FJET 10-Q
Starfighters Space, Inc. (FJET)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from __________ to _________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of organization) | (I.R.S. employer identification no.) | |
| (Address of principal executive offices) | (Zip code) |
(
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
1
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
2
Starfighters Space, Inc.
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
3
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
We make statements in this Quarterly Report on Form 10-Q that are forward-looking statements within the meaning of the federal securities laws. The words "believe," "estimate," "expect," "anticipate," "intend," "plan," "seek," "may," and similar expressions or statements regarding future periods are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any predictions of future results, performance or achievements that we express or imply in this Quarterly Report or in the information incorporated by reference into this Quarterly Report.
The forward-looking statements included in this Quarterly Report on Form 10-Q are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, taking into account the information currently available to us, we cannot guarantee future transactions, results, performance, achievements or outcomes, and our actual results and performance could differ materially from those set forth in any forward-looking statements. The cautionary statements set forth in this Quarterly Report on Form 10-Q identify important factors which you should consider in evaluating our forward-looking statements. These factors include, without limitation:
The Company operates in an evolving industry, making it difficult for the Company to forecast revenue, plan expenses, and evaluate its business and future prospects;
The Company has a history of losses and may not be able to achieve profitability;
The Company's ability to raise capital and the availability of future financing;
The Company's business involves significant risks and uncertainties that may not be covered by insurance;
The Company's business with governmental entities is subject to the policies, regulations, mandates, and funding levels of such entities and may be negatively impacted by any change thereto;
The Company may not be successful in developing new technology, and technology the Company does develop may not meet the needs of its customers;
The Company operates in competitive industries in various jurisdictions across the world;
The Company is highly dependent upon the services of Tim Franta, the Company's newly-appointed Chief Executive Officer, and if the Company is unable to retain Mr. Franta, the Company's ability to compete could be harmed;
Historically, the Company has been highly dependent on the services of Rick Svetkoff, the Company's former President and Chief Executive Officer, and it remains unclear whether his resignation on February 19, 2026, will adversely affect the Company's ability to compete in the long term;
The Company depends on several specialized suppliers for the majority of specialized supply needs. Disruptions in the supply of key raw materials or component and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact the Company; and
The other factors discussed under the heading "Risk Factors" in Part I, Item 1A in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission ("SEC") on April 15, 2026 (the "2025 Annual Report"), and in this Quarterly Report and other filings we make with the SEC.
4
You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q, and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
STARFIGHTERS SPACE, INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited - Stated in United States dollars)
6
STARFIGHTERS SPACE, INC.
CONDENSED CONSOLIDATED INTERIM BALANCE SHEETS
(UNAUDITED)
| June 30, 2026 | December 31, 2025 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash | $ | $ | ||||
| Restricted cash | ||||||
| Short-term investments | ||||||
| Due from related party | ||||||
| Prepaid expenses and other current assets | ||||||
| Total current assets | ||||||
| Restricted cash | ||||||
| Investments - restricted | ||||||
| Right of use assets - operating lease, net | ||||||
| Property, plant, and equipment, net | ||||||
| Long-term deposits | ||||||
| Total assets | $ | $ | ||||
| Liabilities and Stockholders' Equity | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | $ | ||||
| Deferred income | ||||||
| Lease liability - operating lease | ||||||
| Grant payable | ||||||
| Related party notes payable | ||||||
| Total current liabilities | ||||||
| Lease liability - operating lease, non-current | ||||||
| Total liabilities | $ | $ | ||||
| Commitments and contingencies | ||||||
| Stockholders' Equity | ||||||
| Common stock, $ |
||||||
| Additional paid-in-capital | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||
| Total stockholders' equity | ||||||
| Total liabilities and stockholders' equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
7
STARFIGHTERS SPACE, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 | 2025 (as revised) |
2026 | 2025 (as revised) |
|||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative | $ | $ | $ | $ | ||||||||
| Research and development | ||||||||||||
| Impairment of aircraft deposits | ||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Other income (expense) | ||||||||||||
| Interest income | ||||||||||||
| Realized and unrealized gain on short-term investments | ||||||||||||
| Flight training income | ||||||||||||
| Amortization of debt discount | ( |
) | ( |
) | ||||||||
| Change in fair value of derivative liability | ( |
) | ||||||||||
| Interest expense | ( |
) | ( |
) | ||||||||
| Loss to misappropriation of assets | ( |
) | ||||||||||
| Other | ||||||||||||
| Total other income (expense) | ( |
) | ( |
) | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Weighted average number of shares - Basic and diluted | ||||||||||||
| Net loss per share - Basic and diluted | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
8
STARFIGHTERS SPACE, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
| Common Stock | ||||||||||||||||||
| Number of Shares |
Amount | Common Stock Subscribed |
Additional Paid-In- Capital |
Accumulated Deficit |
Total Stockholders' Equity (Deficit) |
|||||||||||||
| Balance, April 1, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||
| Issuance of former stock subscriptions | ( |
) | ||||||||||||||||
| Reg A financing | ||||||||||||||||||
| Reg A financing subscriptions received | ||||||||||||||||||
| Reg A financing share issuance costs | - | ( |
) | ( |
) | |||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||
| Balance April 1, 2026 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
| Cashless exercise of warrants | ( |
) | ||||||||||||||||
| RSUs vesting | ( |
) | ||||||||||||||||
| PIPE financing | ||||||||||||||||||
| PIPE financing share issuance costs | - | ( |
) | ( |
) | |||||||||||||
| Stock-based compensation | - | |||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
| Balance, January 1, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||
| Issuance of former stock subscriptions | ( |
) | ||||||||||||||||
| Reg A financing | ||||||||||||||||||
| Reg A financing subscriptions received | ||||||||||||||||||
| Reg A financing share issuance costs | - | ( |
) | ( |
) | |||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||
| Balance January 1, 2026 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
| Cashless exercise of warrants | ( |
) | ||||||||||||||||
| RSUs vesting | ( |
) | ||||||||||||||||
| PIPE financing | ||||||||||||||||||
| PIPE financing share issuance costs | - | ( |
) | ( |
) | |||||||||||||
| Stock-based compensation | - | |||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( |
) | $ | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
9
STARFIGHTERS SPACE, INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
| Six months ended June 30, | ||||||
| 2026 |
2025 (as revised) |
|||||
| Cash flows from operating activities | ||||||
| Net loss | $ | ( |
) | $ | ( |
) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Depreciation | ||||||
| ROU asset amortization | ||||||
| Unrealized gain on investments | ( |
) | ( |
) | ||
| Realized gain on investments | ( |
) | ||||
| Amortization of debt discount | ||||||
| Change in fair value of derivative liability | ||||||
| Stock-based compensation | ||||||
| Loss on disposal of property, plant, and equipment | ||||||
| Impairment of aircraft deposits | ||||||
| Changes in operating assets and liabilities: | ||||||
| Accrued interest | ||||||
| Accounts payable and accrued liabilities | ||||||
| Due from related parties | ( |
) | ||||
| Deferred income | ( |
) | ( |
) | ||
| Grant payable | ( |
) | ||||
| Prepaid expenses | ( |
) | ( |
) | ||
| Lease liability | ( |
) | ( |
) | ||
| Net cash used in operating activities | ( |
) | ( |
) | ||
| Cash flows from investing activities | ||||||
| Additions to long-term deposits | ( |
) | ||||
| Purchase of property, plant, and equipment | ( |
) | ||||
| Purchase of short-term investments | ( |
) | ( |
) | ||
| Redemption of short-term investments | ||||||
| Net cash used in investing activities | ( |
) | ( |
) | ||
| Cash flows from financing activities | ||||||
| Repayment of related party notes payable | ( |
) | ||||
| Proceeds from private placements | ||||||
| Cash paid for financing costs | ( |
) | ( |
) | ||
| Net cash provided by financing activities | ||||||
| Decrease in cash and restricted cash | ( |
) | ( |
) | ||
| Cash and restricted cash, beginning of period | ||||||
| Cash and restricted cash, end of period | $ | $ | ||||
| Cash | $ | $ | ||||
| Restricted cash | ||||||
| Total cash and restricted cash, end of period | $ | $ | ||||
| Supplemental cash flow information | ||||||
| Income taxes paid | $ | $ | ||||
| Interest paid | $ | $ | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||
| Shares issued for common stock subscribed | $ | $ | ||||
| Deferred financing costs recognized as share issuance costs | $ | $ | ||||
| Property, plant, and equipment additions in accounts payable and accrued liabilities | $ | $ | ||||
| Financing costs in accounts payable and accrued liabilities | $ | $ | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
10
| STARFIGHTERS SPACE, INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS |
1. NATURE OF OPERATIONS AND GOING CONCERN
a) Nature of operations
Starfighters Space Inc. ("SFS" or the "Company") was incorporated on September 6, 2022, under the laws of the State of Delaware. The Company's registered office is held at 850 New Burton Road, Suite 201, Dover, DE 19904. The Company's principal operating facility is located at the NASA Kennedy Space Center in Cape Canaveral, Florida, with an additional base of operations at Midland International Air & Space Port in Texas. The Company has a fleet of seven F-104 Fighter jets that are capable of flying MACH 2+. The Company is currently in the process of gaining a launch waiver and license for its first space launch to launch rockets carrying payloads for data testing from its jets into suborbital space.
b) Going concern
These unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has historically operated at a loss and had negative cash flows from operations, and access to certain bank accounts is restricted due to ongoing dispute and litigation.
