Safe Pro Group Inc 10-Q for FY2025 Q3
Safe Pro Group Inc. (SPAI)
About this 10-Q
Safe Pro Group Inc filed this 10-Q on November 14, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $101.42K
- down 69.3% from $330.76K a year earlier
- Net loss
- $5.01M
- compared with a net loss of $3.69M a year earlier
- Diluted EPS
- -$0.29
- compared with -$0.34 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
OR
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from ______________to _______________.
Commission
File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
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 during the preceding 12 months (or for such shorter period that 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See 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 by Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
As of November 14, 2025, the registrant had outstanding shares of common stock.
FORM 10-Q
INDEX
| i |
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
SAFE PRO GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable and other receivables, net | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| OTHER ASSETS: | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Security deposits | ||||||||
| Total other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued compensation | ||||||||
| Due to related parties | ||||||||
| Contract liabilities | ||||||||
| Lease liabilities, current portion | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Note payable | ||||||||
| Lease liabilities, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| SHAREHOLDERS’ EQUITY | ||||||||
| Preferred stock: $ par value, shares authorized; | ||||||||
| Series A preferred stock; shares designated, shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Series B preferred stock; shares designated, shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Series C preferred stock; shares designated, and shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Preferred stock, value | ||||||||
| Common stock; $ par value, shares authorized, and shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
| 1 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues: | ||||||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Services | ||||||||||||||||
| Total Revenues | ||||||||||||||||
| Cost of Revenues: | ||||||||||||||||
| Product sales | ||||||||||||||||
| Services | ||||||||||||||||
| Depreciation expense | ||||||||||||||||
| Total Cost of Revenues | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Salaries, wages and payroll taxes | ||||||||||||||||
| Research and development | ||||||||||||||||
| Professional services | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Impairment of goodwill | ( | ) | ( | ) | ||||||||||||
| Impairment of other intangibles | ( | ) | ( | ) | ||||||||||||
| Total Other Income (Expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted loss per share of common stock | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Basic and diluted weighted average number of shares of common stock outstanding | ||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements
| 2 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
For the Nine Months Ended September 30, 2024
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | |||||||||||||||||||||||||||||
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional | Total | |||||||||||||||||||||||||||||||||
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | |||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | | ||||||||||||||||||||||||||||
| Issuance of common shares for stock-based compensation | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares and warrants for cash | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series A | ( | ) | ( | ) | - | ||||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series B | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of common shares for cash | - | - | |||||||||||||||||||||||||||||||||||
| Relative fair value of warrants issued with convertible debt | - | - | |||||||||||||||||||||||||||||||||||
| Issuance common shares from conversion of debt | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2025
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional | Total | ||||||||||||||||||||||||||||||||
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common shares for stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of preferred Series C for warrants and cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series C | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of common for exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants for cash | - | - | ||||||||||||||||||||||||||||||||||
| Contributed capital | - | - | - | |||||||||||||||||||||||||||||||||
| Issuance of common for exercise of options | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| 3 |
For the Three Months Ended September 30, 2024
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional | Total | ||||||||||||||||||||||||||||||||
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | | |||||||||||||||||||||||||||
| Issuance of common shares for stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for services | ||||||||||||||||||||||||||||||||||||
| Issuance of common shares and warrants for cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series A | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series B | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of common shares for cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance common shares for conversion of debt | ||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
For the Three Months Ended September 30, 2025
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional | Total | ||||||||||||||||||||||||||||||||
# of Shares | Amount | # of Shares | Amount | # of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | | |||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | $ | ( | ) | $ | | |||||||||||||||||||||||||||
| Issuance of common shares for stock-based compensation | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common shares for preferred Series C | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Issuance of common for exercise of warrants | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants for cash | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common for exercise of options | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Balance | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
See accompanying unaudited notes to the condensed consolidated financial statements.
| 4 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| 2025 | 2024 | |||||||
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization expense | ||||||||
| Stock-based compensation and professional fees | ||||||||
| Amortization of debt discount | ||||||||
| Impairment of goodwill | ||||||||
| Impairment of other intangibles | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other assets | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Contract liabilities | ( | ) | ( | ) | ||||
| Lease liabilities | ( | ) | ||||||
| Accrued compensation | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Investment in internal-use software | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from notes payable | ||||||||
| Proceeds from sale of common stock and warrants | ( | ) | ||||||
| Proceeds from sale of common stock in offering | ||||||||
| Proceeds from sale of Preferred Series C shares and warrants | ||||||||
| Proceeds from warrant exercises | ||||||||
| Proceeds from option exercise | ||||||||
| Proceeds from related party advances | ||||||||
| Repayments of due to related party | ( | ) | ( | ) | ||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE IN CASH | ||||||||
| CASH, beginning of period | ||||||||
| CASH, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Contributed services | $ | $ | ||||||
| Issuance of common shares and equity for convertible debt | $ | $ | ||||||
| Issuance of common shares for accrued interest payable | $ | $ | ||||||
| Increase in additional paid in capital for conversion of preferred shares to common shares | $ | $ | ||||||
| Increase in debt discount and additional paid-in capital | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
| 5 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
NOTE 1 - NATURE OF ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Safe Pro Group. Inc. (the “Company”) is a Delaware corporation organized on December 15, 2021, under the name of Cybernate Corp and started doing business on January 1, 2022. On July 13, 2022, the Company changed its name from Cybernate Corp. to Safe Pro Group Inc. Through a layered approach to the development and integration of advanced artificial intelligence and machine learning, drone-based remote sensing technologies and services, and personal protective gear, the Company has acquired companies with unique safety and security technologies and solutions that can provide governments, enterprises and non-government organizations with innovative solutions designed to respond to evolving threats.
Liquidity
As
reflected in the accompanying unaudited condensed consolidated financial statements; the Company generated a net loss of $
On
October 21, 2025, the Company sold shares of the Company’s common stock at
a purchase price of $ per share. The gross proceeds to the Company from the offering were approximately $
On
August 21, 2025, the Company sold (i)
shares of the Company’s common stock, and (ii) three
On
May 9, 2025, the Company sold: (i)
shares of Series C convertible preferred stock (the “Preferred Stock”) a price of $
On
August 29, 2024, the Company completed its initial public offering (“IPO”), pursuant to which the Company sold
shares of common stock for gross proceeds of $
The
aggregate gross proceeds $
Basis of presentation and principles of consolidation
The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Safe-Pro USA, Airborne Response, and Safe Pro AI. All intercompany accounts and transactions have been eliminated in consolidation.
Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.
Certain information and note disclosure normally included in consolidated financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the six months ended June 30, 2025, the years ended December 31, 2024 and 2023 of the Company which is included in Form 10-Q and Form 10-K, as filed on August 14, 2025 and March 31, 2025, respectively.
| 6 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the nine months ended September 30, 2025 and 2024, include estimates for allowance for credit losses on accounts receivable and other receivables, estimates for obsolete or slow-moving inventory, the useful life of property and equipment, the valuation of assets acquired in an asset acquisition, the valuation of intangible assets and goodwill to determine any impairment, the estimate of the fair value of lease liabilities and related right of use assets, assumptions used in assessing impairment of long-lived assets, estimates related to the allocation of the transaction price for revenue recognition purposes, estimates of current and deferred income taxes and deferred tax valuation allowances, and the fair value of non-cash equity transactions.
Risks and uncertainties
The
Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”)
limit. In August 2024, the Company entered into a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This
service is a secure and convenient way to access FDIC protection on large deposits and earn a return. This service provides for deposits
in excess of $
The Company’s results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of its control, including the impact of health and safety concerns, and war in Ukraine and the Middle East. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for the Company’s products and services and its ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could strain the Company’s domestic and international customers, possibly resulting in delays in customer payments. Any of the foregoing could harm the Company’s business and it cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact the Company’s business.
Revenue recognition
In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
| 7 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
Safe-Pro USA
The Company recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms.
Revenue from Safe-Pro USA customers is generally recognized at the time of shipment, which is the time that the Company satisfies its performance obligations.
Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed, and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.
Airborne Response
Airborne Response recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenues from services are recognized at a point in time when Airborne Response completes services pursuant to its agreements with clients and collectability is probable.
Safe Pro AI
Safe Pro AI sells subscriptions to its customers for the use of its software under a software as a service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including demining, in law enforcement and security. The Company’s SaaS offerings are sold under a prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI initially charges data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.
