What changed in this filing

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Item 1. Financial Statements

2026-05-08 compared with 2025-11-14 · 182 added, 269 removed, 460 unchanged (50% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2025 and December 31, 2024

September 30, 2025

As of March 31, 2026 and December 31, 2025

March 31, 2026

December 31, 2025 (1)

8 unchanged sentences

Accounts payable - trade

Advances from founders

Accrued expenses

10 unchanged sentences

STOCKHOLDERS' DEFICIT:

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 32,013,300 and 30,588,413 shares issued and outstanding as of September 30, 2025 and December 31, 2024

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2026 and December 31, 2025

Common stock - $0.0001 par value, 200,000,000 shares authorized, 34,412,064 and 34,368,162 shares issued and outstanding as of March 31, 2026 and December 31, 2025

Additional paid in capital

10 unchanged sentences

AIRSHIP AI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the three and nine months ended September 30, 2025 and 2024

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the three months ended March 31, 2026 and 2025

Three Months Ended

Nine Months Ended

September 30, 2025

September 30, 2024

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

NET REVENUES:

11 unchanged sentences

( 1,714,357 )

( 6,603,019 )

( 2,013,702 )

OTHER INCOME (EXPENSE) :

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

( 1,095,962 )

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

( 2,833,558 )

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

Loss on note conversion

Interest income (expense), net

Other expense

Total other income (expense), net

( 5,274,818 )

INCOME (LOSS) BEFORE PROVISON FOR INCOME TAXES

( 7,288,520 )

(Loss) gain from change in fair value of earnout liability

Gain from change in fair value of warrant liability

Interest income, net

Total other income, net

(LOSS) INCOME BEFORE PROVISON FOR INCOME TAXES

Provision for income taxes

NET INCOME (LOSS)

( 7,288,520 )

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency income (loss), net

TOTAL COMPREHENSIVE INCOME (LOSS)

NET (LOSS) INCOME

OTHER COMPREHENSIVE (LOSS)

Foreign currency (loss), net

TOTAL COMPREHENSIVE (LOSS) INCOME

$ ( 728,896 )

NET INCOME (LOSS) PER SHARE:

NET (LOSS) INCOME PER SHARE:

Weighted average shares of common stock outstanding

9 unchanged sentences

Stock-based compensation

Issuance of common stock for prior period services

Issuance of common stock for conversion of debt

Issuance of common stock for exercise of warrants

Foreign currency translation gain

( 31,964,469 )

Balance as of March 31, 2024

( 49,441,169 )

( 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

( 30,979,174 )

( 27,966,537 )

Stock-based compensation

Stock based compensation- 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

$ ( 24,765,218 )

$ ( 12,920,583 )

Balance as of January 1, 2025

( 74,941,590 )

( 53,023,137 )

Stock-based compensation

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

Issuance of common stock for earnout shares

3 unchanged sentences

( 23,509,549 )

Stock-based compensation

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

( 23,757,051 )

Balance as of June 30, 2025

Balance as of January 1, 2026

( 45,620,227 )

3 unchanged sentences

Issuance of common stock for stock options exercise

Balance as of September 30, 2025

Foreign currency translation loss

Balance as of March 31, 2026

$ ( 46,340,831 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the nine months ended September 30, 2025 and 2024

Nine Months Ended

September 30, 2025

September 30, 2024

For the three months ended March 31, 2026 and 2025

Three Months Ended

March 31, 2026

March 31, 2025

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

Net (loss) income

$ ( 720,604 )

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

Depreciation and amortization

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

Stock-based compensation

Amortization of operating lease right of use asset

Issuance of common stock for services

Noncash interest expense

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

(Gain) from change in fair value of warrant liability

( 1,499,402 )

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

( 15,521,183 )

Loss from change in fair value of convertible note

Loss on note conversion

Loss (gain) from change in fair value of earnout liability

( 9,823,605 )

Changes in operating assets and liabilities:

