As filed with the Securities and Exchange Commission on ~~February~~September 218, 2025.

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AIRO Group Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

3721

88-0812695

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

5001 Indian School Road NE, Suite 100

Albuquerque, New Mexico 87110

(505) 338-2434

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Captain Joseph D. Burns

Chief Executive Officer

5001 Indian School Road NE, Suite 100

Albuquerque, New Mexico 87110

(505) 338-2434

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Christina T. Roupas Yvan-Claude Pierre Courtney M.W. Tygesson Grady Chang Cooley LLP 110 N. Wacker Drive, Suite 4200 Chicago, Illinois 60606 (312) 881-6500 Dr. Mariya Pylypiv Chief Financial Officer 5001 Indian School Road NE, Suite 100 Albuquerque, New Mexico 87110 (505) 338-2434 Christopher Lueking Jonathan Sarna Latham & Watkins LLP 330 North Wabash Avenue, Suite 2800 Chicago, Illinois 60611 (312) 876-7700

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-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 7(a)(2)(B) of the Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 2025

PRELIMINARY PROSPECTUS

3,500,000 Shares

Common Stock

~~This~~We isare ~~the~~offering ~~initial~~3,500,000 ~~public~~shares ~~offering~~ of our common stock, par value $0.000001 per share. WeOur ~~are offering shares of our~~ common stock. Weis ~~currently~~listed expect that the initial public offering price will be between $ and $ per share of our common stock. Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Global ~~Market~~ Market (“Nasdaq”) under the symbol “AIRO,.” ~~and~~On ~~this~~September ~~offering~~5, is2025, ~~contingent~~the ~~upon~~last ~~obtaining~~reported ~~approval~~sale price of ~~such~~our ~~listing~~common stock on Nasdaq was $20.94 per share.

We ~~are~~intend anto ~~“emerging~~use ~~growth~~a ~~company”~~portion ~~and~~of athe ~~“smaller~~net ~~reporting~~proceeds ~~company”~~from asthis ~~defined~~offering ~~under~~to ~~the~~purchase ~~U.S.~~815,000 ~~federal~~shares ~~securities~~of common stock from certain ~~laws~~of ~~and~~our existing stockholders, asincluding ~~such~~certain directors and executive officers and their affiliates, ~~may~~at ~~elect~~a toprice ~~comply~~per ~~with~~share ~~certain~~equal ~~reduced~~to the public ~~company~~offering ~~reporting~~price ~~requirements~~per share of common stock in ~~future~~this ~~reports~~offering, ~~after~~less the ~~closing~~underwriting discounts and commissions and any withholding taxes. If the underwriters exercise their option to purchase additional shares of common stock in the 30-day period following the date of this ~~offering~~prospectus, we intend to use a portion of the net proceeds to purchase up to an additional 301,312 shares from such stockholders. See the ~~section~~sections titled “~~Prospectus~~Use ~~Summary—Implications~~ of ~~Being~~Proceeds” anand ~~Emerging~~“Certain ~~Growth~~Relationships ~~Company~~ and aRelated ~~Smaller Reporting~~Party ~~Company~~Transactions.”

~~Investing~~We inare ~~our~~an ~~common~~“emerging ~~stock~~growth ~~involves~~company” ~~risks.~~and ~~See~~a ~~the~~“smaller ~~section~~reporting ~~titled~~company” ~~“Risk~~as ~~Factors”~~defined ~~beginning~~under onthe ~~page~~U.S. 16federal securities oflaws ~~this~~and, ~~prospectus~~as such, may elect to ~~read~~comply ~~about~~with ~~factors~~certain ~~you~~reduced ~~should~~public ~~consider~~company ~~before~~reporting ~~buying~~requirements ~~shares~~in future reports. See the section titled “Prospectus Summary—Implications of ~~our~~Being ~~common~~an ~~stock~~Emerging Growth Company and a Smaller Reporting Company.”

Investing in our common stock involves risks. See the section titled “Risk Factors” beginning on page 12 of this prospectus to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

	Per Share	Total
Initial public offering price	$	$
Public offering price	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds, before expenses, to us(2)	$	$

	(1)	We have also agreed to issue to certain of the underwriters warrants exercisable for the number of shares of our common stock equal to 5% of the total number of shares of common stock sold in this offering (which we refer to as the “Underwriters’ Warrants”). See the section titled “Underwriting” for additional information regarding underwriting discounts and commissions, expenses, and other compensation payable to the underwriters.
	(2)	The proceeds, before expenses, to us presented in this table do not give effect to any exercise by the underwriters of (i) the option we have granted to the underwriters to purchase additional shares of our common stock from us as described below or (ii) the Underwriters’ Warrants.

(1)	See the section titled “Underwriting” for additional information regarding underwriting discounts and commissions, expenses, and other compensation payable to the underwriters.

~~We have~~(2) ~~granted~~The ~~the~~proceeds, ~~underwriters~~before anexpenses, ~~option~~ to ~~purchase~~us uppresented ~~to additional~~in ~~shares~~this oftable ~~our~~do ~~common~~not ~~stock~~give ~~from~~effect usto atany ~~the~~exercise ~~public~~by ~~offering~~the ~~price, less underwriting~~underwriters ~~discounts~~of ~~and~~the ~~commissions,~~option ~~for~~we ahave ~~period~~granted ofto 30the ~~days~~underwriters ~~from~~to ~~the~~purchase ~~date~~additional shares of ~~this~~our ~~prospectus~~common tostock ~~cover~~from ~~over-allotments,~~us ~~if any~~as described below.

We have granted the underwriters an option to purchase up to 525,000 additional shares of our common stock from us at the public offering price, less underwriting discounts and commissions, for a period of 30 days from the date of this prospectus to cover over-allotments, if any.

Delivery of the shares of our common stock is expected on or about , 2025.

