What changed in this filing

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Item 1. Financial Statements

2026-08-06 compared with 2026-05-08 · 203 added, 148 removed, 494 unchanged (42% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2026 and December 31, 2025

March 31, 2026

As of June 30, 2026 and December 31, 2025

June 30, 2026

December 31, 2025 (1)

20 unchanged sentences

STOCKHOLDERS' DEFICIT:

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

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2026 and December 31, 2025

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 34,439,562 and 34,368,162 shares issued and outstanding as of June 30, 2026 and December 31, 2025

Additional paid in capital

10 unchanged sentences

AIRSHIP AI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

For the three months ended March 31, 2026 and 2025

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)

For the three and six months ended June 30, 2026 and 2025

Three Months Ended

March 31, 2026

March 31, 2025

Six Months Ended

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

NET REVENUES:

11 unchanged sentences

( 2,021,881 )

( 3,072,229 )

( 3,736,238 )

OTHER INCOME (EXPENSE) :

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

Gain from change in fair value of warrant liability

( 7,301,585 )

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

( 14,494,184 )

Interest income, net

Total other income, net

(LOSS) INCOME BEFORE PROVISON FOR INCOME TAXES

Total other (expense) income, net

( 21,735,170 )

(LOSS) BEFORE PROVISION FOR INCOME TAXES

( 2,406,560 )

( 23,757,051 )

( 3,127,164 )

Provision for income taxes

NET (LOSS) INCOME

( 2,406,560 )

( 23,757,051 )

( 3,127,164 )

OTHER COMPREHENSIVE (LOSS)

Foreign currency (loss), net

TOTAL COMPREHENSIVE (LOSS) INCOME

TOTAL COMPREHENSIVE (LOSS)

$ ( 2,418,371 )

NET (LOSS) INCOME PER SHARE:

$ ( 23,757,051 )

$ ( 3,147,267 )

NET (LOSS) PER SHARE:

Weighted average shares of common stock outstanding

4 unchanged sentences

Stockholders'

Income (Loss)

Balance as of January 1, 2025

9 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

$ ( 74,990,656 )

$ ( 46,879,390 )

Balance as of January 1, 2026

8 unchanged sentences

( 7,201,113 )

Stock-based compensation

Issuance of common stock for stock options exercise

Foreign currency translation loss

( 2,406,560 )

Balance as of June 30, 2026

$ ( 48,747,391 )

$ ( 8,623,772 )

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2026 and 2025

Three Months Ended

March 31, 2026

March 31, 2025

For the six months ended June 30, 2026 and 2025

Six Months Ended

June 30, 2026

June 30, 2025

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 3,127,164 )

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

Adjustments to reconcile net (loss) to net cash provided by

(used in) operating activities

Stock-based compensation

2 unchanged sentences

( 1,026,999 )

( 15,521,183 )

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

12 unchanged sentences

Repayment of advances from founders

( 1,300,000 )

Proceeds from stock option exercises

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

( 1,182,328 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

35 unchanged sentences

Liability as of

March 31, 2026

June 30, 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

Other income related to instruments recorded at fair value during the three months ended June 30, 2026 and 2025

$ ( 1,026,133 )

$ ( 21,795,769 )

Other income related to instruments recorded at fair value during the six months ended June 30, 2026 and 2025

$ ( 252,918 )

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.

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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 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 March 31, 2026.

The Company employed sixty-seven employees as of June 30, 2026.

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

The Company employed nine research and development personnel in Taiwan as of June 30, 2026.

Summary of Significant Accounting Policies

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Securities and Exchange Commission (“SEC”).

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

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

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

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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, 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.

Historically, the Company has not incurred any significant warranty expenses and as such, a warranty reserve was not considered necessary as of June 30, 2026 and December 31, 2025.

Product Revenue

6 unchanged sentences

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, 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.

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

For the three months ended June 30, 2026 and 2025, the Company recognized revenue of $ 514,013 and $ 475,551 , respectively, related to one-year support contracts.

For the three months ended June 30, 2026 and 2025, the Company recognized revenue of $ 1,098,870 and $ 899,820 , respectively, related to multi-year support contracts.

For the six months ended June 30, 2026 and 2025, the Company recognized revenue of $ 1,008,076 and $ 577,150 , respectively, related to one-year support contracts.

For the six months ended June 30, 2026 and 2025, the Company recognized revenue of $ 2,986,145 and $ 2,251,797 , respectively, related to multi-year support contracts.