Accounts receivable

( 1,555,893 )

Prepaid expenses and other

Operating lease liability

Payroll and income tax receivable

Accounts payable - trade and accrued expenses

( 2,261,087 )

Deferred revenue

( 2,058,893 )

NET CASH USED IN OPERATING ACTIVITIES

( 4,502,421 )

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

( 2,097,844 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Issuance of common stock and warrants for offering, net

Proceeds from warrant exercise, net

Repayment of advances from founders

( 1,300,000 )

Proceeds from stock option exercises

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

( 1,149,339 )

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

( 2,595,243 )

5 unchanged sentences

Noncash investing and financing

Issuance of common stock for debt conversion

Issuance of common stock for debt interest payment

Issuance of common stock for earnout shares

27 unchanged sentences

Liability as of

September 30, 2025

March 31, 2026

December 31, 2025

3 unchanged sentences

Total liabilities measured at fair value

Other income related to instruments recorded at fair value during the three months ended March 31, 2026 and 2025

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 six employees as of September 30, 2025.

The Company employed sixty five employees as of March 31, 2026.

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 nine research and development personnel in Taiwan as of September 30, 2025.

The Company employed nine research and development personnel in Taiwan as of March 31, 2026.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

Intercompany accounts and transactions have been eliminated.

5 unchanged sentences

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, 2025.

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 Company believes that all necessary adjustments, which consisted only of normal recurring items, have been included in the accompanying condensed 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, 2026.

25 unchanged sentences

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 and nine months ended September 30, 2025 and 2024, the Company did not incur any significant warranty expenses and as such a warranty reserve was not considered necessary as of September 30, 2025 and December 31, 2024.

For the three months ended March 31, 2026 and 2025, the Company did not incur any significant warranty expenses and as such a warranty reserve was not considered necessary as of March 31, 2026 and December 31, 2025.

Product Revenue

7 unchanged sentences

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, 2025 and 2024, the Company recognized revenue of $ 230,991 and $ 95,120 , respectively, related to one-year support contracts.

For the three months ended September 30, 2025 and 2024, the Company recognized revenue of $ 725,051 and $ 1,042,008 , respectively, related to multi-year support contracts.

For the nine months ended September 30, 2025 and 2024, the Company recognized revenue of $ 902,257 and $ 234,717 , respectively, related to one-year support contracts.

For the nine months ended September 30, 2025 and 2024, the Company recognized revenue of $ 2,882,732 and $ 3,083,464 , respectively, related to multi-year support contracts.

For the three months ended March 31, 2026 and 2025, the Company recognized revenue of $ 494,063 and $ 101,599 , respectively, related to one-year support contracts.

For the three months ended March 31, 2026 and 2025, the Company recognized revenue of $ 1,887,275 and $ 896,452 , respectively, related to multi-year support contracts.

Contracts with Multiple Performance Obligations

17 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 $ 4,652,485 and $ 2,749,263 as of September 30, 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 $ 6,190,333 as of January 1, 2025, the Company recognized $ 727,659 and $ 2,580,131 during the three and nine months ended September 30, 2025.

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

The Company’s short-term and long-term deferred revenue balances totaled $ 5,488,260 and $ 3,638,801 , respectively, as of March 31, 2026.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,668,105 and $ 3,966,407 , respectively, as of December 31, 2025.

Of the deferred revenue balance of $ 8,634,512 and $ 6,190,333 as of January 1, 2026 and 2025, the Company recognized approximately $ 1,307,074 and $ 985,548 during the three months ended March 31, 2026 and 2025, respectively.

Accounts Receivable and Provision for Credit Losses

7 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, 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 September 30, 2025, December 31, 2024 and January 1, 2024 were $ 1,247,321 , $ 1,226,757 and $ 1,648,904 , respectively.

As of March 31, 2026 and December 31, 2025, the Company did not have a reserve for credit losses as all accounts receivable are considered collectible.

