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What changed in Airship AI Holdings, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Airship AI Holdings, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+156 added−150 removedSource: 10-K (2026-02-17) vs 10-K (2025-02-28)

Top changes in Airship AI Holdings, Inc.'s 2025 10-K

156 paragraphs added · 150 removed · 112 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWhile many of these opportunities are multi-year engagements which are expected to be highly competitive, they represent years of work of developing the opportunity around our unique value proposition and differentiators in support of a sole source award or to position Airship AI as the company to beat. 9 Table of Contents For 2025, we see significant investment and focus across the U.S. government in areas where we are highly active, including key efforts in our existing pipeline or efforts where we are piloting technology to assist with the larger effort.
Biggest changeWhile many of these opportunities are multi-year engagements which are expected to be highly competitive, they represent years of work of developing the opportunity around our unique value proposition and differentiators in support of a sole source award or to position Airship AI as the company to beat. 9 Table of Contents Outlook for 2026.
True digital transformation can then be fully achieved when you have the “single pane of glass” interface that brings all your data together, securely, and efficiently, structured and analyzed, when and where the data consumer needs it. Our Solution Airship AI’s platform today is used across multiple verticals and markets, including commercial and government, and small and enterprise.
True digital transformation can then be fully achieved when you have the “single pane of glass” interface that brings all your data together, securely, and efficiently, structured and analyzed, when and where the data consumer needs it. 6 Table of Contents Our Solution Airship AI’s platform today is used across multiple verticals and markets, including commercial and government, and small and enterprise.
Our history shows that organizations that have chosen to partner with Airship AI stick with Airship AI. 5 Table of Contents Since our inception and until the merger in December 2023, we have operated as a 100% employee-owned bootstrapped company with no outside investment, operating in a fiscally conservative model.
Our history shows that organizations that have chosen to partner with Airship AI stick with Airship AI. Since our inception and until the merger in December 2023, we have operated as a 100% employee-owned bootstrapped company with no outside investment, operating in a fiscally conservative model.
Our software is installed on bare-metal servers on-premises, in data centers, and in the cloud, as well as in physical and virtualized environments. 6 Table of Contents Our software is also designed to replace existing capabilities as well as augment and/or enhance existing capabilities, from sensors to IT infrastructure to analytics.
Our software is installed on bare-metal servers on-premises, in data centers, and in the cloud, as well as in physical and virtualized environments. Our software is also designed to replace existing capabilities as well as augment and/or enhance existing capabilities, from sensors to IT infrastructure to analytics.
In addition to the $7 billion combined edge AI hardware and software addressable market by 2029, growing at a blended compounded average growth rate (“CAGR”) of 21.8%, for 2023 alone the U.S. government has set aside $3.2 billion in discretionary resources for state and local grants and $30 billion in mandatory resources to support law enforcement, crime prevention, and violence intervention, based on The President’s Budget for Fiscal Year 2023 We believe our existing product market fit in the law enforcement vertical supported by our rapidly growing edge AI hardware and software offerings positions us well in this market.
In addition to the $7 billion combined edge AI hardware and software addressable market by 2029, growing at a blended compounded average growth rate (“CAGR”) of 21.8%, for 2023 alone the U.S. government has set aside $3.2 billion in discretionary resources for state and local grants and $30 billion in mandatory resources to support law enforcement, crime prevention, and violence intervention, based on The President’s Budget for Fiscal Year 2023.
Intellectual Property We do not have any patents and instead rely on trade secrets and know-how in the development of our business. Although large technology companies use patent portfolios as a means of strategic and legal deterrence, we believe it is more advantageous not to disclose our proprietary know-how. 10 Table of Contents
Although large technology companies use patent portfolios as a means of strategic and legal deterrence, we believe it is more advantageous not to disclose our proprietary know-how. 11 Table of Contents
Employees We employed fifty-three employees as of December 31, 2024. The employees are headquartered in Redmond, WA and are supported by a growing team at our Customer Center of Excellence located in Charlotte, NC. We employed eight research and development personnel in Taiwan as of December 31, 2024.
The employees are headquartered in Redmond, WA and are supported by a growing team at our Customer Center of Excellence located in Charlotte, NC. We employed eight research and development personnel in Taiwan as of December 31, 2025. Intellectual Property We do not have any patents and instead rely on trade secrets and know-how in the development of our business.
We expect that our market opportunity will continue to grow as we expand our edge AI hardware and software capabilities allowing us to serve our customers more broadly across their operations. Growth Strategy For 2025, we start with a pipeline of $137 million, consisting largely of U.S. government agency contracts.
We expect that our market opportunity will continue to grow as we expand our edge AI hardware and software capabilities allowing us to serve our customers more broadly across their operations.
Our typical customer engagement is a multi-year contractual agreement, an agreement which includes our core offerings as well as professional services, technical support, and software maintenance, which we expect will result in predictable, long-term recurring revenue.
While we are heavily focused on continuing to grow market share in the United States, our offerings are currently deployed around the world, with significant room to grow in both the governmental and commercial markets. 5 Table of Contents Our typical customer engagement is a multi-year contractual agreement, an agreement which includes our core offerings as well as professional services, technical support, and software maintenance, which we expect will result in predictable, long-term recurring revenue.
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While we are heavily focused on continuing to grow market share in the United States, our offerings are currently deployed around the world, with significant room to grow in both the governmental and commercial markets.
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We believe our existing product market fit in the law enforcement vertical supported by our rapidly growing edge AI hardware and software offerings positions us well in this market.
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The opportunities that make up this pipeline include opportunities for expansion within existing agencies as well as new opportunities within the agency and/or new agencies themselves.
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Growth Strategy We also began to see movement during the fourth quarter of 2025 and into the first quarter of 2026 on several large projects in the federal and commercial marketplace, including several notable awards: · $1.9 million award from Department of Homeland Security (DHS) supporting large National Special Security Events (NSSE) scheduled for 2026. · $2.8 million award from a large commercial customer supporting a technical refresh of deployed hardware and software.
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Within the 2025 Homeland Security, Justice, and Defense Department Appropriations Bills, some highly relevant areas called out for investment include: $300 million for new border security technology, $51 million for autonomous towers, $50 million for innovative technology, $90 million in funds around Operation Stonegarden which enhances cooperation and coordination amongst federal, state, local and tribal law enforcement groups to secure U.S. borders, and $305 million in the form of Nonprofit Security Grants for physical security enhancements for nonprofit organizations and house of worship that are at a high risk of terrorist attack, $4.1 billion in funds for custody operations which includes facilities and physical security measures for the 50,000 detention beds requested, $547 million to the Department of Justice for organized crime drug enforcement task forces to enhance multi-agency efforts combating transnational organized crime and reducing availability of illicit drugs, $1.14 billion to the Department of Defense for drug interdiction and counterdrug activities, and $220 million in direct support to combatant commanders through the Defense Innovation Unit to quickly obtain the cutting-edge technology and weapons they need and to rapidly get them to the warfighter.
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Our backlog as of December 31, 2025 was $3.3 million. Our total validated pipeline as of December 31, 2025 was $173.4 million, consisting of single and multi-year opportunities for AI-driven edge, video, and sensor and data management platforms across our customer verticals. Our pipeline includes opportunities at varying stages of progression with expected award timeframes over the next 18-24 months.
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While this pipeline represents the path for substantial growth over the next 12-18 months, we are executing a number of strategies which we believe will bring our value proposition to a broader audience in the United States and abroad. • Embrace Existing Direct Routes to Market While Building a Channel Program: Our focus in the near term is to continue building and expanding relationships with existing customers who we enjoy direct relationships with, while we build partnerships with global integrators who bring capabilities outside our core competencies along with access and placement to customers and verticals which we do not currently enjoy.
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We enter 2026 optimistic about growth opportunities across both the federal and commercial market segments. During the second half of 2025, we began to see returns from investments made earlier in the year to expand our sales and business development organization, reflected in increased customer activity, pipeline development, and pilot deployments.
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We believe that these strategies can not only co-exist but be mutually beneficial. • Expand Our Technology Partnerships and Integrations: Our focus remains on providing a best of breed “single pane of glass” solution for our customers data management challenges, which entails expanding our existing technology partnership ecosystem within our existing customer framework, as well as adjacent verticals.
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Based on these results, we have significant additional investments planned across the company, preparing us to execute against anticipated awards and opportunities from the growing pipeline.
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We believe this will drive new customer acquisitions as well as help expand our distribution capability into spaces our partners already participate. • Commercial Expansion: Based on our existing early adopter customers and the rapid acceleration of AI in solving public safety and operational challenges, we see significant opportunities for expansion of our platform in the broader commercial marketplace.
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These investments include additional resources across our software development team, ensuring that we can continue to scale our platform as quickly as our customers need, while operating at the highest levels of cyber-security that our customers demand. As we build out our back-office capabilities, we will continue to add to our customer-facing teams, including more partner-focused sales and marketing personnel.
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While we see opportunities across multiple industry verticals, our focus in the short term will be on those verticals that can immediately benefit from the work already done, significantly reducing additional development efforts along with shortening the sales cycle.
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As part of our on-going digital transformation efforts, we have successfully incorporated AI into our daily operational workflow, leveraging the best of AI to assist with making our existing team and processes more effective and efficient, rather than replacing people or processes.
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These verticals include infrastructure, transportation, logistics, and retail. • Strategic M&A Activities: As part of our commercial landing and government expansion strategies, we plan to focus on strategic acquisition targets with complementary technologies that can rapidly accelerate existing development efforts or add new capabilities to our platform that are supportive of our existing technology partnerships and routes to market strategies.
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All these efforts are aimed at getting to positive cash flow as soon as possible within 2026, driving increased value for our customers and shareholders. Looking forward, we expect most of our revenue to come from the federal vertical in 2026, with meaningful new growth in the commercial vertical adding to our overall pipeline for 2027 and beyond. Federal vertical.
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In 2025, we expanded our footprint across multiple agencies within the Department of Homeland Security (“DHS”) and the Department of Justice (“DoJ”). We initiated multiple new pilot efforts, including our first deployments of rapidly deployable Airship-built hardware and software solutions based on our edge analytics platform, Outpost AI.