These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date of the unaudited condensed consolidated interim financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company's ability to raise additional funds and implement its business plan. These unaudited condensed consolidated interim financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Such adjustments could be material.
The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
2. BASIS OF PRESENTATION
a) Basis of presentation and principles of consolidation
The unaudited condensed consolidated interim financial statements are presented in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and in accordance with the instructions to Article 8-03 of Regulation S-X, and should be read in conjunction with the Company's Annual Report on Form 10-K/A for the year ended December 31, 2025. Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. The financial statements include the accounts of the Company, and all entities in which the Company has a controlling financial interest, including wholly-owned subsidiaries. In the opinion of management, the unaudited condensed consolidated interim financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented. The interim results for the three and six months ended June 30, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any future periods. All significant intercompany balances and transactions have been eliminated in consolidation.
b) Use of estimates and judgments
The preparation of these unaudited condensed consolidated interim financial statements in conformity with U.S. GAAP requires the Company's management to make judgments, estimates and assumptions about future events that impact the amounts reported in the unaudited condensed consolidated interim financial statements. Actual results may differ from these estimates. Significant items subject to such estimates include the useful lives of the Company's long-lived assets, the valuation of stock-based compensation, deferred tax assets and liabilities, income tax uncertainties, and other contingencies.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
3. SIGNIFICANT ACCOUNTING POLICIES
a) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held with banks, and when applicable, short-term, highly liquid deposits which are either cashable or with original maturities of less than three months. There are no cash equivalents as of June 30, 2026 or December 31, 2025. At times, the Company's cash balance exceeds the federally insured limits.
b) Restricted cash
Restricted cash include: (i) deposits held with banks that are held as collateral for the corporate credit cards of the Company, with balances of $
c) Investments
The Company's short-term investments are treasury notes with original maturities greater than 3 months and less than one year.
The following table summarizes the Company's investment securities as of June 30, 2026 and December 31, 2025. All of the Company's investments mature within the next 12 months.
| June 30, 2026 | ||||||||||||
| Cost | Unrealized gains | Unrealized losses | Fair value | |||||||||
| Short-term investments | ||||||||||||
| U.S. treasury notes | ||||||||||||
| Investments - restricted | ||||||||||||
| Certificates of deposits | ||||||||||||
| Total | ||||||||||||
| December 31, 2025 | ||||||||||||
| Cost | Unrealized gains | Unrealized losses | Fair value | |||||||||
| Short-term investments | ||||||||||||
| U.S. treasury notes | ||||||||||||
| Total | ||||||||||||
Certificates of deposits are presented as restricted investments on the unaudited condensed consolidated interim balance sheet as of June 30, 2026 despite having maturities within the next 12 months, as such accounts are frozen or otherwise restricted due to ongoing disputes with the former CEO of the Company, as further discussed in Note 11.
The short-term investments are level 1 investments in the fair value hierarchy. These securities are presented on the unaudited condensed consolidated interim balance sheets at fair value. Earnings from these securities are included in interest income on the unaudited condensed consolidated interim statements of operations. At times, the Company's short-term investment balance exceeds the federally insured limits for brokerages.
d) Reclassification
Certain balances in the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2025 have been reclassified to conform to the presentation in the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2026. In the prior year, the Company separately disclosed contract labour and fuel, repairs and maintenance, vehicle expense, rent expense, advertising and promotion, bank charges, business development, consulting fees, director fees, franchise tax, insurance, licenses, listing fees, management fees, office and administrative, professional fees, and travel and entertainment, and in the current year the Company has reclassified these costs on the unaudited condensed consolidated statement of operations within selling, general and administrative. The Company also previously separately disclosed grant income, and foreign exchange gain or loss, and in the current year the Company has reclassified these costs on the unaudited condensed consolidated statement of operations within other. The Company also disaggregated interest income to separately present realized and unrealized gain on short-term investments. These reclassifications had no effect on the Company’s previously reported results of operations, changes in stockholders’ equity, or cash flows.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
4. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
| June 30, 2026 | December 31, 2025 | |||||
| Vehicle | $ | $ | ||||
| Aircraft improvements | ||||||
| Engines | ||||||
| Display aircraft | ||||||
| Accumulated depreciation | ( |
) | ( |
) | ||
| Net book value | $ | $ |
The Company owns six F-104 aircrafts that were acquired through a common control transaction in 2022, which had zero carrying value at the time of acquisition from the transferring entity, and was carried at $
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||
| Depreciation expense | $ | $ | $ | $ | ||||||||
5. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
| June 30, 2026 | December 31, 2025 | |||||
| Prepaid expenses | ||||||
| Other current assets | ||||||
6. STOCKHOLDERS' EQUITY
a) Common stock
The Company has
On May 27, 2026, the Company issued
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
b) Warrants
A summary of Common Stock warrant activity during the six months ended June 30, 2026 is as follows:
|
Number of warrants |
Weighted average exercise price |
Weighted average remaining life in years |
Aggregate intrinsic value |
|||||||||
| Outstanding, January 1, 2026 | $ | $ | ||||||||||
| Exercised | ( |
) | ||||||||||
| Outstanding, June 30, 2026 | $ | $ | ||||||||||
| Exercisable, June 30, 2026 | $ | $ |
c) Options
A summary of Common Stock option activity during the six months ended June 30, 2026 is as follows:
|
Number of options |
Weighted average exercise price |
Weighted average remaining life in years |
Aggregate intrinsic value |
|||||||||
| Outstanding, January 1, 2026 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Forfeited | ( |
) | ||||||||||
| Outstanding, June 30, 2026 | $ | $ | ||||||||||
| Exercisable, June 30, 2026 | $ | $ |
On June 25, 2026, the Company granted
During the six months ended June 30, 2026, the Company recognized negative stock compensation of ($
During the three months ended June 30, 2026, the Company recognized stock compensation expense of $
During the six months ended June 30, 2026, the Company recognized stock compensation expense of ($
The Company valued stock options using the Black-Scholes model. Based on the below inputs, the Company determined that the options had a fair value of $
| June 25, 2026 | |||
| Expected volatility | |||
| Expected term (years) | |||
| Risk-free interest rate | |||
| Dividend yield |
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
d) Restricted share units ("RSUs")
A summary of RSU activity during the six months ended June 30, 2026 is as follows:
|
Number of RSUs |
|||
| Unvested, January 1, 2026 | |||
| Granted | |||
| Settled | ( |
) | |
| Unvested, June 30, 2026 |
On June 25, 2026, the Company granted
The Company recognized $
The Company recognized $
Future unrecognized stock-based compensation expense arising from the RSUs amount to $
7. FAIR VALUE MEASUREMENTS
ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company's own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following, based on the nature of the valuation inputs:
- Level 1: quoted prices (unadjusted) for identical assets or liabilities in active markets;
- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and,
- Level 3: one or more significant inputs used in a valuation technique are unobservable in determining fair values of the asset or liability. For example, inputs derived through extrapolation or interpolation that cannot be corroborated by observable market data.
The following table presents the placement in the fair value hierarchy of the Company's assets and liabilities measured at fair value on a recurring and nonrecurring basis as of June 30, 2026 and December 31, 2025. Assets and liabilities that are measured at fair value on a nonrecurring basis relate primarily to tangible property and equipment, and right-of-use assets, which are remeasured when the derived fair value is below carrying value in the consolidated balance sheets. Recoverability is based on estimated undiscounted cash flows or other relevant observable/unobservable measures. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. If it is determined that impairment has occurred, the carrying value of the asset is reduced to fair value, and the difference is charged to the condensed consolidated interim statements of operations.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the six months ended June 30, 2026. The carrying amounts of cash, restricted cash, and accounts payable and accrued liabilities approximated their fair values as of June 30, 2026 due to their short-term nature. The carrying amounts of due from related party and related party notes payable approximated their fair values as of December 31, 2025 due to their short-term nature.
| Fair value measurement at reporting date using | ||||||||||||
| Balance |
Quoted prices in active markets for identical assets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||
| As of June 30, 2026: | ||||||||||||
| Recurring fair value measurements | ||||||||||||
| Debt securities: | ||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||
| Investments - restricted | ||||||||||||
| Total debt securities | ||||||||||||
| Total recurring fair value measurements | $ | $ | $ | $ | ||||||||
| As of December 31, 2025: | ||||||||||||
| Recurring fair value measurements | ||||||||||||
| Debt securities: | ||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||
| Total debt securities | ||||||||||||
| Total recurring fair value measurements | $ | $ | $ | $ | ||||||||
| Nonrecurring fair value measurements | ||||||||||||
| Right of use assets - operating lease | ||||||||||||
| Total nonrecurring fair value measurements | $ | $ | $ | $ | ||||||||
As of June 30, 2026, certain investments with maturity within the next 12 months are reported as restricted due to restrictions placed by Flagship Bank on the Company's accounts as a result of ongoing dispute with the former CEO and Director of the Company (Note 11).