Accounts receivable balances as of March 31, 2026, December 31, 2025 and January 1, 2025 were $ 5,379,360 , $ 6,462,675 and $ 1,226,757 , 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, 2025, the Company had revenue from eighty nine customers and two customers represented 68 % of total revenue.

The primary reason for the high level of customer concentration for the nine months ended September 30, 2025 was due to reliance on these two customers for the nine months ended September 30, 2025.

As of September 30, 2025, one customer represents approximately 73 % of outstanding account receivables.

For the three months ended March 31, 2026, the Company had revenue from forty eight customers and five customers represented 92 % of total revenue.

The primary reason for the high level of customer concentration for the three months ended March 31, 2026 was due to reliance on three customers for the three months ended March 31, 2026.

As of March 31, 2026, three customers represent approximately 88 % 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, 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 customers 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, 2025.

As of March 31, 2025, two customers represented approximately 94 % 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, 2025 and December 31, 2024, it had no inventory in stock.

The Company holds inventory for a short period of time and as of March 31, 2026 and 2025, 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 no impairment losses for the three and nine months ended September 30, 2025 and 2024.

The Company recorded no impairment losses for the three months ended March 31, 2026 and 2025.

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 $ 753,229 and $ 1,073,735 for the three months ended September 30, 2025 and 2024, respectively, on development activities.

The Company incurred research and development expenses of $ 2,213,182 and $ 2,471,872 for the nine months ended September 30, 2025 and 2024, respectively, on development activities.

The Company incurred research and development expenses of $ 843,696 and $ 719,382 for the three months ended March 31, 2026 and 2025, 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, 2025 and December 31, 2024.

No software development costs have been capitalized as of March 31, 2026 and December 31, 2025.

Cost of Net Revenues

3 unchanged sentences

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

Advertising and marketing costs for the three months ended September 30, 2025 and 2024 were $ 27,002 and $ 41,107 , respectively.

Advertising and marketing costs for the nine months ended September 30, 2025 and 2024 were $ 251,918 and $ 130,428 , respectively.

Advertising and marketing costs for the three months ended March 31, 2026 and 2025 were $ 61,711 and $ 169,221 , 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 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 Company initially recorded its 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 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 September 30, 2025 and December 31, 2024 are based upon the short-term nature of the assets and liabilities.

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, 2026 and December 31, 2025 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).

5 unchanged sentences

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

As of September 30, 2025, there were 515,000 private placement warrants and 16,145,108 public warrants outstanding.

As of March 31, 2026, there were 515,000 private placement warrants and 16,145,006 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.

10 unchanged sentences

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 nine months ended September 30, 2025 and 2024, the Company stock-based compensation expense for the vesting of earnout shares was $ 401,283 .

As of September 30, 2025, unrecognized compensation cost related to unvested earnout shares totaled $ 1,738,897 .

During the three months ended March 31, 2026 and 2025, the Company’s stock-based compensation expense for the vesting of earnout shares was $ 133,761 .

As of March 31, 2026, unrecognized compensation cost related to unvested earnout shares totaled $ 1,471,375 .

The weighted average period over which this remaining compensation cost is expected to be recognized is 2.75 years.

6 unchanged sentences

Income taxes are accounted for using the liability method.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carry forwards.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between financial statements carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss and tax credit carry forwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled.

2 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 (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 gain of $ 0 and $ 354 , respectively, related to foreign exchange translation for the three months ended September 30, 2025 and 2024, respectively.

There was other comprehensive loss of $ 7,409 and a gain of $ 9,338 related foreign exchange translation for the nine months ended September 30, 2025 and 2024, respectively.

Comprehensive (Loss)

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

There was other comprehensive (loss) of ($ 8,292 ) and ($ 7,409 ), respectively, related to foreign exchange translation for the three months ended March 31, 2026 and 2025, respectively.