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Our current pipeline includes opportunities we estimate to be in the tens of millions of dollars; however, pipeline represents potential opportunities and is not a guarantee of contract award or revenue. We believe current U.S. border and homeland security funding priorities support continued demand for solutions aligned with Airship AI’s capabilities.
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For example, the One Big Beautiful Bill Act (“OBBA”) (H.R. 1), signed into law on July 4, 2025, includes funding for border infrastructure and technology, including $6.2 billion for border security technology and investments that reference artificial intelligence and machine learning, approximately $46.5 billion for border barrier system construction and enhancements (including items such as cameras and sensors), and $5 billion for U.S.
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Customs and Border Protection facilities and checkpoints. We are actively supporting each of these efforts through our growing partner and integrator eco-system, leveraging our long-standing direct customer relationships. Commercial vertical. In 2026, we plan to continue expanding our regional partner and integrator ecosystem.
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We believe a partner-led approach can accelerate customer acquisition and deployment efficiency versus solely direct routes to market, particularly where partners bring established customer relationships and complementary capabilities and services that we do not plan to build internally.
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Early partner and customer engagements have further reinforced our view of the marketplace that there is not only room for but the need for a new entrant in the marketplace, one that can move quickly and be responsive to customer needs while still providing a robust enterprise level platform capable of meeting demanding operational and security requirements. Platform expansion.
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We are expanding the use of our edge AI capabilities across additional sensor modalities and operational platforms, including mobile autonomous platforms.
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We believe analytics developed for fixed deployments can be adapted to mobile use cases, creating additional product and marketplace opportunities. 10 Table of Contents These deployments include emerging partnerships with robotic platforms built to solve physical security and public safety challenges.
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Early customer engagements to date have been encouraging, noting these initiatives are in development and may not result in commercial deployments or revenue on expected timelines. Go-to-market focus. We believe early customer engagement, helping shape requirements based on validated operational needs, remains important to our ability to compete effectively.
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Many opportunities, particularly in the federal market, involve multi-year sales cycles and can represent significant total contract value over their lifetimes (including potential programs that may extend into the $100 million range), but may take years to progress from early-stage activity to awards, if at all.
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In 2026 and beyond, our sales and business development teams will remain focused on building our pipeline, advancing qualified opportunities, and collaborating with partners to develop and pursue joint programs across both the federal and commercial marketplaces. Employees We employed sixty three employees as of December 31, 2025.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30. 32 Table of Contents We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of BYTS’ IPO, (b) in which we have total annual gross revenue of at least $1.23 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
Biggest changeWe will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of BYTS’ IPO, (b) in which we have total annual gross revenue of at least $1.23 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.
Our new and existing platforms and changes to our existing platforms could fail to attain sufficient market acceptance for many reasons, including: · our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; · product defects, errors, or failures or our inability to satisfy customer service level requirements; · negative publicity or negative private statements about the security, performance, or effectiveness of our platforms or product enhancements; · delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; · introduction or anticipated introduction of competing platforms or functionalities by our competitors; · inability of our platforms or product enhancements to scale and perform to meet customer demands; · receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; · poor business conditions for our customers, causing them to delay software purchases; · reluctance of customers to purchase proprietary software products; · reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and · reluctance of customers to purchase products incorporating open source software. 15 Table of Contents If we are not able to continue to identify challenges faced by our customers and develop, license, or acquire new features and capabilities to our platforms in a timely and cost-effective manner, or if such enhancements do not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and our anticipated revenue growth may not be achieved.
Our new and existing platforms and changes to our existing platforms could fail to attain sufficient market acceptance for many reasons, including: · our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; · product defects, errors, or failures or our inability to satisfy customer service level requirements; · negative publicity or negative private statements about the security, performance, or effectiveness of our platforms or product enhancements; · delays in releasing to the market our new offerings or enhancements to our existing offerings, including new product modules; · introduction or anticipated introduction of competing platforms or functionalities by our competitors; · inability of our platforms or product enhancements to scale and perform to meet customer demands; · receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; · poor business conditions for our customers, causing them to delay software purchases; · reluctance of customers to purchase proprietary software products; · reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and · reluctance of customers to purchase products incorporating open source software. 16 Table of Contents If we are not able to continue to identify challenges faced by our customers and develop, license, or acquire new features and capabilities to our platforms in a timely and cost-effective manner, or if such enhancements do not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and our anticipated revenue growth may not be achieved.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: · inability to integrate or benefit from acquired technologies, products, personnel or services in a profitable manner; · unanticipated costs or liabilities associated with the acquisition, including potential liabilities due to litigation and potential identified or unknown security vulnerabilities in acquired technologies that expose us to additional security risks or delay our ability to integrate the product into our offerings or recognize the benefits of our investment; · differences between our values and those of an acquired company, as well as potential disruptions to our workplace culture; · incurrence of acquisition-related costs, including costs related to integration activities; 25 Table of Contents · difficulty integrating the accounting and information systems, operations, and personnel of the acquired business; · augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation; · difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; · challenges converting the acquired company’s revenue recognition policies and forecasting the related revenues, including subscription-based revenues and software license revenues; · potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; · difficulty converting the customers of the acquired business onto our platform and contract terms; · diversion of management’s attention and other company resources; · harm to our existing business relationships with business partners and customers as a result of the acquisition; · the potential loss of key employees; · use of resources that are needed in other parts of our business; and · use of substantial portions of our available cash to consummate the acquisition.
We also may not achieve the anticipated benefits from the acquired business due to a number of factors, including: · inability to integrate or benefit from acquired technologies, products, personnel or services in a profitable manner; · unanticipated costs or liabilities associated with the acquisition, including potential liabilities due to litigation and potential identified or unknown security vulnerabilities in acquired technologies that expose us to additional security risks or delay our ability to integrate the product into our offerings or recognize the benefits of our investment; · differences between our values and those of an acquired company, as well as potential disruptions to our workplace culture; · incurrence of acquisition-related costs, including costs related to integration activities; · difficulty integrating the accounting and information systems, operations, and personnel of the acquired business; 26 Table of Contents · augmenting the acquired technologies and platforms to the levels that are consistent with our brand and reputation; · difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the acquired business; · challenges converting the acquired company’s revenue recognition policies and forecasting the related revenues, including subscription-based revenues and software license revenues; · potential write-offs of acquired assets or investments, and potential financial and credit risks associated with acquired customers; · difficulty converting the customers of the acquired business onto our platform and contract terms; · diversion of management’s attention and other company resources; · harm to our existing business relationships with business partners and customers as a result of the acquisition; · the potential loss of key employees; · use of resources that are needed in other parts of our business; and · use of substantial portions of our available cash to consummate the acquisition.
We cannot assure you that the market price of the common stock and our public warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: · the realization of any of the risk factors presented in this report; · the concentration of the ownership of our shares by a limited number of affiliated stockholders may limit interest in our securities; · limited “public float” with a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for the common stock; · additions or departures of key personnel; · loss of a strategic relationship; · variations in operating results from the expectations of securities analysts or investors; · announcements of new products or services by us or our competitors; · reductions in the market share of our products; · announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; · investor perception of our industry or prospects; · insider selling or buying; · investors entering into short sale contracts; · regulatory developments affecting our industry; · changes in our industry; · competitive pricing pressures; · our ability to obtain working capital financing; 31 Table of Contents · our ability to execute our business plan; · operating results that fall below expectations; · revisions in securities analysts’ estimates or reductions in security analysts’ coverage; and · economic and other external factors.
We cannot assure you that the market price of the common stock and our public warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: · the realization of any of the risk factors presented in this report; · the concentration of the ownership of our shares by a limited number of affiliated stockholders may limit interest in our securities; · limited “public float” with a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for the common stock; · additions or departures of key personnel; · loss of a strategic relationship; · variations in operating results from the expectations of securities analysts or investors; · announcements of new products or services by us or our competitors; · reductions in the market share of our products; · announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; · investor perception of our industry or prospects; · insider selling or buying; · investors entering into short sale contracts; · regulatory developments affecting our industry; · changes in our industry; · competitive pricing pressures; 32 Table of Contents · our ability to obtain working capital financing; · our ability to execute our business plan; · operating results that fall below expectations; · revisions in securities analysts’ estimates or reductions in security analysts’ coverage; and · economic and other external factors.
A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements. 27 Table of Contents If Airship AI’s judgments or estimates relating to its critical accounting policies are based on assumptions that change or prove to be incorrect, Airship AI’s results of operations could fall below expectations of securities analysts and investors, resulting in a decline in its stock price.
A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements. 28 Table of Contents If Airship AI’s judgments or estimates relating to its critical accounting policies are based on assumptions that change or prove to be incorrect, Airship AI’s results of operations could fall below expectations of securities analysts and investors, resulting in a decline in its stock price.
We may be unable to transition away from China to other jurisdictions or obtain secondary source s for raw materials which could result in a material adverse effect on our revenues, profitability and financial condition. 21 Table of Contents If Airship AI’s security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of its services to current or potential customers may be reduced, and Airship AI may incur significant liabilities.
We may be unable to transition away from China to other jurisdictions or obtain secondary source s for raw materials which could result in a material adverse effect on our revenues, profitability and financial condition. 22 Table of Contents If Airship AI’s security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of its services to current or potential customers may be reduced, and Airship AI may incur significant liabilities.
Additionally, despite our internal safeguards and efforts to the contrary, we cannot guarantee that our customers will not ultimately use our platforms for purposes inconsistent with our company values, and such uses may harm our brand and reputation. 16 Table of Contents If the market for Airship AI’s platforms and services develops more slowly than Airship AI expects, its growth may slow or stall, and its business, financial condition, and results of operations could be harmed.
Additionally, despite our internal safeguards and efforts to the contrary, we cannot guarantee that our customers will not ultimately use our platforms for purposes inconsistent with our company values, and such uses may harm our brand and reputation. 17 Table of Contents If the market for Airship AI’s platforms and services develops more slowly than Airship AI expects, its growth may slow or stall, and its business, financial condition, and results of operations could be harmed.