Contract liabilities
Advance
payments received from customers, as well as unpaid amounts that customers are contractually obligated to pay, are deferred until all
revenue recognition criteria are satisfied. As of September 30, 2025 and December 31, 2024, customer advanced payments amounted to $
Advertising costs
All
costs related to advertising of the Company’s services and products are expensed in the period incurred. For the three and nine
months ended September 30, 2025, advertising costs charged to operations were $
| 8 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
ASC 260 “Earnings Per Share”, requires dual presentation of basic and diluted earnings (loss) per common share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares were excluded from the computation of diluted shares outstanding for the nine months ending September 30, 2025 and 2024, as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:
| 2025 | 2024 | |||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Stock warrants | ||||||||
| Stock options | ||||||||
| Common shares issuable upon conversion of convertible notes | ||||||||
| Common shares issuable upon conversion of Preferred Series A | ||||||||
| Common shares issuable upon conversion of Preferred Series B | ||||||||
| Common shares issuable upon conversion of Preferred Series C | ||||||||
| Total | ||||||||
The Company has Series A Preferred, Series B Preferred shares and Series C Preferred shares authorized. On August 28, 2024, Series A Preferred and Series B Preferred shares were converted into and common shares respectively. On July 22, 2025, July 23, 2025 and September 11, 2025 Series C Preferred of , , and , respectively, were converted into , , and common shares, respectively. During the nine months ended September 30, 2025 and 2024, the Company had Series A Preferred shares, of Series B Preferred shares and of Series C Preferred shares issued and outstanding. (See Note 8).
Segment reporting
The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. During the three and nine months ended September 30, 2025 and 2024, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.
Recent accounting pronouncements
In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and application may be applied prospectively or retrospectively. We are currently evaluating the potential effect that ASU 2024-03 will have on our consolidated financial statements.
| 9 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
In November 2024, the FASB issued ASU 2024-04, “Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments,” which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt. The new guidance is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
NOTE 2 – ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES
Accounts receivable
On September 30, 2025 and December 31, 2024, accounts receivable consisted of the following:
SCHEDULE OF ACCOUNTS RECEIVABLE
| September 30, 2025 | December 31, 2024 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ||||||||
| Accounts receivable, net | $ | $ | ||||||
For
the three and nine months ended September 30, 2025 and 2024, the Company did
Performance bond receivable
On September 30, 2025 and December 31, 2024, other receivables consisted solely of performance bond receivables as follows:
SCHEDULE OF OTHER RECEIVABLES
| September 30, 2025 | December 31, 2024 | |||||||
| Other receivables | $ | $ | ||||||
| Less: allowance for doubtful other receivables | ( | ) | ( | ) | ||||
| Other receivables, net | $ | $ | ||||||
Safe-Pro USA was required to obtain a Performance Guarantee (PG) at a bank designated by a former customer. The amount of each separate Performance Guarantee is 10% of the CFR (Cost and Freight) value of the contract in US Dollars. The Performance Guarantee was required to be submitted prior to the Contract being executed. In case of the supplier’s failure to fulfill the contractual obligations as per the terms of the contract, the Performance Guarantee may be forfeited. Upon certain conditions being met, the Company would be entitled to reimbursement from the Performance Guarantee being held. The Company has yet to receive any receipts from their performance bonds being held at the designated bank. As of September 30, 2025 and December 31, 2024, there were no performance bonds receivable and outstanding.
| 10 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
NOTE 3 – INVENTORY
On September 30, 2025 and December 31, 2024, inventories consisted of the following:
SCHEDULE OF INVENTORIES
| September 30, 2025 | December 31, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| Less reserve for obsolete inventory | ||||||||
| Total | $ | $ | ||||||
NOTE 4 – PROPERTY AND EQUIPMENT
On September 30, 2025 and December 31, 2024, property and equipment consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| September 30, 2025 | December 31, 2024 | |||||||
| Manufacturing equipment | $ | $ | ||||||
| Drones and related equipment | ||||||||
| Software library | ||||||||
| Furniture, fixtures and office equipment | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
For
the three and nine months ended September 30, 2025, depreciation expense amounted to $
NOTE 5 – INTANGIBLE ASSETS AND GOODWILL
Impairments
During
the quarter ended September 30, 2025, the Company conducted an interim impairment test of its goodwill and other intangibles due to a
decline in operating performance and a sustained decline in its stock price. As part of the analysis, the Company updated the forecasted
future cash flows and revenues in the impairment assessment to reflect current conditions. Based on the results of the impairment test
performed, the Company recognized a full goodwill impairment charge of $
Intangible assets
As
a result of the acquisition of Safe Pro AI on March 9, 2023, there was a $
During
the three and nine months ended September 30, 2025, the Company capitalized $
As of September 30, 2025, intangible assets subject to amortization consisted of the following:
SCHEDULE OF INTANGIBLE ASSETS SUBJECT TO AMORTIZATION
| September 30, 2025 | ||||||||||||||
| Amortization period (years) | Gross Amount | Accumulated Amortization | Net finite intangible assets | |||||||||||
| Customer relationships | $ | $ | ( | ) | $ | |||||||||
| Contractual employment agreements | ( | ) | ||||||||||||
| Acquired capitalized internal-use software development costs | ( | ) | ||||||||||||
| Amortization of intangible assets | $ | $ | ( | ) | $ | |||||||||
| 11 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
For
the three and nine months ended September 30, 2025, amortization of intangible assets amounted to $
As of December 31, 2024, intangible assets subject to amortization consisted of the following:
| December 31, 2024 | ||||||||||||||
Amortization period (years) | Gross Amount | Accumulated Amortization | Net finite intangible assets | |||||||||||
| Customer relationships | $ | $ | ( | ) | $ | |||||||||
| Contractual employment agreements | ( | ) | ||||||||||||
| Acquired capitalized internal-use software development costs | ( | ) | ||||||||||||
| Amortization of intangible assets | $ | $ | ( | ) | $ | |||||||||
For
the year ended December 31, 2024 amortization of intangible assets amounted to $
Amortization of intangible assets with finite lives attributable to future periods is as follows:
SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS
| Year ending December 31: | Amount | |||
| 2025 (three months ended December 31, 2025) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total | $ | |||
Goodwill
On September 30, 2025 and December 31, 2024, goodwill consisted of the following:
SCHEDULE OF GOODWILL
| September 30, 2025 | December 31, 2024 | |||||||
| Safe-Pro USA | $ | $ | ||||||
| Airborne Response | ||||||||
| Total goodwill | $ | $ | ||||||
For
the three and nine months ended September 30, 2025, impairment of goodwill amounted to $
NOTE 6 – NOTE PAYABLE
On
September 30, 2020, Safe-Pro USA entered into a Loan and Authorization Agreement (the “SBA COVID-19 EIDL Loan”) with respect
to a loan of $
On September 30, 2025 and December 31, 2024, notes payable consisted of the following:
SCHEDULE OF NOTES PAYABLE
| September 30, 2025 | December 31, 2024 | |||||||
| Notes payable | $ | $ | ||||||
| Total notes payable | ||||||||
| Less: current portion of notes payable | ||||||||
| Notes payable – long-term | $ | $ | ||||||
| 12 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
The following schedule provides minimum future note payable principal payments required during future periods:
SCHEDULE OF MINIMUM FUTURE NOTE PAYABLE PRINCIPAL PAYMENTS
| Year ending December 31: | Amount | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total note payable | $ | |||
NOTE 7 – CONVERTIBLE NOTES PAYABLE
On
December 27, 2023, the Company received net proceeds of $
During
March 2024, the Company received net proceeds of $
On
August 27, 2024, the December 2023 Convertible Note and March 2024 Convertible Notes with principal balances of $
During the three and nine months ended September 30, 2025 and the year ended December 31, 2024, the Company did t record any amortization of debt discount.
| 13 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
NOTE 8 – STOCKHOLDERS’ EQUITY
Preferred Stock
Series A Preferred Stock
On June 7, 2022, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate shares of the Series A Preferred, par value $. The Certificate of Designation became effective in the state of Delaware on January 20, 2023. Each share of Series A Preferred had an initial stated value of $ per share. On August 28, 2023, the Company amended its Series A Preferred Certificate of Designation, to amend the Series A Stated Value to $ per share.
Each share of Series A Preferred was convertible into the number of common shares equal to the Series A Stated Value ($) divided by the Fair Market Value of the common stock. The Fair Market Value is equal to the average of the closing price for the Company’s common stock on a National Market Exchange, for the 20 trading days prior to conversion or in the case of an initial public offering the initial listing price, subject to price protection. Series A Preferred has voting rights equal to the number of common shares into which it may convert. The conversion rights of Preferred Series A were contingent upon the Company’s completion of the initial public offering and/or listing on a National Market Exchange. The holders of the Series A Preferred shall be entitled to a dividend that is payable to the holders of the Company’s common stock as well as certain liquidation rights.
The Series A Preferred were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of the Series A Preferred Certificate of Designation, Series A Preferred is not redeemable for cash. As such, the Series A Preferred is classified as permanent equity. The Company concluded that the conversion rights under the Series A Preferred were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series A Preferred were not considered an embedded derivative that required bifurcation.
