Airship AI Holdings, Inc 10-Q for FY2024 Q2

Airship AI Holdings, Inc. (AISP)

10-Q 2024-08-14 For: 2024-06-30

Added on April 09, 2026

About this 10-Q

Airship AI Holdings, Inc filed this 10-Q on August 14, 2024, covering the quarter ended June 30, 2024 (FY2024 Q2).

Headline figures

Quarter ended June 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $6.4M; up 131.1% from $2.77M a year earlier
Net income: $18.46M; compared with a net loss of $3.1M a year earlier
Diluted EPS: $0.58; compared with -$0.14 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Delaware		93-4974766
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

8210 154th Ave NE, Redmond,		98052
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	AISP	The Nasdaq Stock Market LLC
Warrant	AISPW	The Nasdaq Stock Market LLC

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

PART I
Item 1.	Financial Statements (Unaudited).	3
	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023	4
	Consolidated Statements of Changes in Stockholders’ Deficit	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023	6
	Notes to the Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
	SIGNATURES	35

	June 30, 2024			12/31/2023 (1)
ASSETS	(Unaudited)

CURRENT ASSETS:
Cash and cash equivalents	$	226,750		$	3,124,413
Accounts receivable, net of provision for credit losses of $0		3,440,121			1,648,904
Prepaid expenses and other		494,616			18,368
Income tax receivable		9,640			7,230
Total current assets		4,171,127			4,798,915

PROPERTY AND EQUIPMENT, NET		-			1,861

OTHER ASSETS
Other assets		180,432			182,333
Operating lease right of use asset		953,713			1,104,804

TOTAL ASSETS	$	5,305,272		$	6,087,913

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable - trade	$	1,505,442		$	2,908,472
Advances from founders		2,550,000			1,750,000
Accrued expenses		161,406			200,531
Senior Secured Convertible Promissory Notes		2,675,919			2,825,366
Current portion of operating lease liability		198,002			174,876
Deferred revenue- current portion		3,791,970			4,008,654
Total current liabilities		10,882,739			11,867,899

NON-CURRENT LIABILITIES:
Operating lease liability, net of current portion		795,993			943,702
Warrant liability		5,972,729			667,985
Earnout liability		11,741,351			5,133,428
Deferred revenue- non-current		3,878,997			4,962,126
Total liabilities		33,271,809			23,575,140

COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' DEFICIT:
Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023		-			-
Common stock - $0.0001 par value, 200,000,000 shares authorized, 23,736,027 and 22,812,048 shares issued and outstanding as of June 30, 2024 and December 31, 2023		2,372			2,281
Additional paid in capital		3,014,089			-
Accumulated deficit		(30,979,174	)		(17,476,700	)
Accumulated other comprehensive loss		(3,824	)		(12,808	)
Total stockholders' deficit		(27,966,537	)		(17,487,227	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	5,305,272		$	6,087,913

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
NET REVENUES:
Product	$	5,358,808		$	1,805,163		$	14,757,584		$	3,639,329
Post contract support		1,042,223			964,855			2,218,462			2,069,286
		6,401,031			2,770,018			16,976,046			5,708,615
COST OF NET REVENUES:
Cost of Sales		1,306,386			557,792			9,095,795			2,135,958
Post contract support		588,438			538,889			745,917			1,095,040
		1,894,824			1,096,681			9,841,712			3,230,999
GROSS PROFIT		4,506,207			1,673,337			7,134,334			2,477,616
RESEARCH AND DEVELOPMENT EXPENSES		702,771			665,203			1,398,137			1,339,283
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		2,827,120			4,092,646			6,162,414			5,925,016
TOTAL OPERATING EXPENSES		3,529,891			4,757,849			7,560,551			7,264,299
OPERATING INCOME (LOSS)		976,316			(3,084,512	)		(426,217	)		(4,786,683	)
OTHER INCOME (EXPENSE):
Gain (loss) from change in fair value of earnout liability		14,876,927			-			(6,607,923	)		-
Gain (loss) from change in fair value of warrant liability		1,542,347			-			(5,304,744	)		-
Gain (loss) from change in fair value of convertible debt		1,527,193			-			(512,184	)		-
Loss on note conversion		-			-			(158,794	)		-
Interest expense, net		(421,500	)		(19,005	)		(453,324	)		(19,005	)
Other (expense) income		(39,288	)		238			(39,288	)		(9,767	)
Total other income (expense), net		17,485,679			(18,767	)		(13,076,257	)		(28,772	)