The seasonality of our business may cause continued or increased fluctuations in our results of operations and cash flows, which may prevent us from achieving our quarterly or annual forecasts or meeting or exceeding the expectations of research analysts or investors, which in turn may cause a decline in the trading price of our securities. 14 Table of Contents If Airship AI does not successfully develop and deploy new technologies to address the needs of its customers, its business and results of operations could suffer.
The seasonality of our business may cause continued or increased fluctuations in our results of operations and cash flows, which may prevent us from achieving our quarterly or annual forecasts or meeting or exceeding the expectations of research analysts or investors, which in turn may cause a decline in the trading price of our securities. 15 Table of Contents If Airship AI does not successfully develop and deploy new technologies to address the needs of its customers, its business and results of operations could suffer.
If Airship AI is unable to successfully enhance its existing services to meet evolving data consumer requirements, increase adoption and usage of its services, develop new services, or if its efforts to increase the usage of its services are more expensive than Airship AI expects, then its business, results of operations and financial condition would be adversely affected. 11 Table of Contents Airship AI has experienced moderate growth in the past several years, and if Airship AI fails to effectively manage its growth, then its business, results of operations and financial condition could be adversely affected.
If Airship AI is unable to successfully enhance its existing services to meet evolving data consumer requirements, increase adoption and usage of its services, develop new services, or if its efforts to increase the usage of its services are more expensive than Airship AI expects, then its business, results of operations and financial condition would be adversely affected. 12 Table of Contents Airship AI has experienced moderate growth in the past several years, and if Airship AI fails to effectively manage its growth, then its business, results of operations and financial condition could be adversely affected.
If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, including in our growing direct sales force, our business, financial condition, and results of operations could be adversely affected. 12 Table of Contents Historically, existing customers have expanded their relationships with Airship AI, which has resulted in a limited number of customers accounting for a substantial portion of its revenue.
If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, including in our growing direct sales force, our business, financial condition, and results of operations could be adversely affected. 13 Table of Contents Historically, existing customers have expanded their relationships with Airship AI, which has resulted in a limited number of customers accounting for a substantial portion of its revenue.
As a result, it may be more difficult for us to attract and retain qualified individuals to serve on the Board or as executive officers. 29 Table of Contents In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.
As a result, it may be more difficult for us to attract and retain qualified individuals to serve on the Board or as executive officers. 30 Table of Contents In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming.
Alternatively, if a court were to find the choice of forum provision contained in our charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 33 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
Alternatively, if a court were to find the choice of forum provision contained in our charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition. 34 Table of Contents ITEM 1B. UNRESOLVED STAFF COMMENTS. Not applicable.
Any such litigation, regardless of merit, could be costly, divert the attention of management and may not ultimately be resolved in Airship AI’s favor. 18 Table of Contents Effective trademark, service mark, copyright and trade secret protection may not be available or applied for in every country in which Airship AI’s products are available and competitors based in other countries may sell infringing products in one or more markets.
Any such litigation, regardless of merit, could be costly, divert the attention of management and may not ultimately be resolved in Airship AI’s favor. 19 Table of Contents Effective trademark, service mark, copyright and trade secret protection may not be available or applied for in every country in which Airship AI’s products are available and competitors based in other countries may sell infringing products in one or more markets.
The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results. 20 Table of Contents If critical components used in Airship AI’s products become scarce or unavailable, Airship AI may incur delays in delivering its products and providing services, which could damage its business.
The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results. 21 Table of Contents If critical components used in Airship AI’s products become scarce or unavailable, Airship AI may incur delays in delivering its products and providing services, which could damage its business.
Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition. 23 Table of Contents Airship AI’s success depends upon the continued protection of its intellectual property rights and Airship AI may be forced to incur substantial costs to maintain, defend, protect and enforce its intellectual property rights.
Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition. 24 Table of Contents Airship AI’s success depends upon the continued protection of its intellectual property rights and Airship AI may be forced to incur substantial costs to maintain, defend, protect and enforce its intellectual property rights.
Hackers or other malicious parties could circumvent our or our customers’ security measures, and customers may misuse our platforms resulting in a security breach or perceived product failure. 17 Table of Contents Real or perceived errors, failures, or bugs in our platforms and services, or dissatisfaction with our services and outcomes, could result in customer terminations and/or claims by customers for losses sustained by them.
Hackers or other malicious parties could circumvent our or our customers’ security measures, and customers may misuse our platforms resulting in a security breach or perceived product failure. 18 Table of Contents Real or perceived errors, failures, or bugs in our platforms and services, or dissatisfaction with our services and outcomes, could result in customer terminations and/or claims by customers for losses sustained by them.
These and other factors may adversely affect customer demand and ability to pay, cause decrease in sales, and negatively impact the realizability of our accounts and notes receivable and contract assets. 26 Table of Contents Catastrophic events could materially adversely affect Airship AI’s business, results of operations and/or financial condition.
These and other factors may adversely affect customer demand and ability to pay, cause decrease in sales, and negatively impact the realizability of our accounts and notes receivable and contract assets. 27 Table of Contents Catastrophic events could materially adversely affect Airship AI’s business, results of operations and/or financial condition.
Due to the nature and concentration of the customers and timely payment history, credit risk in account receivables is minimal. From time to time, we may lose a major customer. It is not possible for us to predict the future level of demand from our larger customers for our platforms and applications.
Due to the nature and concentration of the customers and timely payment history, credit risk in account receivables is estimated to be minimal. From time to time, we may lose a major customer. It is not possible for us to predict the future level of demand from our larger customers for our platforms and applications.
Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is minimal. We expect to continue to derive a significant portion of our revenue from a limited number of customers in the future and, in some cases, the portion of our revenue attributable to individual customers may increase.
Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is estimated to be minimal. We expect to continue to derive a significant portion of our revenue from a limited number of customers in the future and, in some cases, the portion of our revenue attributable to individual customers may increase.
Therefore, any return on your investment in our capital stock must come from increases in the fair market value and trading price of the capital stock. 30 Table of Contents The market price of our equity securities may be volatile, and you could lose a significant part of your investment.
Therefore, any return on your investment in our capital stock must come from increases in the fair market value and trading price of the capital stock. 31 Table of Contents The market price of our equity securities may be volatile, and you could lose a significant part of your investment.
Our business, financial condition, and results of operations would also be adversely affected if we face difficulty collecting our accounts receivable from our customers or if we are required to refund customer deposits. 13 Table of Contents Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales.
Our business, financial condition, and results of operations would also be adversely affected if we face difficulty collecting our accounts receivable from our customers or if we are required to refund customer deposits. Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales.
Victor Huang, Airship AI’s co-Founder and our Chief Executive Officer, and Derek Xu, Airship AI’s co-Founder and our Chief Operating Officer, beneficially own (including shares underlying outstanding warrants, stock options and SARs) approximately 49.5% of our combined voting power.
Victor Huang, Airship AI’s co-Founder and our Chief Executive Officer, and Derek Xu, Airship AI’s co-Founder and our Chief Operating Officer, beneficially own (including shares underlying outstanding warrants, stock options and SARs) approximately 38.6% of our combined voting power.
We have incurred losses from operations the past few years and had an accumulated deficit of $74,942,000 as of December 31, 2024. There can be no assurance that Airship AI will ever achieve the level of revenues needed to be profitable in the future and if profitability is achieved, that it will be sustained.
We have incurred losses from operations the past few years and had an accumulated deficit of $45.6 million as of December 31, 2025. There can be no assurance that Airship AI will ever achieve the level of revenues needed to be profitable in the future and if profitability is achieved, that it will be sustained.
On February 26, 2025, the last reported sales price of our common stock was $4.48. The exercise price of the public warrants is $4.50. The exercise price of the public warrants is higher than the current market price of our common stock and accordingly, public warrant holders may not be able to exercise their public warrants at this time.
On February 13, 2026, the last reported sales price of our common stock was $2.43. The exercise price of the public warrants is $4.50. The exercise price of the public warrants is higher than the current market price of our common stock and accordingly, public warrant holders may not be able to exercise their public warrants at this time.
Additionally, these systems contain valuable proprietary and confidential information and may contain personal data of our customers. A security breach could result in disruptions of our internal systems and business applications, harm to our competitive position from the compromise of confidential business information, or subject us to liability under laws that protect personal data.
A security breach could result in disruptions of our internal systems and business applications, harm to our competitive position from the compromise of confidential business information, or subject us to liability under laws that protect personal data.
Sales to such government entities include the following risks: 24 Table of Contents · selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale; · government certification requirements applicable to our platform may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the revised certification; · government demand and payment for our platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our platform; and · governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our platform, which would adversely impact our revenue and operating results.
Sales to such government entities include the following risks: · selling to governmental agencies can be highly competitive, expensive and time consuming, often requiring significant upfront time and expense without any assurance that such efforts will generate a sale; · government certification requirements applicable to our platform may change and, in doing so, restrict our ability to sell into the governmental sector until we have attained the revised certification; · government demand and payment for our platform may be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our platform; and · governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our platform, which would adversely impact our revenue and operating results. 25 Table of Contents The occurrence of any of the foregoing could cause governmental organizations to delay or refrain from purchasing our solutions in the future or otherwise have an adverse effect on our business, operating results and financial condition.
The net income for the year ended December 31, 2023 was primarily as a result of the gain from change in fair value of earnout liability of approximately $21,976,000. 19 Table of Contents Airship AI requires substantial additional funding, which may not be available to Airship AI on acceptable terms, or at all, and, if not so available, may require Airship AI to delay, limit, reduce or cease its operations.
The net loss for the year ended December 31, 2024 was primarily a result of the loss from change in fair value of warrant liability of $33,513,000 and the loss from change in fair value of earnout liability of $18,171,000. 20 Table of Contents Airship AI requires substantial additional funding, which may not be available to Airship AI on acceptable terms, or at all, and, if not so available, may require Airship AI to delay, limit, reduce or cease its operations.