On
June 7, 2022, in connection with the acquisition of
Series B Preferred Stock
On August 29, 2022, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate shares of the Series B Preferred, par value $. The Certificate of Designation became effective in the state of Delaware on January 20, 2023. Each share of Series B Preferred had a stated value of $ per share.
Each share of Series B Preferred was convertible into the number of common shares equal to the Series B Stated Value ($) divided by the Fair Market Value of the common stock. The Fair Market Value is equal to the average of the closing price for the Company’s common stock on a National Market Exchange, for the 20 trading days prior to conversion or in the case of an initial public offering the initial listing price, subject to price protection. Series B Preferred has voting rights equal to the number of common shares into which it may convert. The conversion rights of Preferred Series B were contingent upon the Company’s completion of the initial public offering and/or listing on a National Market Exchange. The holders of the Series B Preferred shall be entitled to a dividend that is payable to the holders of the Company’s common stock as well as certain liquidation rights.
On
August 29, 2022, in connection with the acquisition of
Series C Preferred Stock
On
May 7, 2025, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate shares
of the Series C Preferred, par value $. On May 8, 2025, the Company’s Certificate of Designation for Series C Preferred Stock
became effective, authorizing shares with a stated value of $ per share. The Series C Preferred Stock was non-voting, entitled
to dividends on an as-converted basis, and convertible into common stock at a fixed price of $
| 14 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
On
July 22, 2025, the Company issued
common shares pursuant to the conversion of
shares of Preferred Series C at a conversion ratio of $
On
July 23, 2025, the Company issued
common shares pursuant to the conversion of
shares of Preferred Series C at a conversion ratio of $
On
September 11, 2025, the Company issued
common shares pursuant to the conversion of
shares of Preferred Series C at a conversion ratio of $
As of September 30, 2025, all Series C Preferred Stock had been converted into common shares, resulting in no outstanding balance.
Common stock issued for compensation and services
2025
On
February 27, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount
of $
On
February 28, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was issued to Mr. Erdberg, the Company’s CEO, as pursuant to his contractual agreement
with the Company. Stock-based compensation in the amount of $
Also
on February 28, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount
of $
On
March 11, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount
of $
On
March 20, 2025, the Company issued common shares, outside of its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was issued to individuals for services. Stock-based professional fees in the amount of
$
On
June 13, 2025, the Company issued common shares, pursuant to 2022 Equity Plan, at a fair market value of $, representing the
market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount of
$
Also
on June 13, 2025, the Company issued restricted shares at a fair market value of $, representing the market close on date
of issuance. Stock-based professional fees in the amount of $
On
July 22, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The awards were issued to individuals in connection with services performed or pursuant to contractual
employment agreements. Stock-based compensation fees totaling $ are recorded, including $
| 15 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Also
on July 22, 2025, the Company issued restricted shares at a fair market value of $, representing the market close on date
of issuance. Stock based professional fees in the amount of $
On
August 4, 2025, the Company granted common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The award was granted to an individual in connection with services performed. The shares vest in
equal monthly installments of shares over a 12-month period beginning September 1, 2025, subject to continued service. As of September
30, 2025, the Company issued shares. Stock-based professional fees in the amount of $
On
August 22, 2025, the Company issued common shares, pursuant to its 2022 Equity Plan, at a fair market value of $, representing
the market close on date of issuance. The awards were issued to individuals in connection with services performed or pursuant to contractual
employment agreements. Stock based professional fees in the amount of $
2024
On
January 9, 2024, the Company issued vested restricted common shares to a director for services rendered pursuant to a board of
directors’ agreement (See Note 11). The Company valued these common shares at the fair value of $
On June 24, 2024, the Company issued fully vested restricted common shares to consultants for services rendered. The Company valued these common shares at $ or $ per share based on sales of common stock units in recent private placements.
On August 29, 2024, the Company issued restricted common shares to consultants for services rendered. The Company valued these common shares at $ or $ per share based on the initial listing price for its public offering.
Additionally,
on August 29, 2024, the Company issued restricted common shares to Daniyel Erdberg, restricted common shares to Theresa
Carlise and restricted common shares to an Employee. The Company valued these common shares at $
In connection with these shares, the Company recorded stock-based professional fees of $ and $, respectively, for the three and nine months ended September 30, 2024.
Common stock and warrants issued for cash
2025
During
the three months ended September 30, 2025, the Company completed a private placement of Units for aggregate gross proceeds
of $
2024
For
the three months ending September 30, 2024, the Company issued common shares for cash. During the nine months ended September 30, 2024,
the Company completed a private placement of (i) Units for aggregate proceeds of $
Contributed capital
On
March 31, 2025, Mr. Borkar, President of Safe-Pro USA and an employee, which is his spouse, agreed to forgive aggregate accrued salary
of $
| 16 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Warrants
A summary of the status of the Company’s total outstanding warrants and changes during the nine months ended September 30, 2025 and 2024, respectively are as follows:
SCHEDULE OF OUTSTANDING WARRANTS AND CHANGES
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (1) |
|||||||||||||
| Balance Outstanding on December 31, 2024 | $ | $ | ||||||||||||||
| Issued | - | |||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Balance Outstanding on September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2025 | $ | $ | ||||||||||||||
| (1) |
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (1) | |||||||||||||
| Balance Outstanding on December 31, 2023 | $ | $ | ||||||||||||||
| Issued | - | |||||||||||||||
| Balance Outstanding on September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2024 | $ | $ | ||||||||||||||
| (1) | The
aggregate intrinsic value on September 30, 2024, was calculated based on Nasdaq’s market close on September 30, 2024 of $ |
For the nine months ending September 30, 2025 and 2024, the Company recorded $ and $, respectively, for stock-based compensation expense related to warrants as issued for services. As of September 30, 2025, unamortized stock-based compensation for warrants was $ to be recognized through December 31, 2025.
The above warrants granted during the nine months ended September 30, 2025 were valued using the Black-Scholes option pricing model using the following weighted average assumptions:
SCHEDULE OF BLACK-SCHOLES OPTION PRICING MODEL TO WARRANTS GRANTED ASSUMPTION
| September 30, 2025 | ||||
| Expected term, in years | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Dividend yield | ||||
Representative warrants
On
August 29, 2024, in connection with the IPO, the Company entered into an underwriting agreement (the “Underwriting
Agreement”) with Dawson James Securities, Inc. (the “Underwriter”), Pursuant to the Underwriting Agreement, the
Company issued a common stock purchase warrant to the Underwriter for the purchase of
Warrants issued for Convertible Preferred Series C Stock
On
May 8, 2025, the Company entered into convertible Series C Preferred agreements with investors pursuant to which the Company issued and
sold to the Investors for an aggregate price of $
During
the three months ended September 30, 2025,
Warrants issued for Convertible Debt
During
March 2024, the Company entered into convertible note agreements with investors pursuant to which the Company issued and sold to the
Investors (i) the March 2024 Convertible Notes in the principal amount of $
Warrants issued in connection with private placement
During
the three months ended September 30, 2025, the Company completed a private placement of Units for aggregate gross proceeds
of $
| 17 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
The Company determined that the warrants do not meet the definition of liability under FASB ASC Topic 480 and therefore classified the warrants as equity instruments.
Options
SCHEDULE OF STOCK OPTION ACTIVITY
| Shares Underlying Options | Weighted
Average Exercise Price | Weighted Average Contractual Life (Years) | Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2024 | $ | $ | ||||||||||||||
| Granted | - | |||||||||||||||
| Forfeited | - | - | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Outstanding at September 30, 2025 | $ | $ | ||||||||||||||
| Exercisable at September 30, 2025 | $ | $ | ||||||||||||||
For the nine months ending September 30, 2025 and 2024, the Company recorded $ and $, respectively, for stock-based compensation expense related to stock options. As of September 30, 2025, unamortized stock-based compensation for stock options was $ to be recognized through March 31, 2030.
SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS OF OPTIONS
| September 30, 2025 | ||||
| Expected term, in years | ||||
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Dividend yield | ||||
2022 Equity Incentive Plan
On July 1, 2022, the Company’s Board of Directors authorized and adopted the 2022 Equity Incentive Plan (the “2022 Plan”) and reserved shares of common stock for issuance thereunder. The 2022 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. The 2022 Plan provides for the issuance of incentive stock options, non-statutory stock options, restricted stock, restricted stock units (“RSUs”), and other stock-based awards. During the year ended December 31, 2024 and 2023, and of the Company’s common shares issued for services, as described above, were issued pursuant to the 2022 Plan, respectively. During the nine months ended September 30, 2025, of the Company’s common shares and options issued for services and compensation, as described above, were issued pursuant to the 2022 Plan. As of September 30, 2025, the Company had shares available for issuance under the 2022 Plan.