Going Concern Assessment

2 unchanged sentences

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 2025, the Company analyzed its cash requirements and operations at least through November 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.

In May 2026, the Company analyzed its cash requirements and operations at least through May 2027 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

1 unchanged sentence

Actual results could differ from those estimates.

Significant estimates and assumptions included in the Company’s consolidated financial statements relate to the calculation of revenue recognition, stock-based compensation, valuation of common stock, valuation of senior secured convertible notes, warrant liability, earnout share liabilities, accruals for potential liabilities including income taxes, valuation of deferred tax assets and valuation assumptions related to share-based compensation.

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, 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.

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

Significant estimates and assumptions included in the Company’s consolidated financial statements relate to the calculation of revenue recognition, stock-based compensation, valuation of common stock, warrant liability, earnout share liabilities, accruals for potential liabilities including income taxes, valuation of deferred tax assets and valuation assumptions related to share-based compensation.

(Loss) Income Per Share

Basic (loss) income per share is based upon the net (loss) income for the three months ended March 31, 2026 and 2025 divided by the weighted average shares of common stock outstanding.

Diluted net (loss) 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.

Common stock equivalents for the three months ended March 31, 2026 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 12—Earnings per share.

8 unchanged sentences

All recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Advances due to and from Founders

Advances due to Founders

As of January 1, 2024, advances due to founders totaled $ 1,750,000 .

During 2024, Mr.

Huang and Mr.

Xu (founders and officers) 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 were repaid $ 650,000 each, with $ 0 recorded as advances from founders as of September 30, 2025.

The outstanding advances as of December 31, 2024 were non-interest bearing and the Company paid the balance off as of September 30, 2025.

Disaggregation of Revenue

The Company’s net revenues for the three months ended September 30, 2025 and 2024 consisted of approximately $ 0.2 million and $ 1.7 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time.

The Company’s net revenues for the nine months ended September 30, 2025 and 2024 consisted of approximately $ 5.0 million and $ 16.5 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 three months ended September 30, 2025 and 2024 of approximately $ 1.0 million and $ 1.1 million, respectively relates to PCS revenue and other services which are transferred over time.

The Company’s remaining net revenue for the nine months ended September 30, 2025 and 2024 of approximately $ 3.8 million and $ 3.3 million, respectively, relates to PCS revenue and other services which are transferred over time.

The Company’s net revenues for the three months ended March 31, 2026 and 2025 consisted of approximately $ 3.9 million and $ 4.5 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 three months ended March 31, 2026 and 2025 of approximately $ 2.4 million and $ 1.0 million, respectively, 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.

3 unchanged sentences

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

As of September 30, 2025 and December 31, 2024, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,652,485 and $ 2,749,263 as of September 30, 2025.

As of March 31, 2026 and December 31, 2025, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 5,488,260 and $ 3,638,801 as of March 31, 2026.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,668,105 and $ 3,966,407 as of December 31, 2025.

Remaining Performance Obligations

As of September 30, 2025 and December 31, 2024, the Company had approximately $ 7.4 million and $ 6.2 million of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

As of March 31, 2026 and December 31, 2025, the Company had approximately $ 9.1 million and $ 8.6 million, respectively, of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

The Company expects to recognize approximately 60 % of its remaining performance obligations as revenue in fiscal 2026 and the remaining 40 % in fiscal 2027 and years thereafter.

3 unchanged sentences

Other costs of contract fulfillment such as software maintenance are expensed in the period incurred and align with when the revenue is amortized.

Notes Payable and Convertible Notes Payable

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

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.

At the option of the holders, the notes were convertible into cash, common stock or a combination of cash and stock.

On March 5, 2024, the two private investors converted the notes with a face value of $ 600,000 and interest into 169,204 shares of the Company’s common stock valued at $ 835,610 .

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 recorded an unrealized loss due to the increase in the fair value of the convertible notes payable totaling $ 141,636 .

