earnout shares were considered to be equity instruments and valued at approximately $ 2,675,000 .

This amount will be recognized as stock-based compensation going forward over the five-year vesting period.

At the closing of the Merger, the earnout shares associated with unvested underlying shares were considered to be equity instruments and valued at approximately $ 2,675,000 .

During the three months ended March 31, 2025 and 2024, the Company stock-based compensation expense for the vesting of earnout shares was $ 133,761 .

As of March 31, 2025, unrecognized compensation cost related to unvested earnout shares totaled $ 2,006,419 .

The weighted average period over which this remaining compensation cost is expected to be recognized is 3.75 years.

Derivative warrant and earnout shares liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of significant current assets or require the creation of current liabilities.

10 unchanged sentences

The Company considers historical and future taxable income, future reversals of existing taxable temporary differences, taxable income in prior carryback years, and ongoing tax planning strategies in assessing the need for valuation.

Comprehensive Gain

Comprehensive gain is defined as the change in equity of a business during a period from non-owner sources.

There was other comprehensive gain of $ 354 and loss of $ 2,410 related foreign exchange translation for the three months ended September 30, 2024 and 2023, respectively.

There was other comprehensive gain of $ 9,338 and gain of $ 40,141 related foreign exchange translation for the nine months ended September 30, 2024 and 2023, respectively.

Comprehensive (Loss) Gain

Comprehensive (loss) gain is defined as the change in equity of a business during a period from non-owner sources.

There was other comprehensive (loss) gain of ($ 7,409 ) and $ 3,239 , respectively, related to foreign exchange translation for the three months ended March 31, 2025 and 2024, respectively.

Going Concern Assessment

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Further, a company must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern” and management plans to alleviate the going concern.

In November 2024, the Company analyzed its cash requirements and operations at least through November 2025 and has determined that, based upon the Company’s current available cash and operations, the Company has no substantial doubt about its ability to continue as a going concern.

In May 2025, the Company analyzed its cash requirements and operations at least through May 2026 and has determined that, based upon the Company’s current available cash and operations, the Company has no substantial doubt about its ability to continue as a going concern.

Use of Estimates

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Income (Loss) Per Share

Basic income (loss) per share is based upon the net income (loss) for the three and nine months ended September 30, 2024 and 2023 divided by the weighted average shares of common stock outstanding.

Diluted net income per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, warrants, convertible notes payable and stock appreciation rights) outstanding during the period using the treasury stock method for the three months ended September 30, 2024.

Common stock equivalents for the three months ended September 30, 2023 and the nine months ended September 30, 2024 and 2023 are not included in the calculation of diluted earnings (loss) per share given the Company incurred a loss and they are anti-dilutive.

Basic income (loss) per share is based upon the net income (loss) for the three months ended March 31, 2025 and 2024 divided by the weighted average shares of common stock outstanding.

Diluted net income per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, warrants and stock appreciation rights) outstanding during the period using the treasury stock method for the three months ended March 31, 2025.

Common stock equivalents for the three months ended March 31, 2024 are not included in the calculation of diluted earnings (loss) per share given the Company incurred a loss and they are anti-dilutive.

See Note 14—Earnings per share.

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The Financial Accounting Standards Board, or FASB, Accounting Standard Codification, or ASC, Topic 280, Segment Reporting , requires that an enterprise report selected information about reportable segments in its financial reports issued to its stockholders.

Management monitors the revenue and expense components of the various products and services the Company offers, but operations are managed and financial performance is evaluated on a corporation-wide basis in comparison to a business plan which is developed each year.

Accordingly, all operations are considered by management to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations and Comprehensive Loss to the consolidated financial statements.

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance.

The Chief Executive Officer, Chief Financial Officer and President are the Company’s CODM.

The CODM monitors the revenue and expense components of the various products and services the Company offers, but operations are managed and financial performance is evaluated on a corporation-wide basis in comparison to a business plan which is developed each year.

Accordingly, all operations are considered by the CODM to be one operating segment and one reportable segment as contained in the Consolidated Statements of Operations and Comprehensive Loss to the consolidated financial statements.

The CODM uses consolidated net income (loss) as its required measure of segment profit/loss, as such measure is determined in accordance with the measurement principles most consistent with the consolidated financial statements.

Recent Accounting Pronouncements

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Advances due to Founders

Prior to 2023, the founders had advanced the Company a net $ 600,000 .

In the year ended December 31, 2023, Mr.

During 2024, Mr.

Huang and Mr.

Xu advanced Airship AI a total of $ 1,350,000 and were repaid a total of $ 200,000 , with $ 1,750,000 recorded as advances from founders as of December 31, 2023.

Xu advanced Airship AI $ 2,100,000 and were repaid $ 2,550,000 , with $ 1,300,000 recorded as advances from founders as of December 31, 2024.

During 2025, Mr.

Huang and Mr.

Xu advanced Airship AI $ 2,100,000 and were repaid $ 2,100,000 , with $ 1,750,000 recorded as advances from founders as of September 30, 2024.

The outstanding advances as of September 30, 2024 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Xu were repaid $ 300,000 each, with $ 700,000 recorded as advances from founders as of March 31, 2025.

The outstanding advances as of March 31, 2025 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Master Loan Agreement

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The $ 284,478 fair value of the warrant is recorded in permanent equity in the consolidated balance sheets and was fully expensed on the date of grant.

There are no outstanding advances under this Master Loan Agreement as of September 30, 2024.

There are no outstanding advances under this Master Loan Agreement as of March 31, 2025 and December 31, 2024.

Disaggregation of Revenue

The Company’s net revenues for the nine months ended September 30, 2024 and 2023 consisted of approximately $ 16.5 million and $ 4.4 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time The Company’s remaining net revenue for the nine months ended September 30, 2024 and 2023 of approximately $ 3.3 million and $ 3.7 million, respectively, related to PCS revenue and other services which are transferred over time.