2025 Equity Incentive Plan
In April 2025, the Compensation Committee of the Board of Directors approved the 2025 Stock Plan, pending stockholders’ approval, which was subsequently received on June 26, 2025. The 2025 Plan is a stock-based compensation plan that provides discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights to key employees, non-employee directors and consultants. The share reserve is subject to an annual automatic increase of up to 5% of the Company’s outstanding common stock through January 1, 2035, unless otherwise determined by the Board. The plan includes provisions related to award limits, changes in control, and restrictions on repricing. No shares, stock options, or other awards have been issued under the 2025 Plan as of September 30, 2025.
| 18 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
NOTE 9 – COMMITMENTS AND CONTINGENCIES
Legal matters
From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of September 30, 2025, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.
Product liability insurance
The
Company’s subsidiary, Safe-Pro USA, carries a product liability policy that covers up to $
Contingent amounts due to related parties
As
discussed in Note 11 – Related Party Transactions, the Company agreed to assume liability to the former members of Safe-Pro USA
of $
NOTE 10 – CONCENTRATIONS
Concentrations of credit risk
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable and cash deposits.
The
Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”)
limit. To date, the Company has not experienced any losses on its invested cash. As of September 30, 2025 and December 31, 2024, the
Company recorded no cash in bank in excess of FDIC insured levels. In August 2024, the Company entered into a deposit placement agreement
for Insured Cash Sweep Service (“ICS”). This service is a secure, and convenient way to access FDIC protection on large deposits,
earn a return, and enjoy flexibility. This reduces the Company’s risk as it relates to uninsured FDIC amounts in excess of $
Geographic concentrations of sales
For
the three months ended September 30, 2025,
For
the three months ended September 30, 2024,
Customer concentration
For
the three months ended September 30, 2025, four customers accounted for approximately
For
the three months ended September 30, 2024, two customers accounted for approximately
| 19 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
A
reduction in sales from or the loss of such customers would have a material adverse effect on the Company’s results of
operations and financial condition. On September 30, 2025, three customers accounted for
On
September 30, 2024, one customer accounted for
Supplier concentration
During
the three months ended September 30, 2025, the Company purchased approximately
During
the three months ended September 30, 2024, the Company purchased approximately
The loss of these suppliers may have a material adverse effect on the Company’s results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.
NOTE 11 – RELATED PARTY TRANSACTIONS
Due to related parties
In
connection with the Acquisition of Safe-Pro USA, the Company agreed to assume a liability due to the former member of Safe-Pro USA, who
is a current director of the Company, of $
On
March 31, 2025, Mr. Borkar waived accrued salary in aggregate of $
On
March 31, 2025, a spouse of Mr. Borkar waived the accrued salary in aggregate of $
For
the nine months ended September 30, 2025 and 2024, the Company recorded gross wages of $
| 20 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Related party purchases
During
the nine months ended September 30, 2025 and 2024, the Company purchased inventory and services from a company owned by the spouse of
Mr. Borkar, in the amount of $
NOTE 12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES
On
July 13, 2022, and effective August 1, 2022, the Company entered into a
On
June 20, 2025, the Company renewed the above operating lease through
In
July 2021, Safe-Pro USA entered into a
In
April 2024, Airborne Response entered into a
In adopting ASC Topic 842, Leases (Topic 842) on January 1, 2022 the Company had elected the ‘package of practical expedients, which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. Upon signing new leases for property and equipment, the Company analyzed the new leases and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheets, at fair value.
During
the three and nine months ended September 30, 2025, in connection with its operating property leases, the Company recorded rent expense
of $
The
significant assumption used to determine the present value of the lease liabilities on August 1, 2022 and June 7, 2022, and April 2024
was a discount rate ranging from
On September 30, 2025 and December 31, 2024, right-of-use asset (“ROU”) is summarized as follows:
SCHEDULE OF RIGHT OF USE ASSET
September 30, 2025 | December 31, 2024 | |||||||
| Office lease right of use assets | $ | $ | ||||||
| Auto lease right of use asset | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Balance of ROU assets | $ | $ | ||||||
| 21 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
| Other information: | September 30, 2025 | December 31, 2024 | ||||||
| Weighted average remaining lease term – operating leases | ||||||||
| Weighted average discount rate – operating leases | % | % | ||||||
On September 30, 2025 and December 31, 2024, operating lease liabilities related to the ROU assets are summarized as follows:
SCHEDULE OF OPERATING LEASE LIABILITY TO ROU ASSET
September 30, 2025 |
December 31, 2024 |
|||||||
| Lease liabilities related to office lease right of use assets | $ | $ | ||||||
| Lease liabilities related to auto lease right of use asset | ||||||||
| Less: current portion of lease liabilities | ( |
) | ( |
) | ||||
| Lease liabilities – long-term | $ | $ | ||||||
On September 30, 2025, future minimum base lease payments due under non-cancelable operating leases are as follows:
SCHEDULE OF LEASE PAYMENTS DUE UNDER NON-CANCELABLE OPERATING LEASES
| Twelve months ended December 31, | Amount | |||
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total minimum non-cancellable operating lease payments | ||||
| Less: discount to fair value | ( | ) | ||
| Total lease liabilities on September 30, 2025 | $ | |||
NOTE 13 – SEGMENT REPORTING
During
the three and nine months ended September 30, 2025 and 2024, the Company operated in
| 22 |
SAFE
PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
Information with respect to these reportable business segments for the three and nine months ending September 30, 2025 and 2024 was as follows:
SCHEDULE OF BUSINESS SEGMENT REPORTING
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenues: | ||||||||||||||||
| Safe-Pro USA | $ | $ | $ | $ | ||||||||||||
| Airborne Response | ||||||||||||||||
| Safe Pro AI | ||||||||||||||||
| Revenues | ||||||||||||||||
| Depreciation and amortization: | ||||||||||||||||
| Safe-Pro USA | ||||||||||||||||
| Airborne Response | ||||||||||||||||
| Safe Pro AI | ||||||||||||||||
| Other (a) | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Interest expense: | ||||||||||||||||
| Safe-Pro USA | ||||||||||||||||
| Airborne Response | ||||||||||||||||
| Safe Pro AI | ||||||||||||||||
| Other (b) | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Net (loss) income: | ||||||||||||||||
| Safe-Pro USA | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Airborne Response | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Safe Pro AI | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (a) | |
| (b) |
September 30, 2025 | December 31, 2024 | |||||||
| Identifiable long-lived tangible assets, net by segment: | ||||||||
| Safe-Pro USA | $ | $ | ||||||
| Airborne Response | ||||||||
| Safe Pro AI | ||||||||
| Other (a) | ||||||||
| Long lived tangible assets | $ | $ | ||||||
| 23 |
SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)
NOTE 14 – SUBSEQUENT EVENTS
Stock-based compensation issued for wages and services
On October 1, 2025, the Company issued shares of common stock to an individual service provider as the second installment of a -share award under the 2022 Equity Incentive Plan. The shares were valued at $ per share, based on the market close on the grant date. The award vests in equal monthly installments of shares over 12 months, beginning September 1, 2025, subject to continued service. The stock-based compensation of $ was recorded on the Company’s statement of operations to Professional fees.
On
October 2, 2025, the Company issued shares of common stock pursuant to a warrant exercise. As of September 30, 2025, the Company
had received proceeds of $
On October 17, 2025, the Company issued shares of its common stock pursuant to its 2022 Equity Incentive Plan. The shares were granted at a fair market value of $ per share, based on the closing price on the grant date. This issuance was made in accordance with a contractual employment agreement dated February 27, 2025, which provided for the issuance of shares effective six months from the agreement date. As of September 30, 2025, the Company recognized stock-based compensation expense totaling $, which was recorded as Professional Fees in the unaudited condensed consolidated statement of operations. Upon issuance of the shares on October 17, 2025, the Company reclassified the par value of the shares from additional paid-in capital to common stock to reflect the shares outstanding.
On October 17, 2025, the Company issued shares of its common stock pursuant to its 2022 Equity Incentive Plan. The shares were granted at a fair market value of $ per share, based on the closing price on the grant date. This issuance was made in accordance with a contractual employment agreement dated March 11, 2025, which provided for the issuance of shares effective six months from the agreement date. As of September 30, 2025, the Company recognized stock-based compensation expense totaling $, which was recorded as Professional Fees in the unaudited condensed consolidated statement of operations. Upon issuance of the shares on October 17, 2025, the Company reclassified the par value of the shares from additional paid-in capital to common stock to reflect the shares outstanding.
On October 31, 2025, the Compensation Committee approved the accelerated vesting and issuance of shares of common stock under the 2022 Equity Incentive Plan. In accordance with ASC 718, the fair value of the award was measured at $ per share, the closing price on the acceleration date, as this constituted a modification of the original grant. As a result, the stock-based compensation of $ was recorded on the Company’s statement of operations to Professional fees.