Stockholders’ Deficit

3 unchanged sentences

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, 2025 and filed with the SEC on February 17, 2026.

As of September 30, 2025 and December 31, 2024, there were 32,013,300 and 30,588,413 shares of common stock outstanding, respectively.

Nine months Ended September 30, 2025

During the nine months ended September 30, 2025, the Company had the following issuances of equity securities:

Preferred Stock

As of March 31, 2026 and December 31, 2025, there were no shares of preferred stock outstanding.

As of March 31, 2026 and December 31, 2025, there were 34,412,064 and 34,368,162 shares of common stock outstanding, respectively.

Three months Ended March 31, 2026

During the three months ended March 31, 2026, the Company had the following issuances of equity securities:

During the three months ended March 31, 2026, investors exercised warrants for 2 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 9 .

During the three months ended March 31, 2026, the Company issued an aggregate of 43,900 shares of common stock and received $ 11,351 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 1.64 per share.

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 nine months ended September 30, 2025, investors exercised warrants for 13,302 shares of the Company’s common stock at $4.50 per share, and the Company received proceeds of $59,850.

During the nine months ended September 30, 2025, the Company issued an aggregate of 250,679 shares of common stock and received $ 90,811 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 2.95 per share.

2023 Equity Incentive Plan

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 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 aggregate number of shares of common stock reserved for grant and issuance under the 2023 Plan is 3,240,949 as of September 30, 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 Amended and Restated Equity Incentive Plan

On December 4, 2023, the Company adopted the Airship AI Holdings, Inc.

2023 Equity Incentive Plan, which plan was approved by stockholders at the extraordinary general meeting held on December 19, 2023 in connection with the Merger.

On October 15, 2025, the Company adopted the Airship AI Holdings, Inc.

2023 Amended and Restated Equity Incentive Plan (the “Equity Incentive Plan”), which increased the number of shares of common stock authorized for issuance pursuant to awards granted thereunder by 2,000,000 shares.

The Equity Incentive Plan was approved by the Company’s stockholders at its annual meeting held on December 11, 2025.

The aggregate number of shares of common stock issued under the Equity Incentive Plan is 6,942,880 .

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, 2023 and ending on (and including) January 1, 2032, in an amount equal to 2.0 % of the total number of shares of common stock outstanding on December 31 of the preceding year;

provided, however, that the Company’s Board of Directors may act prior to January 1 of a given year to provide that the increase for such year will be a lesser number of shares of common stock.

The aggregate number of shares of common stock reserved for grant and issuance under the 2023 Plan is 4,574,684 as of March 31, 2026.

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 requisite service period.

The Company had the following stock option activity during the nine months ended September 30, 2025:

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, 2026:

Weighted Average

1 unchanged sentence

Outstanding as of January 1, 2026

Outstanding as of September 30, 2025

During the nine months ended September 30, 2025, the Company granted stock options to nine employees and directors to purchase an aggregate of 825,000 shares of common stock with an exercise price of $ 3.75 and which vest primarily quarterly over four years and expire during 2035.

The following table summarizes information about stock options outstanding and exercisable as of September 30, 2025:

Outstanding as of March 31, 2026

During the three months ended March 31, 2026, the Company granted stock options to 6 employees to purchase an aggregate of 194,000 shares of common stock with an exercise price of $ 2.72 of which 109,000 vest quarterly over four years and 85,000 were vested immediately.

The 194,000 stock options granted expire during 2033.

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2026:

Remaining Life

5 unchanged sentences

and Exercisable

There were 5,994,380 options to purchase common stock at an average exercise price of $ 1.40 per share outstanding as of September 30, 2025 under the 2023 Plan.

The Company recorded $ 221,659 and $ 139,409 of compensation expense, net of related tax effects, relative to stock options for the three months ended September 30, 2025 and 2024, respectively, in accordance with ASC 718.