The Company’s net revenues for the three months ended March 31, 2025 and 2024 consisted of approximately $ 4.5 million and $ 9.4 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time.

The Company’s remaining net revenue of approximately $ 1.0 million and $ 1.2 million relates to PCS revenue and other services which are transferred over time.

Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing, and uncertainty around revenue recognition and cash flow are substantially similar.

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Receivables are generally paid within thirty days and there is no financing element to the customer contracts.

As of September 30, 2024 and December 31, 2023, there were no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,326,543 and $ 3,585,344 as of September 30, 2024.

As of March 31, 2025 and December 31, 2024, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 2,948,695 and $ 2,528,716 as of March 31, 2025.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,238,483 and $ 2,951,850 as of December 31, 2024.

Of the deferred revenue balance of $ 8,970,780 as of January 1, 2024, the Company recognized approximately $ 933,675 and $ 3,061,613 during the three and nine months ended September 30, 2024, respectively.

Of the deferred revenue balance of $ 6,190,333 and $ 8,970,780 as of January 1, 2025 and 2024, the Company recognized approximately $ 985,548 and $ 1,176,239 during the three months ended March 31, 2025 and 2024, respectively.

Remaining Performance Obligations

As of September 30, 2024, the Company had approximately $ 6.9 million of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

As of March 31, 2025 and December 31, 2024, the Company had approximately $ 5.5 million and $ 6.2 million of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

The Company expects to recognize approximately 43 % of its remaining performance obligations as revenue in fiscal 2025 and the remaining 57 % in fiscal 2026 and years thereafter.

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On June 22, 2023, the Company issued a $ 2,000,000 senior secured convertible promissory note to Platinum Capital Partners, Inc.

On February 2, 2024, the Company issued an amended and restated senior secured convertible promissory note to Platinum in the principal amount of $ 2,000,000 .

Interest accrued on the Platinum convertible note at the rate of 6 % per annum calculated on the basis of 360 days.

At the option of Platinum, the $ 2,000,000 principal amount of the note plus any accrued but unpaid interest is convertible into shares of the Company’s common stock at a conversion price per share equal to the lower of (i) $ 3 .69717, subject to appropriate adjustment as provided in the note, and (ii) 65% of the VWAP of the common stock for the five trading days immediately prior to any conversion, but in no event below $ 2 .27518, subject to appropriate adjustment as provided in the note.

The note contains “weighted average” anti-dilution protection for issuances of shares of common stock or common stock equivalents at a price less than the conversion price then in effect.

In connection with the issuance of the Platinum convertible note, the Company issued to Platinum an amended and restated common stock purchase warrant dated February 2, 2024, to purchase 189,334 shares of the Company’s common stock at an exercise price per share of $ 3 .69717.

On March 18, 2024, Platinum exercised the Platinum warrant and received 137,367 shares of common stock.

Platinum forfeited 51,967 shares.

On June 22, 2024, the Company entered into an extension agreement related to the Platinum convertible note.

The extension agreement extended the due date of the note to June 22, 2025.

In consideration for entering into the extension agreement, the Company issued to Platinum 232,360 shares of the Company’s restricted common stock in payment of all interest and extension fees through June 22, 2025 with a value of $ 1,008,400 .

Approximately $ 487,000 of the total payment related to the future interest periods and were recorded in prepaid expenses and others on the consolidated balance sheet.

Subject to the terms and conditions of such extension agreement, for a period commencing on December 22, 2024 and ending at the close of business on December 22, 2025, Platinum has a one-time put right to have the Company purchase all or a portion of Platinum’s 232,360 restricted shares at $ 2 .27518 per share.

The Company granted piggyback registration rights to Platinum.

The obligations under the Platinum convertible note are secured by a blanket lien on all assets of the Company pursuant to an Amended and Restated Security Agreement dated February 2, 2024 and are guaranteed pursuant to an Amended and Restated Guaranty dated February 2, 2024.

The Company also concurrently entered into an Amended and Restated Subordination Agreement.

During the nine months ended September 30, 2024, the Company issued 219,763 shares of common stock related to the conversion of $ 500,000 of the Platinum convertible note and recorded a loss on note conversion of $ 200,338 .

During the year ended December 31, 2024, the Company issued 879,051 shares of common stock related to the conversion of $ 2,000,000 of the senior secured convertible promissory note.

On October 3, 2023, the Company issued senior secured convertible promissory notes for $ 600,000 to two private investors.

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On September 13, 2024, the Company issued an additional 86,198 shares of common stock related to the conversion of notes at $ 2.65 per share.

The Company recognized a loss on debt conversion of $ 234,459 and $ 393,253 , respectively during the three and nine months ended September 30, 2024.

The Company accounts for the notes under the fair value method of accounting and as of September 30, 2024 and December 31, 2023, the notes were recorded at $ 1,793,360 and $ 2,825,366 , respectively.

During the nine months ended September 30, 2024 and 2023, the Company recorded an increase in the fair value of the convertible notes payable totaling $ 141,636 and $ 400,921 , respectively, which were recorded as loss from change in fair value of convertible debt on the statement of operations and comprehensive loss.

See Note 14 – Fair Value Measurements for more information.

Details on notes payable and convertible notes payable were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC on April 1, 2024.

During the three months ended March 31, 2024, the Company recorded an unrealized loss due to the increase in the fair value of the convertible notes payable totaling $ 2,039,377 .

Stockholders’ Deficit

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The Company’s charter authorizes the issuance of 205,000,000 shares, consisting of 200,000,000 shares of common stock and 5,000,000 shares of preferred stock, par value $ 0.0001 per share.