Cantor ~~BTIG Mizuho Bancroft Capital, LLC~~

Prospectus dated , 2025

TABLE OF CONTENTS

PROSPECTUS SUMMARY	1
RISK FACTORS	1612
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS	6047
MARKET, INDUSTRY AND OTHER DATA	6249
DIVIDEND POLICY	6350
USE OF PROCEEDS	6451
CAPITALIZATION	6552
DILUTION	6753
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION	71
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	54
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	77
BUSINESS	77
BUSINESS	100
MANAGEMENT	101
MANAGEMENT	129
EXECUTIVE AND DIRECTOR COMPENSATION	109
EXECUTIVE AND DIRECTOR COMPENSATION	137
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	120
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS	150
PRINCIPAL STOCKHOLDERS	122
PRINCIPAL STOCKHOLDERS	153
DESCRIPTION OF CAPITAL STOCK	124
DESCRIPTION OF CAPITAL STOCK	155
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS	130
SHARES ELIGIBLE FOR FUTURE SALE	159
UNDERWRITING	134
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS	162
LEGAL MATTERS	145
UNDERWRITING	167
EXPERTS	145
LEGAL MATTERS	180
WHERE YOU CAN FIND MORE INFORMATION	145
EXPERTS	180
WHERE YOU CAN FIND MORE INFORMATION	180
INDEX TO FINANCIAL STATEMENTS	F-1

We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses by or on behalf of us. Neither we nor the underwriters take any responsibility for, and cannot provide any assurance as to the reliability of, any other information that others may provide you. The information contained in this prospectus or in any applicable free writing prospectus is accurate only as of the date of this prospectus or such free writing prospectus, as applicable, regardless of the time of delivery of this prospectus or any such free writing prospectus or of any sale of the securities offered hereby. Our business, operating results, financial condition and prospects may have changed since that date.

This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who have come into possession of this prospectus in a jurisdiction outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.

CERTAIN DEFINED TERMS

AAV means Autonomous Aerial Vehicles.

Acquired Companies means, collectively, Aspen Avionics, Agile Defense, CDI, AIRO Drone, Sky-Watch, and Jaunt.

AIRO Drone means AIRO Drone LLC, a subsidiary entity we acquired on February 25, 2022, which makes up a portion of our Drones reportable segment.

Agile Defense means Agile Defense, LLC, a subsidiary entity we acquired on February 25, 2022, which makes up a portion of our Training reportable segment.

Aspen Avionics means Aspen Avionics, Inc., a subsidiary entity we acquired on April 1, 2022, which makes up our Avionics reportable segment.

BCA Transactions means a series of transactions that would have occurred pursuant to the Business Combination Agreement and resulted in us becoming a wholly-owned subsidiary of AIRO Group, Inc. with AIRO Group, Inc. becoming a publicly listed company.

Business Combination Agreement means the Business Combination Agreement, as amended, between Kernel Group Holdings, Inc., a Cayman Islands exempted company, AIRO Group, Inc., a Delaware corporation, Kernel Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of AIRO Group, Inc., AIRO Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of AIRO Group, Inc., VKSS Capital, LLC, a Delaware limited liability company, in the capacity as the representative for the stockholders of Kernel Group Holdings, Inc. and AIRO Group, Inc. and also in the capacity as Kernel Group Holdings, Inc.’s sponsor, and Dr. Chirinjeev Kathuria, in the capacity as the representative for our stockholders.

BVLOS means Beyond Visual Line of Sight, which refers to drone operations where the drone is not visible to the pilot.

CDI means Coastal Defense Inc., a subsidiary entity we acquired on April 26, 2022, which makes up a portion of our Training reportable segment.

Civil Aviation Authorities means the TCCA, the FAA, and the EASA.

DaaS means Drone as a Service, including but not limited to, surveillance services for businesses interested in monitoring, surveying, and evaluating their properties.

DFARS means the Defense Federal Acquisition Regulation Supplement.

DHS means the U.S. Department of Homeland Security.

DoD means the U.S. Department of Defense.

EASA means the European Union Aviation Safety Agency.

ENAC means the National Civil Aviation Agency of Brazil.

EU means the European Union.

eVTOL means electric vertical take-off and landing.

FAA means the Federal Aviation Administration.

FAR means the Federal Acquisition Regulation.

Fixed Conversion Obligations means (i) the conversion of approximately $10.9 million of aggregate principal amount of the Put-Together Transaction Notes, which we converted upon the completion of our IPO into an aggregate of 275,147 shares of our common stock, (ii) the conversion of approximately $17.5 million of aggregate principal amount of notes issued pursuant to (a) that certain Note and Warrant Purchase Agreement dated as of March 9, 2018, as amended on July 11, 2024, (b) that certain Note Purchase Agreement dated as of October 18, 2019, as amended on July 11, 2024, and (c) that certain Note Purchase Agreement dated as of January 31, 2022, as amended on July 11, 2024, each among Aspen Avionics and the respective holders of convertible notes (collectively, the “Aspen Notes”), which we converted upon the completion of our IPO into an aggregate of 440,584 shares of our common stock, (iii) the conversion of $44.6 million of the obligations owed to Carter Aviation Technologies, LLC (“Carter Aviation”) in partial satisfaction of the Jaunt Contingent Arrangement (as defined in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which we converted upon the completion of our IPO into an aggregate of 1,122,437 shares of our common stock, (iv) the conversion of $1.7 million of the principal owed to the former Aspen Avionics shareholders (the “Aspen Contingent Debt”), which converted upon the completion of our IPO into an aggregate of 43,512 shares of our common stock, (v) the conversion of $0.8 million of the principal owed to certain former Aspen Avionics shareholders pursuant to the Aspen Merger Agreement (as defined herein), which we converted upon the completion of our IPO into an aggregate of 20,010 shares of our common stock (the “Aspen Carveout Contingency”), (vi) an aggregate of 51,309 shares of our common stock issuable pursuant to a one-time stock payment of $2.0 million pursuant to the 2021 Management Carveout Plan that we adopted in December 2021 (as defined below and as described in the section titled “Executive and Director Compensation—Management Carveout Plan”), which establishes a benefit pool for designated employees and consultants payable upon the occurrence of certain change in control events (the “Aspen Carveout Stock Obligation”), (vii) the conversion of $1.4 million of the principal owed to New Generation Aerospace, Inc. (“NGA”) under that certain Amended and Restated Success Fee Agreement (as described in the section titled “Certain Relationships and Related Party Transactions—Success Fee Arrangement”), which we converted upon the completion of our IPO into an aggregate of 33,995 shares of our common stock, (viii) the conversion of $7.8 million of the principal amounts owed to various holders under deferred salary arrangements, which we converted in connection with our IPO into an aggregate of 250,591 shares of our common stock.

GNSS means the Global Navigation Satellite System, a term that refers to the global satellite positioning systems.

GPS means the Global Positioning System, a form of GNSS using DoD-developed satellites.

IDIQ contract means a DoD Indefinite Delivery Indefinite Quantity Contract.