Our ability to renew or expand our customer relationships may decrease or vary as a result of a number of factors, including our customers’ satisfaction or dissatisfaction with our platforms and services, the frequency and severity of software and implementation errors, our platforms’ reliability, our pricing, the effects of general economic conditions, competitive offerings or alternatives, or reductions in our customers’ spending levels.
This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations. 14 Table of Contents Our ability to renew or expand our customer relationships may decrease or vary as a result of a number of factors, including our customers’ satisfaction or dissatisfaction with our platforms and services, the frequency and severity of software and implementation errors, our platforms’ reliability, our pricing, the effects of general economic conditions, competitive offerings or alternatives, or reductions in our customers’ spending levels.
Airship AI sells its product to commercial and government customers under agreements that are normally paid within 30 days of contract completion. For the year ended December 31, 2024, we had revenue from seventy-four customers and one customer represented 57% of total revenue, although such a high level of customer concentration is not typical.
Airship AI sells its product to commercial and government customers under agreements that are normally paid within 30 days of contract completion. For the year ended December 31, 2025, we had revenue from ninety two customers and four customers represented 87% of total revenue.
Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance. 22 Table of Contents As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information.
Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.
The primary reason for the high level of customer concentration for the year ended December 31, 2024 was due to one large order received in late 2023 which was fulfilled in the year ended December 31, 2024. As of December 31, 2024, four customers represent approximately 36%, 25%, 19% and 12% of outstanding account receivables.
The primary reason for the high level of customer concentration for the year ended December 31, 2025 was due to reliance on these four customers for the year ended December 31, 2025. As of December 31, 2025, three customers represent approximately 34%, 33% and 17% of outstanding account receivables.
Investors may not find our common stock attractive because we may rely on these exemptions and reduced disclosures. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
Investors may not find our common stock attractive because we may rely on these exemptions and reduced disclosures.
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 during the years ended or as of December 31, 2024 and 2023. 28 Table of Contents Risks Related to Our Securities Currently, our common stock and public warrants are listed on Nasdaq.
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 during the years ended or as of December 31, 2025 and 2024. On July 4, 2025, OBBBA was signed into law in the United States.
These risks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business.
Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business. 23 Table of Contents Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to Airship AI’s competitive position.
Due to the nature and concentration of the customers and timely payment history, credit risk in account receivables is estimated to be minimal. For the year ended December 31, 2023, three customers represented 34%, 21% and 12% of total revenue from 58 customers, although such a high level of customer concentration is not typical.
As of December 31, 2025, three customers represent approximately 34%, 33% and 17% 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.
Hackers develop and deploy viruses, worms, and other malicious software programs that attack products and services and gain access to networks and data centers. If we experience difficulties maintaining existing systems or implementing new systems, we could incur significant losses due to disruptions in our operations.
If we experience difficulties maintaining existing systems or implementing new systems, we could incur significant losses due to disruptions in our operations. Additionally, these systems contain valuable proprietary and confidential information and may contain personal data of our customers.
Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to Airship AI’s competitive position. Increased sophistication and activities of perpetrators of cyber-attacks have resulted in an increase in information security risks in recent years.
Increased sophistication and activities of perpetrators of cyber-attacks have resulted in an increase in information security risks in recent years. Hackers develop and deploy viruses, worms, and other malicious software programs that attack products and services and gain access to networks and data centers.
Removed
The primary reason for the increase in reliance on a single customer for the year ended December 31, 2023 was due to the lag-time in delivering on a large order which was not fulfilled until 2023. As of December 31, 2023, three customers represented approximately 51%, 26% and 17% of outstanding account receivables.
Added
For the year ended December 31, 2025, we had revenue from ninety two customers and four customers represented 87% of total revenue. The primary reason for the high level of customer concentration for the year ended December 31, 2025 was due to reliance on these four customers for the year ended December 31, 2025.
Removed
This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations.
Added
The net income for the year ended December 31, 2025 was $29,321,000 primarily as a result of the gain from change in fair value of change in fair value of warrant liability of $20,853,000 and the gain from change in fair value of change earnout liability of approximately $15,402,000.
Removed
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 year ended December 31, 2023, three customers represented 34%, 21% and 12% of total revenue from 58 customers, although such a high level of customer concentration is not typical.
Added
As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information. These risks could arise from external parties or from acts or omissions of internal or service provider personnel.
Removed
The primary reason for the increase in reliance on a single customer for the year ended December 31, 2023 was due to the lag-time in delivering on a large order received in late 2022 which was not fulfilled until 2023. As of December 31, 2023, three customers represented approximately 51%, 26% and 17% of outstanding account receivables.
Added
Key provisions of the OBBBA include the permanent extension of once-temporary provisions of the Tax Cuts and Jobs Act of 2017, along with the introduction of other significant changes that may impact the Company. The legislation has multiple effective dates, with certain provisions effective in the Company’s fiscal year 2025 and others implemented through the Company’s fiscal year 2028.
Removed
The occurrence of any of the foregoing could cause governmental organizations to delay or refrain from purchasing our solutions in the future or otherwise have an adverse effect on our business, operating results and financial condition.
Added
The Company continues to evaluate the impact of the OBBBA and has included the impact of changes in the law that were effective during its fiscal year 2025 in the results of its consolidated financial statements. 29 Table of Contents Risks Related to Our Securities Currently, our common stock and public warrants are listed on Nasdaq.
Added
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. 33 Table of Contents We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe attack did not affect business operations and did not have a significant financial impact on the Company. Most files affected had backup and Airship was able to remove affected files and restore them from backup. 34 Table of Contents
Biggest changeThe attack did not affect business operations and did not have a significant financial impact on the Company. Most files affected had backup and Airship was able to remove affected files and restore them from backup. 35 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOn August 27, 2024, we extended the lease to February 28, 2025. We will exit this location on February 28, 2025. On February 1, 2025, we entered into an office lease in Mooresville, North Carolina. We lease 5,240 square feet and the net monthly payment is $9,105.
Biggest changeWe lease 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.
ITEM 2. PROPERTIES. On July 13, 2023, we entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started on 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.
ITEM 2. PROPERTIES. On September 7, 2023, we 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 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 it is reasonably certain that the lease will be extended. On February 29, 2024, we extended an office lease in Mooresville, North Carolina. We lease 3,621 square feet and the net monthly payment is $6,488.
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 is reasonably certain that the lease will be extended. On December 6, 2024, we entered into two separate office leases in Mooresville, North Carolina, the terms of which commenced on February 1, 2025.
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. We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.
We believe that all our properties have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not currently a party to any actions, claims, suits, or other legal procedures whose conclusion, if not determined in our favor, would have a major adverse effect on our business, financial condition, or results of operations, either individually or in the aggregate. 35 Table of Contents PART II
Biggest changeWe are not currently a party to any actions, claims, suits, or other legal procedures whose conclusion, if not determined in our favor, would have a major adverse effect on our business, financial condition, or results of operations, either individually or in the aggregate. 36 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

19 edited+3 added−3 removed110 unchanged
Biggest changeAlternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board.
Biggest changeAlternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board. 43 Table of Contents Private Warrants The private warrants will not be redeemable by the Company so long as they are held by the Sponsor, members of the Sponsor or their permitted transferees (except as set forth under “ — Warrants — Public Warrants — Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00 ”).
Redemption Date (period to expiration of warrants) Fair Market Value of Common Stock ≤10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 ≥18.00 60 months 0.261 0.281 0.297 0.311 0.324 0.337 0.348 0.358 0.361 57 months 0.257 0.277 0.294 0.310 0.324 0.337 0.348 0.358 0.361 54 months 0.252 0.272 0.291 0.307 0.322 0.335 0.347 0.357 0.361 51 months 0.246 0.268 0.287 0.304 0.320 0.333 0.346 0.357 0.361 48 months 0.241 0.263 0.283 0.301 0.317 0.332 0.344 0.356 0.361 45 months 0.235 0.258 0.279 0.298 0.315 0.330 0.343 0.356 0.361 42 months 0.228 0.252 0.274 0.294 0.312 0.328 0.342 0.355 0.361 39 months 0.221 0.246 0.269 0.290 0.309 0.325 0.340 0.354 0.361 36 months 0.213 0.239 0.263 0.285 0.305 0.323 0.339 0.353 0.361 33 months 0.205 0.232 0.257 0.280 0.301 0.320 0.337 0.352 0.361 30 months 0.196 0.224 0.250 0.274 0.297 0.316 0.335 0.351 0.361 27 months 0.185 0.214 0.242 0.268 0.291 0.313 0.332 0.350 0.361 24 months 0.173 0.204 0.233 0.260 0.285 0.308 0.329 0.348 0.361 21 months 0.161 0.193 0.223 0.252 0.279 0.304 0.326 0.347 0.361 18 months 0.146 0.179 0.211 0.242 0.271 0.298 0.322 0.345 0.361 15 months 0.130 0.164 0.197 0.230 0.262 0.291 0.317 0.342 0.361 12 months 0.111 0.146 0.181 0.216 0.250 0.282 0.312 0.339 0.361 9 months 0.090 0.125 0.162 0.199 0.237 0.272 0.305 0.336 0.361 6 months 0.065 0.099 0.137 0.178 0.219 0.259 0.296 0.331 0.361 3 months 0.034 0.065 0.104 0.150 0.197 0.243 0.286 0.326 0.361 0 months — — 0.042 0.115 0.179 0.233 0.281 0.323 0.361 The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of common stock to be issued for each public warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as applicable.