Details on the common stock, preferred stock and equity incentive plans were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC on April 1, 2024.

As of September 30, 2024, there were 26,954,871 shares of common stock outstanding.

Nine Months Ended September 30, 2024

During the nine months ended September 30, 2024, the Company had the following sales of unregistered equity securities:

On March 5, 2024, a private investor converted a senior secured convertible promissory note for $ 250,000 and interest into 70,502 shares of the Company’s common stock.

On March 5, 2024, a private investor converted a senior secured convertible promissory note for $ 350,000 and interest into 98,702 shares of the Company’s common stock.

On March 21, 2024, the Company issued 15,000 shares of common stock for services performed as of December 31, 2023 to MZHCI, LLC related to an investor relations consulting agreement.

On May 16, 2024, the Company issued 50,000 shares of common stock to Pamria LLC for consulting and investor relations services.

On June 22, 2024, the Company entered into an extension agreement with Platinum Capital Partners Inc.

to extend the maturity date of the Platinum convertible note to June 22, 2025.

In consideration for entering into the extension agreement, the Company issued to Platinum 232,360 shares of common stock in payment of all interest and extension fees through June 22, 2025.

On September 3, 2024, the Company issued 2,882,883 shares of common stock at a combined price of $ 2.775 related to the closing of a public offering.

On September 13, 2024, the Company issued an additional 86,198 shares of common stock related to the conversion of notes at $ 2.65 per share.

During the nine months ended September 30, 2024, the Company issued 219,763 shares of common stock related to the conversion of $ 500,000 of the Platinum convertible note.

During the nine months ended September 30, 2024, the Company issued an aggregate of 324,448 shares of common stock upon the exercise of stock options at $ 0.60 weighted average price.

During the nine months ended September 30, 2024, the Company issued an aggregate of 162,967 shares of common stock upon the exercise of warrants at $ 4.92 weighted average price.

Details on the common stock, preferred stock and equity incentive plans were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the SEC on February 28, 2025.

As of March 31, 2025 and December 31, 2024, there were 31,844,471 and 30,588,413 shares of common stock outstanding, respectively.

Three Months Ended March 31, 2025

During the three months ended March 31, 2025, the Company had the following issuances of equity securities:

As of September 30, 2024, the Company determined the First Operating Performance Milestone of the earnout shares was achieved resulting in the vesting of 1,250,000 shares, of which 1,160,906 shares of the Company’s common stock were issued to applicable personnel on January 7, 2025.

During the three months ended March 31, 2025, investors exercised warrants for 13,200 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,400 .

During the three months ended March 31, 2025, the Company issued an aggregate of 81,952 shares of common stock and received $ 43,201 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 1.64 per share.

2023 Equity Incentive Plan

The Company has adopted the 2023 Equity Incentive Plan, which plan was approved by stockholders at the extraordinary general meeting held in December 2023.

The Company has adopted the 2023 Equity Incentive Plan (the “2023 Plan”), which plan was approved by stockholders at the extraordinary general meeting held in December 2023.

Details on the equity incentive plan were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC on April 1, 2024.

The aggregate number of shares of common stock initially reserved and available for grant and issuance under the equity incentive plan is 4,456,241 as of September 30, 2024.

The 2022 Combined Incentive and Non-Qualified Stock Option Plan (the “2022 Plan”) is no longer available for use for the grant of future awards.

The 2022 Plan will continue to govern the terms of awards that have been granted under the 2022 Plan before, and that are still outstanding following the Merger.

The aggregate number of shares of common stock initially reserved and available for grant and issuance under the 2023 Plan is 4,000,000 .

Such aggregate number of shares of stock will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2024 and ending on January 1, 2033, in an amount equal to 2.0 % of the total number of shares of common stock outstanding on December 31 of the preceding year.

The Company had the following stock option activity during the nine months ended September 30, 2024:

During the nine months ended September 30, 2024, the Company granted stock options to seven employees to purchase an aggregate of 1,050,000 shares of common stock with an exercise price of $ 3.74 and which vest primarily quarterly over four years and expire March to August 2034.

During the nine months ended September 30, 2024, five employees voluntarily cancelled stock options to purchase an aggregate of 300,000 shares of common stock with an exercise price of $ 6.85 .

During the nine months ended September 30, 2024, the Company issued an aggregate of 324,448 shares of common stock and received $ 196,173 upon the exercise of stock options at exercise prices ranging from $ 0.60 per share.

Stock option activity for the nine months ended September 30, 2024 was as follows:

Weighted Average

The aggregate number of shares of common stock reserved for grant and issuance under the 2023 Plan is 3,334,721 as of March 31, 2025.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The cost is recognized over the period which an employee is required to provide service in exchange for the award-the requisite service period.

The Company had the following stock option activity during the three months ended March 31, 2025:

During the three months ended March 31, 2025, the Company granted stock options to 3 employees to purchase an aggregate of 455,000 shares of common stock with an exercise price of $ 3.34 and which vest primarily quarterly over four years and expire on during 2035.

Stock option activity for the three months ended March 31, 2025 was as follows:

Exercise Price

Outstanding as of December 31, 2023

Outstanding as of September 30.

The following table summarizes information about stock options outstanding and exercisable as of September 30, 2024:

Outstanding as of January 1, 2025

Outstanding as of March 31, 2025

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2025:

Remaining Life

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and Exercisable

There were 5,090,141 options to purchase common stock at an average exercise price of $ 0.83 per share outstanding as of September 30, 2024 under the 2023 Equity Incentive Plan.

The Company recorded $ 139,409 and $ 206,495 of compensation expense, net of related tax effects, relative to stock options for the three months ended September 30, 2024 and 2023, respectively.

The Company recorded $ 420,824 and $ 479,913 of compensation expense, net of related tax effects, relative to stock options for the nine months ended September 30, 2024 and 2023, respectively, in accordance with ASC 718.