Investor Notes means the unsecured promissory notes historically issued by the Company to certain investors, which have included various interest features in the form of both stock and cash contingently payable upon the closing of an initial public offering or qualified financing.

IPO means the initial public offering of our common stock that closed on June 16, 2025.

ISR means intelligence, surveillance and reconnaissance.

Jaunt means Jaunt Air Mobility LLC, a subsidiary entity we acquired on March 10, 2022, which makes up our Electric Air Mobility reportable segment.

JTAC means Joint Terminal Attack Controller training.

mUAS means mini unmanned aircraft systems.

NAS means the U.S. National Airspace System.

NASA means the National Aeronautics and Space Administration.

NATO means the North Atlantic Treaty Organization.

OEM means original equipment manufacturer.

Put-Together Transaction means the acquisition of the Acquired Companies which are now organized into our four reportable segments, each with a diverse set of partners and customers: (i) Drones, through our subsidiaries, AIRO Drone and Sky-Watch; (ii) Avionics, through our subsidiary, Aspen Avionics; (iii) Training, through our subsidiaries, Agile Defense and CDI; and (iv) Electric Air Mobility, through our subsidiary, Jaunt.

Put-Together Transaction Notes means the convertible promissory notes, as amended, that we entered into with equity holders of AIRO Drone, Agile Defense and CDI in connection with the Put-Together Transaction.

SEAL teams means the U.S. Navy Sea, Air, and Land teams.

Sky-Watch means Sky-Watch A/S, a subsidiary entity we acquired on March 28, 2022, which makes up a portion of our Drones reportable segment.

sUAS means small unmanned aircraft systems.

TCCA means Transport Canada Civil Aviation.

UAM means urban air mobility.

UAS means unmanned aircraft systems.

USAF means the U.S. Air Force.

iiiii

BASIS OF PRESENTATION

As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “AIRO,” “AIRO Group,” “AIRO Group Holdings” and similar references refer to AIRO Group Holdings, Inc. together with its subsidiaries.

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our fiscal year ends on December 31 of each year. References to fiscal 2023 and 2024 are references to the years ended December 31, 2023 and 2024, respectively. Our most recent fiscal year ended on December 31, 2024.

Our unaudited interim condensed consolidated financial statements as of June 30, 2025 and for the three- and six-month periods ended June 30, 2025 and 2024 have been prepared in accordance with GAAP for interim financial information. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited consolidated financial statements as of that date, but do not include all of the information and footnotes required by GAAP for complete financial statements as of an annual date.

Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Percentage amounts included in this prospectus have not in all cases been calculated on the basis of such rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this prospectus may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this prospectus. Certain other amounts that appear in this prospectus may not sum due to rounding.

TRADEMARKS

This prospectus contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus, including logos, artwork and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

~~iii~~iv

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. Before investing in our common stock, you should read this entire prospectus carefully, especially the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.

Overview

We are a technologically differentiated aerospace, autonomy, and air mobility platform targeting 21^st century aerospace and defense opportunities. We leverage decades of industry expertise and connections across the drone, aviation, and avionics markets to provide leading solutions to the aerospace and defense market. We offer connected and diversified solutions providing operational synergies across our segments and are powered by an international footprint as well as supplier and public sector relationships. Supported by complementary and innovative technologies, we believe we bring a unique value proposition to the market and are well-positioned to become a differentiated leader in the industry.

Our business is organized into four operating segments, each of which represents a critical growth vector in the aerospace and defense market: Drones, Avionics, Training, and Electric Air Mobility. These four segments collectively target a combined total addressable market estimated to be over $315.4 billion by 2030.

Drones. The Drones segment develops, manufactures, and sells drones and will provide drone services, such as DaaS, for military and commercial end users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. A critical point of differentiation lies in our drones’ ability to perform in a GPS-denied environment, which is a technology application relevant for both military and commercial end markets.

Avionics. The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our advanced avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy military aircraft and general aviation platforms. We sell our advanced avionics through our Aspen Avionics brand, which is well-recognized in the general aviation aftermarket sector with over 20 years of operating history and long-term customer loyalty for our value proposition. We also serve as an avionics supplier for OEMs, including Robinson Helicopters, Pilatus, and Honeywell. We believe our avionics solutions have a considerable market opportunity as general aviation fleets continue to age, with owners and operators seeking to upgrade the avionics technology on their aircraft.

Training. The Training segment currently provides military pilot training and will provide commercial pilot training in the future. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include adversary air, close air support, ISR aircraft leasing, pilot training ground liaison services, and JTAC, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and USAF Air Combat Command, and are a mandated recipient on a $5.7 billion IDIQ contract. Our personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to bid on mandates. We also plan to offer commercial pilot training and plan to expand our non-military capabilities in response to the global pilot shortage.

Electric Air Mobility. The Electric Air Mobility segment is developing a rotorcraft eVTOL for cargo and passenger use through our Jaunt brand for fixed route flights, on-demand trips, and cargo operations. Our research and development (“R&D”) efforts are focused on developing a cargo eVTOL platform, which will be a scaled-down version of our passenger eVTOL platform, and will target the attractive middle mile delivery cargo market. Meanwhile, our long-term R&D efforts are focused on developing a full-scale multi-role eVTOL platform, which will be able to serve both the cargo and passenger markets. We plan to certify our eVTOLs through existing CAR 529 Rotorcraft standards, with our platform including the best attributes of both rotary and fixed wing aircraft. Our patented compound rotorcraft technology, a core point of technological differentiation that will underpin our cargo eVTOL’s commercial capability, has over 300 piloted flight hours on multiple Jaunt demonstrator aircraft. We believe the range and payload capabilities driven by this technology uniquely position us to provide a compelling commercial solution for the eVTOL cargo market. Once developed and certified, we expect our cargo eVTOL program will serve as the foundation of our commercialization efforts, with passenger applications serving as a longer-term secondary initiative.

Our Platform

Our business is thoughtfully interconnected as we seek to leverage each segment’s full capabilities and drive synergies, creating a significant competitive advantage. We are synergistically leveraging our field-proven product track record – particularly through our Drones and Avionics brands – to drive opportunities across our platform. The manufacturing capabilities of our Avionics segment enable us to supply most of our own components for our drone and aircraft systems, including our eVTOL aircraft, which enhances our product quality and reduces production costs. Our deep, long-term relationships with the U.S. government and NATO countries that underpin our Training and Drones segments provide us with access to key decisionmakers, which provides us with new business opportunities. Our Electric Air Mobility platform represents a significant future growth opportunity to expand into cargo and passenger eVTOLs while also providing an original equipment (“OE”) platform for new products and services across our other segments.