Shelf Registration Statement
On
October 10, 2025, the Company filed a shelf registration statement on Form S-3 with the SEC, allowing for the potential offering of up
to $
Private Placement of Common Stock
On
October 17, 2025, the Company closed on a private placement of shares of common stock at a purchase price of $ per share,
resulting in aggregate gross proceeds of $
The Company agreed to use its best efforts to file a registration statement to register the resale of the shares within fifteen business days of closing. Additionally, the Company agreed not to enter into any transaction for the sale of equity securities or securities convertible into equity securities for a period of 90 days following the closing, except that after the registration statement has been effective for at least 30 days, the Company may enter into such transactions if the price per share is at least $.
On
October 22, 2025, the Board of Directors approved payments totaling $
| 24 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. See the section titled “Risk Factors” in our Form 10-K dated March 31, 2025 as filed with the Securities and Exchange Commission (the “SEC”), which is available on the SEC’s EDGAR website at www.sec.gov, for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q includes forward-looking statements. These statements involve risks known to us, significant uncertainties, and other factors which may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements.
Some of the statements used in this report constitute “forward-looking statements” that represent our beliefs, projections and predictions about future events. Forward-looking statements are all statements other than statements of historical fact, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements about the following:
| ● | our prospects, including our future business, revenues, expenses, net income, earnings per share, gross margins, profitability, cash flows, cash position, liquidity, financial condition and results of operations, backlog of orders and revenue, our targeted growth rate, our goals for future revenues and earnings, and our expectations about realizing the revenues in our backlog and in our sales pipeline; | |
| ● | the effects on our business, financial condition, and results of operations of current and future economic, business, market and regulatory conditions, including the current economic and market conditions and their effects on our customers and their capital spending and ability to finance purchases of our products, services, technologies and systems; | |
| ● | the effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins, profitability, cash flows, capital expenditures, liquidity, financial condition, and results of operations; | |
| ● | our products, services, technologies, and systems, including their quality and performance in absolute terms and as compared to competitive alternatives, their benefits to our customers and their ability to meet our customers’ requirements, and our ability to successfully develop and market new products, services, technologies and systems; | |
| ● | our markets, including our market position and our market share; |
| 25 |
| ● | our ability to successfully develop, operate, grow and diversify our operations and businesses; | |
| ● | our business plans, strategies, goals and objectives, and our ability to successfully achieve them; | |
| ● | the sufficiency of our capital resources, including our cash and cash equivalents, funds generated from operations, availability of borrowings under our credit and financing arrangements and other capital resources, to meet our future working capital, capital expenditure, lease and debt service and business growth needs; | |
| ● | the value of our assets and businesses, including the revenues, profits and cash flows they are capable of delivering in the future; | |
| ● | the effects on our business operations, financial results, and prospects of business acquisitions, combinations, sales, alliances, ventures and other similar business transactions and relationships; | |
| ● | industry trends and customer preferences and the demand for our products, services, technologies and systems; and | |
| ● | the nature and intensity of our competition, and our ability to successfully compete in our markets. |
These statements are necessarily subjective, are based upon our current plans, intentions, objectives, goals, strategies, beliefs, projections and expectations, and 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 future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based, or the success of our business. Furthermore, industry forecasts are likely to be inaccurate, especially over long periods of time.
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that may cause actual results, our performance or achievements, or industry results to differ materially from those contemplated by such forward-looking statements include, without limitation, those discussed under the caption “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC.
Business Overview
We were incorporated in the State of Delaware on December 15, 2021. Safe Pro Group Inc. is the parent company of Airborne Response Corp. and Safe-Pro USA, LLC, which were both incorporated in Florida, in 2016 and 2008, respectively. On March 9, 2023, Safe Pro Group Inc. acquired Safe Pro AI LLC (formerly known as Demining Development LLC), a privately held developer of Artificial Intelligence (“AI”) and Machine Learning (“ML”) software technology for processing of drone-based imagery and data. We are a company focused on innovative security and protection solutions, specifically, advanced artificial intelligence / machine learning (AI/ML) software technology for the creation of robust datasets sourced from the analysis of aerial imagery, bullet and blast resistant personal protection equipment and providing mission-critical aerial managed services.
| 26 |
Through a layered approach to the development and integration of advanced technologies in artificial intelligence, drone-based remote sensing technologies, services, and personal protective gear, Safe Pro Group seeks to provide government, NGOs and enterprises with innovative solutions designed to respond to evolving threats.
Currently, the Company’s revenue is primarily generated by its subsidiaries Airborne Response and Safe-Pro USA. We expect to begin realizing revenue from Safe Pro AI for its Safe Pro Object Threat Detection (SPOTD) technology ecosystem - Spotlight AI™, SpotlightAI™ OnSight and SPOTD NODE (Navigation, Observation and Detection Engine)- as a result of multiple completed demonstrations and evaluations in Ukraine, the Philippines and the United States during 2025, as well as planned demonstrations including events hosted by the U.S. Army in early 2026. As of November 1, 2025, SpotlightAI™, has analyzed more than 2,130,777 drone images from Ukraine, identifying more than 38,195 landmines and unexploded remnants of war across 10,966 hectares (27,086 acres) of Ukrainian territory.
Furthermore, the Company expects to generate revenue through a number of strategic relationships formed during August and September of 2025 with select drone industry vendors introduced through its most recent investors, such as Ondas Holdings Inc. and Unusual Machines Inc.
Principle of Consolidation
Our consolidated financial statements included in this report include our accounts and those of our subsidiaries: Airborne Response Corp., Safe-Pro USA LLC, and Safe Pro AI LLC from their respective dates of acquisition.
Supplier Concentration
During the three months ended September 30, 2025, the Company purchased approximately 78.5% of its inventory from three suppliers (Barrday Corp 21.9%, Industries Bitossi Inc. 32.2%, and Lincoln Fabrics 24.4%). During the nine months ended September 30, 2025, the Company purchased approximately 56.8% of its inventory from two suppliers (Avient Protective Materials 29.6% and Lincoln Fabrics 27.3%).
During the three months ended September 30, 2024, the Company purchased approximately 37.9% of its inventory from two suppliers (Matrix Space 10.8% and Southeast Drone Technologies 27.1%).
During the nine months ended September 30, 2024, the Company purchased approximately 50.1% of its inventory from two suppliers, (Minelab Electronics 36.7% and Mithix Pro 13.4%).
The loss of these suppliers may have a material adverse effect on the Company’s results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.
Segment Information
During the nine months ended September 30, 2025 and 2024, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.
Significant Components of Our Results of Operations
Revenues. Our revenues are generated primarily from the sale of our products, which consist primarily of personal protective gear (“PPE”) and ballistic protective equipment including Explosive Ordnance Disposal (“EOD”) and blast and fragmentation resistant vests and body armor, as well as aerial managed services (drones) for the inspection of customer’s critical infrastructure including radio towers and power grids. At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation for each. To determine the performance obligation, we consider all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration expected to be received in exchange for transferring goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met.
Cost of Goods Sold and Gross Profit. Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and the evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer and supply chain. Gross margin will vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing, labor costs for services and depreciation for our drone-related fixed assets and our production costs, which includes depreciation related costs for manufacturing equipment, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.
| 27 |
Operating Expenses. We classify our operating expenses as salary, wages and payroll taxes, research and development, professional fees, selling, general, administrative, non-production and services related depreciation and amortization. Additionally, we separate depreciation and amortization expense into its own category.
Salary, Wages and Payroll Taxes. Salaries are representative of officer and stock-based compensation and administrative personnel costs. The salary and wages associated payroll tax is reflected here as well.
Research and Development expenses consist of costs associated with personnel and contractor fees associated with the design and development of our products, product certification, travel, recruiting and information technology. Development costs incurred prior to establishment of technological feasibility were expensed as incurred. Software development costs related to design enhancement of the product are capitalized. We expect our research and development costs to continue to increase as we develop new products and modify existing products to meet the changes within our markets.
Professional Fees primarily represent certain costs for legal, audit, accounting, public company expense, investor relations, consulting fees and share-based compensation for services.
Selling, General and Administrative expenses consist of expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, commissions payable, national and local regulatory approvals of our products, travel, entertainment, recruiting, operating supplies such as, computer equipment, drones, EOD testing supplies; and facilities and other supporting overhead costs. For the year ending December 31, 2025, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a First Responder (DFR).
Depreciation and Amortization expense consists of depreciation related to computer and related office equipment, as well as amortization related to finite-lived intangibles.
Interest Expense is comprised of interest expense associated with our secured notes payable and convertible notes. The amortization of debt discounts is also recorded as part of interest expense.