8. RELATED PARTY TRANSACTIONS
Due From Related Party
As of June 30, 2026, $
Notes Payable
On August 14, 2010, Company entered into a loan agreement with the former CEO, who is also a significant shareholder, in the amount of $
On August 14, 2010, the Company entered into a loan agreement with an entity owned by the spouse of the former CEO, who is also a significant shareholder, in the amount of $
On August 1, 2022, the Company entered into a loan agreement with the former CEO, who is also a significant shareholder, in the amount of $
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Related Party Transactions
Total related party transactions reported for the following items are as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||
| Selling, general and administrative | $ | $ | $ | $ | ||||||||
Management Compensation
The former CEO, the CEO, and the CFO are paid through consulting arrangements. Their remuneration, reported in selling, general and administrative expenses are as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||
| Former CEO and Director(1) | $ | $ | $ | $ | ||||||||
| CEO, VP of Development, and Director(2) | ||||||||||||
| CFO(3) | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||
(1) As of June 30, 2026 and December 31, 2025, $
(2) As of June 30, 2026 and December 31, 2025, $
(3) As of June 30, 2026 and December 31, 2025, $
Consulting Fees and Contract Labor
The Company incurred other selling, general, and administrative expenses to family members of the former CEO and director, and other former directors as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||
| Spouse of former CEO and Director(1) | $ | $ | $ | $ | ||||||||
| Other family members of former CEO and Director (2) | ||||||||||||
| Former directors(1) | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||
(1) Paid for consulting services.
(2) Paid for contract labor.
9. LOSS PER SHARE
Basic earnings (loss) per share ("EPS") is calculated by dividing profit or loss attributable to ordinary equity holders (numerator) by the weighted average number of ordinary shares outstanding (denominator) during the period. The denominator is calculated by adjusting the shares issued at the beginning of the period by the number of shares bought back during the period, multiplied by a time-weighting factor.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of dilutive options and other dilutive potential units. The effects of anti-dilutive options and potential units are ignored in calculating diluted EPS. All options and potential units are considered anti-dilutive when the Company is in a loss position.
The Company has the following anti-dilutive securities for the three and six months ended June 30, 2026 and 2025:
| June 30, 2026 | June 30, 2025 | ||||||
| Warrants | |||||||
| Options | |||||||
| Restricted Share Units | |||||||
As of June 30, 2026,
As of June 30, 2025, due to the terms of the conversion option for the Note Payable and Convertible Debentures, the Company could not predict the anti-dilutive shares for these instruments, and as such, they were excluded from the above table.
10. COMMITMENTS
Midland Economic Development Agreement
On October 7, 2024, the Company entered into an economic development agreement (the "Economic Development Agreement") with Midland Development Corporation ("MDC"), whereby MDC has agreed to provide certain incentives to the Company for (i) expansion of its business operations to the Midland International Air & Space Port ("KMAF"), (ii) creation and retention of primary jobs within the corporate limits of the City of Midland, and (iii) relocation of certain capital assets and equipment at the Midland International Air & Space Port. In connection with the Economic Development Agreement, the Company has a commitment to enter into certain temporary, short-term, and long-term hangar leases at KMAF, and the MDC would provide reimbursements of lease payments until a long-term hangar lease is being entered into. For the three and six months ended June 30, 2026, the Company incurred short-term rent expenses of $
During the six months ended June 30, 2026 and 2025, the Company received from MDC advances of $
For the six months ended June 30, 2026 and 2025, the Company is entitled to grant income related to reimbursement of these costs of $
Aerovision Aircraft Acquisition Agreement
On October 31, 2024, the Company entered into an aircraft acquisition agreement ("Aircraft Agreement") with Aerovision LLC ("Aerovision"), pursuant to which the Company agreed to purchase from Aerovision various used aircrafts and associated spare equipment (the "Aircraft Transactions") in phases. The subject aircraft for acquisition pursuant to the Aircraft Agreement are: (i) twelve F-4 Phantom II aircraft, (ii) one MD-83 with U.S. Federal Aviation Administration ("FAA") Registration N572AA, and (iii) one DC-9 with FAA Registration N932NA. The twelve F-4 Phantom II aircraft have recently been decommissioned by the Republic of Korea Air Force, and will have to be registered with the FAA after they are imported into the United States from South Korea.
The Aircraft Agreement requires an initial deposit advance in the amount of $
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
On January 28, 2025, the Company and Aerovision verbally agreed to amend the Aircraft Agreement regarding the Aircraft Transactions, pursuant to which: (i) the Company may elect not to proceed with Phase 3 and/or Phase 4; (ii) the initial deposit advance of $
If all four phases of the Aircraft Agreement are completed, the total cost of the agreement will be $
11. CONTINGENCIES
In the ordinary course of business, the Company may from time to time become subject to legal proceedings and claims arising in connection with ongoing business activities. Management assesses such claims and, if it considers that it is probable that an asset had been impaired or a liability had been incurred, and the amount of loss can be reasonably estimated, provisions for loss are made based on management’s assessment of the most likely outcome.
Pending Litigation with Rick Svetkoff, former CEO and Director
On April 9, 2026, Rick Svetkoff, former CEO and Director, filed a complaint against the Company, and its board members in the 18th Judicial Circuit in Brevard County, Florida. The complaint alleges that the defendants breached fiduciary duty, deceptive business practices, and improper control and alteration of corporate records and is seeking $
On February 19, 2026, Rick Svetkoff, the former CEO and Director, and Brenda Svetkoff, former Secretary and spouse of the former CEO, voluntarily resigned from the Company. On February 3, 2026 and February 17, 2026, Rick Svetkoff withdrew and transferred funds amounting to $
Aerovision Aircraft Acquisition Agreement
During the six months ended June 30, 2026, in relation to the Aircraft Agreement (Note 10), Aerovision has not provided any information as to the availability of any of the F-4 Phantom II aircraft contemplated to be purchased by the Company, and all recent attempts by the Company to contact Aerovision have been unsuccessful. On August 10, 2026, the Company has filed a legal claim to initiate legal proceedings against Aerovision and individuals connected with Aerovision.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
In considering the recoverability of the deposits to Aerovision, the Company considered the lack of communication from Aerovision as an impairment indicator, as analogized from ASC 360-10-35, and applied the recognition and measurement framework in ASC 450-20-25 to evaluate whether a loss was probable and estimable, in relation to the probability of recoverability.
The Company considered the following factors:
- the lack of communication persisted since February 2026;
- there have been no further progress demonstrated in sourcing appropriate aircraft for purchase;
- Aerovision has failed to respond to a letter of demand from the litigation counsel of the Company during the three months ended June 30, 2026.
The Company concluded that it was probable, that the deposit may be impaired. As such, an impairment of $
The Company will revisit this assessment each subsequent reporting period as new facts and information become available.
Pending Litigation with Mountain CI Holdings Ltd.
On April 17, 2026, Mountain CI Holdings Ltd. filed a complaint against Starfighters, Inc., a subsidiary of the Company, in the 18th Judicial Circuit in Brevard County, Florida. The plaintiff is seeking $
Flagship Bank Account Restrictions
Due to ongoing dispute and a legal complaint filed by Rick Svetkoff, former CEO and Director, on April 9, 2026, Flagship Bank has placed restrictions on all accounts held by SFII. As such, the Company reports cash of $
Regions Bank Account Restrictions
Due to ongoing dispute with Rick Svetkoff, former CEO and Director, over the control of bank accounts, Regions Bank has formally notified the Company on May 15, 2026, that it has placed restrictions on all accounts held by Starfighters International, Inc., a Texas subsidiary of the Company. As such, the Company reports cash of $
12. CORRECTION OF IMMATERIAL ERRORS
As disclosed in the Company's Form 10-K filed on April 15, 2026, and Form 10-K/A filed on July 21, 2026, certain revisions, noted below, were necessary to the previously filed financial statements for the three and six months ended June 30, 2025.