In addition, we are able to utilize our certification capabilities to improve time to market for the introduction of products and services. These offerings leverage our U.S. and international sales and manufacturing capabilities to reduce costs and expand our market footprint. This capability also helps us swiftly integrate new avionics, electronics, and artificial intelligence (“AI”) into our products, all while sharing the intra-segment R&D insights that drive our high-quality, interconnected products and services.

Our Competitive Strengths

We are an at scale, integrated aerospace and defense platform with multiple solutions and services in the high-growth aerospace and defense categories. Our competitive advantages include:

Cross-Platform Strategy Generates Operational and Product Synergies

Our business is thoughtfully interconnected to leverage each segment’s full capabilities, with synergies driving growth in new customer categories, geographies, and product lines that would not be attainable as standalone entities. Each of our segments benefits from operational synergies in certification, economies of scale, shared R&D insights and integration of products and services across a global platform with operations in the United States, Canada and Denmark. Accordingly, our platform generates a considerable positive network effect, with shared access to commercial, technological, and public sector relationship resources, including the United States, EU members, NATO countries and other international allies of the United States, which drive growth and innovation to meet customer needs.

Fulsome Product Assortment Targeting Actionable Market Opportunities

We offer differentiated technologies and diversified product offerings across the Drones, Avionics, Training, and Electric Air Mobility segments for both military and commercial end users. Our product lineup is competitively designed to take advantage of key opportunities in the aerospace and defense sector, focusing on areas with potential for future growth. Additionally, the collaboration between our R&D and commercial teams ensures that our products are both market-relevant and commercially available. With offerings ranging from training to drones to services to avionics, we address the marketplace of tomorrow.

Talented Management Team Possesses Robust Operational Experience and Deep Private and Public Sector Relationships

Our robust leadership team possesses over 150 years of combined operating experience and industry success in the aerospace and defense market. We maintain strong relationships with key contacts within the U.S. government and NATO, as well as regulatory agencies, such as the FAA, DHS, and NASA, which has provided us with access to key decisionmakers to secure new business and enable us to build the trust necessary to offer additional functions and features for our products and services. For example, certain members of our management team currently serve on various boards for several government agencies and have held military leadership positions in the past. These relationships are critical to this industry and have enabled us to initiate discussions with key government officials, which is a significant barrier to entry. We believe our established relationships are a core point of differentiation that will support our future success.

Exceptional R&D that Supports the Potential for Industry-Leading Products

We have a history of developing and launching innovative products, with our product advantage rooted in our exceptional R&D capabilities. From prototyping to certification to commercialization, our ability to launch solutions with strongly differentiated technology and direct product market fit is core to our platform. Our innovative, technology-additive solutions are underpinned by a robust new product development pipeline supported by our platform. Moreover, critical human capital interdependencies between our various segments have provided a positive network effect, increasing the quality and efficiency of our development process. This has been proven out particularly in our Drones and Avionics segments, where the RQ-35 Heidrun and Connected Panel solutions, respectively, have proven to be compelling value propositions in their end markets.

Market Opportunity

The defense industry is affected by geopolitical and security issues. Conflicts in Ukraine, the Middle East, and heightened geopolitical tension in the Pacific region have elevated global security concerns. This has caused many governments to increase their focus on defense and security, leading to a rise in defense spending and a growing willingness to adopt new technologies and solutions. Specifically, beginning in 2014 in response to Russia’s illegal annexation of Crimea and amid broader instability in the Middle East, NATO countries agreed to commit 2% of their national gross domestic product (“GDP”) to defense spending to help ensure the continued military readiness of NATO allies. According to NATO, 23 all NATO countries are expected to meet or exceed the target of investing at least 2% of GDP in defense in 2024, compared to only three NATO countries in 2014. Over the past decade, European allies of the United States ~~and~~ and Canada have steadily increased their collective investment in defense by 41.3%, and are investing a combined total of more than $430 billion in defense spending in 2024. Moreover, NATO has recently signaled it will increase its defense spending benchmark from its ~~current~~ current 2% of GDP target. ~~Current~~Moreover, at the 2025 NATO Summit in The Hague, NATO members adopted a new long-term defense investment commitment: by 2035, member states aim to allocate 5% of GDP annually on combined defense and security-related spending, with at least 3.5% of GDP dedicated to core defense requirements and up to 1.5% of GDP directed to critical infrastructure protection, cyber defense, innovation, and strengthening the defense industrial base. NATO has also reaffirmed its guideline that at least 20% of defense expenditures should go toward major equipment, including associated research and development, to ensure modernization and interoperability. These commitments reflect NATO’s recognition that the “2% guideline” alone is no longer sufficient to meet emerging threats and technological demands. NATO leaders have signaled that higher, sustained investment levels are needed to close capability gaps, accelerate modernization, and support innovation across domains such as artificial intelligence, autonomous systems, and advanced defense technologies. Current NATO Secretary General, Mark Rutte, has acknowledged the “goal of 2%, set a decade ago, will not be enough to meet the challenges of tomorrow” and that NATO members will have to increase spending by “considerably more than 3%.” In order to ensure that these funds are spent in the most effective and efficient way to acquire and deploy modern capabilities, NATO countries have also agreed that at least 20% of defense expenditure should be devoted to major new equipment, including associated R&D perceived as a crucial indicator for the scale and pace of modernization. These tailwinds support the development of a new market leader in the aerospace and defense market, with the emergence of new technologies such as 5G, artificial intelligence, and advanced autonomous vehicles creating new commercial opportunities.

Drones. Global conflicts, particularly the conflict between Russia and Ukraine, have led to an increase in military spending and investment in new technologies solutions such as drones. According to the Precedence Military Drones Report, the military drone market size is expected to reach approximately $24.75 billion by 2030. Key demand drivers include the rise of asymmetrical warfare, new avionics, and the inherent user safety advantages of drones over manned systems. We believe that our products will continue to play a role in the arsenals of the future, including through NATO countries. In addition, we believe that the U.S. military’s transformation into a smaller, more agile force that operates via a network of observation, communication, and precision targeting technologies will continue to accelerate the acceptance and use of small drone military operations around the world.