As of September 30, 2024, there was $ 1,962,124 of total unrecognized costs related to employee granted stock options that were not vested.

There were 5,900,607 options to purchase common stock at an average exercise price of $ 1.22 per share outstanding as of March 31, 2025 under the 2023 and 2022 Plans.

The Company recorded $ 294,525 and $ 135,227 of compensation expense, net of related tax effects, relative to stock options for the three months ended March 31, 2025 and 2024, respectively, in accordance with ASC 718.

As of March 31, 2025, there was $ 2,777,071 of total unrecognized costs related to employee granted stock options that were not vested.

These costs are expected to be recognized over a period of approximately 3.5 years.

In August 2024, the Company cancelled out-of-the money options to exercise 300,000 shares held by current employees and replaced them with 525,000 options at lower exercise prices.

The new options were subject to the same service-based vesting schedule as the original options.

The Company accounted for the replacement options as a modification of the terms of the cancelled option awards and in accordance with ASC 718-20-35-2A, the Company will recognize additional $ 205,879 stock compensation expense over the remaining vesting period as the incremental cost measured as the excess of the fair value of the replaced options on the grant date using the Black-Scholes-Merton option pricing model over the fair value of the cancelled option award at the cancellation date.

The significant weighted-average assumptions relating to the valuation of the Company’s stock option grants were as follows for the nine months ended:

The significant weighted-average assumptions relating to the valuation of the Company’s stock option grants were as follows for the three months ended March 31, 2025:

Estimated stock price

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Risk free interest rate

There were stock incentive plan awards outstanding at September 30, 2024 totaling 5,090,141 shares with an aggregate intrinsic value of $ 7,781,223 .

As of September 30, 2024 and December 31, 2023 there were 1,758,000 SARs outstanding.

There were no SAR grants in the nine months ended September 30, 2024 or the year ended December 31, 2023.

3.48 %- 3.81 %

There were stock incentive plan awards outstanding at March 31, 2025 totaling 5,900,607 shares with an aggregate intrinsic value of $ 15,552,307 .

Stock Appreciation Rights Plan

Related to the Share Exchange Agreement with Super Simple AI, Inc., on February 17, 2022, the Company’s Board of Directors approved the 2022 Stock Appreciation Rights Plan (the “SAR Plan”) to issue a maximum of 1,500,000, which was later adjusted to 2,637,150 stock appreciation rights (“SARs”) after the Merger .

As of March 31, 2025 and December 31, 2024, there were 1,758,000 SARs outstanding with a base value of $ 0.12 and January 2028 expiration.

There were no SAR grants during the three months ended March 31, 2025 or the year ended December 31, 2024.

Warrants to Purchase Common Stock

See Note 11 for public and private placement warrants assumed after the merger.

The Company had the following warrant activity during the nine months ended September 30, 2024:

In connection with the issuance of the Platinum convertible note, the Company issued to Platinum an amended and restated common stock purchase warrant dated February 2, 2024 to purchase 189,334 shares of common stock at an exercise price per share of $ 3 .69717.

On March 18, 2024, Platinum exercised the Platinum warrant and received 137,367 shares of common stock.

Platinum forfeited 51,967 shares.

On September 3, 2024 the Company issued warrants to purchase up to 2,882,883 shares of its common stock.

The warrants have an exercise price of $ 2.65 per share, are exercisable immediately upon issuance and will expire five years following the date of issuance.

On September 3, 2024 the Company issued warrants to purchase up to 216,216 shares of its common stock.

The warrants have an exercise price of $ 3.47 per share, are exercisable immediately upon issuance and will expire five years following the date of issuance.

On September 27, 2024, the Company issued warrants to purchase up to 220,000 shares of common stock.

The warrants have an exercise price of $ 2.36 per share, are exercisable immediately upon issuance and will expire in five years following the date of issuance.

During the nine months ended September 30, 2024, investors exercised warrants for 25,600 shares of the Company’s common stock at $ 11.49 per share, and the Company received proceeds of $ 294,030 .

Warrant activity for the nine months ended September 30, 2024 was as follows:

September 30, 2024

The Company had the following warrant activity during the three months ended March 31, 2025:

During the three months ended March 31, 2025, investors exercised warrants for 13,200 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,400 .

Warrant activity for the three months ended March 31, 2025 was as follows:

Outstanding January 1, 2025

Outstanding at September 30, 2024

A summary of the warrants outstanding as of September 30, 2024 were as follows:

September 30, 2024

Outstanding at March 31, 2025

A summary of the warrants outstanding as of March 31, 2025 were as follows:

March 31, 2025

Life ( In Years)

The significant weighted average assumptions relating to the valuation of the Company’s warrants issued for the nine months ended September 30, 2024 were as follows:

Dividend yield

Exercise price

Expected life

Expected volatility

Risk free interest rate

Earnout Liability

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The plan provides for a 3.5% match on up to 6% of deferred salary .

The Company expensed $ 52,456 and $ 44,973 of contributions during the three months ended September 30, 2024 and 2023, respectively.

The Company expensed $ 153,254 and $ 138,532 of contributions during the nine months ended September 30, 2024 and 2023, respectively.

The Company expensed $ 50,978 and $ 50,102 of contributions during the three months ended March 31, 2025 and 2024, respectively.

Related Party Transactions

Advances due to Founders

Prior to 2023, the founders had advanced the Company a net $ 600,000 .

In the year ended December 31, 2023, Mr.

During 2024, Mr.

Huang and Mr.

Xu advanced Airship AI a total of $ 1,350,000 and were repaid a total of $ 200,000 , with $ 1,750,000 recorded as advances from founders as of December 31, 2023.