Contracts with Multiple Performance Obligations

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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 $ 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 $ 4,314,602 and $ 4,634,237 , respectively, as of June 30, 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.

Of the deferred revenue balance of $ 8,634,512 and $ 6,190,333 as of January 1, 2026 and 2025, the Company recognized $ 1,163,690 and $ 460,393 during the three months ended June 30, 2026 and 2025, respectively.

The Company recognized $ 2,470,764 and $ 1,123,100 during the six months ended June 30, 2026 and 2025, respectively.

Accounts Receivable and Provision for Credit Losses

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

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 determines estimates of uncollectible accounts receivable based primarily on actual historical bad debt, 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.

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

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.

As of June 30, 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 June 30, 2026, December 31, 2025 and January 1, 2025 were $ 3,746,980 , $ 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 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.

For the six months ended June 30, 2026, the Company had revenue from ninety three customers and five customers represented 88 % of total revenue.

The primary reason for the high level of customer concentration for the six months ended June 30, 2026 was due to reliance on five customers for the six months ended June 30, 2026.

As of June 30, 2026, three customers represented approximately 83 % 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 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.

For the six months ended June 30, 2025, the Company had revenue from thirty customers and two customers represented 65 % of total revenue.

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

As of June 30, 2025, one customer represented approximately 83 % 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.

The Company’s purchase of inventory, primarily computer servers, is undertaken to match purchase orders received from customers.

The Company’s purchase of inventory, primarily computer servers and AI hardware, is undertaken to match purchase orders received from customers.

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 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.

Inventory is recorded on a first in first out basis.

The Company reviews its inventory on a periodic basis to identify products that are slow moving and/or obsolete, and if such products are identified, the Company records the appropriate inventory impairment charge at such time.

Long-Lived Assets

3 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 months ended March 31, 2026 and 2025.

The Company recorded no impairment losses for the three months ended June 30, 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 $ 843,696 and $ 719,382 for the three months ended March 31, 2026 and 2025, respectively, on development activities.

The Company incurred research and development expenses of $ 854,196 and $ 740,571 for the three months ended June 30, 2026 and 2025, respectively, on development activities.

The Company incurred research and development expenses of $ 1,697,892 and $ 1,459,953 for the six months ended June 30, 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 March 31, 2026 and December 31, 2025.

No software development costs have been capitalized as of June 30, 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 March 31, 2026 and 2025 were $ 61,711 and $ 169,221 , respectively.

Advertising and marketing costs for the three months ended June 30, 2026 and 2025 were $ 43,962 and $ 55,694 , respectively.

Advertising and marketing costs for the six months ended June 30, 2026 and 2025 were $ 105,673 and $ 224,915 , respectively.

Shipping and Handling of Products

11 unchanged sentences

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

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 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 June 30, 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 March 31, 2026, there were 515,000 private placement warrants and 16,145,006 public warrants outstanding.

As of June 30, 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 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 .

During the three months ended June 30, 2026 and 2025, the Company’s stock-based compensation expense for the vesting of earnout shares was $ 133,761 .

As of June 30, 2026, unrecognized compensation cost related to unvested earnout shares totaled $ 1,337,614 .

The weighted average period over which this remaining compensation cost is expected to be recognized is 2.5 years.

13 unchanged sentences

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.

There was other comprehensive (loss) of ($ 11,811 ) and ($ 0 ), respectively, related to foreign exchange translation for the three months ended June 30, 2026 and 2025, respectively.

There was other comprehensive (loss) of ($ 20,103 ) and ($ 7,409 ), respectively, related to foreign exchange translation for the six months ended June 30, 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 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.

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

2 unchanged sentences

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.

(Loss) Per Share

Basic (loss) per share is based upon the net (loss) for the three and six months ended June 30, 2026 and 2025 divided by the weighted average shares of common stock outstanding.

Diluted net (loss) per share is determined using the weighted average number of shares of common stock and potential common stock (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 and six months ended June 30, 2026 and 2025 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 13—Earnings per share.

9 unchanged sentences

Disaggregation of Revenue

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.

The Company’s net revenues for the three months ended June 30, 2026 and 2025 consisted of approximately $ 2.5 million and $ 0.7 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 six months ended June 30, 2026 and 2025 consisted of approximately $ 6.4 million and $ 4.8 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 June 30, 2026 and 2025 of approximately $ 1.6 million and $ 1.4 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.