In addition, commercial drone use is gaining momentum as multiple industries are incorporating drones into their daily business functions, given the wide range of applications, including monitoring, inspection and surveillance. According to the Grand View Drone Report, it is anticipated that worldwide drone revenues will reach $163.5 billion by 2030. For example, farmers are using drones to inspect and spray their crops, which improves yields, construction sites are adopting drones to survey and monitor land, which improves workplace safety, and companies are using drones to inventory product in factories and warehouses, which improves efficiency. Additionally, drones are being used increasingly to transport and deliver goods. For example, hospitals are deploying drones to deliver critical medicine and other medical supplies to remote and underserved regions, while logistics companies are using drones to transport cargo between locations, expediting deliveries. As the commercial drone industry matures, we believe that aircraft and their components subsystems will become more commoditized, with additional pockets of growth expected in services and service-derivative revenues. The trajectory of commercial drone applications is well-aligned with our business strategy, which includes a focus on commercializing multiple types of value-added drone solutions to meet various end user and industry needs.

Avionics. New aircraft production and upgrades to existing aircraft are driving demand for our avionics solutions. We believe the market places a premium on avionics solutions like ours that have capabilities such as improved flight controls, communications and navigation capabilities, and flight monitoring. Continued technological advances in avionics and aging general aviation fleets are expected to drive growth for the general aviation avionics aftermarket.

Training. Overall demand for military flight training is expected to grow as countries around the world increase defense spending and outsource flight training to the private sector. Key market drivers include outsourcing of military training, technological advancement, and the ongoing pilot shortage. Additionally, the DoD has awarded over $13.7 billion in military aviation training contracts since 2015, representing a new public-private sector market norm. In the commercial market, the same shortage of trained pilots serves as the main driver of demand. According to the Fortune U.S. Pilot Training Report, the commercial training market is projected to grow from $1.8 billion in 2023 to over $4.9 billion in 2030, representing a CAGR of 15.4%.

Electric Air Mobility. According to the Morgan Stanley Report, it is estimated that the global electric air mobility market may grow to approximately $55 billion by 2030 and to approximately $1 trillion by 2040. We believe that autonomous aerial cargo is one of the largest unaddressed segments within the EAM market, with an additional actionable opportunity in passenger transportation. We expect both of these segments will provide a substantial market opportunity. While the electric air mobility market is in its nascent stage, we believe that the growing prevalence of e-commerce, rising labor costs in traditional ground transportation, traffic congestion and the continued advancement in AAV technology will lead to growing demand for cargo solutions based on AAVs. In addition, the implementation of government regulations and creation of federal and state incentives has started to meaningfully influence consumer behavior by increasing the focus on emissions standards and targets and leading to greater interest in aircraft electrification. Ultimately, cargo represents the most actionable near-term end market owing to its large commercial opportunity and reduced technological hurdles.

Our Growth Strategies

We are a growing platform built off a successful mergers and acquisitions (“M&A”) strategy, with a robust pipeline of future commercial opportunities. Our growth strategies are rooted in a bold and focused vision for the future, with a mix of organic and inorganic growth initiatives. Within each of our segments, there are several opportunities to increase market share and penetrate new business areas.

Organically grow existing business line capabilities

We intend to make substantial investments in our sales and marketing, analytics, and communications functions to support our expansion within current markets and into future and specialized markets within each of our segments. We have identified specific opportunities to invest in organic growth, including procuring additional aircraft to expand the capabilities of the Training segment, launching larger screen form factor avionics with increased functionality, and iteratively developing our existing drone technology to enter new commercial end markets. With strong customer relationships and a focus on loyalty and satisfaction, we will continue to upsell and cross-sell across our portfolio, which in conjunction with investments in marketing and brand positioning will bolster our brand awareness. Finally, we are planning on both measured geographic expansion and targeting new customer end markets, which will further expand our addressable market.

Develop and commercialize new products and services and expand certification of new and future products and services.

Our segment specific initiatives are as follows:

●

Drones. We intend to launch U.S. production of our military drones and subsequently seek DoD Blue UAS drone certification, which we currently estimate will take approximately six months to achieve and will allow us to sell drones to the DoD. This certification process involves sponsors in various U.S. military branches supporting our product, with full certification essentially contingent on U.S.-domiciled production. In addition, we intend to expand our drone and DaaS offerings into new verticals, including agricultural, security, and industrial applications, leveraging our GPS denied technology proposition as the leading edge of our value proposition owing to its inherent product-market fit.

●

Avionics. We intend to focus our R&D activities on integrated avionics for our cargo eVTOL platform, the Jaunt Journey, and other eVTOLs as well as training aircraft in current markets. We believe focusing on in-flight controls, navigation, and communications will lead us to experience strong growth through organic expansion opportunities designed to expedite the development of integrated systems for both internal platforms and external OEM initiatives. With a history of providing innovative avionics for over 20 years, Aspen Avionics is primed to launch products for the aircraft of tomorrow.

●

Training. We intend to expand our current training capabilities through the acquisition of a flight school for commercial flight training and the launch of a fixed wing military simulation service offering. Our training capabilities will be further enhanced by the acquisition of additional training aircraft through our acquisition of a flight school or otherwise. Additionally, we plan to offer drone and electric air mobility flight training to take advantage of these rapidly growing markets.

●

Electric Air Mobility. We intend to develop, certify, and commercialize our eVTOL aircraft. We anticipate certification of our 33% downscaled cargo eVTOL under drone rules as early as 2027 and expect our first passenger production aircraft to be certified by the TCCA under existing CAR 529 Transport Category Rotorcraft airworthiness rules as early as 2031.

Leverage Public Sector Relationships and Security Clearances to Drive Business.

Our deep public sector relationships and security clearances enable us to bid on government requests for proposals (“RFPs”) and drive brand awareness of our drone, eVTOL, avionics, and training solutions with key military decision makers. For example, members of our management team maintain close relationships with the highest levels of government around the world, including military leaders, ambassadors, and defense attachés from NATO and its allies. Our senior leadership team has also held and/or currently holds positions on various government committees across the FAA, Pentagon, and White House. Key employees also possess extensive military leadership experience having served in U.S. special forces units. This competitive moat grants us enviable access to key growth end markets and unlocks commercial synergies between our various segments.

Partnering with other firms on commercial ventures to drive technology convergence.