Xu advanced Airship AI $ 2,100,000 and were repaid $ 2,550,000 , with $ 1,300,000 recorded as advances from founders as of December 31, 2024.

During 2025, Mr.

Huang and Mr.

Xu advanced Airship AI $ 2,100,000 and was repaid $ 2,100,000 , with $ 1,750,000 recorded as advances from founders as of September 30, 2024.

The outstanding advances as of September 30, 2024 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Xu were repaid $ 300,000 each, with $ 700,000 recorded as advances from founders as of March 31, 2025.

The outstanding advances as of March 31, 2025 and December 31, 2024 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Master Loan Agreement

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The $ 284,478 fair value of the warrant is recorded in permanent equity in the consolidated balance sheets and was fully expensed on the date of grant.

There are no outstanding advances under this Master Loan Agreement as of September 30, 2024.

Warrants to Purchase Common Stock

On May 8, 2023, Airship AI issued warrants to purchase 1,344,951 shares of common stock to each of Victor Huang and Derek Xu.

The warrants were valued at $ 2,136,115 based on the exercise price of $ 1.77 , the fair market stock price of $ 1.89 , a five year term, a volatility of 39.4 % and interest of 3.41 %.

The warrants were recorded as stock-based compensation expense and as additional paid in capital.

All warrants are fully vested as they were issued for services performed.

There are no outstanding advances under this Master Loan Agreement as of March 31, 2025 and December 31, 2024.

Commitments, Contingencies and Legal Proceedings

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The incremental borrowing taking into consideration the Company’s credit quality and borrowing rate for similar assets is used in determining the present value of future payments.

Lease expense is recorded as general and administrative expenses on the Company’s consolidated statements of operations.

Lease expense is recorded as general and administrative expenses on the Company’s consolidated statements of operations and comprehensive income (loss).

The Company elected the package of transitional practical expedients, under which (1) the Company did not reassess whether any expired or existing contracts are or contain leases, (2) the Company did not reassess the lease classification for any expired or existing leases and (3) the Company did not reassess initial direct costs for any existing leases.

Additionally, the Company elected the short-term lease recognition exemption for all leases that qualify, meaning it does not recognize right-of use assets or lease liabilities for those leases.

The Company also elected the practical expedient to not separate lease and non-lease components for all asset classes.

On July 13, 2023, the Company entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started October 1, 2023.

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The Company leases 3,621 square feet and the net monthly payment is $ 6,488 .

On August 27, 2024, the Company extended the lease to February 28, 2025 .

The Company has entered into operating leases for office and development facilities for four years and include options to renew.

On August 27, 2024, the Company extended the lease, which expired on February 28, 2025 .

On February 1, 2025, the Company entered into an office lease in Mooresville, North Carolina.

The Company leases 5,240 square feet and the net monthly payment is $ 9,105 .

The lease expires January 31, 2028 and the monthly payment increases 3 % on February 1, 2026 and each year thereafter.

There is no option to extend the lease.

The Company has entered into operating leases for office and development facilities for three to four years and may include an option to renew.

The Company determines whether an arrangement is or contains a lease based upon the unique facts and circumstances at the inception of the lease.

Operating lease liabilities and their corresponding right-of-use assets are recorded based upon the present value of the lease payments over the expected lease term.

As of September 30, 2024 and December 31, 2023, total operating lease liabilities was $ 986,053 and $ 1,118,578 , respectively.

Right of use assets was $ 929,890 and $ 1,104,804 at September 30, 2024 and December 31, 2023, respectively.

Current lease liabilities were $ 267,660 and $ 174,876 at September 30, 2024 and December 31, 2023, respectively.

In the three months ended September 30, 2024 and 2023, the Company recognized $ 88,428 and $ 162,414 in total lease costs for the leases, respectively.

In the nine months ended September 30, 2024 and 2023, the Company recognized $ 265,283 and $ 487,242 in total lease costs for the leases, respectively.

As of March 31, 2025 and December 31, 2024, total operating lease liabilities were $ 1,164,292 and $ 943,703 , respectively.

Right of use assets was $ 1,102,967 and $ 882,024 at March 31, 2025 and December 31, 2024, respectively.

Current lease liabilities were $ 405,917 and $ 305,178 at March 31, 2025 and December 31, 2024, respectively.

In the three months ended March 31, 2025 and 2024, the Company recognized $ 102,417 and $ 98,943 in total lease costs for the leases, respectively.

Because the rate implicit in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the lease payments.

The weighted average remaining lease term for the operating leases was thirty seven months at September 30, 2024 and the weighted average discount rate was 7 %.

The minimum future lease payments as of September 30, 2024 are as follows:

Years Ended September 30,

The weighted average remaining lease term for the operating leases was thirty two months at March 31, 2025 and the weighted average discount rate was 7 %.

The minimum future lease payments as of March 31, 2025 are as follows:

Years Ended March 31,

Total remaining payments

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Employment Agreement

On March 1, 2024, the Company entered into an employment agreement with Mark E.

Scott, the Company’s Chief Financial Officer, which provides for a base salary of $ 250,000 annually.

Scott is also eligible to participate in annual performance-based bonus programs established by the board or compensation committee, subject to the achievement of applicable performance criteria established by the board or compensation committee, which shall be determined in good faith by the board or compensation committee.

Scott was also granted options to purchase up to twenty five thousand (25,000) shares of common stock with an exercise price equal to $ 1.49 , which options vested in full on the date of issuance.

The Company recorded a provision for income taxes of $ 0 for the nine months ended September 30, 2024 and 2023.

The Company’s effective tax rate was 0 % for the nine months ended September 30, 2024 and 2023.

The difference between the effective tax rate and the federal statutory tax rate for the nine months ended September 30, 2024 and 2023 primarily related to the valuation allowance on the Company’s deferred tax assets.