Redemption Date (period to expiration of warrants) Fair Market Value of Common Stock ≤10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 ≥18.00 60 months 0.261 0.281 0.297 0.311 0.324 0.337 0.348 0.358 0.361 57 months 0.257 0.277 0.294 0.310 0.324 0.337 0.348 0.358 0.361 54 months 0.252 0.272 0.291 0.307 0.322 0.335 0.347 0.357 0.361 51 months 0.246 0.268 0.287 0.304 0.320 0.333 0.346 0.357 0.361 48 months 0.241 0.263 0.283 0.301 0.317 0.332 0.344 0.356 0.361 45 months 0.235 0.258 0.279 0.298 0.315 0.330 0.343 0.356 0.361 42 months 0.228 0.252 0.274 0.294 0.312 0.328 0.342 0.355 0.361 39 months 0.221 0.246 0.269 0.290 0.309 0.325 0.340 0.354 0.361 36 months 0.213 0.239 0.263 0.285 0.305 0.323 0.339 0.353 0.361 33 months 0.205 0.232 0.257 0.280 0.301 0.320 0.337 0.352 0.361 30 months 0.196 0.224 0.250 0.274 0.297 0.316 0.335 0.351 0.361 27 months 0.185 0.214 0.242 0.268 0.291 0.313 0.332 0.350 0.361 24 months 0.173 0.204 0.233 0.260 0.285 0.308 0.329 0.348 0.361 21 months 0.161 0.193 0.223 0.252 0.279 0.304 0.326 0.347 0.361 18 months 0.146 0.179 0.211 0.242 0.271 0.298 0.322 0.345 0.361 15 months 0.130 0.164 0.197 0.230 0.262 0.291 0.317 0.342 0.361 12 months 0.111 0.146 0.181 0.216 0.250 0.282 0.312 0.339 0.361 9 months 0.090 0.125 0.162 0.199 0.237 0.272 0.305 0.336 0.361 6 months 0.065 0.099 0.137 0.178 0.219 0.259 0.296 0.331 0.361 3 months 0.034 0.065 0.104 0.150 0.197 0.243 0.286 0.326 0.361 0 months — — 0.042 0.115 0.179 0.233 0.281 0.323 0.361 40 Table of Contents The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of common stock to be issued for each public warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as applicable.
Our charter provides that the following provisions therein may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 66 and 2/3% in voting power all the then outstanding shares of the Company’s stock entitled to vote thereon, voting together as a single class: • the provision regarding the Board being authorized to establish one or more series of preferred stock with such powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as the Board may determine; • the provisions regarding removal of directors; • the provisions regarding filling vacancies on the Board and newly created directorships; • the provision regarding the Board being authorized to amend the bylaws without a stockholder vote; • the provisions regarding calling special meetings of stockholders; 45 Table of Contents • the provisions regarding stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders; • the provisions regarding limitation on liability and indemnification of the Company’s directors and officers; • the provisions regarding the Company electing not to be governed by Section 203 of the DGCL; • the provisions adopting Delaware as the exclusive forum for certain stockholder litigation and adopting the federal district courts of the United States as the exclusive forum for resolving complaints asserting a cause of action under the Securities Act; • the provisions regarding the Company renouncing its interest or expectancy in any corporate opportunity offered to any of its non-employee directors or principal stockholders and their affiliates; and • the amendment provision requiring that the above provisions be amended only with a 66 and 2/3% supermajority vote.
Our charter provides that the following provisions therein may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 66 and 2/3% in voting power all the then outstanding shares of the Company’s stock entitled to vote thereon, voting together as a single class: · the provision regarding the Board being authorized to establish one or more series of preferred stock with such powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as the Board may determine; · the provisions regarding removal of directors; · the provisions regarding filling vacancies on the Board and newly created directorships; · the provision regarding the Board being authorized to amend the bylaws without a stockholder vote; · the provisions regarding calling special meetings of stockholders; 46 Table of Contents · the provisions regarding stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders; · the provisions regarding limitation on liability and indemnification of the Company’s directors and officers; · the provisions regarding the Company electing not to be governed by Section 203 of the DGCL; · the provisions adopting Delaware as the exclusive forum for certain stockholder litigation and adopting the federal district courts of the United States as the exclusive forum for resolving complaints asserting a cause of action under the Securities Act; · the provisions regarding the Company renouncing its interest or expectancy in any corporate opportunity offered to any of its non-employee directors or principal stockholders and their affiliates; and · the amendment provision requiring that the above provisions be amended only with a 66 and 2/3% supermajority vote.
Beneficial Ownership Limitations A holder of a public warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder) of the common stock outstanding immediately after giving effect to such exercise. 40 Table of Contents Anti-dilution Adjustments.
Beneficial Ownership Limitations A holder of a public warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (as specified by the holder) of the common stock outstanding immediately after giving effect to such exercise. 41 Table of Contents Anti-dilution Adjustments.
Although the Company believes this provision will benefit the Company by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against the Company’s directors and officers. 46 Table of Contents Conflicts of Interest Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders.
Although the Company believes this provision will benefit the Company by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against the Company’s directors and officers. 47 Table of Contents Conflicts of Interest Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders.
The purpose of such exercise price reduction is to provide additional value to holders of the public warrants when an extraordinary transaction occurs during the exercise period of the public warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the public warrants. 41 Table of Contents The public warrants are issued in registered form under a warrant agreement between the Company and Equiniti Trust Company, LLC, as warrant agent.
The purpose of such exercise price reduction is to provide additional value to holders of the public warrants when an extraordinary transaction occurs during the exercise period of the public warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the public warrants. 42 Table of Contents The public warrants are issued in registered form under a warrant agreement between the Company and Equiniti Trust Company, LLC, as warrant agent.
Quorum Our bylaws provide that at any meeting of the Board, a majority of the total number of directors then in office constitutes a quorum for the transaction of business. 44 Table of Contents No Cumulative Voting Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation expressly authorizes cumulative voting.
Quorum Our bylaws provide that at any meeting of the Board, a majority of the total number of directors then in office constitutes a quorum for the transaction of business. 45 Table of Contents No Cumulative Voting Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation expressly authorizes cumulative voting.
Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $18.00. 37 Table of Contents Once the public warrants become exercisable, the Company may redeem the outstanding public warrants: • in whole and not in part; • at a price of $0.01 per warrant; • upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and • if, and only if, the closing price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a public warrant as described under the heading “— Warrants — Public Warrants — Anti-Dilution Adjustments ”) for any 20 trading days within a 30-trading day period ending three business days before we send to the notice of redemption to the warrant holders (which we refer to as the “Reference Value”).
Once the public warrants become exercisable, the Company may redeem the outstanding public warrants: · in whole and not in part; · at a price of $0.01 per warrant; · upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and · if, and only if, the closing price of the shares of common stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a public warrant as described under the heading “— Warrants — Public Warrants — Anti-Dilution Adjustments ”) for any 20 trading days within a 30-trading day period ending three business days before we send to the notice of redemption to the warrant holders (which we refer to as the “Reference Value”).
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available for such purposes. 36 Table of Contents Liquidation Rights.
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board out of funds legally available for such purposes. 37 Table of Contents Liquidation Rights.
Securities Authorized for Issuance under Equity Compensation Plans See Item 12 “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .” Recent Sales of Unregistered Securities There were no sales of unregistered securities during the three months ended December 31, 2024.
Securities Authorized for Issuance under Equity Compensation Plans See Item 12 “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .” Recent Sales of Unregistered Securities There were no sales of unregistered securities during the three months ended December 31, 2025.
Once the public warrants become exercisable, the Company may redeem the outstanding warrants: • in whole and not in part; • at a price of $0.10 per warrant; • upon not less than 30 days’ prior written notice of redemption, provided that holders will be able to exercise their public warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” (as defined below) of common stock except as otherwise described below; • if, and only if, the Reference Value equals or exceeds $10.00 per Public Share (as adjusted for adjustments to the number of shares issuable upon exercise) or the exercise price of a warrant as described under the heading “— Anti-dilution Adjustments ”; and • if the Reference Value is less than $18.00 per share, the private warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
Once the public warrants become exercisable, the Company may redeem the outstanding warrants: · in whole and not in part; · at a price of $0.10 per warrant; · upon not less than 30 days’ prior written notice of redemption, provided that holders will be able to exercise their public warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” (as defined below) of common stock except as otherwise described below; · if, and only if, the Reference Value equals or exceeds $10.00 per Public Share (as adjusted for adjustments to the number of shares issuable upon exercise) or the exercise price of a warrant as described under the heading “— Anti-dilution Adjustments ”; and · if the Reference Value is less than $18.00 per share, the private warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above. 39 Table of Contents Beginning on the date the notice of redemption is given until the public warrants are redeemed or exercised, holders may elect to exercise their public warrants on a cashless basis.
If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith. 43 Table of Contents Our Transfer Agent and Warrant Agent The transfer agent for the common stock and warrant agent for the warrants is Equiniti Trust Company, LLC.
If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith. Our Transfer Agent and Warrant Agent The transfer agent for the common stock and warrant agent for the warrants is Equiniti Trust Company, LLC.
The numbers in the table below represent the number of shares of common stock that a warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of common stock on the corresponding redemption date (assuming holders elect to exercise their public warrants and such warrants are not redeemed for $0.10 per warrant), determined for these purposes based on the volume weighted average price of the common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. the Company will provide warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends. 38 Table of Contents The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a public warrant or the exercise price of a public warrant is adjusted as set forth under the heading “— Anti-dilution Adjustments ” below.
The numbers in the table below represent the number of shares of common stock that a warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of common stock on the corresponding redemption date (assuming holders elect to exercise their public warrants and such warrants are not redeemed for $0.10 per warrant), determined for these purposes based on the volume weighted average price of the common stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. the Company will provide warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends.
Our charter authorizes the issuance of 205,000,000 shares, consisting of 200,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Common Stock As of December 31, 2024, there were 30,588,413 shares of common stock outstanding. Voting rights.
Our charter authorizes the issuance of 205,000,000 shares, consisting of 200,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Common Stock As of December 31, 2025, there were 34,368,162 shares of common stock outstanding. Voting rights.
We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. 42 Table of Contents Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum.
Certain Anti-Takeover Provisions of the Charter, the Bylaws and Certain Provisions of Delaware law Our charter and bylaws and the DGCL contain provisions, which are summarized in the following paragraphs, which are intended to enhance the likelihood of continuity and stability in the composition of the Board and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company.
Its address is 48 Wall Street, Floor 23, New York, New York 10005, and its telephone number is (800) 937-5449. 44 Table of Contents Certain Anti-Takeover Provisions of the Charter, the Bylaws and Certain Provisions of Delaware law Our charter and bylaws and the DGCL contain provisions, which are summarized in the following paragraphs, which are intended to enhance the likelihood of continuity and stability in the composition of the Board and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company.