Partnerships allow us to expedite development of customer solutions by bringing together critical technologies across the aerospace and defense marketplace. For example, our Sky-Watch brand has critical partnerships with companies such as Palantir and Helsing that have boosted our drone’s capabilities. For our Electric Air Mobility segment, partnerships have been and will be at the forefront of our eVTOL platform’s integrated and convergent technology advantage - not only for the end-product but also in the areas of manufacturing, engineering and supply chain. New partnerships in AI and machine learning are also being explored in the Drones segment as well as virtual training system partnerships in the Training segment.

Strategically acquire businesses and technologies to enhance our offerings.

We were formed in August 2021 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry. Since our founding, including the Put-Together Transaction, we have gained experience in successfully integrating businesses, and will continue to focus on thoughtful strategic acquisitions as a key component of our business growth strategy. For example, the drone and avionics markets are primed for consolidation due to the lack of scale, capital, and resources necessary for expansion by many drone and avionics companies, and we have identified and are actively evaluating a wide range of strategic opportunities for expansion. We believe our acquisition strategy will enable us to expand our footprint and opportunities in new and existing areas, strengthen our customer base and market share and improve overall brand recognition.

Continual investment in software, AI, and machine learning to expand solutions capabilities and increase operational efficiencies.

We plan on building out our software, AI, and machine learning capabilities to help our customers solve more complex problems and bring additional capabilities to the marketplace. In addition, we intend to offer new product and service lines to ensure our customers are equipped with the proper tools for their evolving needs. These investments are expected to further bolster our cross-platform network effort to help support future R&D and new product development. These initiatives will also help us streamline our internal processes and optimize our supply chain, which will support further growth.

7Recent Developments

On September 8, 2025, we entered into a non-binding letter of intent (the “LOI”) with Nord-Drone LLC (“Nord Drone”) establishing the framework for a proposed joint venture between us and Nord Drone, with the objective of developing, manufacturing, and commercializing UAS in the United States, Ukraine, NATO countries, and other agreed territories (the “Proposed Joint Venture”). Pursuant to the terms of the LOI, the Proposed Joint Venture will be established as a Delaware limited liability company with 50/50 ownership between us and Nord Drone and, subject to customary reserves and applicable law, distributable cash of the Proposed Joint Venture will be distributed 50/50 between us and Nord Drone. The Proposed Joint Venture will be managed by a five-member board of managers with two representatives from each party, plus a mutually agreed independent member, and day-to-day management will be led by co-CEOs, one from each party.

Under the LOI, AIRO is expected to contribute manufacturing oversight, R&D resources, government procurement leadership, and strategic corporate support while Nord Drone is expected to provide proprietary drone technologies, production facilities, supply chain access, and coordination with defense ministries, including Ukraine’s Ministry of Defense. Nord Drone will grant the Proposed Joint Venture a royalty-free, worldwide, irrevocable license to use its pre-existing intellectual property solely for the Proposed Joint Venture’s business, and all inventions, improvements, data, software and other intellectual property developed by or for the Proposed Joint Venture will be owned exclusively by the Proposed Joint Venture.

Each party has agreed to use good faith efforts to negotiate and execute definitive joint venture and ancillary agreements within sixty (60) days of the LOI. In addition, the parties agreed for a period of sixty (60) days following the LOI not to enter into any agreement with any third party concerning the development or commercialization of First-Person View drone technologies within the United States or Ukraine without the agreement of the other party.

The terms of the LOI are non-binding and the execution of definitive agreements is subject to customary conditions, including completion of due diligence, internal approvals, tax structuring, export control assessments, and agreement on definitive documentation. There can be no assurance that such conditions will be satisfied or that the definitive agreements related to the Proposed Joint Venture will be entered into on the terms described herein or at all.

Risk Factors Summary

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. The following is a summary of the principal risks we face:

● We have a limited operating history in new and evolving markets, which may make it difficult to evaluate our current business and future prospects and increase the risk of your investment. ● We are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses for the foreseeable future. ● Our failure to comply with covenants under debt instruments could adversely affect our business and financial condition. ● We have made and may in the future make acquisitions and investments, which involve numerous risks. ● We may not be able to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired in the Put-Together Transaction, and may not realize the anticipated synergies and benefits of such acquisitions. ● We face significant competition from other companies, many of which have substantially greater resources than we do.

● We ~~may~~are ~~not~~an beearly-stage ~~able~~company ~~to keep pace~~ with ~~technological~~a ~~advances~~history ~~and~~of we depend on advances in technology by other companies. ● We may not be able to produce aircraft in the volumes or on the timelines that we anticipate. ● In order to reach production for our aircraftlosses, ~~we need to develop complex software~~ and ~~technology~~we ~~systems~~expect ~~in coordination with our partners and suppliers, and there can be no assurance such systems will be successfully developed. ● We may be unable~~ to ~~acquire~~incur ~~additional~~significant ~~aircraft~~expenses ~~to support our Training segment on acceptable terms or at all. ● Due to the nature of our products~~ and ~~services,~~continuing alosses ~~product~~for ~~safety failure, quality issue or other failure affecting our or our customers’ or suppliers’ products or systems could seriously harm our business. ● Our future success depends on~~ the ~~continuing~~foreseeable ~~efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management~~future.

8● Our failure to comply with covenants under debt instruments could adversely affect our business and financial condition.

● We ~~rely~~have onmade ~~a limited number of suppliers in Canada~~ and Europe for critical components and raw materials used to manufacture and develop our products. ● We rely on independent dealers and distributors to sell our Avionics products, and disruption to these channels would harm our business. ● We currently, and may in the future, ~~use~~make ~~and develop generative AI technologies throughout our business~~acquisitions, which may expose us to certain regulatory and other risks that could adversely affect our results of operations and financial condition. ● If our information technology systems or data, or the third parties with whom we work, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, risks which are amplified by our work for world governments. ● Our commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively impact our financial results. ● The market for eVTOL aircraft and electric air mobility has not been clearly defined, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected, which may harm our business, financial condition, and results of operations. ● We are still developing our eVTOL aircraft, have not yet obtained FAA certification of our eVTOL aircraft under development and we have yet to manufacture or deliver any aircraft to customers, which makes evaluating our business and future prospects difficult and increases the risk of investment. ● There may be reluctance by consumers to adopt a new form ofjoint ~~mobility,~~ventures ~~or an unwillingness to pay aircraft operators’ projected prices. ● We are subject to extensive government regulation,~~ and ~~our~~make ~~failure~~investments to comply with applicable regulations may subject us to significant financial liability, penalties, and other government actions that restrict our ability to conduct our business. ● U.S. government contracts are subject to a competitive bidding process, are generally not fully funded at inception, and contain certain terms that may be unfavorable to us, which could result in ~~contracts~~companies ~~and opportunities consuming significant resources without generating revenue~~ or ~~profit. ● We rely to a significant degree on sales to the U.S. government~~technologies, particularly to agencies of the Department of Defense, and a decline in government budgets, funding, changes in spending or budgetary priorities, or delays in contract awards may materially adversely affect our future revenue, business, financial condition, results of operations, cash flow and equity. ● The U.S. government may modify, curtail or terminate one or more of our contracts. ● Our business may benefit in part from government funding, and our inability to receive such financial support could harm our business. ● Many of our products and services are subject to local, state, federal and international regulatory frameworks that are costly to comply with, are subject to interpretation, may be dependent on political pressures and factors and/or are subject to change. ● Our business is highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes and the speed with which ~~such~~involve ~~restrictions~~numerous ~~and/or changes occur. ● We are subject to the~~ risks ~~associated with conducting international business operations~~. ● If we fail to protect, or incur significant costs in defending or enforcing, our intellectual property and other proprietary rights, our business, financial condition, and results of operations could be materially harmed.