On March 4, 2025, the Company entered into an employment agreement with Paul Allen to serve as President.

The employment agreement provides for a base salary of $ 350,000 .

The term of the employment agreement is for a period of three years, which will be automatically extended for additional one-year periods unless either party gives the other party written notice of such party’s decision not to renew the term at least 90 days prior to the end of the initial three-year term or any renewal term.

Allen is also eligible to participate in annual performance-based bonus programs established from time to time by the Company’s Board, subject to the achievement by Mr.

Allen and the Company of the applicable performance criteria set forth in the employment agreement and established for Mr.

Allen by the Board.

The employment agreement is terminable by either party at any time.

In the event of termination by us without cause or by Mr.

Allen for good reason, as those terms are defined in the employment agreement, he is entitled to three months’ severance.

In connection with entering into the employment agreement, Mr.

Allen was granted ten-year options under our 2023 Plan to purchase 100,000 shares of common stock, which options vest immediately, at an exercise price equal to $ 3.27 , being the fair market value on the date of grant.

The total stock compensation expense related to this grant was approximately $ 131,000 .

Allen was also granted ten-year options under the Plan to purchase 300,000 shares of common stock, which options vest quarterly over four years, at an exercise price equal to $3.27 , being the fair market value on the date of grant.

The Company recorded a provision for income taxes of $ 0 for the three months ended March 31, 2025 and 2024.

The Company’s effective tax rate was 0 % for the three months ended March 31, 2025 and 2024.

The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2025 and 2024 primarily related to the valuation allowance on the Company’s deferred tax assets.

For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes.

1 unchanged sentence

The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

As of September 30, 2024 and December 31, 2023, the Company retains a full valuation allowance on its deferred tax assets.

As of March 31, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods.

The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income.

Reverse Recapitalization

On December 21, 2023, the Company completed the merger and received net proceeds of $ 2.8 million, net of transaction costs of $ 6.6 million.

The merger was accounted for as a reverse recapitalization in accordance with GAAP.

Under this method of accounting, BYTS, who was the legal acquirer, was treated as the “acquired” company for accounting purposes and Airship AI was treated as the accounting acquirer.

Accordingly, the merger was treated as the equivalent of Airship AI issuing shares at the closing of the merger for the net assets of BYTS as of the closing date, accompanied by a recapitalization.

The net assets of BYTS was stated at historical cost, with no goodwill or other intangible assets recorded.

Airship AI was determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

Airship AI’s stockholders have the majority voting interest in the combined company;

The board of the post-merger company is composed of one (1) director designated by BYTS and four (4) directors designated by Airship AI;

Airship AI’s senior management is the senior management of the post-merger company;

The business of Airship AI comprises the ongoing operations of post-merger company;

Airship AI is the larger entity, in terms of substantive assets.

The table below summarizes the shares of common stock issued immediately after the closing of the merger as well as the impact on the consolidated statement of stockholders’ equity as of December 21, 2023:

Paid in Capital

SPAC Financing

Transaction expenses (1)

( 6,651,674 )

Earnout liability

( 4,470,918 )

( 22,638,859 )

Warrants liability

( 2,009,105 )

Reverse capitalization on December 21, 2023 (1)

$ ( 4,816,511 )

$ ( 23,533,521 )

Adjusted for correction of transaction expense discussed below.

Immaterial Revision of Prior Period Financial Information

In connection with the preparation of its consolidated financial statements, the Company identified an immaterial error related to the classification of prepaid expenses and transaction expenses (classified in accumulated deficit as reverse recapitalization).

In accordance with SAB No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in the Current Year Financial Statements,” the Company evaluated the error and determined that the impact was not material to its financial statements for the prior annual and current interim period, accordingly the Company revised the prior period financial information for comparative purposes.

The revision does not impact the consolidated statements of operations and comprehensive loss.

A summary of the revision to the Company’s previously reported consolidated balance sheets is included below for comparative purposes:

As of December 31, 2023

Prepaid expenses and other

Total current assets

Accumulated deficit

Total stockholders' deficit

The revision had no impact to cash provided by operating activities in such period.

Private Placement and Public Warrants

Warrant Liability

At the Merger closing, the Company assumed 515,000 private placement warrants and 16,184,612 public warrants.

On June 3, 2024, the Company permanently reduced the exercise price of such warrants from $ 11.50 per share to an exercise price of $ 7.80 per share.

On November 20, 2024, the Company further reduced the exercise price of the outstanding public warrants and private warrants to an exercise price of $ 4.50 per share.

The purpose of this reduced exercise price was to potentially raise proceeds received from the exercise of such warrants, if any, for working capital and general corporate purposes.

As of September 30, 2024, there were 515,000 private placement warrants and 16,159,012 public warrants outstanding.

Details on the warrants were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and filed with the SEC on April 1, 2024.

Details on the warrant liability were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the SEC on February 28, 2025.

The public warrants will expire on December 21, 2028.

The following table is a summary of the number of shares of the Company’s common stock issuable upon exercise of the public and private warrants outstanding as of September 30, 2024:

The following table is a summary of the number of shares of the Company’s common stock issuable upon exercise of the public and private warrants outstanding as of March 31, 2025 and December 31, 2024:

March 31, 2025

Number of Shares

5 unchanged sentences

December 21, 2028

December 31, 2024

Number of Shares

Exercise Price

Expiration Date

Public Warrants

December 21, 2028

Private Warrants

December 21, 2028

Earnout Liability

At the closing of the merger, the Airship AI securityholders that hold shares of common stock of Airship AI, Airship AI options, Airship AI earnout warrants or Airship AI SARs have the contingent right to receive up to 5,000,000 earnout shares of the Company’s common stock if the following earnout milestones are met.