INCOME (LOSS) BEFORE PROVISON FOR INCOME TAXES		18,461,995			(3,103,279	)		(13,502,474	)		(4,815,455	)

Provision for income taxes		-			-			-			-

NET INCOME (LOSS)		18,461,995			(3,103,279	)		(13,502,474	)		(4,815,455	)

OTHER COMPREHENSIVE INCOME
Foreign currency translation income, net		3,239			-			8,984			42,551

TOTAL COMPREHENSIVE INCOME (LOSS)	$	18,465,234		$	(3,103,279	)	$	(13,493,490	)	$	(4,772,904	)

NET INCOME (LOSS) PER SHARE:
Basic	$	0.80		$	(0.14	)	$	(0.59	)	$	(0.21	)
Diluted	$	0.58		$	(0.14	)	$	(0.59	)	$	(0.21	)

Weighted average shares of common stock outstanding
Basic		23,220,709			22,812,048			23,059,598			22,812,048
Diluted		30,272,228			22,812,048			23,059,598			22,812,048

			Common		Additional					Other			Total
	Common		Stock		Paid in		Accumulated			Comprehensive			Stockholders'
	Stock		$		Capital		Deficit			Income (Loss)			Deficit
Balance as of January 1, 2023		22,812,048	$	2,281	$	1,963,727	$	(10,314,313	)	$	(10,106	)	$	(8,358,411	)
Stock-based compensation		-		-		136,709		-			-			136,709
Net loss		-		-		-		(1,712,176	)		-			(1,712,176	)
Balance as of March 31, 2023		22,812,048		2,281		2,100,436		(12,026,489	)		(10,106	)		(9,933,878	)
Stock-based compensation- stock option grants		-		-		136,709		-			-			136,709
Stock based compensation- warrants		-		-		2,136,115		-			-			2,136,115
Foreign currency translation gain		-		-		-		-			42,551			42,551
Net loss		-		-		-		(3,103,279	)		-			(3,103,279	)
Balance as of June 30, 2023		22,812,048		2,281		4,373,260		(15,129,768	)		32,445			(10,721,782	)

Balance as of January 1, 2024		22,812,048		2,281		-		(17,476,700	)		(12,808	)		(17,487,227	)
Stock-based compensation		-		-		268,989		-			-			268,989
Issuance of common stock for prior period services		15,000		-		-		-			-			-
Issuance of common stock for conversion of debt		169,204		17		835,593		-			-			835,610
Issuance of common stock for exercise of warrants		162,867		16		293,233		-			-			293,249
Foreign currency translation gain		-		-		-		-			3,239			3,239
Net loss		-		-		-		(31,964,469	)		-			(31,964,469	)
Balance as of March 31, 2024		23,159,119		2,314		1,397,815		(49,441,169	)		(9,569	)		(48,050,609	)
Stock-based compensation		-		-		261,636		-			-			261,636
Issuance of common stock for services		50,000		5		198,495		-			-			198,500
Issuance of common stock for exercise of warrants		100		-		800		-			-			800
Issuance of common stock for stock options exercise		294,448		29		146,943		-			-			146,972
Issuance of common stock for debt interest payment		232,360		23		1,008,400		-			-			1,008,423
Foreign currency translation gain		-		-		-		-			5,745			5,745
Net income		-		-		-		18,461,995			-			18,461,995
Balance as of June 30, 2024		23,736,027	$	2,372	$	3,014,089	$	(30,979,174	)	$	(3,824	)	$	(27,966,537	)