The Company identified the following errors affecting the previously filed financial statements:
(i) an under-recognition of research and development expenses of $
(ii) an under-accrual of business development expenses, related to hourly billings for services between May and June 2025, where insufficient accruals for those services were provided based on information available at the time of reporting for those periods.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The Company determined business development expenses of $
A tabular presentation of each affected prior interim period, for each line item impacted, showing the amount as previously reported, the amount of correction, and the amount as corrected, is as follows:
Unaudited condensed consolidated interim statement of operations for the three months ended June 30, 2025
| Line item | As previously reported | Adjustment | As corrected | ||||||
| Selling, administrative and general(*) | |||||||||
| Research and development expenses | ( |
) | |||||||
| Operating loss | |||||||||
| Net loss | |||||||||
| Loss per share |
(*) Conformed to current presentation (Note 3)
Unaudited condensed consolidated interim statement of operations for the six months ended June 30, 2025
| Line item | As previously reported | Adjustment | As corrected | ||||||
| Selling, administrative and general(*) | |||||||||
| Operating loss | |||||||||
| Net loss | |||||||||
| Loss per share |
(*) Conformed to current presentation (Note 3)
Unaudited condensed consolidated interim balance sheet as of June 30, 2025
| Line item | As previously reported | Adjustment | As corrected | ||||||
| Accounts payable and accrued liabilities | |||||||||
| Total current liabilities | |||||||||
| Total liabilities | |||||||||
| Accumulated deficit | ( |
) | ( |
) | ( |
) | |||
| Total stockholders' equity (deficit) | ( |
) | ( |
) | ( |
) |
Unaudited condensed consolidated interim statement of cash flows for the six months ended June 30, 2025
| Line item | As previously reported | Adjustment | As corrected | ||||||
| Net loss for the year | ( |
) | ( |
) | ( |
) | |||
| Changes in non-cash working capital: Accounts payable and accrued liabilities | ( |
) | |||||||
| Net cash used in operating activities | ( |
) | ( |
) |
Unaudited condensed consolidated interim statement of changes in stockholders' equity (deficit) for the six months ended June 30, 2025
| Line item | As previously reported | Adjustment | As corrected | ||||||
| Accumulated deficit | ( |
) | ( |
) | ( |
) | |||
| Total stockholders' equity (deficit) | ( |
) | ( |
) | ( |
) |
For the three and six months ended June 30, 2025, the corrected net loss is $
The Company evaluated the corrections and has determined their impacts were immaterial, individually and in aggregate, to the previously issued unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2025.
STARFIGHTERS SPACE, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
13. SEGMENT INFORMATION
Segment assets are the same as consolidated total assets of $
The table below details the Company's significant expenses and other segment items and reconciles those amounts to the Company's consolidated net loss as computed under U.S. GAAP in the unaudited condensed consolidated interim statements of operations:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2026 |
2025 (as revised) |
2026 |
2025 (as revised) |
|||||||||
| Selling, general and administrative | ||||||||||||
| Consulting fees | $ | $ | $ | $ | ||||||||
| Marketing | ||||||||||||
| Professional fees | ||||||||||||
| Personnel costs | ||||||||||||
| Management compensation(1) | ||||||||||||
| Contract labour, fuel, vehicle and maintenance | ||||||||||||
| Insurance | ||||||||||||
| Public company, franchise and license fees | ||||||||||||
| Business development | ||||||||||||
| Other selling, general and administrative items(2) | ||||||||||||
| Total selling, general and administrative | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Research and development | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Amortization of debt discount | ( |
) | ( |
) | ||||||||
| Change in fair value of derivative liability | ( |
) | ||||||||||
| Loss to misappropriation of assets | ( |
) | ||||||||||
| Impairment of aircraft deposits | ( |
) | ( |
) | ||||||||
| Other segment items(3) | ||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
(1) Inclusive of stock-based compensation of $
(2) Other selling, general and administrative items consist of rent, office and administrative expenses, travel and entertainment, directors' fees, relocation costs, depreciation, and loss on disposal of property, plant, and equipment.
(3) Other segment items consists of interest income, realized and unrealized gains on short-term investments, interest expense, and other income (loss), net, none of which is individually significant.
14. SUBSEQUENT EVENTS
On July 7, 2026, the Company issued
22
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following management's discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated interim financial statements and the related notes contained therein which have been prepared in accordance with US GAAP. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections titled "Risk Factors" and "Statements Regarding Forward-Looking Information" appearing elsewhere in this discussion and analysis. All figures are in US dollars unless otherwise noted. Unless the context otherwise requires, for the purposes of this section, "Starfighters", "we", "us", "our", or the "Company" refer to Starfighters Space, Inc. and its subsidiaries.
Company Overview
The Company was founded and incorporated under the laws of the State of Delaware on September 6, 2022. Our common shares are listed for trading on the NYSE American under the trading symbol "FJET". Our goal is to make space accessible to entrepreneurs, researchers, industry participants, and the government at a high cadence and the right cost.
Our principal operating facility, head office and mailing address is located at 505 Odyssey Way, Suite 101, Kennedy Space Center, Florida, 32953 and our phone number is 321-261-0900. Our registered and records office is located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. Our website address is https://starfightersspace.com/.
We operate the world's only commercial fleet of flight-ready F-104 supersonic aircraft. Recent increases in government expenditures and commercial investment are driving growth in the space economy. This increase has created a demand for services similar to those that the F-104s formerly owned by the National Aeronautics and Space Administration ("NASA") used to provide. To our knowledge, there is currently no other commercially available aircraft to the public with the capabilities of the F-104 in terms of speed and climbing performance. We plan to fulfill these needs through a fleet of seven (7) F-104 aircraft and operate from NASA's Kennedy Space Center in Florida, with an additional base of operations at Midland International Air & Space Port in Texas. We have three aircraft that are flight-ready available for customers or development flights, three of our aircraft are flight-capable, and one aircraft is not flight-capable. Our current activities are focused on the following groups of services:
- Launch Services and Access to Space; and
- Airborne Testbed for Hypersonic Research and Development (R&D) and Test and Evaluation (T&E) Test Bed for commercial, academic, civil and government clients;
While our central business activities are focused on the foregoing, we still provide specialized pilot-training, payload preparation and integration, and flight-testing services since we have the F-104s and capability and authorization to perform such training and testing services.
Recent Developments
Private Placement Financing
On May 27, 2026, we completed a private placement of 5,223,879 Common Stock at a price of $3.35 per share to certain institutional investors, for aggregate gross proceeds of $17,499,995. We intend to use the net proceeds from the private placement to support operational expansion, infrastructure development, and continued advancement of its STARLAUNCH platform, including initiatives tied to launch readiness, mission execution capabilities, and broader space launch operations.
Successful completion of wind tunnel testing for STARLAUNCH 1
On January 21, 2026, we announced the successful completion of wind tunnel testing of STARLAUNCH 1, a key technical milestone in our air-launched rocket development efforts.
23
The completed test campaign evaluated separation of the STARLAUNCH 1 vehicle from the Starfighters' aircraft platform across both subsonic and supersonic conditions. Using a combination of computational fluid dynamics (CFD) analysis and experimental wind tunnel testing, we assessed separation behavior at Mach 0.85 and Mach 1.3. Across all test conditions, clean separation was demonstrated with no adverse aerodynamic interactions observed.
The wind tunnel campaign consisted of ten successful runs, conducted at both subsonic and supersonic speeds. Experimental results showed strong agreement between CFD predictions and measured forces and moments, confirming the accuracy of Starfighters' aerodynamic models and separation simulations.
Testing was conducted at the FAMU/FSU Joint College of Engineering Polysonic Wind Tunnel. The correlation between simulation and experimental data represents an important risk-reduction step as the program transitions from analytical validation toward physical test articles.
Based on the completed testing, we have initiated the next procedural step in the program by moving forward with the procurement of instrumented drop test articles. These articles are intended to support further evaluation of separation dynamics under flight conditions and will incorporate onboard sensors and telemetry systems.
STARLAUNCH 1 is being developed as a sub-orbital vehicle designed to support short-duration microgravity missions and serves as a pathfinder for future air-launched concepts. In parallel, the validated separation work also supports our broader aerospace testing services, including programs where clean separation is required for advanced and hypersonic vehicle testing.
Current Status of Aerovision Aircraft Acquisition Agreement and Litigation Against Aerovision
Our wholly owned subsidiary, Starfighters International, Inc. ("SFII"), is party to an aircraft acquisition agreement dated October 31, 2024, and amended on January 28, 2025 (as amended, the "Aircraft Agreement"), with Aerovision LLC, a Florida limited liability company ("Aerovision"), pursuant to which SFII agreed to purchase from Aerovision various used aircraft and associated spare equipment in phases. The subject aircraft for acquisition pursuant to the Aircraft Agreement originally included twelve F-4 Phantom II aircraft that had been decommissioned by the Republic of Korea Air Force.