25% of the earnout shares if, for the period starting on the closing date and ending on the last day of the full calendar quarter immediately following the first anniversary of the closing date, (1) company revenue (as defined in the merger agreement) is at least $39 million, or (2) the aggregate value of new contract awards with federal law enforcement agencies has grown by at least 100% as compared to the year-over-year amount for the twelve-month period ending on the date of the merger agreement (the “First Operating Performance Milestone”) ;

75% of the earnout shares if, for the period starting on the closing date and ending on the last day of the full calendar quarter immediately following the third anniversary of the closing date, company revenue is at least $100 million ;

50% of the earnout shares if, at any time during the period starting on the closing date and ending on the fifth anniversary of the closing date, over any twenty (20) trading days within any thirty (30) trading day period the volume weighted average price (“VWAP”) of the common stock is greater than or equal to $12.50 per share;

50% of the earnout shares if, at any time during the period starting on the closing date and ending on the fifth anniversary of the closing date, over any twenty (20) trading days within any thirty (30) trading day period the VWAP of the common stock is greater than or equal to $15.00 per share .

Any earnout shares issuable under the merger agreement to a Airship AI securityholder in respect of each Airship AI option or Airship AI SAR held by such holder as of immediately prior to the effective time of the merger shall be earned by such holder on the later of (i) the occurrence of the applicable earnout milestone, and (ii) the date on which the option in respect of such Airship AI option or SAR in respect of such Airship AI SAR, as applicable, becomes vested pursuant to its applicable vesting schedule, but only if such holder continues to provide services (whether as an employee, director or individual independent contractor) to the Company or one of its subsidiaries through such date.

Notwithstanding the foregoing, any earnout shares that are not earned by Airship AI securityholder in respect of its options or SARs on or before the fifth anniversary of the closing date of the merger shall be forfeited without any consideration.

Any earnout shares that are forfeited pursuant to the merger agreement shall be reallocated to the other Airship AI securityholders who remain entitled to receive earnout shares in accordance with their respective earnout pro rata shares.

These earnout shares have been categorized into two components:

(i) the “Vested Shares” - those associated with earnout holders with vested equity at the closing of the merger that will be earned upon achievement of the earnout milestones and (ii) the “Unvested Shares” - those associated with earnout holders with unvested equity at the closing of the merger that will be earned over the remaining service period with the Company on their unvested equity shares and upon achievement of the earnout milestones.

The Vested Shares, which represent 95% of the total earnout shares are classified as liabilities in the consolidated balance sheet at fair value with changes in fair value recognized in the consolidated statements of operations due to the variability in the number of earnout shares at settlement which could change upon a change of control event.

The earnout arrangement contains a settlement provision that violates the indexation guidance under ASC 815-40.

The Unvested Shares are equity-classified share-based compensation to be recognized over time under ASC 718 due to the service component.

At the closing of the merger on December 21, 2023, the earnout liability had an initial fair value of $ 27,109,777 , which was recorded as a long-term liability and a reduction to additional paid in capital in the consolidated balance sheet.

As of December 31, 2023, the earnout liability had decreased to $ 5,133,428 as a result of the decline in the Company’s share price since the closing of the merger.

As of September 30, 2024, the estimated fair value of the earnout liability increased to $ 6,229,390 primarily due to the increase in the Company’s share price, which resulted in a gain (loss) due to the change in fair value of the earnout liability during the three and nine months ended September 30, 2024 of $ 5,511,961 and $( 1,095,962 ), respectively, and is recorded on the consolidated statements of operations and comprehensive loss.

See Note 14– Fair Value Measurements for more information.

At the closing of the Merger, the Airship AI securityholders that hold shares of common stock of Airship AI, Airship AI options, Airship AI earnout warrants or Airship AI SARs had the contingent right to receive up to 5,000,000 earnout shares of the Company’s common stock if certain earnout milestones are met.

Refer to the Company’s annual report on Form 10-K filed with the SEC on February 28, 2025 for more information.

As of March 31, 2025, the estimated fair value of the earnout liability decreased to $ 8,199,079 primarily due to the common stock issued to settle approximately $ 5.3 million of earnout liability that was previously achieved plus the decrease in the Company’s share price, which resulted in a gain due to the change in fair value of the earnout liability during the three months ended March 31, 2025 of approximately $ 9.8 million and is recorded on the consolidated statements of operations and comprehensive income (loss).

In addition, a portion of the earnout shares may be issued to individuals with unvested equity awards.

1 unchanged sentence

As a result, these unvested earn-out shares are equity-classified awards and have an aggregated grant date fair value of $ 2,675,223 (or $5.96 per share).

During the three and nine months ended September 30, 2024, the Company stock-based compensation expense for the vesting of earnout shares was $ 133,761 and $ 401,283 , respectively.

As of September 30, 2024, unrecognized compensation cost related to unvested earnout shares totaled $ 2,273,941 .

The weighted average period over which this remaining compensation cost is expected to be recognized is 4.25 years.

As of September 30, 2024, the Company determined the First Operating Performance Milestone (A,2) is achieved and 1,250,000 shares are to be issued to applicable personnel in early January 2025.

The fair value of the 1,250,000 vested shares as of September 30, 2024 of $ 2,875,000 was determined using the Company’s closing trading price on September 30, 2024 and is included in the earnout liability on the consolidated balance sheet.

The vested earnout shares are considered a level 1 fair value instrument.

As of September 30, 2024, the Company determined the first operating performance milestone was achieved resulting in the vesting of 1,250,000 earnout shares, of which 1,160,906 shares of the Company’s common stock were issued to applicable personnel on January 7, 2025.

The fair value of the 1,160,906 vested shares on the issuance date of $ 5,282,008 was determined using the Company’s closing trading price on January 7, 2025 and was reclassified from earnout liability to equity as additional paid in capital on the consolidated balance sheet.