The Company’s remaining net revenue for the six months ended June 30, 2026 and 2025 of approximately $ 4 million and $ 2.8 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.

Contract Balances

2 unchanged sentences

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

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.

As of June 30, 2026 and December 31, 2025, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,314,602 and $ 4,634,237 , respectively, as of June 30, 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.

Remaining Performance Obligations

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.

As of June 30, 2026 and December 31, 2025, the Company had approximately $ 8.9 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 48 % of its remaining performance obligations as revenue during the next twelve months and the remaining 52 % in the second half of fiscal 2027 and years thereafter.

Costs to Obtain or Fulfill a Contract

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

Inventory was $ 843,590 and $ 0 , respectively, as of June 30, 2026 and December 31, 2025.

Inventory primarily consists of computer servers and AI hardware.

Stockholders’ Deficit

4 unchanged sentences

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 June 30, 2026 and December 31, 2025, there were no shares of preferred stock outstanding.

As of June 30, 2026 and December 31, 2025, there were 34,439,562 and 34,368,162 shares of common stock outstanding, respectively.

Six months Ended June 30, 2026

During the six months ended June 30, 2026, the Company had the following issuances of equity securities:

During the six months ended June 30, 2026, investors exercised warrants for two shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 10 .

During the six months ended June 30, 2026, the Company issued an aggregate of 71,398 shares of common stock and received $ 56,447 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 1.64 per share.

Six Months Ended June 30, 2025

During the six months ended June 30, 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.

During the six months ended June 30, 2025, investors exercised warrants for 13,300 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,850 .

During the six months ended June 30, 2025, the Company issued an aggregate of 146,477 shares of common stock and received $ 57,822 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 2.64 per share.

2023 Amended and Restated Equity Incentive Plan

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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 aggregate number of shares of common stock reserved for grant and issuance under the Equity Incentive Plan is 4,149,684 as of June 30, 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-the requisite service period.

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

The Company had the following stock option activity during the six months ended June 30, 2026:

Weighted Average

1 unchanged sentence

Outstanding as of January 1, 2026

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.

Outstanding as of June 30, 2026

During the six months ended June 30, 2026, the Company granted stock options to eight employees and consultants to purchase an aggregate of 619,000 shares of common stock with an exercise price of $ 2.55 of which 509,000 vest quarterly over four years and 110,000 were vested immediately.

The 619,000 stock options granted expire during 2033.

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

On April 20, 2026, the Company modified 4,860,197 previously issued stock options held by four employees and a director by extending the contractual term by five years.

The Company recorded incremental stock-based compensation of $ 379,045 related to this modification.

The following table summarizes information about stock options outstanding and exercisable as of June 30, 2026:

Remaining Life

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and Exercisable

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.

There were 7,340,382 options to purchase common stock at an average exercise price of $ 1.76 per share outstanding as of June 30, 2026 under the Equity Incentive Plan.

The Company recorded $ 970,113 and $ 800,425 of compensation expense, net of related tax effects, relative to stock options for the six months ended June 30, 2026 and 2025, respectively, in accordance with ASC 718.

As of June 30, 2026, there were $ 3,600,228 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 2 - 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 March 31, 2026:

The significant weighted-average assumptions relating to the valuation of the Company’s stock option grants were as follows for the three months ended June 30, 2026:

Exercise price

$ 2.27 - 2.49

Dividend yield

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Risk free interest rate

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 .

3.68 - 3.79 %

There were stock incentive plan awards outstanding at June 30, 2026 totaling 7,340,382 shares with an aggregate intrinsic value of $ 6,993,856 .

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, 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.

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

As of June 30, 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 June 30, 2026 or the year ended December 31, 2025.

Warrants to Purchase Common Stock

See Note 10 for public and private placement warrants assumed after the Merger.

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

( 2,175,564 )

The Company had the following warrant activity during the three months ended June 30, 2026:

During the three months ended June 30, 2026, investors exercised warrants for two shares of the Company’s common stock and the Company received proceeds of $ 10 .

Warrant activity for the six months ended June 30, 2026 was as follows:

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

Outstanding at June 30, 2026

A summary of the warrants outstanding as of June 30, 2026 were as follows:

June 30, 2026

Life (In Years)

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

There were warrants outstanding at June 30, 2026 totaling 22,488,826 shares with an aggregate intrinsic value of $ 1,674,339 .