Finally, as reflected in the table above, if the public warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of common stock. 39 Table of Contents This redemption feature is structured to allow for all of the outstanding public warrants to be redeemed when the common stock is trading at or above $10.00 per share, which may be at a time when the trading price of the common stock is below the exercise price of the public warrants.
Finally, as reflected in the table above, if the public warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of common stock.
As of February 26, 2025, the closing sale price of our common stock and the closing sales price of our public warrants were $4.48 and $1.45, respectively. Number of Holders of our Securities As of February 26, 2025, there were approximately 437 holders of record of our common stock and five holders of record of the public warrants.
As of February 13, 2026, the closing sales price of our common stock and the closing sales price of our public warrants were $2.43 and $0.85, respectively. Number of Holders of our Securities As of February 13, 2026, there were approximately 425 holders of record of our common stock and five holders of record of the public warrants.
In no event will the Company be required to net cash settle any public warrant.
In no event will the Company be required to net cash settle any public warrant. 38 Table of Contents Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $18.00.
Removed
Beginning on the date the notice of redemption is given until the public warrants are redeemed or exercised, holders may elect to exercise their public warrants on a cashless basis.
Added
The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a public warrant or the exercise price of a public warrant is adjusted as set forth under the heading “— Anti-dilution Adjustments ” below.
Removed
Private Warrants The private warrants will not be redeemable by the Company so long as they are held by the Sponsor, members of the Sponsor or their permitted transferees (except as set forth under “ — Warrants — Public Warrants — Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00 ”).
Added
This redemption feature is structured to allow for all of the outstanding public warrants to be redeemed when the common stock is trading at or above $10.00 per share, which may be at a time when the trading price of the common stock is below the exercise price of the public warrants.
Removed
Its address is 48 Wall Street, Floor 23, New York, New York 10005, and its telephone number is (800) 937-5449.
Added
We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

41 edited+16 added−22 removed50 unchanged
Biggest change(dollars in thousands) Years Ended December 31, 2024 2023 $ Variance % Variance Net revenues $ 23,050 $ 12,300 $ 10,750 87.4 % Cost of net revenues 12,523 6,536 (5,987 ) -91.6 % Gross profit 10,527 5,764 4,763 82.6 % Research and development expenses 2,805 2,729 (76 ) -2.8 % Selling, general and administrative expenses 11,227 9,675 (1,552 ) -16.0 % Total operating expenses 14,032 12,404 (1,628 ) -13.1 % Operating loss (3,505 ) (6,640 ) 3,135 47.2 % Other income (expense): (Loss) gain from change in fair value of earnout liability (18,171 ) 21,977 (40,148 ) -182.7 % (Loss) gain from change in fair value of warrant liability (33,513 ) 1,341 (34,854 ) -2599.1 % Loss from change in fair value of convertible debt (142 ) (241 ) 99 41.1 % Loss on note conversion (1,145 ) - (1,145 ) -100.0 % Interest expense, net (1,003 ) (56 ) (947 ) -1691.1 % Other income (expense) 14 (10 ) 24 240.0 % Total other (expense) income, net (53,960 ) 23,011 (76,971 ) -334.5 % (Loss) income before income taxes (57,465 ) 16,371 (73,836 ) -451.0 % Provision for income taxes - - - - Net (loss) income $ (57,465 ) $ 16,371 $ (73,836 ) -451.0 % Net Revenues — Net revenues for the year ended December 31, 2024 increased $10,750,000 to $23,050,000 as compared to $12,300,000 for the year ended December 31, 2023, as a result of increased product sales.
Biggest change(dollars in thousands) Years Ended December 31, 2025 2024 $ Variance % Variance Net revenues $ 15,321 $ 23,050 $ (7,729 ) -33.5 % Cost of net revenues 7,624 12,523 4,899 39.1 % Gross profit 7,697 10,527 (2,830 ) -26.9 % Research and development expenses 3,076 2,805 (271 ) -9.7 % Selling, general and administrative expenses 11,837 11,227 (610 ) -5.4 % Total operating expenses 14,913 14,032 (881 ) -6.3 % Operating loss (7,216 ) (3,505 ) (3,711 ) -105.9 % Other income (expense): Gain (loss) from change in fair value of earnout liability 15,402 (18,171 ) 33,573 184.8 % Gain (loss) change in fair value of warrant liability 20,853 (33,513 ) 54,366 162.2 % Loss from change in fair value of convertible debt - (142 ) 142 100.0 % Loss on note conversion - (1,145 ) 1,145 100.0 % Interest income (expense), net 282 (1,003 ) 1,285 128.1 % Other expense - 14 (14 ) 100.0 % Total income (other expense), net 36,537 (53,960 ) 90,497 167.7 % Income (loss) before income taxes 29,321 (57,465 ) 86,786 151.0 % Provision for income taxes - - - - Net income (loss) $ 29,321 $ (57,465 ) $ 86,786 151.0 % Net Revenues — Net revenues for the year ended December 31, 2025 decreased $7,729,000 to $15,321,000 as compared to $23,050,000 for the year ended December 31, 2024.
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, we issued an additional 86,198 shares of our common stock related to the conversion of notes at $2.65 per share.
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 our common stock valued at $835,610. On September 13, 2024, we issued an additional 86,198 shares of our common stock related to the conversion of notes at $2.65 per share.
Our AI modelling process starts with pre-trained AI models from our technology ecosystem partners which we then customize using proprietary datasets tailored towards our customers unique workflow requirements. Where customers have pre-existing AI models or engines, we integrate those models or engines into our edge platform allowing customers to leverage proprietary models within the Airship AI software ecosystem.
Our AI modelling process starts with pre-trained AI models from our technology ecosystem partners which we then customize using proprietary datasets tailored towards our customers’ unique workflow requirements. Where customers have pre-existing AI models or engines, we integrate those models or engines into our edge platform allowing customers to leverage proprietary models within the Airship AI software ecosystem.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2024 was $14,785,000 and consisted of (i) net proceeds from offering of $7,290,000; (ii) net proceeds from exercise of warrants of $7,705,000; and (iii) proceeds from stock option exercises of $240,000; offset by repayment of advances by founders of $450,000.
Net cash provided by financing activities for the year ended December 31, 2024 was $14,785,000 and consisted of (i) net proceeds from offering of $7,290,000; (ii) net proceeds from exercise of warrants of $7,705,000; and (iii) proceeds from stock option exercises of $240,000; and (iv) offset by repayment of advances by founders of $450,000.
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).
We classify 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).
The amount of consideration we expect to receive in exchange for delivering on the contract is allocated to each performance obligation based on its relative standalone selling price. 54 Table of Contents We establish the standalone selling price using the prices charged for a deliverable when sold separately.
The amount of consideration we expect to receive in exchange for delivering on the contract is allocated to each performance obligation based on its relative standalone selling price. We establish the standalone selling price using the prices charged for a deliverable when sold separately.
The CODM uses consolidated net income (loss) as its required measure of segment profit/loss, as such measure is determined in accordance with the measurement principles most consistent with the consolidated financial statements. 50 Table of Contents Results of Operations The following table sets forth key components of our results of operations during the years ended December 31, 2024 and 2023.
The CODM uses consolidated net income (loss) as its required measure of segment profit/loss, as such measure is determined in accordance with the measurement principles most consistent with the consolidated financial statements. 52 Table of Contents Results of Operations The following table sets forth key components of our results of operations during the years ended December 31, 2025 and 2024.
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.
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.
On June 22, 2024, we entered into an extension agreement with Platinum Capital Partner, Inc. to extend the maturity date of a $2,000,000 senior secured convertible promissory note to June 22, 2025.
Debt Financing Arrangements On June 22, 2023, we entered into a senior secured convertible promissory note with Platinum Capital Partners Inc. (“Platinum”) and received $2,000,000. On June 22, 2024, we entered into an extension agreement with Platinum to extend the maturity date of the $2,000,000 senior secured convertible promissory note to June 22, 2025.
We will exit this location on February 28, 2025. On February 1, 2025, we entered into an office lease in Mooresville, North Carolina. We lease 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.
We do not believe that is reasonably certain that the lease will be extended. On February 1, 2025, we entered into an office lease in Mooresville, North Carolina. We lease 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.
Operating Activities Net cash used in operating activities for the year ended December 31, 2024 was $6,504,000. This amount was primarily related to (i) net loss of $57,465,000; and (ii) net working capital reductions of $4,804,000 (including a $2,780,000 reduction in deferred revenues); offset by (iii) noncash items of $55,766,000.
This amount was primarily related to (i) net loss of $57,465,000; and (ii) net working capital reductions of $4,804,000 (including a $2,780,000 reduction in deferred revenues); offset by (iii) noncash items of $55,766,000.
The gain from change in fair value of various financial instruments was primarily the result of a decrease in the stock price from the merger date to December 31, 2023. Net Loss — Net loss for the year ended December 31, 2024 was $57,465,000 as compared to a net income of $16,371,000 for the year ended December 31, 2023.
The loss from change in fair value of various financial instruments was primarily the result of an increase in the stock price. Net Income (Loss) — Net income (loss) for the year ended December 31, 2025 was $29,321,000 as compared to a net loss of $57,465,000 for the year ended December 31, 2024.
While we currently have a strong footprint across multiple large U.S. government agencies, growing our business within these agencies outside of the investigation focused departments is a fundamental area of our projected growth.
We believe the following key performance indicators apply to us in the future: · Growth within existing government customers . While we currently have a strong footprint across multiple large U.S. government agencies, growing our business within these agencies outside of the investigation focused departments is a fundamental area of our projected growth.
Noncash items included (iv) depreciation of $2,000; (v) stock based compensation of $1,363,000; (vi) net amortization of operating lease right of use asset of $223,000; (vii) issuance of common stock for services of $199,000; (viii) noncash interest expense of $1,008,000; (ix) loss from change in warrant liability of $33,513,000; (x) loss from change in earnout liability of $18,171,000; (xi) loss from change in fair value of convertible note of $142,000; and (xii) loss on note conversions of $1,145,000. 52 Table of Contents Net cash used in operating activities for the year ended December 31, 2023 was $3,291,000.