The remaining 89,094 shares that vested as of September 30, 2024 will continue to be valued on a recurring basis as a Level 1 instrument until issued.

The remaining unvested earnout shares continue to be accounted for as liabilities until their respective triggering event occurs.

Fair Value Measurements

The following table sets forth by level within the ASC 820, Fair Value Measurement, fair value hierarchy of the Company’s liabilities that are measured at fair value on a recurring basis as of September 30, 2024:

September 30, 2024

March 31, 2025

Earnout liability

Senior Secured Convertible Promissory Notes

Warrant liability (Public Warrants)

4 unchanged sentences

Earnout liability

Senior Secured Convertible Promissory Notes

Warrant liability (Public Warrants)

2 unchanged sentences

The estimated fair value of the earnout liability was determined using a Monte Carlo Model.

The assumptions utilized in the calculation are based on the achievement of certain stock price milestones including projected stock price, volatility, probability of meeting the federal law enforcement agency growth and risk-free rate.

The assumptions utilized in the calculation are based on the achievement of certain milestones including projected stock price, volatility, probability of meeting the federal law enforcement agency growth and risk-free rate.

The following assumptions were used in the simulation at each valuation date:

September 30,

March 31, 2025

March 31, 2024

Risk-free interest rate

2 unchanged sentences

Dividend yield

The assumptions also included the probability of meeting the federal law enforcement agency growth milestone at 100%.

The fair value of the 1,250,000 vested shares as of September 30, 2024 of $ 2,875,000 was determined using the Company’s closing trading price on September 30, 2024.

The fair value of the 1,250,000 vested shares as of December 31, 2024 of $ 7,825,000 was determined using the Company’s closing trading price on December 31, 2024.

On January 7, 2025, 1,160,906 shares were issued with a fair value of $ 5,282,125 to applicable personnel and were reclassified to equity as additional paid in capital.

The fair value of the remaining 89,094 shares that vested as of September 30, 2024 was determined using the Company’s closing stock price on March 31, 2025.

The initial estimated fair value of the private warrants was measured using a Monte Carlo simulation.

The estimated fair value of the public warrants is based on the listed price in an active market for such warrants and the fair value of the private placement warrants continues to be measured based on the public warrants listed price.

The estimated fair value of the senior secured convertible promissory notes was measured using a Monte Carlo simulation pricing model that factors in potential outcomes being consummated, such as the convertible notes being repaid in cash and the convertible notes being converted to common stock.

All of these scenarios take into consideration the terms and conditions of the underlying convertible notes plus potential changes in the underlying value of the common stock.

The following assumptions were used in the simulation:

September 30,

Effective discount rate

Expected term (in years)

Expected volatility

Dividend yield

On September 13, 2024, the vested earnout shares were transferred from Level 3 to Level 1 upon the Board approval of the achievement of the First Operating Performance Milestone (A,2).

The fair value on the day of transfer was $3,400,000.

There were no transfers of financial instruments between valuation levels during the year ended December 31, 2023.

The changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2024 were as follows:

Beginning Balance

Unrealized and

Conversions /

Transfers out

Ending Balance as of

January 1, 2024

Realized Loss

Settlements (a)

September 30, 2024

Earnout liability

$ ( 3,400,000 )

Senior Secured Convertible Promissory Notes

( 1,767,233 )

$ ( 1,767,233 )

$ ( 3,400,000 )

(a) The conversions and settlements represent the fair value of the Senior Secured Convertible Promissory Notes at the dates of conversion.

There were no transfers of financial instruments between valuation levels during the three months ended March 31, 2025 and 2024.

Earnings per Share

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders:

September 30, 2024,

September 30, 2023,

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

March 31, 2025

March 31, 2024

Net income (loss)

$ ( 31,964,469 )

$ ( 1,666,607 )

$ ( 6,482,062 )

interest expense and gain on remeasurement of

convertible debt

Net income (loss) - Diluted

$ ( 7,288,520 )

$ ( 1,666,607 )

$ ( 6,482,062 )

Weighted average shares outstanding-

dilutive effect of convertible debt, stock options, SARs, vested earnout shares and warrants

dilutive effect of stock options, SARs, vested earnout shares and Airship warrants

Income (loss) per share-

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive:

September 30,

March 31, 2025

March 31, 2024

Public Warrants

Private Warrants

Convertible debt

Outstanding stock options

The 3,750,000 remaining unvested earnout shares as of September 30, 2024 are excluded from basic and diluted net loss per share as such shares are contingently issuable until the Company exceeds certain milestone thresholds that have not been achieved.

The 1,250,000 vested earnout shares are included in the diluted earnings per share calculation for the three-month period ended September 30, 2024 and will be issued to applicable personnel in early January 2025.

As a result of the merger, the weighted-average number of shares of common stock used in the calculation of net income (loss) per share have been retroactively converted by applying the conversion ratio.

The 3,750,000 remaining unvested earnout shares as of March 31, 2025 are excluded from basic and diluted net loss per share as such shares are contingently issuable until the Company exceeds certain milestone thresholds that have not been achieved.

Subsequent Events

The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued.

Subsequent to September 30, 2024, there were the following material transaction that occurred that would require recognition or disclosure in the financial statements:

On November 11, 2024, the Company issued 109,881 shares of common stock related to the conversion of the Platinum convertible note.

This issuance was made pursuant to the exemption from registration under the Securities Act in reliance on Section 4(a)(2).

On November 13, 2024, the Company issued 219,763 shares of common stock related to the conversion of the Platinum convertible note.

This issuance was made pursuant to the exemption from registration under the Securities Act in reliance on Section 4(a)(2).

Subsequent to March 31, 2025, there were no material transaction that occurred that would require recognition or disclosure in the financial statements.

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