●

We may not be able to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired in the Put-Together Transaction, and may not realize the anticipated synergies and benefits of such acquisitions.

●

We face significant competition from other companies, many of which have substantially greater resources than we do.

●

We may not be able to keep pace with technological advances and we depend on advances in technology by other companies.

●

We may not be able to produce aircraft in the volumes or on the timelines that we anticipate.

●

In order to reach production for our aircraft, we need to develop complex software and technology systems in coordination with our partners and suppliers, and there can be no assurance such systems will be successfully developed.

●

We may be unable to acquire additional aircraft to support our Training segment on acceptable terms or at all.

●

Due to the nature of our products and services, a product safety failure, quality issue or other failure affecting our or our customers’ or suppliers’ products or systems could seriously harm our business.

●

Our future success depends on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management.

●

We rely on a limited number of suppliers in Canada and Europe for critical components and raw materials used to manufacture and develop our products.

●

We rely on independent dealers and distributors to sell our Avionics products, and disruption to these channels would harm our business.

●

We currently, and may in the future, use and develop generative AI technologies throughout our business, which may expose us to certain regulatory and other risks that could adversely affect our results of operations and financial condition.

●

If our information technology systems or data, or the third parties with whom we work, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences, risks which are amplified by our work for world governments.

●

Our commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively impact our financial results.

●

The market for eVTOL aircraft and electric air mobility has not been clearly defined, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected, which may harm our business, financial condition, and results of operations.

●

We are still developing our eVTOL aircraft, have not yet obtained FAA certification of our eVTOL aircraft under development and we have yet to manufacture or deliver any aircraft to customers, which makes evaluating our business and future prospects difficult and increases the risk of investment.

●

There may be reluctance by consumers to adopt a new form of mobility, or an unwillingness to pay aircraft operators’ projected prices.

●

We are subject to extensive government regulation, and our failure to comply with applicable regulations may subject us to significant financial liability, penalties, and other government actions that restrict our ability to conduct our business.

●

U.S. government contracts are subject to a competitive bidding process, are generally not fully funded at inception, and contain certain terms that may be unfavorable to us, which could result in contracts and opportunities consuming significant resources without generating revenue or profit.

●

We rely to a significant degree on sales to the U.S. government, particularly to agencies of the Department of Defense, and a decline in government budgets, funding, changes in spending or budgetary priorities, or delays in contract awards may materially adversely affect our future revenue, business, financial condition, results of operations, cash flow and equity.

●

The U.S. government may modify, curtail or terminate one or more of our contracts.

●

Our business may benefit in part from government funding, and our inability to receive such financial support could harm our business.

●

Many of our products and services are subject to local, state, federal and international regulatory frameworks that are costly to comply with, are subject to interpretation, may be dependent on political pressures and factors and/or are subject to change.

●

Our business is highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes and the speed with which such restrictions and/or changes occur.

●

We are subject to the risks associated with conducting international business operations.

●

If we fail to protect, or incur significant costs in defending or enforcing, our intellectual property and other proprietary rights, our business, financial condition, and results of operations could be materially harmed.

●

We have identified material weaknesses in our internal control over financial reporting. If we are unable to effectively remediate these material weaknesses, identify additional material weaknesses in the future, or otherwise fail to maintain effective internal control over financial reporting, then we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business.

Our Corporate Information

AIRO Group Holdings, Inc., a Delaware corporation, was formed on August 30, 2021, for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry. During the year ended December 31, 2022, we completed our Put-Together Transaction to acquire six companies which are now organized into our four reportable segments, each with a diverse set of partners and customers: (i) Drones, through our subsidiaries AIRO Drone and Sky-Watch; (ii) Avionics, through our subsidiary Aspen Avionics; (iii) Training, through our subsidiaries Agile Defense and CDI; and (iv) Electric Air Mobility, through our subsidiary Jaunt.

Our principal executive offices are located at 5001 Indian School Road NE, Suite 100, Albuquerque, New Mexico 87110 and our telephone number is (505) 338-2434. Our website address is www.theairogroup.com. The information contained on, or accessible through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained in, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.

Implications of Being an Emerging Growth Company and a Smaller Reporting Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we may take advantage of reduced reporting requirements and other requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

●

being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations in this prospectus;

10● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”);

● not being required to comply with the ~~auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”); ● not being required to comply with the~~ requirement of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements; ● the ability to elect to defer compliance with new or revised accounting standards until such standards would apply to private companies; ● reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and ● exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

~~We may~~● ~~use these provisions until~~ the ~~last~~ability ~~day~~to ofelect ~~our fiscal year following the fifth anniversary of the closing of this offering. However, if certain events occur prior~~ to ~~the~~defer ~~end~~compliance ofwith ~~such~~new ~~five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion~~ or werevised ~~issue~~accounting ~~more~~standards ~~than~~until ~~$1.0~~such ~~billion~~standards ofwould ~~non-convertible~~apply ~~debt in any three-year period, we will cease~~ to beprivate ~~an emerging growth company prior to the end of such five-year period.~~companies;

●

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

●

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

We may use these provisions until December 31, 2030. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.