The Company recorded $ 765,764 and $ 420,824 of compensation expense, net of related tax effects, relative to stock options for the nine months ended September 30, 2025 and 2024, respectively, in accordance with ASC 718.

As of September 30, 2025, there were $ 2,879,281 of total unrecognized costs related to employee granted stock options that were not vested.

There were 6,942,880 options to purchase common stock at an average exercise price of $ 1.72 per share outstanding as of March 31, 2026 under the 2023 Plan.

The Company recorded $ 532,303 and $ 294,525 of compensation expense, net of related tax effects, relative to stock options for the three months ended March 31, 2026 and 2025, respectively, in accordance with ASC 718.

As of March 31, 2026, there were $ 3,580,721 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 years.

The significant weighted-average assumptions relating to the valuation of the Company’s stock option grants were as follows for the three months ended September 30, 2025:

Estimated stock price

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, 2026:

Exercise price

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Risk free interest rate

There were stock incentive plan awards outstanding at September 30, 2025 totaling 5,994,380 shares with an aggregate intrinsic value of $ 22,572,097 .

There were stock incentive plan awards outstanding at March 31, 2026 totaling 6,942,880 shares with an aggregate intrinsic value of $ 6,496,023 .

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 September 30, 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 September 30, 2025 or the year ended December 31, 2024.

As of March 31, 2026 and December 31, 2025, 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, 2026 or the year ended December 31, 2025.

Warrants to Purchase Common Stock

See Note 9 for public and private placement warrants assumed after the Merger.

The Company had the following warrant activity during the nine months ended September 30, 2025:

During the nine months ended September 30, 2025, investors exercised warrants for 13,302 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,850 .

Warrant activity for the nine months ended September 30, 2025 was as follows:

The Company had the following warrant activity during the three months ended March 31, 2026:

During the three months ended March 31, 2026, investors exercised warrants for 2 shares of the Company’s common stock and the Company received proceeds of $ 10 .

Warrant activity for the three months ended March 31, 2026 was as follows:

Outstanding January 1, 2025

Outstanding at September 30, 2025

A summary of the warrants outstanding as of September 30, 2025 were as follows:

( 2,175,564 )

Outstanding January 1, 2026

Outstanding at March 31, 2026

A summary of the warrants outstanding as of March 31, 2026 were as follows:

March 31, 2026

Life (In Years)

There were warrants outstanding at September 30, 2025 totaling 21,948,388 shares with an aggregate intrinsic value of $ 22,742,571 .

There were warrants outstanding at March 31, 2026 totaling 22,488,826 shares with an aggregate intrinsic value of $ 1,318,052 .

Earnout Liability

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

The Company expensed $ 27,354 and $ 52,456 of contributions during the three months ended September 30, 2025 and 2024, respectively.

The Company expensed $ 134,000 and $ 153,254 of contributions during the nine months ended September 30, 2025 and 2024, respectively.

The Company expensed $ 50,111 and $ 50,978 of contributions during the three months ended March 31, 2026 and 2025, respectively.

Related Party Transactions

Advances due to Founders

As of January 1, 2024, advances due to founders totaled $ 1,750,000 .

During 2024, Mr.

Huang and Mr.

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 were repaid $ 650,000 each, with $ 0 recorded as advances from founders as of September 30, 2025.

The outstanding advances as of December 31, 2024 were non-interest bearing and the Company paid the balance off as of September 30, 2025.

There are no related party transactions outside of the ordinary course of business.

Commitments, Contingencies and Legal Proceedings

6 unchanged sentences

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 and comprehensive income (loss).

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

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.

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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.

The monthly payment is $ 25,000 per month.

The lease expires October 31, 2027 and the monthly payment increases 3 % on July 31, 2024 and each year thereafter.

There is a one three year option to extend the lease based on the fair market rate on October 31, 2027, which the Company expects to exercise.

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 has entered into operating leases for office and development facilities for four years and include options 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, 2025 and December 31, 2024, total operating lease liabilities were $ 966,873 and $ 943,703 , respectively.