Provision for Income Taxes. Current and deferred income tax expense or benefit in any given period will depend upon a number of events and circumstances, one of which is the income tax net income or loss from operations for the period which is usually different from the U.S. GAAP net income or loss, for the period due to differences in tax laws and timing differences. Management assesses our deferred tax assets in each reporting period, and if it is determined that it is not more likely than not to be realized, we will record a change in our valuation allowance in that period.
| 28 |
Results of Operations
Comparison of the Three months Ended September 30, 2025 and 2024
For the Three months Ended September 30, 2025 and 2024:
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| REVENUES: | ||||||||||||||||
| Product Sales | $ | 81,142 | $ | 98,636 | $ | (17,495 | ) | (17.7 | )% | |||||||
| Services | 20,280 | 232,120 | (211,840 | ) | (91.3 | )% | ||||||||||
| Total Revenues | 101,422 | 330,756 | (229,334 | ) | (69.3 | )% | ||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Product sales | 42,229 | 55,815 | (13,586 | ) | (24.3 | )% | ||||||||||
| Services | 8,003 | 122,851 | (114,848 | ) | (93.5 | )% | ||||||||||
| Cost of depreciation | 17,596 | 17,857 | (261 | ) | (1.5 | )% | ||||||||||
| Total Cost of Revenues | 67,828 | 196,523 | (128,695 | ) | (65.5 | )% | ||||||||||
| Gross profit | 33,594 | 134,233 | (100,639 | ) | (75.0 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Salary, wages and payroll taxes: | ||||||||||||||||
| Salary, wages and payroll taxes | 454,429 | 545,525 | (91,096 | ) | (16.7 | )% | ||||||||||
| Stock-based compensation | 831,385 | 2,200,000 | (1,368,615 | ) | (62.2 | )% | ||||||||||
| Total salary wages and payroll taxes | 1,285,814 | 2,745,525 | (1,459,711 | ) | (53.2 | )% | ||||||||||
| Research and development | 109,763 | - | 109,763 | - | ||||||||||||
| Professional fees: | ||||||||||||||||
| Professional fees - other | 408,821 | 230,698 | 178,123 | (77.2 | )% | |||||||||||
| Stock-based compensation – professional fees | 1,759,261 | 200,000 | 1,559,261 | (779.6 | )% | |||||||||||
| Total Professional fees | 2,168,082 | 430,698 | 1,737,384 | 403.4 | % | |||||||||||
| Selling, general and administrative expenses | 602,715 | 418,366 | 184,349 | 44.1 | % | |||||||||||
| Depreciation and amortization | 74,855 | 81,718 | (6,863 | ) | (8.4 | )% | ||||||||||
| Total operating expenses | 4,241,229 | 3,676,307 | 564,922 | 15.4 | % | |||||||||||
| Loss from operations | (4,207,635 | ) | (3,542,074 | ) | (665,561 | ) | 18.8 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | 31,398 | - | 31,398 | - | ||||||||||||
| Interest income | - | 10,082 | (10,082 | ) | - | |||||||||||
| Interest expense | (3,253 | ) | (153,464 | ) | 150,211 | (97.9 | )% | |||||||||
| Impairment of goodwill | (684,867 | ) | - | (684,867 | ) | - | ||||||||||
| Impairment of other intangibles | (146,001 | ) | - | (146,001 | ) | - | ||||||||||
| Total other income (expense) | (802,723 | ) | (143,382 | ) | (659,341 | ) | (459.8 | )% | ||||||||
| Net loss | $ | (5,010,358 | ) | $ | (3,685,456 | ) | $ | (1,324,902 | ) | 36.0 | % | |||||
| 29 |
Comparison of the Nine Months Ended September 30, 2025 and 2024
For the Nine Months Ended September 30, 2025 and 2024:
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| REVENUES: | ||||||||||||||||
| Product Sales | $ | 270,490 | $ | 907,260 | $ | (636,770 | ) | (70.2 | )% | |||||||
| Services | 108,487 | 374,139 | (265,652 | ) | (71.0 | )% | ||||||||||
| Total Revenues | 378,977 | 1,281,399 | (902,422 | ) | (70.4 | )% | ||||||||||
| COST OF REVENUES: | ||||||||||||||||
| Product sales | 141,720 | 604,000 | (462,280 | ) | (76.5 | )% | ||||||||||
| Services | 54,737 | 185,302 | (130,565 | ) | (70.5 | )% | ||||||||||
| Cost of depreciation | 55,803 | 49,796 | 6,007 | 12.1 | % | |||||||||||
| Total Cost of Revenues | 252,260 | 839,098 | (586,838 | ) | (69.9 | )% | ||||||||||
| Gross profit | 126,717 | 442,301 | (315,584 | ) | (71.4 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Salary, wages and payroll taxes: | ||||||||||||||||
| Salary, wages and payroll taxes | 1,689,872 | 1,371,310 | 318,562 | 23.2 | % | |||||||||||
| Stock-based compensation | 2,054,955 | 2,200,000 | (145,045 | ) | (6.6 | )% | ||||||||||
| Total salary wages and payroll taxes | 3,744,827 | 3,571,310 | 173,517 | 4.9 | % | |||||||||||
| Research and development | 127,638 | 85,937 | 41,701 | 48.5 | % | |||||||||||
| Professional fees: | ||||||||||||||||
| Professional fees - other | 1,200,636 | 760,908 | 439,728 | 57.8 | % | |||||||||||
| Stock-based compensation – professional fees | 3,610,955 | 748,000 | 2,862,955 | 382.7 | % | |||||||||||
| Total Professional fees | 4,811,591 | 1,508,908 | 3,302,683 | 218.9 | % | |||||||||||
| Selling, general and administrative expenses | 1,329,374 | 853,077 | 476,297 | 55.8 | % | |||||||||||
| Depreciation and amortization | 249,957 | 172,834 | 77,123 | 44.6 | % | |||||||||||
| Total operating expenses | 10,263,387 | 6,192,066 | 4,071,321 | 65.8 | % | |||||||||||
| Loss from operations | (10,136,670 | ) | (5,749,765 | ) | (4,386,905 | ) | 76.3 | % | ||||||||
| Other income (expense): | ||||||||||||||||
| Other income | 33,890 | - | 33,890 | - | ||||||||||||
| Interest income | 51,905 | 10,082 | 41,823 | 414.8 | % | |||||||||||
| Interest expense | (8,190 | ) | (304,556 | ) | 296,366 | (97.3 | )% | |||||||||
| Impairment of goodwill | (684,867 | ) | - | (684,867 | ) | - | ||||||||||
| Impairment of other intangibles | (146,001 | ) | - | (146,001 | ) | - | ||||||||||
| Total other income (expense) | (753,264 | ) | (294,474 | ) | (458,790 | ) | 155.8 | % | ||||||||
| Net loss | $ | (10,889,934 | ) | $ | (6,044,239 | ) | $ | (4,845,695 | ) | 80.2 | % | |||||
Net Revenue. For the three months ended September 30, 2025 and 2024, revenues generated were $101,422 and $330,756, a decrease of $229,334 or 69.3%. Comparable sales for Safe-Pro USA were $81,141 for the three months ended September 30, 2025 as compared to $98,637 for the same period in 2024, a decrease of $17,496 or 17.7%. Comparable sales for Airborne Response were $20,280 for the three months ended September 30, 2025 as compared to $227,745 for the same period in 2024, a decrease of $207,465 or 91.1%. Comparable sales for Safe Pro AI were $0 for the three months ended September 30, 2025 as compared to $4,375 for the same period in 2024.
For the nine months ended September 30, 2025 and 2024, revenues generated were $378,977 and $1,281,399, a decrease of $902,422 or 70.4%. Comparable sales for Safe-Pro USA were $270,489 for the nine months ended September 30, 2025 as compared to $751,031 for the same period in 2024, a decrease of $480,542 or 64.0%. Comparable sales for Airborne Response were $39,157 for the nine months ended September 30, 2025 as compared to $525,992 for the same period in 2024, a decrease of $486,835 or 92.6%. Comparable sales for Safe Pro AI were $69,330 for the nine months ended September 30, 2025 as compared to $4,375 for the same period in 2024.
| 30 |
A substantial portion of revenue for Airborne Response, is with one customer, Florida Power & Light, (“FPL”). If there is positive weather patterns, the electrical power grid remains in stable condition requiring less maintenance and repair work which results in fewer work orders for Airborne Response. For the three and nine months ended September 30, 2025 and 2024, the decrease in revenue for Airborne Response was primarily attributable the lack of disruptions to the FPL electrical power grid, due to positive weather patterns, which included no active hurricanes. Airborne Response is currently in the process of completing a training program for a new revenue stream, providing nested flight services with FPL/NextEra.