Earnout Liability

See Note 10 for common stock shares related to earnout liability.

See Note 11 for shares of common stock related to earnout liability.

Employee 401(k) Plan

1 unchanged sentence

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

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

The Company expensed $ 54,741 and $ 55,668 of contributions during the three months ended June 30, 2026 and 2025, respectively.

The Company expensed $ 104,852 and $ 106,646 of contributions during the six months ended June 30, 2026 and 2025, respectively.

Related Party Transactions

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The Company is currently not a party to any pending legal proceedings that is not ordinary routine litigation incidental to its business.

Employment Agreement

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 of $ 2.49 , the fair market value on the date of grant.

Properties and Operating Leases-Right of Use Asset and Lease Liability

8 unchanged sentences

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 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.

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 June 30, 2026 and December 31, 2025, total operating lease liabilities were $ 650,748 and $ 863,744 , respectively.

Right of use assets totaled $ 600,951 and $ 807,915 as of June 30, 2026 and December 31, 2025, respectively.

In the three months ended June 30, 2026 and 2025, the Company recognized $ 116,562 and $ 115,742 in total lease costs for the leases, respectively.

In the six months ended June 30, 2026 and 2025, the Company recognized $ 232,723 and $ 218,159 in total lease costs for the leases, respectively.

Cash paid for amounts included in the measurement of lease liabilities were $ 119,577 and $ 116,096 , respectively, for the three months ended June 30, 2026 and 2025.

Cash paid for amounts included in the measurement of lease liabilities were $ 238,754 and $ 218,868 , respectively, for the six months ended June 30, 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 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,

The weighted average remaining lease term for the operating leases was twenty six months at June 30, 2026.

The weighted average discount rate was 7 % as of June 30, 2026 and December 31, 2025.

The minimum future lease payments as of June 30, 2026 are as follows:

Years Ended June 30,

Total remaining payments

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

The option must be exercised by October 31, 2026.

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

The Company recorded a provision for income taxes of $ 0 for the three and six months ended June 30, 2026 and 2025.

The Company’s effective tax rate was 0 % for the three and six months ended June 30, 2026 and 2025.

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 March 31, 2026 and December 31, 2025, the Company retains a full valuation allowance on its deferred tax assets.

As of June 30, 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.

13 unchanged sentences

The public warrants will expire on December 21, 2028 .

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

As of June 30, 2026 and December 31, 2025, the Private and Public Warrants had an aggregate fair value of $ 12,661,605 and $ 13,328,006 , respectively.

The Company recorded (expense) of $ 833,001 and ($ 14,494,184 ) due to change in the fair value of the warrant liability during the three months ended June 30, 2026 and 2025, respectively.

The Company recorded a gain of $ 666,401 and $ 1,026,999 due to change in the fair value of the warrant liability during the six months ended June 30, 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 June 30, 2026 and December 31, 2025, respectively:

June 30, 2026

Number of Shares

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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 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 17, 2026 for more information.

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.

At the closing of the Merger, the Airship AI securityholders that held 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 for the year ended December 31, 2025 and filed with the SEC on February 17, 2026 for more information.

As of June 30, 2026, the estimated fair value of the earnout liability increased to $ 3,540,252 primarily due to the increase in the volatility factor to 76.8 %, 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 and six months ended June 30, 2026 of $ 193,132 and $ 919,319 , respectively and is recorded on the consolidated statements of operations and comprehensive (loss).

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 March 31, 2026:

March 31, 2026

June 30, 2026

Earnout liability

11 unchanged sentences

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

March 31, 2026

June 30, 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 March 31, 2026.

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 June 30, 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 three months ended March 31, 2026 and 2025.

There were no transfers of financial instruments between valuation levels during the three and six months ended June 30, 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:

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

June 30, 2026

June 30, 2025

Three Months Ended,

March 31, 2026

March 31, 2025

Net (loss) income

Six Months Ended,

Three Months Ended,

Six Months Ended,

$ ( 2,406,560 )

$ ( 3,127,164 )

( 23,757,051 )

Weighted average shares outstanding-

dilutive effect of stock options, SARs and warrants

(Loss) income per share-

(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:

Anti-dilutive shares

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

Public Warrants

1 unchanged sentence

Outstanding stock options

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.

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

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.

Subsequent to June 30, 2026, there were no material transactions 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