Right of use assets was $ 908,029 and $ 882,024 at September 30, 2025 and December 31, 2024, respectively.

Current lease liabilities were $ 427,498 and $ 305,178 at September 30, 2025 and December 31, 2024, respectively.

In the three months ended September 30, 2025 and 2024, the Company recognized $ 115,742 and $ 88,428 in total lease costs for the leases, respectively.

In the nine months ended September 30, 2025 and 2024, the Company recognized $ 333,902 and $ 265,283 in total lease costs for the leases, respectively.

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

As of March 31, 2026 and December 31, 2025, total operating lease liabilities were approximately $ 758,376 and $ 863,744 , respectively.

Right of use assets totaled approximately $ 705,564 and $ 807,915 as of March 31, 2026 and December 31, 2025, respectively.

In the three months ended March 31, 2026 and 2025, the Company recognized $ 116,162 and $ 102,417 in total lease costs for the leases, respectively.

Cash paid for amounts included in the measurement of lease liabilities were $ 119,177 and $ 102,771 , respectively, for the three months ended March 31, 2026 and 2025.

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 twenty nine months at September 30, 2025 and the weighted average discount rate was 7 %.

The minimum future lease payments as of September 30, 2025 are as follows:

Years Ended September 30,

The weighted average remaining lease term for the operating leases was twenty nine months at March 31, 2026.

The weighted average discount rate was 7 % as of March 31, 2026 and December 31, 2025.

The minimum future lease payments as of March 31, 2026 are as follows:

Years Ended March 31,

Total remaining payments

1 unchanged sentence

Total lease liability

The Company recorded a provision for income taxes of $ 0 for the nine months ended September 30, 2025 and 2024.

The Company’s effective tax rate was 0 % for the nine months ended September 30, 2025 and 2024.

The difference between the effective tax rate and the federal statutory tax rate for the nine months ended September 30, 2025 and 2024 primarily related to the valuation allowance on the Company’s deferred tax assets.

On September 7, 2023, the Company entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started August 1, 2024.

The monthly payment is currently approximately $ 29,600 per month.

The lease expires October 31, 2027 and the monthly payment increases 3 % on August 1, 2025 and each year thereafter.

There is a one three year option to extend the lease based on the fair market rate on October 31, 2027.

We do not believe that it is reasonably certain that the lease will be extended.

On December 6, 2024, the Company entered into two separate office leases in Mooresville, North Carolina, the terms of which commenced on February 1, 2025.

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

The leases expire 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 recorded a provision for income taxes of $ 0 for the three months ended March 31, 2026 and 2025.

The Company’s effective tax rate was 0 % for the three months ended March 31, 2026 and 2025.

The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2026 and 2025 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, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

As of March 31, 2026 and December 31, 2025, 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.

8 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.

On June 3, 2024, the Company 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.

2 unchanged sentences

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, 2025 and December 31, 2024:

September 30, 2025

As of March 31, 2026 and December 31, 2025, the Private and Public Warrants had an aggregate fair value of $ 11,828,604 and $ 13,328,006 , respectively.

The Company recorded a gain of $ 1,499,402 and $ 15,521,183 due to change in the fair value of the warrant liability during the three months ended March 31, 2026 and 2025, respectively.

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, 2026 and December 31, 2025, respectively:

March 31, 2026

Number of Shares

11 unchanged sentences

December 21, 2028

See Note 11 – Fair Value Measurements for more information.

Earnout Liability

1 unchanged sentence

Refer to the Company’s annual report on Form 10-K filed with the SEC on February 17, 2026 for more information.

As of September 30, 2025, the estimated fair value of the earnout liability decreased to $ 11,607,790 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 nine months ended September 30, 2025 of approximately $ 6.4 million and is recorded on the consolidated statements of operations and comprehensive income (loss).