Noncash items included (iv) depreciation of $2,000; (v) stock based compensation of $1,363,000; (vi) net amortization of operating lease right of use asset of $223,000; (vii) issuance of common stock for services of $199,000; (viii) noncash interest expense of $1,008,000; (ix) loss from change in warrant liability of $33,513,000; (x) loss from change in earnout liability of $18,171,000; (xi) loss from change in fair value of convertible note of $142,000; and (xii) loss on note conversions of $1,145,000. 54 Table of Contents Financing Activities Net cash provided by financing activities for the year ended December 31, 2025 was $8,347,000 and consisted of (i) net proceeds from exercise of warrants of $9,498,000; (ii) proceeds from stock option exercises of $149,000; and offset by (iii) repayment of advances by founders of $1,300,000.
The loss from change in fair value of various financial instruments was primarily the result of an increase in the stock price.
The income from change in fair value of various financial instruments was primarily the result of a decrease in our stock price.
We received purchase orders from various federal government agency customers totaling over $16 million which we shipped in the year ended December 31, 2024. Cost of Net Revenues — Cost of net revenues primarily consists of product costs and post customer support.
The net revenues for the year ended December 31, 2024 included purchase orders from various federal government agency customers totaling over $16 million, which we primarily shipped in 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 December 31, 2024 and 2023 are based upon the short-term nature of the assets and liabilities.
We recorded our earnout liability (unvested earnout shares) and public and private placement warrants, remeasured on a recurring basis 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 December 31, 2025 and 2024 are based upon the short-term nature of the assets and liabilities.
The critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below. Revenue Recognition The majority of our contracts with our customers include various combinations of our products and post contract support (“PCS”) services. Our products and PCS offerings have significant standalone functionalities and capabilities.
Revenue Recognition The majority of our contracts with our customers include various combinations of our products and post contract support (“PCS”) services. Our products and PCS offerings have significant standalone functionalities and capabilities.
The net loss primarily related to noncash items of $55,766 ,000.
The net loss for the year ended December 31, 2024 was primarily related to noncash items of $55,766,000.
On December 24, 2024, we entered into a warrant exercise inducement agreement with a holder of existing common stock warrants exercisable for an aggregate of 2,882,883 shares of common stock at the existing exercise price of $2.65 per share (collectively, the “Existing Warrants”), in exchange for the issuance of new common stock warrants to purchase 2,162,162 shares of common stock at an exercise price per share of $4.50 (collectively, the “Inducement Warrants”).
Warrant Exercise On October 8, 2025, we entered into a warrant exercise inducement offer letter with the holder of existing common stock warrants exercisable for an aggregate of 2,162,162 shares of common stock to exercise such warrants at the existing exercise price of $4.50 per share, in exchange for our 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.
To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected. We believe that the significant accounting policies described in “ Note 2, Summary of Significant Accounting Policies ” to our audited consolidated financial statements are accurate and complete.
To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected.
Key Performance Indicators Historically, a majority of our product revenue has consisted primarily of a bundled hardware and software product and to date we have sold or licensed a minimal amount of standalone software.
Key Performance Indicators Historically, a majority of our product revenue has consisted primarily of a bundled hardware and software product and to date we have sold or licensed a minimal amount of standalone software. In the future, we expect to see more delivery of our products using a cloud-based software solution which will allow us to create additional subscription revenue.
Stock Based Compensation The Company records stock-based compensation expense associated with stock options, warrants, SARs, unvested earnout shares and other equity-based compensation using the Black-Scholes-Merton option valuation and Monte Carlo valuation models for estimating fair value of such equity instruments.
We do not believe that we currently have any material uncertain tax positions and no reserves are currently required given our deferred tax asset has a 100% valuation allowance. 56 Table of Contents Stock Based Compensation The Company records stock-based compensation expense associated with stock options, warrants, SARs, unvested earnout shares and other equity-based compensation using the Black-Scholes-Merton option valuation and Monte Carlo valuation models for estimating fair value of such equity instruments.
To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected. We believe that the significant accounting policies described in “ Note 2, Summary of Significant Accounting Policies ” to our audited consolidated financial statements are accurate and complete.
We believe that the significant accounting policies described in “ Note 2, Summary of Significant Accounting Policies ” to our audited consolidated financial statements are accurate and complete. The critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below.
Principal Factors Affecting Our Financial Performance We believe the following factors and trends may cause previously reported financial information not to be necessarily indicative of future operating results or future financial conditions: · Increase in the sales of lower margin solutions as we expand our operational footprint .
We will measure progress against this objective through the disclosure of the numbers of edge AI hardware devices we are selling as well as the growth of our edge AI analytic capabilities, providing tangible evidence of the success of our strategy to both management and investors alike. 51 Table of Contents Principal Factors Affecting Our Financial Performance We believe the following factors and trends may cause previously reported financial information not to be necessarily indicative of future operating results or future financial conditions: · Increase in the sales of lower margin solutions as we expand our operational footprint .
The net income for the year ended December 31, 2023 included noncash income of $19,627,000. Liquidity and Capital Resources as of December 31, 2024 and 2023 Liquidity is our ability to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.
Liquidity and Capital Resources as of December 31, 2025 and 2024 Liquidity is our ability to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures.
The second step requires us to estimate and measure the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement. We do not believe that we currently have any material uncertain tax positions and no reserves are currently required given our deferred tax asset has a 100% valuation allowance.
The second step requires us to estimate and measure the tax benefit as the largest amount that is more likely than not to be realized upon ultimate settlement.
Selling, General and Administrative Expenses — Selling, general and administrative expenses for the year ended December 31, 2024 increased $1,552,000 to $11,227,000 as compared to $9,675,000 for the year ended December 31, 2023.
The increase was due to increased expenses for product development in the United States and Taiwan. Selling, General and Administrative Expenses — Selling, general and administrative expenses for the year ended December 31, 2025 increased $610,000 to $11,837,000 as compared to $11,227,000 for the year ended December 31, 2024.
The hierarchy consists of three levels: Level 1 — Quoted prices in active markets for identical assets and liabilities; Level 2 — Inputs other than level one inputs that are either directly or indirectly observable; and Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 55 Table of Contents We recorded our senior secured convertible promissory note, earnout liability (unvested earnout shares), public and private placement warrants and the warrants that were issued with the senior secured convertible note at fair value, remeasured on a recurring basis The senior secured convertible note was fully converted to equity as of December 31, 2024.
The hierarchy consists of three levels: Level 1 — Quoted prices in active markets for identical assets and liabilities; Level 2 — Inputs other than level one inputs that are either directly or indirectly observable; and Level 3 — Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditures. We have incurred losses from operations in the past few years and had an accumulated deficit of $74.9 million as of December 31, 2024.
We have incurred losses from operations in the past few years and had an accumulated deficit of $45.6 million as of December 31, 2025.
Other income for the year ended December 31, 2023 consisted of (i) gain from change in fair value of warrant liability of $1,341,000; (ii) gain from change in fair value of earnout liability of $21,977,000; and offset by (iii) unrealized loss for increase in fair value of convertible promissory note of $241,000 and (iv) noncash interest and other, net of $66,000.
Other income for the year ended December 31, 2025 consisted of (i) gain from change in fair value of earnout liability of $15,402,000; (ii) gain from change in fair value of warrant liability of $20,853,000; and (iii) interest income of $282,000.
Research and Development Expenses — Research and development expenses for the year ended December 31, 2024 increased $76,000 to $2,805,000 as compared to $2,729,000 for the year ended December 31, 2023. The increase was due to increased expenses for product development.
The decrease was due to lower sales, offset by product mix with decreased equipment purchases during the year ended December 31, 2025. 53 Table of Contents Research and Development Expenses — Research and development expenses for the year ended December 31, 2025 increased $271,000 to $3,076,000 as compared to $2,805,000 for the year ended December 31, 2024.
Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis.
We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the current economic environment.
Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the current economic environment. To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected.
Contractual Obligations and Commitments Less Than Contractual Cash Obligations Total 1 Year 1-3 Years Operating lease cash payments $ 1,046,705 $ 359,563 $ 687,142 On July 13, 2023, we entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started on October 1, 2023. The monthly payment is $25,000 per month.
We recognized a loss on debt conversion of $1,144,676 during the year ended December 31, 2024. Contractual Obligations and Commitments [MAKE CHANGES TO SAME DISCLOSURE THAT APPEARS ON PAGE 36] On July 13, 2023, we entered into a lease in Redmond, WA for 15,567 square feet of office and warehouse space which started on October 1, 2023.
For the year ended December 31, 2024, cost of sales increased $5,987,000 to $12,523,000 as compared to $6,536,000 for the year ended December 31, 2023. The increase was due to higher product sales and product mix with increased equipment purchases during the year ended December 31, 2024.
For the year ended December 31, 2025, cost of sales decreased $4,899,000 to $7,624,000 as compared to $12,523,000 for the year ended December 31, 2024.
This amount was primarily related to (i) net income of $16,371,000; (ii) depreciation of $15,000; (iii) stock based compensation of $2,852,000; (iv) net amortization of operating lease right of use asset of $597,000; (v) unrealized loss for increase in fair value of convertible promissory note of $240,000; (vi) non cash interest, net of $65,000; offset by (vii) gain from change in fair value of warrant liability of $1,341,000; (viii) gain from change in fair value of earnout liability of $21,976,000; and (ix) working capital changes of $36,000.
The net income primarily related to noncash items of $34,247,000. Noncash items included (i) gain from change in warrant liability of $20,853,000; (ii) gain from change in earnout liability of $15,402,000; and offset by (iii) stock based compensation of $1,630,000; and (iv) net amortization of operating lease right of use asset of $378,000.
Our 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. 48 Table of Contents Recent Developments On June 3, 2024, we permanently reduced the exercise price of our outstanding public warrants and private warrants, previously exercisable at $11.50 per share, to an exercise price of $7.80 per share.