The Aircraft Agreement required an initial deposit advance in the amount of $5,000,000, payable in two instalments of $2,500,000 each, with the first payment to be made on or before January 31, 2025 and the second payment to be made within 10 days of Aerovision executing a binding agreement to acquire a minimum of eight F-4 Phantom II aircraft from one or more alternative suppliers when it became uncertain whether the F-4 Phantom II aircraft originally identified for acquisition by SFII were, in fact, available.
SFII paid the two instalments of the initial deposit advance to Aerovision, totaling $5,000,000, on January 24, 2025, and March 3, 2025. However, Aerovision has not provided any information as to the availability of any of the F-4 Phantom II aircraft contemplated to be purchased by SFII, and all recent attempts by our Company to contact Aerovision have been unsuccessful. We, acting through SFII, are reviewing what remedies might be available under the Aircraft Agreement. As of June 30, 2026, the Company has fully impaired the deposits paid to Aerovision.
On August 10, 2026, the SFII's legal counsel filed a complaint in the 18th Judicial Circuit in and for Brevard County, Florida (case number not yet assigned) against Hunter Daniels d/b/a Aerovision, Hunter Daniels, and Mark Daniels , alleging: (1) breach of contract against Aerovision due to its complete failure to perform under the Aircraft Agreement, despite SFII's complete performance under the Aircraft Agreement by providing $5 million in deposit funds to Aerovision (the "Deposits"); (2) conversion against Aerovision for its failure to return the Deposits rightfully belonging to SFII despite two demand letters demanding return of the Deposits; (3) unjust enrichment, in the alternative to the breach of contract claim, against Aerovision for its improper retaining of the Deposits despite its provision of no benefits to SFII in exchange; (4) fraudulent inducement due to Aerovision and the Daniels' improper conduct in inducing SFII to enter into the Aircraft Agreement despite Aerovision's seeming intention not to perform under the Aircraft Agreement; and (5) negligent misrepresentation, in the alternative to the fraudulent inducement claim, based on Aerovision's improper representations which induced SFII to enter into the Aircraft Agreement.
24
Pending Litigation with Rick Svetkoff
On April 9, 2026, Richard "Rick" Svetkoff, former Chief Executive Officer, President, Chairman and director of the Company, filed a complaint in the 18th Judicial Circuit in and for Brevard County, Florida (Case No. 26TC-245660994), against the Company, Timothy Franta (the Company's current CEO and a board member), board members Sean Bromley, Brian Goldmeier and Geoffrey "Hak" Hickman, and Flagship Bank as trustee for funds held in the name of the Company's wholly-owned subsidiary, SFII. Mr. Svetkoff previously served as the Company's CEO, President and Executive Chairman, and as a Director, until his voluntary resignation from these positions on February 19, 2026. Following his resignation, the Company removed Mr. Svetkoff as an officer and director of SFII, a corporation formed under the laws of the State of Florida, and Starfighters International, Inc., a corporation formed under the laws of Texas, on March 9, 2026, and caused Articles of Amendment to be filed for SFII with the Florida Secretary of State office on March 27, 2026. In addition, the Company removed Mr. Svetkoff as an officer and director of Starfighters, Inc. ("SI"), a corporation formed under the laws of the State of Florida, on April 2, 2026, and caused Articles of Amendment to be filed for SI with the Florida Secretary of State office on April 3, 2026.
Mr. Svetkoff's complaint asserts three counts: (i) a claim for breach of fiduciary duty against the director defendants alleging, among other things, self-dealing, mismanagement of assets, and failure to act in good faith that seeks damages alleged to exceed $26,000,000, as well as equitable relief, including removal of certain directors; (ii) a claim under the Florida Deceptive and Unfair Trade Practices Act, alleging that the Company and Mr. Franta improperly used certain corporate entities and related assets to divert business and to trade on plaintiff's goodwill, and injunctive relief, damages, to be determined at trial, attorneys' fees and transfer of the domain name starfighters.net; and (iii) a claim for injunctive relief relating to alleged changes to corporate records and control over certain assets, including funds held at Flagship Bank.
The Company denies all of the allegations of the complaint and intends to vigorously defend itself. The Company also conducted an internal review regarding certain transactions and activities involving Mr. Svetkoff both prior to and following his resignation. The Company contends that Mr. Svetkoff opened an offshore bank account in the Company's name at Hamilton Reserve Bank of St. Kitts and Nevis and transferred approximately $1.0 million of SFII's funds into that account without authorization, though the funds were subsequently returned and such account was closed. The Company also identified several issues related to banking transactions in SFII's accounts at Flagship Bank in February 2026, including, but not limited to, unauthorized withdrawals and transfers of funds in the aggregate amount in excess of $1.9 million to Mr. Svetkoff and RLB Aviation, Inc., a corporation owned by Mr. Svetkoff's wife, Brenda Svetkoff, as well as for rental payments for a residential private property, without approval of the Company's Board of Directors or audit committee. In May 2026, the Company discovered a further bank account opened in 2024 which the Company contends was without approval of the Company's Board of Directors or audit committee by Mr. and Mrs. Svetkoff, which processed Company funds, and had $5,788 withdrawn and not returned to the Company's treasury, upon account closure in March 2025. Such amounts total to $1,921,159, which the Company intends to pursue a recovery of.
The Company is preparing to file a motion to dismiss the complaint and is evaluating potential counterclaims and other claims against Mr. Svetkoff and related parties, which may include claims for conversion, misappropriation of corporate assets, and breach of fiduciary duty. The Company reserves all rights and defenses in connection with this matter, cannot predict the outcome of this matter, and an adverse result could have a material adverse effect on the Company business, financial condition, cash flows, or results of operations.
In relation to this pending litigation and ongoing dispute over controls of bank accounts, Flagship Bank has placed restrictions on all accounts held by SFII with the bank, which held cash and short-term investments totaling over $1.1 million.
In addition, due to ongoing dispute over control of bank accounts, Regions Bank has also placed restrictions on all accounts held by our Texas subsidiary with the bank, which held cash totaling approximately $0.2 million.
25
Results of Operations - Six Months Ended June 30, 2026, Comparison Against the Six Months Ended June 30, 2025
| 2026 | 2025 | |||||
| Operating expenses | ||||||
| Selling, general and administrative | $ | 10,423,430 | $ | 3,614,879 | ||
| Research and development | 85,181 | 441,992 | ||||
| Impairment of aircraft deposits | 5,150,000 | - | ||||
| Operating loss | (15,658,611 | ) | (4,056,871 | ) | ||
| Other income (expense) | ||||||
| Interest income | 71,880 | 57,071 | ||||
| Realized and unrealized gain on short-term investments | 196,956 | 25,050 | ||||
| Flight training income | - | 354,140 | ||||
| Amortization of debt discount | - | (238,981 | ) | |||
| Change in fair value of derivative liability | - | (548,763 | ) | |||
| Interest expense | - | (270,542 | ) | |||
| Loss to misappropriation of assets | (395,033 | ) | - | |||
| Other | 57,470 | 91,362 | ||||
| Total other income (expense) | (68,727 | ) | (530,663 | ) | ||
| Net loss | $ | (15,727,338 | ) | $ | (4,587,534 | ) |
During the six months ended June 30, 2026, we incurred a net loss of $15,727,338 compared to net loss of $4,587,534 for the six months ended June 30, 2025. An analysis of the increase in net loss of $11,139,804 including the major components of our results for the periods, is below.
Selling, general and administrative
During the six months ended June 30, 2026, we incurred selling, general and administrative costs of $10,423,430 compared to $3,614,879 for the six months ended June 30, 2025, an increase of $6,808,551 year over year. The increase is primarily due to $4,464,752 incurred in stock-based compensation to management and consultants. Outside of stock-based compensation, the remaining increase of $2,343,799 is driven by non stock-based increases in marketing, professional fees, public company costs, and personnel costs by $1,636,875, $1,115,502, $333,881, and $367,349, respectively, and partially offset by decreases in business development and consulting fees by $762,125 and $459,754, respectively. Marketing costs increased as the Company embarked on a public relations campaign to raise awareness about its brand and business following the Company's listing on the NYSE American. Increase in professional fees mainly relates to additional legal, audit, and accounting fees incurred to fulfill the Company's increased reporting obligations as a result of becoming a public company in December 2025, as well as increased legal expenditures related to disputes the Company is party to, including those involving the Company's former CEO, the Aircraft Agreement, and access to certain bank accounts of the Company's subsidiaries in relation to the resignation of the Company's former CEO. Increase in public company costs is driven by the Company's listing on the NYSE American since December 2025. Increase in personnel costs is primarily due to the Company hiring numerous employees during the six months ended June 30, 2026, including hiring certain long-time contractors on a permanent basis.
Research and development
During the six months ended June 30, 2026, we incurred research and development expenses of $85,181 compared to $441,992 for the six months ended June 30, 2025, a decrease of $356,811 year-over-year. The decrease reflected the completion of the initial phase of testing for the Company's StarLaunch platform, as announced in January 2026 and disclosed earlier in this management's discussion and analysis, with the Company currently preparing for further research and development activities.