	Liability as of			Liability as of
	June 30, 2024			December 31, 2023

Earnout liability	$	11,741,351		$	5,133,428
Senior Secured Convertible Promissory Notes		2,675,919			2,825,366
Warrant liability (Public Warrants)		144,120			646,428
Warrant liability (Private Warrants)		5,828,609			21,557
Total liabilities measured at fair value	$	20,389,999		$	8,626,779

Other loss related to instruments recorded at fair value during the six months ended June 30, 2024	$	(12,424,851	)

Other loss related to instruments recorded at fair value during the six months ended June 30, 2023	$	-

	·	The Company has a contract with a customer that creates enforceable rights and obligations,

	·	Promised performance obligations are identified,

	·	The transaction price, or the amount the Company expects to receive, is determinable and

	·	The Company has satisfied the performance obligations to the customer.

	Options			Weighted Average			Potential
	Shares			Exercise Price			Proceeds
Outstanding as of December 31, 2023		4,664,589		$	0.55		$	2,545,765
Granted		525,000			4.61			2,420,750
Exercised		(294,448	)		(0.50	)		(146,972	)
Outstanding as of June 30, 2024		4,895,141		$	0.98		$	4,819,543

				Weighted						Weighted
				Average		Weighted				Average
Range of		Number		Remaining Life		Average		Number		Exercise Price
Exercise Prices		Outstanding		In Years		Exercise Price		Exercisable		Exercisable
$	0.12		2,495,803		3.84	$	0.12		2,495,803	$	0.12
	0.57		922,963		4.02		0.57		922,963		0.57
1.49-1.65			1,126,562		7.93		1.64		483,625		1.64
	1.90		49,813		3.48		1.90		6,227		1.90
6.59-7.61			300,000		9.75		6.84		18,750		6.84
			4,895,141		5.17	$	0.98		3,927,367	$	0.45

Assumptions	6/30/2024			3/31/2024
Estimated stock price	$	7.61		$1.49-$6.59
Exercise price	$	7.61		$1.49-$6.59
Dividend yield		0	%		0	%
Expected life	4 years			5-10 years
Expected volatility		69	%		69	%
Risk free interest rate		4.68	%		4.23	%

Assumptions
Dividend yield		0%
Expected life	3-5 years
Expected volatility		69%
Risk free interest rate		4.23%

Years Ended June 30,
2025	$	261,752
2026		364,885
2027		375,859
2028		128,397
Total remaining payments		1,130,893
Less Imputed Interest		(136,898	)
Total lease liability	$	993,995

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

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

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

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

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

		June 30, 2024
		Weighted		Weighted				Weighted
		Average		Average				Average
Number of		Remaining		Exercise		Shares		Exercise
Warrants		Life ( In Years)		Price		Exercisable		Price
	2,689,902		3.85	$	1.77		2,689,902	$	1.77
	515,000		4.42		7.80		515,000		7.80
	16,159,012		4.42		7.80		16,159,012		7.80

	19,363,914		4.40	$	6.96		19,363,914	$	6.96

	As of December 31, 2023
	As Reported			Adjustment			As Revised
Prepaid expenses and other	$	913,030		$	(894,662	)	$	18,368
Total current assets		5,693,577			(894,662	)		4,798,915
Total assets		6,982,575			(894,662	)		6,087,913
Accumulated deficit		(16,582,038	)		(894,662	)		(17,476,700	)
Total stockholders' deficit		(16,592,565	)		(894,662	)		(17,487,227	)

	Number of Shares		Exercise Price		Expiration Date	Fair Value
Public Warrants		16,159,012	$	7.80	December 21, 2028		5,828,609
Private Warrants		515,000	$	7.80	December 21, 2028		144,120