For the three and nine months ended September 30, 2025 and 2024, Safe-Pro USA’s decrease in revenue is attributable to the effects of U.S. Tariffs on Chinese products. The Company imports Security Guards’ uniforms from China As the result of the high tariffs of goods imported from China, a our business model is being reevaluated and recalibrated at this time, with the consequence that business is at its lowest level. Safe-Pro USA is in the process of sourcing additional customers along with obtaining government certifications to become a supplier for the U.S. government.
We expect to begin realizing revenue from Safe Pro AI for its Safe Pro Object Threat Detection (SPOTD) technology ecosystem - Spotlight AI™, SpotlightAI™ OnSight and SPOTD NODE (Navigation, Observation and Detection Engine)- as a result of multiple completed demonstrations and evaluations in Ukraine, the Philippines and the United States during 2025, as well as planned demonstrations including events hosted by the U.S. Army in early 2026. As the Company begins to bring on SaaS and subscription customers related to its AI offerings, it is expected that revenue growth will have a more predictable trajectory, and decrease the volatility from one-time contracts.
Cost of Revenue During the three months ended September 30, 2025 and 2024, cost of revenues decreased to $67,828 compared to $196,523, a decrease of $128,695, or 65.5%. Gross profit margins were 33.1% and 40.7%, respectively. The decrease in cost of revenue is directly attributable to a decrease in revenue. For the nine months ended September 30, 2025 and 2024, gross profit margins were 33.4% and 34.5%, respectively. The decrease in margin was attributable to an increase in sales for products which have a lower gross profit margin.
Operating Expenses. Total operating expenses for the three months ended September 30, 2025 and 2024 were $4,241,228 and $3,676,307, an increase of $564,922 or 15.4%. Total operating expenses for the nine months ended September 30, 2025 and 2024 were $10,263,387 and $6,192,066, an increase of $4,071,321 or 65.8%. Factors resulting in the increase are described more fully below. For the year ending December 31, 2025, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a First Responder (DFR).
Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended September 30, 2025 and 2024 were $1,285,814 and $2,745,525, a decrease of $1,459,711 or 53.2%. The decrease was primarily driven by higher stock-based compensation expense of $2,200,000 recorded during the three months ended September 30, 2024, compared to $831,385 in the current period. The prior year expense was associated with new employment agreements executed in preparation for the Company’s initial public offering.
Total salaries, wages and payroll taxes for the nine months ended September 30, 2025 and 2024 were $3,744,827 and $3,571,310, an increase of $173,517 or 4.9%. The increases were primarily attributable to additional compensation expense related to employment agreements and incentive bonuses associated with current-year equity issuances, partially offset by a reduction in officer wages incurred pursuant to the terms of employment agreements with the Chief Executive Officer.
Research and Development expenses were $109,763 and $0, for the three months ended September 30, 2025 and 2024, respectively, an increase of $109,763. Research and Development expenses were $127,638 and $85,937, for the nine months ended September 30, 2025 and 2024, respectively, an increase of $41,701 or 48.5%. The increase is primarily attributable to expanded development efforts and the engagement of external contractors to support enhancements to the artificial intelligence business.
Professional fees were $2,168,082 and $430,698 for the three months ended September 30, 2025 and 2024, respectively, an increase of $1,737,384 or 403.4%. Professional fees were $4,811,591 and $1,508,908 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $3,302,683 or 218.9%. The increases for nine months ended September 30, 2025 as compared to the same period in 2024, were attributable to non-cash expenses for share-based professional fees of $2,862,955 recognized pursuant to contractual agreements, additional public company expenses of $344,518 including legal and investor relations fees, and additional director fees of $95,210. The increase is partially offset by the reduction of reclassification of contractor expenses from professional fees to selling, general and administrative expenses in 2025.
Selling, general and administrative expenses were $602,715 and $418,366 for the three months ended September 30, 2025 and 2024, respectively, an increase of $184,349 or 44.1%. Selling, general and administrative expenses were $1,329,374 and $853,077 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $476,297 or 55.8%. The increases for the nine months ended September 30, 2025 as compared to the same period in 2024, are primarily attributable to increases in advertising and D&O insurance premiums and the reclassification of contractor fees from professional fees to selling, general and administrative expenses.
Depreciation and amortization expenses were $74,855 and $81,718 for the three months ended September 30, 2025 and 2024, respectively, a decrease of $6,863, or 8.4%. For the nine months ended September 30, 2025 and 2024, depreciation and amortization costs were $249,957 and $172,834 respectively, an increase of $77,123, or 44.6%.
We expect our expenses in each of these areas to continue to increase during fiscal 2025 and beyond as we expand our operations and begin generating additional revenues for our current business. However, we are unable at this time to estimate the amount of the expected increases.
Total Other Income (Expense). Our total other expenses were $802,723 compared to $143,382 during the three months ended September 30, 2025 and 2024 respectively, an increase of $659,341, or 459.8%. Our total other expenses were $753,264 compared to $294,474, during the nine months ended September 30, 2025 and 2024 respectively, an increase of $458,790, or 155.8%. The increase is primarily attributable to the goodwill and intangible asset impairment charges recognized during the three months ended September 30, 2025.
Net Loss. We recorded a net loss of $5,010,358 for the three months ended September 30, 2025 as compared to a net loss of $3,685,456 an increase of $1,324,902, or 36.0%, for the three months ended September 30, 2024. We recorded a net loss of $10,889,934 for the nine months ended September 30, 2025 as compared to a net loss of $6,044,239 for the nine months ended September 30, 2024, an increase of $4,845,695, or 80.2%. The increase is a result of the factors as described above.
| 31 |
Consolidated Balance Sheet Data:
| September 30, | December 31, | |||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| (Unaudited) | ||||||||||||||||
| Cash | $ | 7,597,009 | $ | 1,970,719 | $ | 5,626,290 | 285.5 | % | ||||||||
| Property and equipment, net | 281,650 | 314,881 | (33,231 | ) | (10.6 | )% | ||||||||||
| Current assets | 8,422,290 | 2,750,129 | 5,672,161 | 206.3 | % | |||||||||||
| Total assets | 9,695,387 | 4,949,943 | 4,745,444 | 95.9 | % | |||||||||||
| Current liabilities | 1,108,308 | 893,926 | 214,382 | 24.0 | % | |||||||||||
| Working capital | 7,313,982 | 1,856,203 | 5,457,779 | 294.0 | % | |||||||||||
| Total liabilities | 1,256,051 | 1,075,518 | 180,533 | 16.8 | % | |||||||||||
| Additional paid in capital | 33,578,136 | 18,123,723 | 15,454,413 | 85.3 | % | |||||||||||
| Accumulated deficit | (25,140,685 | ) | (14,250,751 | ) | (10,889,934 | ) | 76.4 | % | ||||||||
| Total stockholders’ equity | $ | 8,439,336 | $ | 3,874,425 | $ | 4,564,911 | 117.8 | % | ||||||||
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At September 30, 2025, we had a cash balance of $7,597,009 and working capital of $7,313,982.
Our current assets at September 30, 2025 increased by $5,672,161, or 206.3%, to $8,422,290 from $2,750,129, from December 31, 2024. The increases included cash of $5,626,290 and inventory of $151,486, and are partially offset by decreases in accounts receivable of $83,292 and prepaid expenses and other current assets of $22,323, which is primarily a result of the proceeds from the private placement and the exercise of warrants during the three months ended September 30, 2025.
Our current liabilities at September 30, 2025 increased to $1,108,308 from $893,926 or an increase of $214,382, or 24.0% from December 31, 2024. The increase is comprised of increases in accounts payable of $141,301, accrued expenses of $170,210, due to related parties of $11,108, current portion of lease liabilities of $10,302 and are partially offset by decreases in accrued compensation of $107,778 and contract liabilities of $10,761.
Operating Activities
Net cash flows used in operating activities for the nine months ended September 30, 2025 amounted to $3,549,597 and were primarily attributable to our net loss of $10,889,934, offset by depreciation and amortization expense of $305,760, impairment of goodwill of $684,687, impairment of other intangibles of $146,001, and stock-based compensation and professional fees of $6,048,410. Changes in operating assets and liabilities were reflected by increases in accounts receivable of $83,292, prepaid and other current assets of $22,323, accounts payable of $141,301, accrued expenses of $170,210 and lease liability of $122 which were offset by decreases in inventory of $151,486, contract liabilities of $10,761 and accrued compensation of $99,702.
Net cash flows used in operating activities for the nine months ended September 30, 2024 amounted to $3,065,107 and were primarily attributable to our net loss of $6,044,239, offset by depreciation and amortization expense of $222,630, stock-based compensation and professional fees of $2,948,000, and amortization of debt discount of $208,006. Changes in operating assets and liabilities were reflected by increases in accounts payable of $64,661 and accrued expenses of $161,652 offset by decreases in accounts receivable of $58,141, inventory of $16,115, prepaid and other current assets of $370,124, contract liabilities of $14,382, lease liability of $9,110 and accrued compensation of $157,945.