26
Impairment of aircraft deposits
During the six months ended June 30, 2026, we recognized an impairment of aircraft deposits of $5,150,000 in relation to deposits we previously made for the Aircraft Agreement with Aerovision. We determined a loss contingency event has occurred during the six months ended June 30, 2026, due to the continued non-communication and failure to respond to our demand letters for performance or return of the deposits.
Interest income
During the six months ended June 30, 2026, we earned interest income of $71,880 compared to $57,071 for the six months ended June 30, 2025, an increase of $14,809 year-over-year. Realized and unrealized gain on short-term investments for the six months ended June 30, 2026 was $196,956, compared to $25,050 for the comparative period, an increase of $171,906 year-over-year. Interest income is earned on the Company's short-term investments, and realized and unrealized gains are driven by fair value remeasurements of short-term investments as they approach maturity. The increases in both reflect the increase in balances of these short-term investments held by the Company in the current period.
Flight training income
During the six months ended June 30, 2026, we earned flight training income of $0 compared to $354,140 for the six months ended June 30, 2025, a decrease of $354,140 year-over-year. Flight training income is earned from occasional flight training activities undertaken by us for civil customers based on airspace availability, as well as availability of our personnel and equipment away from our primary activities. We have undertaken no such flights during the six months ended June 30, 2026.
Amortization of debt discount
During the six months ended June 30, 2025, the Company recognized amortization of the discount on its convertible debt of $238,981, whereas there were no equivalent expenses in the current period. The discount related to a bifurcated conversion option and transaction costs incurred for a previously outstanding convertible debt financing. The convertible debt was fully converted and settled in December 2025, concurrently with the Company's IPO.
Change in fair value of derivative liability
During the six months ended June 30, 2025, the Company recorded a change in the fair value of its derivative liability of $548,763, whereas there were no equivalent expenses in the current period. The derivative liability resulted from a conversion option on the Company's previously existing convertible debt which was bifurcated as the number of shares to be issued upon conversion may vary. The change in fair value reflects updates to key valuation inputs into the Monte Carlo valuation, including the Company's share price, expected volatility and time to maturity. The convertible debt was fully converted and settled in December 2025, concurrently with the Company's IPO.
Interest expense
During the six months ended June 30, 2026, we incurred no interest expense compared to $270,542 for the six months ended June 30, 2025. Interest expense consisted of interest on convertible debentures of the Company which were carried at 5% per annum and raised to 8% per annum in February 2025, and note payable to Space Florida which was carried at 3% per annum. These loans were converted into common stock upon the Company's listing on the NYSE American in December 2025, and are no longer outstanding.
Loss to misappropriation of assets
During the six months ended June 30, 2026, we recognized a loss to misappropriation of assets of $395,033 in relation to withdrawal and transfer of funds of the Company by the former CEO of the Company without approval of the Board of Directors or the Audit Committee of the Company, totaling $1,921,159. The portion to which we recognized a loss for represented excess amounts over related party notes payable owed to the former CEO and his related entities of $1,526,126 which we applied against amounts withdrawn. We determined there is no sufficient evidence for collectability of the excess amounts.
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Other income, net
During the six months ended June 30, 2026, we earned other income, net of $57,470 compared to $91,362 for the six months ended June 30, 2025, a decrease of $33,892 year-over-year. The decrease is primarily due to the $53,011 decrease in grant income. Grant income consists of expense reimbursement received or is receivable by the Company in connection with rent expenses and costs of relocation of assets and operations to Midland, Texas, in accordance with the Economic Development Agreement with the MDC.
Results of Operations - Three Months Ended June 30, 2026, Comparison Against the Three Months Ended June 30, 2025
| 2026 | 2025 | |||||
| Operating expenses | ||||||
| Selling, general and administrative | $ | 6,448,238 | $ | 1,990,805 | ||
| Research and development | 1,918 | 186,513 | ||||
| Impairment of aircraft deposits | 5,150,000 | - | ||||
| Operating loss | (11,600,156 | ) | (2,177,318 | ) | ||
| Other income (expense) | ||||||
| Interest income | 43,583 | 25,718 | ||||
| Realized and unrealized gain on short-term investments | 74,465 | 13,628 | ||||
| Flight training income | - | 266,240 | ||||
| Amortization of debt discount | - | (121,914 | ) | |||
| Change in fair value of derivative liability | - | 155,899 | ||||
| Interest expense | - | (152,132 | ) | |||
| Other | 23,901 | 55,452 | ||||
| Total other income (expense) | 141,949 | 242,891 | ||||
| Net loss | $ | (11,458,207 | ) | $ | (1,934,427 | ) |
During the three months ended June 30, 2026, we incurred a net loss of $11,458,207 compared to net loss of $1,934,427 for the three months ended June 30, 2025. An analysis of the increase in net loss of $9,523,780 including the major components of our results for the periods, is below.
Selling, general and administrative
During the three months ended June 30, 2026, we incurred selling, general and administrative costs of $6,448,238 compared to $1,990,805 for the three months ended June 30, 2025, an increase of $4,457,433 year-over-year. The increase is mainly due to $2,667,978 incurred in stock-based compensation to management and consultants. Outside of stock-based compensation, the remaining increase of $1,789,455 is driven by non stock-based increases in marketing, professional fees, and personnel costs by $1,219,873, $891,172, and $367,349, respectively, and partially offset by decreases in business development and consulting fees by $582,125 and $210,206, respectively. Marketing costs increased as the Company embarked on a public relations campaign to raise awareness about its brand and business following the Company's listing on the NYSE American. Increase in professional fees mainly relates to additional legal, audit, and accounting fees incurred to fulfill the Company's increased reporting obligations as a result of becoming a public company in December 2025, as well as increased legal expenditures related to disputes the Company is party to, including those involving the Company's former CEO, the Aircraft Agreement, and access to certain bank accounts of the Company's subsidiaries in relation to the resignation of the Company's former CEO. Increase in personnel costs is primarily due to the Company hiring numerous employees during the three months ended June 30, 2026, including hiring certain long-time contractors on a permanent basis.
Research and development
During the three months ended June 30, 2026, we incurred research and development expenses of $1,918 compared to $186,513 for the three months ended June 30, 2025, a decrease of $184,595 year-over-year. The decrease reflected the completion of the initial phase of testing for the Company's StarLaunch platform, as announced in January 2026 and disclosed earlier in this management's discussion and analysis, with the Company currently preparing for further research and development activities.
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Impairment of aircraft deposits
During the three months ended June 30, 2026, we recognized an impairment of aircraft deposits of $5,150,000 in relation to deposits we previously made for the Aircraft Agreement with Aerovision. We determined a loss contingency event has occurred during the three months ended June 30, 2026, due to the continued non-communication and failure to respond to our demand letters for performance or return of the deposits.
Interest income
During the three months ended June 30, 2026, we earned interest income of $43,583 compared to $25,718 for the three months ended June 30, 2025, an increase of $17,865 year-over-year. Realized and unrealized gain on short-term investments for the three months ended June 30, 2026 was $74,465, compared to $13,628 for the comparative period, an increase of $60,837 year-over-year. Interest income is earned on the short-term investments, and realized and unrealized gains are driven by fair value remeasurements of short-term investments as they approach maturity.
Flight training income
During the three months ended June 30, 2026, we earned flight training income of $0 compared to $266,240 for the three months ended June 30, 2025, a decrease of $266,240 year-over-year. Flight training income is earned from occasional flight training activities undertaken by us for civil customers based on airspace availability, as well as availability of our personnel and equipment away from our primary activities. We have undertaken no such flights during the three months ended June 30, 2026.
Amortization of debt discount
During the three months ended June 30, 2025, the Company recognized amortization of the discount on its convertible debt of $121,914, whereas there were no equivalent expenses in the current period. The discount related to a bifurcated conversion option and transaction costs incurred for a previously outstanding convertible debt financing. The convertible debt was fully converted and settled in December 2025, concurrently with the Company's IPO.
Change in fair value of derivative liability
During the three months ended June 30, 2025, the Company recorded an income arising from a change in the fair value of its derivative liability of $155,899, whereas there were no equivalent movement in the current period. The derivative liability resulted from a conversion option on the Company's previously existing convertible debt which was bifurcated as the number of shares to be issued upon conversion may vary. The change in fair value reflects updates to key valuation inputs into the Monte Carlo valuation, including the Company's share price, expected volatility and time to maturity. The convertible debt was fully converted and settled in December 2025, concurrently with the Company's IPO.