	(B)	75% of the earnout shares if, for the period starting on the closing date and ending on the last day of the full calendar quarter immediately following the third anniversary of the closing date, Company Revenue is at least $100 million (the “Second Operating Performance Milestone”);

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

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

	June 30, 2024
	Level 1		Level 2		Level 3		Total
Liabilities
Earnout liability	$	-	$	-	$	11,741,351	$	11,741,351
Senior Secured Convertible Promissory Notes		-		-		2,675,919		2,675,919
Warrant liability (Public Warrants)		5,828,609		-		-		5,828,609
Warrant liability (Private Warrants)		-		144,120		-		144,120
Total liabilities measured at fair value	$	5,828,609	$	144,120	$	14,417,270	$	20,389,999

	December 31, 2023
	Level 1		Level 2		Level 3		Total
Liabilities
Earnout liability	$	-	$	-	$	5,133,428	$	5,133,428
Senior Secured Convertible Promissory Notes		-		-		2,825,366		2,825,366
Warrant liability (Public Warrants)		646,428		-		-		646,428
Warrant liability (Private Warrants)		-		21,557		-		21,557
Total liabilities measured at fair value	$	646,428	$	21,557	$	7,958,794	$	8,626,779

	June 30, 2024			December 31, 2023
Stock price	$	3.59		$	1.70
Risk-free interest rate		4.33	%		3.84	%
Expected term (in years)		4.5			5
Expected volatility		62.9	%		75.9	%
Dividend yield		0	%		0	%

	·	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. Our ability to expand our footprint by implementing AI based solutions that leverage our core existing competencies within the agencies will be a critical indicator of the success of this strategy. We will measure progress against this objective through the disclosure of awards for new business within these agencies during the affected timeframe, providing tangible evidence of the success of our strategy to both management and investors alike.

	·	Greater penetration into the commercial marketplace. While we have several existing customers in the commercial marketplace, our ability to build on the solutions we provide those customers and expand that base will be critical to our projected growth objectives. We will measure progress against this objective through the disclosure of the number of new commercial customers added during the affected timeframe, providing tangible evidence of the success of our strategy to both management and investors alike.

	·	Expansion of our edge AI based solutions. We began to sell AI based solutions in late 2022. Our current strategy is highly focused on the transition of data management and analysis workloads to the edge, driving efficiency and cost savings for our customers. This strategy also includes new models being trained to extract data at the edge which enables real-time intelligent decision making for our customers. 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.

	·	Increase in the sales of lower margin solutions as we expand our operational footprint. While our current focus remains on expanding our AI driven software application portfolio, opportunities will continue to present themselves to provide those software-based solutions as part of a larger hardware-based turn-key solutions where Airship AI can provide a unique value-add to the customer. While these solutions will positively affect revenue we anticipate our operating profits in future periods may be adversely affected as compared to previous years due to the lower operating margin for hardware versus software applications.

	·	Challenges due to geo-political driven supply-chain constraints. While many of the COVID-19 driven supply chain issues have been resolved, challenges to the timely production and delivery of Taiwan based products we utilize for our edge AI platform due to geo-political factors is a concern looking forward. In the event that our suppliers are unable to provide timely delivery of those supplies it will significantly impact our ability to meet delivery schedules for existing and anticipated edge AI hardware-based solutions.

	·	Near-term impacts due to merger and acquisition activity. If Airship AI merges with or acquires another company, it is reasonably expected that there will be increased operating expenses and costs associated with the merger that could negatively impact operating profits in the future periods immediately following the M&A event. The extent and longevity of those impacts is not possible to quantify.