Investing Activities
Net cash flows used in investing activities were $233,580 and $266,397, for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, we purchased property and equipment of $26,035 and investment in intangible technologies of $207,545.
Financing Activities
Net cash flows provided by financing activities were $9,409,467 and $4,922,851 for the nine months ended September 30, 2025 and 2024, respectively.
During the nine months ended September 30, 2025, we had proceeds from the sale of common stock in private placement offering of $6,767,500, proceeds from exercise of warrants of $1,511,570, proceeds from sale of Preferred Series C shares and warrants of $1,050,000, proceeds from exercise of options of $12,750, and proceeds from related party advances of $129,051 and partially offset by related party repayments of $61,404.
During the nine months ended September 30, 2024, we had proceeds from the sale of convertible notes payable of $275,002, proceeds from the sale of common stock and warrants of $489,003, proceeds from our initial public offering of $4,179,500, proceeds from notes payable of $236,500, which were offset by repayments due to related party for $20,564 and repayments of notes payable of $236,500.
| 32 |
Critical Accounting Policies and Estimates
The following is not intended to be a comprehensive list of our accounting policies or estimates. Our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies in the Notes. In preparing our consolidated financial statements and accounting for the underlying transactions and balances, we apply our accounting policies and estimates as disclosed in the Notes. We consider the policies and estimates discussed below as critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment, with financial reporting results dependent on estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Specific risks for these critical accounting estimates are described in the following paragraphs. Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.
Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in preparing our consolidated financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that we do not deem “critical.”
Accounts receivable and other receivables
The Company adopted ASC 326 “Financial Instruments – Credit Losses” on January 1, 2023. The Company recognizes an allowance for losses on accounts receivable and other receivables in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts or other accounts considered at risk or uncollectible. The bad debt expense associated with the allowance for doubtful accounts related to accounts receivable and other receivables is recognized in selling, general and administrative expenses.
Revenue recognition
In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The Company offers a warranty on its manufactured products. The Company considered the need to make an accrual for warranty expenses that may be incurred. Historically, the Company has incurred no warranty expense and accordingly, the Company believes that no warranty expense accrual is deemed necessary.
Safe-Pro USA
Safe-Pro USA recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed, and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.
Airborne Response
Airborne Response recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenues from services are recognized at a point in time when Airborne Response completes services pursuant to its agreements with clients and collectability is probable.
| 33 |
Safe Pro AI
Safe Pro AI sells subscriptions and licenses to its customers for the use of its software under a software-as-a-service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including defense, demining, in law enforcement and border security. Safe Pro AI’s, SaaS offerings are sold under a license or prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers will utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI will initially charge data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.
Goodwill and intangible assets
The Company’s business acquisitions typically result in the recording of goodwill and other intangible assets, which affect the amount of amortization expense and possibly impairment write-downs that the Company may incur in future periods.
Intangible assets are carried at cost less accumulated amortization for finite-lived assets, computed using the straight-line method over the estimated useful life, less any impairment charges.
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business acquisitions. Goodwill is not subject to amortization but is subject to impairment tests at least annually. The Company reviews the carrying amounts of goodwill by reporting unit at least annually, or when indicators of impairment are present, to determine if goodwill may be impaired. To test goodwill impairment, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. The Company would not be required to quantitatively determine the fair value of goodwill unless it determines, based on the qualitative assessment there are indicators of impairment. Under the quantitative test of goodwill, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value exceeds the fair value, then the goodwill is impaired by the excess amount. The Company performs its annual testing for goodwill during the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit.
Intangibles assets, net consists of contractual employment agreements, customer relationships and acquired capitalized internal-use software. All intangible assets determined to have finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. The Company periodically evaluates both finite and indefinite lived intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.
Impairment of long-lived assets
In accordance with ASC Topic 360, the Company reviews long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.
| 34 |
Stock-based compensation
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the consolidated financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
Business acquisitions
The Company accounts for business acquisitions using the acquisition method of accounting where the assets are acquired, and the liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company’s consolidated financial statements as of the date of the acquisition.
Asset Acquisitions
The Company evaluates acquisitions pursuant to ASC 805, “Business Combinations,” to determine whether the acquisition should be classified as either an asset acquisition or a business combination. Acquisitions for which substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets are accounted for as an asset acquisition. For acquisitions of an asset or a group of assets that does not constitute a business, the Company applies ASC 805-50 which provides guidance on acquisitions of assets rather than a business. Acquisitions of assets are accounted for using the cost accumulation and allocation model. For asset acquisitions, the Company allocates the purchase price of these acquired assets on a relative fair value basis and capitalizes direct acquisition related costs as part of the purchase price. Acquisition costs that do not meet the criteria to be capitalized are expensed as incurred and presented in general and administrative costs in the consolidated statements of operations, if any.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Management, with the participation of our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that we file or submit under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation of our disclosure controls and procedures as of September 30, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were ineffective due to the material weakness in internal control over financial reporting discussed below.
| 35 |
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions; | |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.
In its assessment of the effectiveness of internal control over financial reporting as of September 30, 2025, management identified a material weakness related to segregation of duties. Specifically, due to limited resources and headcount we did not have multiple people in the accounting function for a full segregation of duties and were reliant on outside consultants for external reporting. During the first quarter of 2025, the Company has remedied the material weakness related to inventory management by its implementation of a new system.
Based on this assessment, management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2025, based on the criteria in Internal Control – Integrated Framework (2013).
Plan for Remediation of Material Weakness
We are in the process of; (i) engaging a third party to conduct a full assessment of our controls and procedures and (ii) adding an accounting professional to facilitate segregation of duties. Management’s current expectation is to have completed its assessment of its controls and procedures for the filing of its Form 10-K for the year ended December 31, 2025.
Changes in Internal Control over Financial Reporting
Except as disclosed above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently involved in any pending legal proceeding or litigation, and to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results.
| 36 |
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in the Form 10-K for the year ended December 31, 2024, as filed on March 31, 2025. The risks described in the Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes to our risk factors from those set forth in our Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On July 22, 2025, the Company issued 30,000 restricted shares of common stock at a fair market value of $3.85 per share, representing the market close on date of issuance. Stock-based professional fees in the amount of $115,500 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations.
The securities were issued pursuant to Section 4(a)(2) of the Securities Act. The awards were issued to an individual for services relating to certain equity transactions. These securities have not been registered pursuant to the Securities Act of 1933, as amended (the “Securities Act”).
On August 19, 2025, the Company sold an aggregate of: (i) 2,000,000 shares of common stock, and (ii) three-year warrants to purchase up to 2,000,000 shares of common stock at an exercise price of $6.00 per share. The combined purchase price of one share of common stock and one accompanying warrant was $4.00. The common stock and warrants issued in the offering and the shares issuable upon exercise of the warrants were offered and sold to “accredited investors” in a private placement under Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder and have not been registered under the Securities Act or applicable state securities laws.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During
the fiscal quarter ended September 30, 2025, none of the Company’s officers and directors adopted,
ITEM 6. EXHIBITS
| 37 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Dated: November 14, 2025 | SAFE PRO GROUP INC. | |
| By: | /s/ Daniyel Erdberg | |
| Daniyel Erdberg | ||
| Chairman and Chief Executive Officer | ||
| (principal executive officer) | ||
| /s/ Theresa Carlise | ||
| Theresa Carlise | ||
| Chief Financial Officer, Treasurer & Assistant Secretary | ||
| (principal financial and accounting officer) | ||
| 38 |
Exhibit 31.1
CERTIFICATIONS
I, Daniyel Erdberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Safe Pro Group Inc. for the quarter ended September 30, 2025;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Intentionally omitted;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2025 | /s/ Daniyel Erdberg |
| Daniyel Erdberg | |
| Chairman and Chief Executive Officer | |
| (principal executive officer) |
Exhibit 31.2
CERTIFICATIONS
I, Theresa Carlise, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Safe Pro Group Inc. for the quarter ended September 30, 2025;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Intentionally omitted;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: November 14, 2025 | /s/ Theresa Carlise |
| Theresa Carlise | |
| Chief Financial Officer, Treasurer & Assistant Secretary | |
| (principal financial and accounting officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Safe Pro Group Inc. (the “Company”) on Form 10-Q for the fiscal period ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniyel Erdberg, Chief Executive Officer of the Company, and I, Theresa Carlise, Chief Financial Officer of the Company, duly certify pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Dated: November 14, 2025 | ||
| By: | /s/ Daniyel Erdberg | |
| Daniyel Erdberg | ||
| Chairman and Chief Executive Officer | ||
| (principal executive officer) | ||
| /s/ Theresa Carlise | ||
| Theresa Carlise | ||
| Chief Financial Officer, Treasurer & Assistant Secretary | ||
| (principal financial and accounting officer) |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.