Interest expense
During the three months ended June 30, 2026, we incurred no interest expense compared to $152,132 for the three months ended June 30, 2025. Interest expense consisted of interest on convertible debentures of the Company which were carried at 5% per annum and raised to 8% per annum in February 2025, and note payable to Space Florida which was carried at 3% per annum. These loans were converted into common stock upon the Company's listing on the NYSE American in December 2025, and are no longer outstanding.
Other income, net
During the three months ended June 30, 2026, we earned other income, net of $23,901 compared to $55,452 for the three months ended June 30, 2025, a decrease of $31,551 year-over-year. The decrease is primarily due to the $37,011 decrease in grant income. Grant income consists of expense reimbursement received or is receivable by the Company in connection with rent expenses and costs of relocation of assets and operations to Midland, Texas, in accordance with the Economic Development Agreement with the MDC.
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Liquidity and Capital Resources
We continually monitor and manage cash flow to assess the liquidity necessary to fund operations and capital projects. We manage our capital resources and adjust them to take into account changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital resources, we may, where necessary, control the amount of working capital, pursue financing or manage the timing of our capital expenditures. As of June 30, 2026, we had a positive working capital of $25,742,338 (current assets of $28,094,778, less current liabilities of $2,352,440) and as of December 31, 2025, we had a positive working capital of $17,091,337 (current assets of $20,143,416, less current liabilities of $3,052,079).
Our continuing operations are dependent upon our ability to obtain debt or equity financing until such time that we achieve profitable operations. There can be no assurance that we will gain adequate market acceptance for our products or be able to generate sufficient gross margins to reach profitability.
Since our inception, we have incurred operating losses and have experienced negative cash flows from operations. We do not anticipate that cash on hand will be adequate to satisfy our obligations in the ordinary course of business over the next 12 months.
Furthermore, as disclosed earlier, cash and short-term investments of $1,192,986 were restricted by Flagship Bank due to ongoing litigation involving Rick Svetkoff, our former CEO and Director; a further $211,119 of cash and short-term investments were restricted by Regions Bank due to ongoing disputes over ownership and control of bank accounts with Rick Svetkoff; and $1,921,159 was identified to have been unauthorized withdrawals and transfers by Rick Svetkoff from our Flagship Bank and Regions Bank accounts without approval by our board of directors or audit committee prior to his resignation. After setting off related party notes payable of $1,526,126 owed to him and his affiliates, the balance of $395,033 was recorded as loss to misappropriation of assets.
Based on this assessment, we have material uncertainties about our business that may cast substantial doubt about our ability to continue as a going concern. Accordingly, our ability to continue as a going concern is dependent upon our ability to raise sufficient funds to pay ongoing operating expenditures and to meet our obligations. See further discussion related to our ability to continue as a going concern within Note 1 to our unaudited condensed consolidated interim financial statements for the six months ended June 30, 2026 and 2025 under "Nature of operations and going concern."
As of June 30, 2026 and December 31, 2025, we had $2,399,572 and $4,631,720 in cash (including restricted cash), respectively. We are actively managing current cash flows until such time that we are profitable.
The chart below highlights our cash flows for the periods indicated:
| For the six months ended June 30, | ||
| 2026 | 2025 | |
| $ | $ | |
| Net cash provided by (used in): | ||
| Operating activities | (10,060,406) | (3,488,588) |
| Investing activities | (6,878,611) | (6,318,603) |
| Financing activities | 14,706,869 | 6,520,823 |
| Decrease in cash and restricted cash | (2,232,148) | (3,286,368) |
Cash Used in Operating Activities
Our net cash used in operating activities is primarily due to cash payments for operating expenses that we incur in the day-to-day operations of the business. Net cash used in operating activities for the six months ended June 30, 2026, was $10,060,406 compared to $3,488,588 for the six months ended June 30, 2025. The loss for the six months ended June 30, 2026, of $15,727,338 was amplified by $3,973,420 in working capital items and offset by $9,640,352 in non-cash items consisting mainly of stock-based compensation of $4,464,752 and impairment of aircraft deposits of $5,150,000. This compares to a loss of $4,587,534 for the comparative period, that was offset by $282,916 in changes in working capital items and $816,030 in non-cash items consisting mainly of amortization of the convertible debt discount of $238,981 and change in fair value of derivative liability of $548,763.
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Cash Used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was an outflow of $6,878,611 and relates to the redemption of short-term investments of $19,043,594, netted off by purchase of short-term investments of $25,811,038 and purchase of $111,167 of equipment. Net cash used in investing activities during the comparative period was $6,318,603 and relates to deposits made toward the purchase of property, plant and equipment of $6,000,000 and the purchase of short-term investments of $318,603.
Cash Provided by Financing Activities
We have funded our business to date from the issuance of our common stock, warrants and convertible debentures through Reg A financing, private placements, and from loans from related parties.
Net cash provided by financing activities during the six months ended June 30, 2026 was $14,706,869 and relates to $17,499,995 from proceeds of issuance of shares less $1,267,000 of financing costs and an outflow of $1,526,126 related to unauthorized withdrawals by our former CEO for the repayment of related party loans. During the six months ended June 30, 2025, the Company received gross proceeds from Reg A financing of $6,919,701 and paid for share issuance costs of $398,878, resulting in a net cash inflow of $6,520,823.
Capital Management
Capital is comprised of our stockholders' equity and any debt that we may issue. Our objectives when managing capital are to maintain financial strength and to protect our ability to meet ongoing liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for our shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. We manage capital structure to maximize financial flexibility by making adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. We do not presently utilize any quantitative measures to monitor our capital, but rather we rely on our management's expertise to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given our size, is reasonable.
There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements.
Critical Accounting Estimates
There have been no material changes to the Company's critical accounting estimates from those disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.
Off-Balance Sheet Arrangements
We have not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative financial obligations, or with respect to any obligations under a variable interest equity arrangement.
Subsequent Events
On July 7, 2026, the Company issued 124,999 Common Shares for the settlement of 124,999 RSUs vested upon grant on June 25, 2026.
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Implications of Being an Emerging Growth Company
The Company, as an issuer with less than $1.235 billion in total annual gross revenues during its last fiscal year, will qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, the Company:
• will not be required to obtain an auditor attestation on its internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
• will not be required to provide a detailed narrative disclosure discussing its compensation principles, objectives and elements and analyzing how those elements fit with its principles and objectives (commonly referred to as "compensation discussion and analysis");
• will not be required to obtain a non-binding advisory vote from its shareholders on executive compensation or golden parachute arrangements (commonly referred to as the "say-on-pay," "say-on-frequency" and "say-on-golden-parachute" votes);
• will be exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;
• may present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"); and
• will be eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards.
The Company intends to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. The Company's election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.
Under the JOBS Act, the Company may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after the Company's initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time should it no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that the Company would cease to be an "emerging growth company" if the Company has more than $1.235 billion in annual revenues, has more than $700 million in market value of its common stock held by non-affiliates, or issues more than $1 billion in principal amount of non-convertible debt over a three-year period.
Certain of these reduced reporting requirements and exemptions are also available to the Company due to the fact that it may also qualify, once subject to the reporting obligations under section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, as a "smaller reporting company" under the SEC's rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.
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Item 3. Quantitative And Qualitative Disclosures About Market Risk
As a smaller reporting company as defined in Rule 12b-2 under the Exchange Act, the Company is not required to provide the information required by this item.
Item 4. Controls And Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal period ended June 30, 2026, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that during the period covered by this report, our disclosure controls and procedures were not effective as our management has identified material weaknesses.
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual financial statements will not be prevented or detected in a timely manner.
The Company has identified the following material weaknesses:
• Insufficient segregation of duties, oversight of work performed and lack of compensating controls in our finance and accounting functions, including, without limitation, the processing, review and authorization of all routine, non-routine, and related party transactions, due to limited personnel and resources;
• Lack of controls over banking authorities, including the opening of and custody over bank accounts, and the review and approval over cash disbursements; and
• Lack of controls around complex accounting of significant transactions, inclusive of financial instruments.
Remediation Efforts to Address the Identified Material Weaknesses
We plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate debt and stock-based compensation accounting requirements that apply to our financial statements, and to improve robustness of controls and approvals processes of transactions and disbursements. Our plans at this time include:
• Adopting banking resolutions that limit banking relationships and defining approval authorities to ensure oversight and accountability over the Company's funds;
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• Adopting approval thresholds and enforcing dual-approval requirements for material payments, including those of the Company's subsidiaries;
• Adopting board-approved bank account inventory and account-opening authority policy;
• Adopting bank access grant and revocation protocols;
• Providing enhanced access to accounting literature and research materials;
• Increasing communication among our personnel and third-party professionals;
• Enhancing our processes in our treasury functions to improve transparency and control;
• Implementing an enhanced matrix of approval authorities and review requirements on banking transactions;
• Implementing enhanced tracking of payables expenditures, including centralized processing of invoices; and,
• Enhancing vendor communications.