	Three Months Ended June 30,
	2024			2023			$ Variance			% Variance

Net revenues	$	6,401		$	2,770		$	3,631			131.1	%
Cost of net revenues		1,895			1,097			(798	)		-72.7	%
Gross profit		4,506			1,673			2,833			169.3	%
Research and development expenses		703			665			(38	)		-5.7	%
Selling, general and administrative expenses		2,827			4,092			1,265			30.9	%
Total operating expenses		3,530			4,757			1,227			25.8	%
Operating income (loss)		976			(3,084	)		4,060			131.6	%
Other income (expense):
Gain from change in fair value of warrants		1,542			-			1,542			100.0	%
Gain from change in fair value of earnout liability		14,877			-			14,877			100.0	%
Gain from change in fair value of convertible debt		1,527			-			1,527			100.0	%
Interest expense		(421	)		(19	)		(402	)		-2115.8	%
Other expense		(39	)		-			(39	)		-100.0	%
Total other income (expense), net		17,486			(19	)		17,505			92131.6	%
Income (loss) before income taxes		18,462			(3,103	)		21,565			695.0	%
Income tax benefit (expense)		-			-			-			-
Net income (loss)	$	18,462		$	(3,103	)	$	21,565			695.0	%

	Six Months Ended June 30,
	2024			2023			$ Variance			% Variance

Net revenues	$	16,976		$	5,709		$	11,267			197.4	%
Cost of net revenues		9,842			3,231			(6,611	)		-204.6	%
Gross profit		7,134			2,478			4,656			187.9	%
Research and development expenses		1,398			1,339			(59	)		-4.4	%
Selling, general and administrative expenses		6,162			5,925			(237	)		-4.0	%
Total operating expenses		7,560			7,264			(296	)		-4.1	%
Operating loss		(426	)		(4,786	)		4,360			91.1	%
Other income (expense):
Loss from change in fair value of warrants		(5,305	)		-			(5,305	)		-100.0	%
Loss from change in fair value of earnout liability		(6,608	)		-			(6,608	)		-100.0	%
Loss from change in fair value of convertible debt		(512	)		-			(512	)		-100.0	%
Loss on note conversion		(159	)		-			(159	)		-100.0	%
Interest expense		(453	)		(19	)		(434	)		-2284.2	%
Other expense		(39	)		(10	)		(29	)		-100.0	%
Total other expense, net		(13,076	)		(29	)		(13,047	)		-44989.7	%
Loss before income taxes		(13,502	)		(4,815	)		(8,687	)		-180.4	%
Income tax benefit (expense)		-			-			-			-
Net loss	$	(13,502	)	$	(4,815	)	$	(8,687	)		-180.4	%

Contractual Cash Obligations		Total				1 Year				1-3 Years				4-5 Years
Operating lease cash payments		$	1,168,865			$	299,727			$	740,740			$	128,398

Exhibit No.		Description

10.1		Amended and Restated Senior Secured Convertible Promissory Note issued February 2, 2024 by Airship AI Holdings, Inc. to Platinum Capital Partners Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2024).
10.2		Amended and Restated Security Agreement dated February 2, 2024 between Airship AI Holdings, Inc. and Platinum Capital Partners Inc. (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2024).
10.3		Amended and Restated Guaranty dated February 2, 2024 between Airship AI Holdings, Inc., Platinum Capital Partners Inc. (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2024).
10.4		Amended and Restated Subordination Agreement dated February 2, 2024 between Airship AI Holdings, Inc. and Platinum Capital Partners Inc. (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on February 6, 2024).
10.5		Extension Agreement between Airship AI Holdings, Inc. and Platinum Capital Partners Inc. dated June 22, 2024. (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 24, 2024)

31.1		Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because iXBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document.
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104		The Cover Page Interactive Data File, formatted in Inline XBRL (included within the Exhibit 101 attachments).

	/s/ Victor Huang
	Name: Victor Huang
	Title: Chief Executive Officer
	(Principal Executive Officer)

	/s/ Mark E. Scott
	Name: Mark E. Scott
	Title: Chief Financial Officer
	(Principal Financial and Accounting Officer)

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.