Our 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. 49 Table of Contents Recent Developments Expansion into Robotics and Autonomous Systems We are pursuing the extension of our edge AI platform to support robotic and autonomous system deployments and expect to conduct pilot programs during 2026.
As we grow and increase our product offerings and customer base, we intend to modify and develop more advanced performance indicators. We believe the following key performance indicators apply to us in the future: · Growth within existing government customers .
We have historically evaluated our business solely based on revenue generated from customers and we have not tracked any other customer-related metrics. As we grow and increase our product offerings and customer base, we intend to modify and develop more advanced performance indicators.
The Company received net proceeds of approximately $7.3 million, after deducting the estimated offering expenses payable by us, including the placement agent fees. We intend to use the net proceeds from the offering for working capital and general corporate purposes, including cost of goods sold purchases, personnel and product development.
The aggregate gross proceeds received from the exercise of the existing warrants were approximately $9,729,729, before deducting financial advisory fees. We intend to use the net proceeds from the exercise of the existing warrants for working capital and general corporate purposes.
The stock based compensation during the year ended December 31, 2023 included warrants to purchase common stock issued on May 8, 2023 for 765,000 shares to each of the two founders valued at $2,136,000. 51 Table of Contents Other Expense — Other expense for the year ended December 31, 2024 was $53,960,000 as compared to other income of $23,011,000 for the year ended December 31, 2023.
The increase is primarily due to an increase in stock-based compensation expense of $267,000 and other personnel costs. Other Income (Expense) — Other income for the year ended December 31, 2025 was $36,537,000 as compared to other expense of $53,960,000 for the year ended December 31, 2024.
Removed
On November 20, 2024, we further reduced the exercise price of our outstanding public warrants and private warrants to an exercise price of $4.50 per share. The purpose of this reduced exercise price was to potentially raise proceeds received from the exercise of such warrants, if any, for working capital and general corporate purposes.
Added
We believe the integration of advanced computer vision, sensor fusion, and real-time edge analytics with mobile and semi-autonomous platforms represents a natural extension of our existing software capabilities. Our robotics-related initiatives are focused on enabling our AI software to operate on, and integrate with, ground-based or mobile robotic platforms for applications such as security, inspection, monitoring, and situational awareness.
Removed
In consideration for entering into the extension agreement, we issued to Platinum 232,360 shares of common stock in payment of all interest and extension fees through June 22, 2025. As of December 31, 2024, the $2,000,000 principal balance of the senior secured convertible note was converted to equity.
Added
These platforms are expected to leverage our existing AI models, including object detection, behavior analysis, and anomaly detection, deployed at the edge to support real-time decision-making in dynamic environments. During 2026, we plan to conduct limited pilot deployments with selected customers and partners to evaluate technical performance, operational integration, and market demand.
Removed
During the year ended December 31, 2024, we issued 879,051 shares of common stock related to the conversion.
Added
These pilot programs are not expected to generate material revenue. Any future commercialization of robotics-enabled offerings would be expected to complement our existing software-centric business model. There can be no assurance that these pilot efforts will result in commercially viable products or services.
Removed
On September 3, 2024, we closed an offering of $8 million consisting of 2,882,883 shares of common stock and 2,882,883 common warrants to purchase up to 2,882,883 shares of common stock at a combined offering price of $2.775 per share and common stock warrant.
Added
Backlog and Pipeline We also began to see movement during the fourth quarter of 2025 and into the first quarter of 2026 on several large projects in the federal and commercial marketplace, including several notable awards: · $1.9 million award from Department of Homeland Security (DHS) supporting large National Special Security Events (NSSE) scheduled for 2026. · $2.8 million award from a large commercial customer supporting a technical refresh of deployed hardware and software.
Removed
On September 27, 2024, the Company entered into a master loan agreement with Mr. Huang, whereby he may provide additional funding of up to $1,500,000 under certain terms and conditions. The agreement provides for interest of 6%. We agreed to pay interest for the 2024 advances of $11,913 and issued warrants to purchase up to 220,000 shares of common stock.
Added
Our backlog as of December 31, 2025 was $3.3 million. Our total validated pipeline as of December 31, 2025 was $173.4 million, consisting of single and multi-year opportunities for AI-driven edge, video, and sensor and data management platform across our customer verticals. Our pipeline includes opportunities at varying stages of progression with expected award timeframes over the next 18-24 months.
Removed
The warrants have an exercise price of $2.36 per share, are exercisable immediately upon issuance and will expire in five years following the date of issuance. There are no outstanding advances under this master loan agreement as of December 31, 2024.
Added
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. 50 Table of Contents In consideration for the immediate exercise of the existing warrants for cash, the holder received the inducement warrants to purchase 2,702,702 shares of common stock in a private placement pursuant to Section 4(a)(2) of the Securities Act.
Removed
The investor agreed to exercise the existing 2,882,883 warrants for cash resulting in aggregate gross proceeds of approximately $7.6 million with approximately $7.4 million in net proceeds after deducting advisory fees. The Inducement Warrants are immediately exercisable and will be exercisable for five years from the date of issuance.
Added
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.
Removed
As of September 30, 2024, we determined the First Operating Performance Milestone of the earnout shares was achieved and 1,250,000 shares of our common stock were issued to applicable personnel on January 7, 2025.
Added
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.
Removed
In the future, we expect to see more delivery of our products using a cloud-based software solution which will allow us to create additional subscription revenue. 49 Table of Contents We have historically evaluated our business solely based on revenue generated from customers and we have not tracked any other customer-related metrics.
Added
As part of the transaction, we have 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, which registration statement went effective on November 16, 2025.
Removed
We will measure progress against this objective through the disclosure of the numbers of edge AI hardware devices we are selling as well as the growth of our edge AI analytic capabilities, providing tangible evidence of the success of our strategy to both management and investors alike.
Added
On January 20, 2025, President Trump signed an executive order creating an advisory commission, the Department of Government Efficiency, to reform federal government processes and reduce expenditures. Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities and spending levels, could adversely affect staffing levels and the funding for government projects.
Removed
The increase was due to (i) increased insurance costs of $626,000; (ii) increased professional fees of $944,000, primarily related to the merger and the Nasdaq listing; (iii) increased other operating expenses of $1,471,000 including higher wages and other costs associated with the Nasdaq listing; and offset by (iv) decreased stock based compensation of $1,489,000.
Added
Disruptions in how the government agencies operate due to these policies may materially affect our business and resulted in a decline in revenue for the year ended December 31, 2025. Cost of Net Revenues — Cost of net revenues primarily consists of product costs and post customer support.
Removed
As disclosed in Note 1, in September 2024, we closed an $8 million public offering with approximately $7.3 million in net proceeds. In December 2024, we received net proceeds of approximately $7.4 million from the exercise of warrants related to an inducement offer agreement.
Added
On October 8, 2025, we entered into warrant exercise inducement offer letter with the holder of existing common stock warrants exercisable for an aggregate of 2,162,162 shares of common stock to exercise such warrants at the existing exercise price of $4.50 per share, in exchange for our 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.
Removed
We formally evaluated our liquidity and cash position in February 2025 when preparing the December 31, 2024 audited consolidated financial statements.
Added
The aggregate gross proceeds received from the exercise of the existing warrants were approximately $9,729,729, before deducting financial advisory fees. We intend to use the net proceeds from the exercise of the existing warrants for working capital and general corporate purposes. Operating Activities Net cash used in operating activities for the year ended December 31, 2025 was $8,005,000.
Removed
During this process, we analyzed our cash requirements and operations at least through February 2026 and determined that, based upon our current available cash and operations, we have no substantial doubt about our ability to continue as a going concern.
Added
This amount was primarily related to (i) net income of $29,321,000; offset by (ii) net working capital changes of $3,080,000 (including a $2,444,000 increase in deferred revenues); and (iii) noncash items of $34,247,000.
Removed
Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. Our actual results could vary as a result of our near and long-term future capital requirements that will depend on many factors.
Added
Noncash items included (iv) gain from change in warrant liability of $20,853,000; (v) gain from change in earnout liability of $15,402,000; and offset by (vi) stock based compensation of $1,630,000; and (vii) net amortization of operating lease right of use asset of $378,000. Net cash used in operating activities for the year ended December 31, 2024 was $6,504,000.
Removed
Net cash provided by financing activities for the year ended December 31, 2023 was $6,120,000 and consisted of (i) issuance of a senior secured convertible promissory note of $2,585,000; (ii) net advances provided by the founders of $1,150,000; (iii) proceeds from reverse capitalization of $2,800,000; and offset by (iv) the payoff of small business loan and line of credit of $425,000.
Added
We believe that the significant accounting policies described in “ Note 2, Summary of Significant Accounting Policies ” to our audited consolidated financial statements are accurate and complete. 55 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with U.S. GAAP.
Removed
Debt Financing Arrangements On June 22, 2023, we entered into a senior secured convertible promissory note with Platinum Capital Partners Inc. and received $2,000,000.
Removed
On February 2, 2024, we issued an amended and restated senior secured convertible promissory note to Platinum in the principal amount of $2,000,000 primarily to adjust the conversion price per share to the lower of (i) $3.69717, subject to appropriate adjustment as provided in the note, and (ii) 65% of the VWAP of the common stock for the five trading days immediately prior to any conversion, but in no event below $2.27518, subject to appropriate adjustment as provided in the note.
Removed
The note contained “weighted average” anti-dilution protection for issuances of shares of common stock or common stock equivalents at a price less than the conversion price then in effect.
Removed
On June 22, 2024, we entered into an extension agreement with Platinum Capital Partner, Inc. to extend the maturity date of the $2,000,000 senior secured convertible promissory note to June 22, 2025.
Removed
We recognized a loss on debt conversion of $393,253 during the year ended December 31, 2024.
Removed
We do not believe that is reasonably certain that the lease will be extended. 53 Table of Contents On February 29, 2024, we extended an office lease in Mooresville, North Carolina. We lease 3,621 square feet and the net monthly payment is $6,488. On August 27, 2024, we extended the lease to February 28, 2025.

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