During the quarter ended June 30, 2026, the Company is in the process of implementing the aforementioned controls and procedures, subject to personnel and resource availability. Certain measures, such as adopting of banking resolutions and policies over account opening have been implemented, but efficacy thereof can only be evaluated over time. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control over Financial Reporting
Except for the material weakness identified and the remediation procedures being implemented by the Company as described above, there was no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2026 covered by this Quarterly Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, we may from time to time become subject to legal proceedings and claims arising in connection with ongoing business activities. The results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially affect our results of operations, financial condition or cash flows. In addition, regardless of the outcome, litigation could have an adverse impact on us as a result of legal fees, the diversion of management's time and attention and other factors. At this time, the Company is unable to estimate the possible loss or range of loss, if any, associated with the matters described below.
On April 9, 2026, Richard "Rick" Svetkoff filed a complaint in the 18th Judicial Circuit in and for Brevard County, Florida (Case No. 26TC-245660994), against the Company, Timothy Franta (the Company's current CEO and a board member), board members Sean Bromley, Brian Goldmeier and Geoffrey "Hak" Hickman, and Flagship Bank as trustee for funds held in the name of the Company's wholly-owned subsidiary, Starfighters International, Inc. ("SFII"). Mr. Svetkoff previously served as the Company's CEO, President and Executive Chairman, and as a Director, until his voluntary resignation from these positions on February 19, 2026. Following his resignation, the Company removed Mr. Svetkoff as an officer and director of SFII, a corporation formed under the laws of the State of Florida, and Starfighters International, Inc., a corporation formed under the laws of Texas, on March 9, 2026, and caused Articles of Amendment to be filed for SFII with the Florida Secretary of State office on March 27, 2026. In addition, the Company removed Mr. Svetkoff as an officer and director of Starfighters, Inc. ("SI"), a corporation formed under the laws of the State of Florida, on April 2, 2026, and caused Articles of Amendment to be filed for SI with the Florida Secretary of State office on April 3, 2026.
Mr. Svetkoff's complaint asserts three counts: (i) a claim for breach of fiduciary duty against the director defendants alleging, among other things, self-dealing, mismanagement of assets, and failure to act in good faith that seeks damages alleged to exceed $26,000,000, as well as equitable relief, including removal of certain directors; (ii) a claim under the Florida Deceptive and Unfair Trade Practices Act, alleging that the Company and Mr. Franta improperly used certain corporate entities and related assets to divert business and to trade on plaintiff's goodwill, and injunctive relief, damages, to be determined at trial, attorneys' fees and transfer of the domain name starfighters.net; and (iii) a claim for injunctive relief relating to alleged changes to corporate records and control over certain assets, including funds held at Flagship Bank.
The Company denies all of the allegations of the complaint and intends to vigorously defend itself. The Company also conducted an internal review regarding certain transactions and activities involving Mr. Svetkoff both prior to and following his resignation. The Company contends that Mr. Svetkoff opened an offshore bank account in the Company's name at Hamilton Reserve Bank of St. Kitts and Nevis and transferred approximately $1.0 million of SFII's funds into that account without authorization, though the funds were subsequently returned and such account was closed. The Company also identified several issues related to banking transactions in SFII's accounts at Flagship Bank in February 2026, including, but not limited to, unauthorized withdrawals and transfers of funds in the aggregate amount of $1,895,869 to Mr. Svetkoff and RLB Aviation, Inc., a corporation owned by Mr. Svetkoff's wife, Brenda Svetkoff, without approval of the Company's Board of Directors or audit committee. In February 2026, Mr. and Mrs. Svetkoff made $19,502 in rental payments for a residential private property from the Company's funds without authorization. In May 2026, the Company discovered a further bank account opened in 2024 which the Company contends was without approval of the Company's Board of Directors or audit committee by Mr. and Mrs. Svetkoff, which processed Company funds, and had $5,788 withdrawn and not returned to the Company's treasury, upon account closure in March 2025. Such amounts total to $1,921,159, which the Company intends to pursue a recovery of.
The Company is preparing to file a motion to dismiss the complaint and is evaluating potential counterclaims and other claims against Mr. Svetkoff and related parties, which may include claims for conversion, misappropriation of corporate assets, and breach of fiduciary duty. The Company reserves all rights and defenses in connection with this matter, cannot predict the outcome of this matter, and an adverse result could have a material adverse effect on the Company business, financial condition, cash flows, or results of operations.
On April 17, 2026, Mountain CI Holdings Ltd. ("Mountain CI") filed a complaint against Starfighters, Inc., a subsidiary of the Company, in the 18th Judicial Circuit in Brevard County, Florida. The complaint alleges that the plaintiff lent funds to Starfighters, Inc. in 2014 - 2021 which remained unpaid. The Company denies all of the allegations of the complaint and intends to vigorously defend itself. The outcome of the complaint cannot be determined at this time.
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On June 10, 2026, Starfighters filed a motion to dismiss the complaint filed by Mountain CI. Following the motion to dismiss, Mountain CI filed an amended complaint on June 16, 2026, asserting claims for money lent and unjust enrichment. Starfighters' litigation counsel filed an answer to the claims in the complaint and asserted eight strong affirmative defenses on behalf of Starfighters, Inc., including defenses asserting that the money lent claim, premised on alleged oral demand notes, fails because Mountain CI did not demand repayment on the oral on-demand notes within a reasonable time, and that the unjust enrichment claim, premised on four promissory notes attached to the complaint, fails because the signatory to those notes was Starfighters Aerospace, Inc., an entity distinct from the named defendant. Discovery is ongoing.
On August 10, 2026, the SFII's legal counsel filed a complaint in the 18th Judicial Circuit in and for Brevard County, Florida (case number not yet assigned) against Hunter Daniels d/b/a Aerovision, Hunter Daniels, and Mark Daniels , alleging: (1) breach of contract against Aerovision due to its complete failure to perform under the Aircraft Agreement, despite SFII's complete performance under the Aircraft Agreement by providing $5 million in deposit funds to Aerovision (the "Deposits"); (2) conversion against Aerovision for its failure to return the Deposits rightfully belonging to SFII despite two demand letters demanding return of the Deposits; (3) unjust enrichment, in the alternative to the breach of contract claim, against Aerovision for its improper retaining of the Deposits despite its provision of no benefits to SFII in exchange; (4) fraudulent inducement due to Aerovision and the Daniels' improper conduct in inducing SFII to enter into the Aircraft Agreement despite Aerovision's seeming intention not to perform under the Aircraft Agreement; and (5) negligent misrepresentation, in the alternative to the fraudulent inducement claim, based on Aerovision's improper representations which induced SFII to enter into the Aircraft Agreement.
Item 1A. Risk Factors
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. You should carefully consider the risks discussed in the section entitled "Risk Factors" in Part I, Item 1A in our 2025 Annual Report, which could materially affect our business, financial condition, or future results. The risks described in our 2025 Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we do not currently deem material, may also materially affect our business, results of operations, cash flows and financial position. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the 2025 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) On May 22, 2026, we entered into a Securities Purchase Agreement with certain institutional investors pursuant to which we agreed to issue and sell an aggregate of 5,223,879 shares of Common Stock at a price of $3.35 per share, for aggregate gross proceeds of $17,499,994.65 (the "Private Placement"). The Private Placement closed on or about May 27, 2026. We relied upon the exemption from the registration requirements of the Securities Act provided by Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, based on representations from each purchaser that it was an "accredited investor" within the meaning of Rule 501(a) or a "qualified institutional buyer" as defined in Rule 144A(a). Additional information regarding the Private Placement is set forth in our Current Report on Form 8-K filed with the SEC on May 22, 2026, which is incorporated herein by reference.
On June 15, 2026, we issued an aggregate of 3,530,919 shares of Common Stock (the "Warrant Shares") pursuant to the cashless exercise of 3,667,500 warrants outstanding, at an exercise price of $0.33 per share. The cashless exercise resulted in us effectively withholding and cancelling 136,581 Warrant Shares, with an aggregate value of $1,210,285.22, based on the five trading day volume weighted average price of $8.8613 per Warrant Share, to cover the aggregate exercise price of the warrants. We relied upon the exemption from the registration requirements of the Securities Act provided by Section 3(a)(9) of the Securities Act with respect to the issuance of the Warrant Shares.
(b) Not applicable.
(c) There were no repurchases of our Common Stock or purchases by affiliated parties in the fiscal quarter ended June 30, 2026.
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Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During our fiscal quarter ended June 30, 2026, none of our
Item 6. Exhibits
The following exhibits are included with this Quarterly Report:
Notes:
(*) Filed herewith
(**) Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| STARFIGHTERS SPACE, INC. | ||
| Date: August 19, 2026 | By: | /s/ Tim Franta |
| Name: | Tim Franta | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) and Director |
||
| Date: August 19, 2026 | By: | /s/ David Whitney |
| Name: | David Whitney | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
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