As of March 31, 2026, the estimated fair value of the earnout liability increased to $ 3,347,120 primarily due to the increase in the volatility factor to 78.4 %, offset by a decrease in the Company’s share price, which resulted in a loss due to the change in fair value of the earnout liability during the three months ended March 31, 2026 of approximately $ 726,187 and is recorded on the consolidated statements of operations and comprehensive (loss) income.

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

6 unchanged sentences

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, 2025:

September 30, 2025

March 31, 2026

Earnout liability

11 unchanged sentences

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

September 30, 2025

March 31, 2026

December 31, 2025

5 unchanged sentences

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 September 30, 2025.

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, 2026.

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.

There were no transfers of financial instruments between valuation levels during the nine months ended September 30, 2025 and 2024.

There were no transfers of financial instruments between valuation levels during the three months ended March 31, 2026 and 2025.

Earnings per Share

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

September 30, 2025

September 30, 2024

Three Months Ended,

Nine Months Ended

Three Months Ended

Nine Months Ended

Net income (loss)

( 7,288,520 )

interest expense and remeasurement of convertible debt

Net income (loss) - Diluted

March 31, 2026

March 31, 2025

Net (loss) income

$ ( 720,604 )

Weighted average shares outstanding-

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

Income (loss) per share-

dilutive effect of stock options, SARs and warrants

(Loss) income 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, 2025

September 30, 2024

Anti-dilutive shares

March 31, 2026

March 31, 2025

Public Warrants

1 unchanged sentence

Outstanding stock options

The 3,750,000 remaining unvested earnout shares as of September 30, 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.

The 3,750,000 remaining unvested earnout shares as of March 31, 2026 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, 2025, there were no material transactions that occurred that would require recognition or disclosure in the financial statements.

Backlog as of October 6, 2025 was approximately $ 11 million, representing firm fixed price contracts awarded in the third quarter of 2025 that will be shipped and invoiced through the remainder of calendar year 2025 and early 2026.

Warrant Exercise

On October 8, 2025, the Company entered into warrant exercise inducement offer letter with the holder of its existing common stock warrants exercisable for an aggregate of 2,162,162 shares of its common stock to exercise its existing warrants at the existing exercise price of $ 4.50 per share, in exchange for the Company’s agreement to issue new common stock warrants to purchase 2,702,702 shares of common stock at an exercise price per share of $ 6.20 .

The aggregate gross proceeds from the exercise of the existing warrants were approximately $ 9,729,729 , before deducting financial advisory fees.

The Company intends to use the net proceeds from the exercise of the existing warrants for working capital and general corporate purposes.

The shares of common stock issuable upon exercise of the existing warrants are registered for issuance pursuant to a registration statement on Form S-3 (File No.

333-284462), which was declared effective by the SEC on January 31, 2025.

In consideration for the immediate exercise of the existing warrants for cash, the holder received the inducement warrants in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The inducement warrants have an exercise price of $6.20 per share, are immediately exercisable and will be exercisable for five and one-half years from the date of issuance.

The inducement warrants and the shares of common stock underlying the inducement warrants offered in the private placement have not been registered under the Securities Act or applicable state securities laws.

Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

As part of the transaction, the Company filed a resale registration statement on Form S-3 with the SEC to register the resale of the shares of common stock underlying the inducement warrants.

Subsequent to March 31, 2026, there were no material transactions that occurred that would require recognition or disclosure in the financial statements.

On April 20, 2026, the Company extended the maturity date of stock option grants for four employees and a director for 4,860,197 shares by five years.

On April 20, 2026, the Company entered into an employment agreement with Yanda Ma to serve as its Chief Technology Officer, which provides for a base salary of $ 300,000 .

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.

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

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

Ma 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.

Ma 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.

Ma was granted ten-year options under our 2023 Equity Incentive Plan to purchase 400,000 shares of our common stock, which options vest quarterly over four years, at an exercise price equal to $ 2.49 , being the fair market value on the date of grant.

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