We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

We are also a “smaller reporting company” as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K, we are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

119

The Offering

Common stock offered by us		3,500,000 shares.
Option to purchase additional shares of our common stock offered by us		We have granted the underwriters an option to purchase up to 525,000 additional shares of common stock from us at the ~~initial~~ public offering price, less underwriting discounts and commissions, to cover over-allotments, if any, for a period of 30 days from the date of this prospectus.
Common stock to be outstanding immediately after this offering		shares (or shares if the underwriters exercise their option to purchase additional shares in full).
Stock Repurchase		We intend to use a portion of the net proceeds from this offering to purchase 815,000 shares of common stock, assuming no exercise of the underwriters’ option to purchase additional shares, from certain of our existing stockholders, including certain directors and executive officers and their affiliates, at a price per share equal to the public offering price per share of common stock in this offering, less the underwriting discounts and commissions and any tax withholdings (the “Stock Repurchase”). In addition, if the underwriters exercise their option to purchase additional shares, we intend to use a portion of the net proceeds to purchase up to an additional 301,312 shares in the Stock Repurchase. See the sections titled “Use of Proceeds” and “Certain Relationships and Related Party Transactions.”
Use of proceeds		We estimate that the net proceeds to us from this offering will be approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares in full) from the sale of the shares of our common stock offered by us in this offering, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use the net proceeds from this offering as follows: (i) approximately $ to scale operations of our Avionics segment and to support the production and design of Avionics products; (ii) approximately $ to support our Electric Air Mobility segment’s business operations and to fund the eVTOL aircraft development program over the next 12 months; (iii) approximately $ to fund acquisitions in the areas of drone vehicles, AI and networking service in our Drones segment; (iv) approximately $ to acquire the aircraft and support equipment that is necessary to meet the additional demand under the IDIQ contracts for our Training segment and to fund acquisitions for the Training segment in the areas of training and aircraft maintenance; (v) to repay an aggregate of $10.8 million in Fixed Conversion Obligations (as defined below) that are not being converted into shares of our common stock in connection with this offering, which are payable at the closing of this offering; (vi) to repay an aggregate of $11.7 million of principal, cash premiums and interest under the Investor Notes (as defined below), which bear interest at rates ranging from 10.5% to 15% and are payable on dates ranging from the closing of this offering to 190 days following the closing of this offering; and (vii) the remainder to fund working capital and other general corporate purposes. As of the date of this prospectus, we do not have any binding agreements or commitments to enter into any material acquisitions. See the section titled “Use of Proceeds.”
Common stock to be outstanding immediately after this offering		30,525,503 shares (or 31,050,503 shares if the underwriters exercise their option to purchase additional shares in full) before giving effect to the Stock Repurchase. 29,710,503 shares (or 29,934,191 shares if the underwriters exercise their option to purchase additional shares in full) after giving effect to the Stock Repurchase.
Underwriters’ warrants		We have agreed to issue to certain of the underwriters, upon the closing of this offering, warrants exercisable for the number of shares of our common stock equal to 5% of the total number of shares of our common stock sold in this offering (which we refer to as the “Underwriters’ Warrants”). The Underwriters’ Warrants will be exercisable at an exercise price equal to 110% of the initial public offering price of our common stock sold in this offering, will be exercisable, in whole or in part, from time to time after six months following the date of this prospectus, and will expire on the date that is five years following the date of this prospectus. See the section titled “Underwriting—Underwriters’ Warrants.”
Use of proceeds		We estimate that the net proceeds to us from this offering will be approximately $67.5 million (or approximately $77.8 million if the underwriters exercise their option to purchase additional shares in full) from the sale of the shares of our common stock offered by us in this offering, assuming a public offering price of $20.94 per share, the last reported share price of our common stock on Nasdaq on September 5, 2025, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use (i) approximately $16.0 million of the net proceeds from this offering to effect the Stock Repurchase, assuming a public offering price of $20.94 per share, the last reported share price of our common stock on Nasdaq on September 5, 2025, after deducting estimated underwriting discounts and commissions, and (ii) the remainder primarily to fund growth initiatives and pursue opportunistic acquisitions of complementary businesses, products, services or technologies that align with our strategic objectives. At this time, we do not have any binding agreements or commitments to enter into any material acquisitions. Any remaining proceeds will be used for general corporate purposes, including working capital and ongoing operational needs. If the underwriters exercise their option to purchase additional shares, we intend to use a portion of the net proceeds to purchase up to an additional 301,312 shares in the Stock Repurchase.
Risk factors		See the section titled “Risk Factors” and the other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock.
Proposed Nasdaq symbol		“AIRO”
Nasdaq Global Market symbol		“AIRO.”

12The number of shares of our common stock to be outstanding after this offering is based on 27,025,503 shares of our common stock outstanding as of June 30, 2025, and excludes:

~~The number~~● of305,367 shares of our common stock toissuable be outstanding after this offering is based on shares of our common stock outstanding as of December 31, 2024, on a pro forma basis after giving effect to (i) the conversion of approximately $11.9 million of aggregate principal amount of the Put-Together Transaction Notes, which we intend to convert upon the ~~completion~~exercise of ~~this~~ ~~offering into an aggregate of 510,588 shares of our common~~ stock, ~~(ii)~~options ~~the~~outstanding ~~conversion of approximately $17.5 million of aggregate principal amount of notes issued pursuant to (a) that certain Note and Warrant Purchase Agreement dated~~ as of ~~March~~June 930, ~~2018~~2025, as ~~amended~~under on July 11, 2024, (b) that certain Note Purchase Agreement dated as of October 18, 2019, as amended on July 11, 2024, and (c) that certain Note Purchase Agreement dated as of January 31, 2022, as amended on July 11, 2024, each among Aspen Avionics and the ~~respective~~ ~~holders~~Jaunt ofAir ~~convertible notes (collectively~~Mobility, the “Aspen Notes”), which we intend to convert upon the completion of this offering into an aggregate of 749,007 shares of our common stock, (iii) the conversion of $44.6 million of the obligations owed to Carter Aviation Technologies, LLC (“Carter Aviation”) in partial satisfaction of the Jaunt Contingent Arrangement (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which we intend to convert upon the completion of this offering into an aggregate of 1,908,143 shares of our common stock, (iv) the conversion of $1.7 million of the principal owed to the former Aspen Avionics shareholders (the “Aspen Contingent Debt”), which we intend to convert upon the completion of this offering into an aggregate of 73,971 shares of our common stock, (v) the conversion of $0.8 million of the principal owed to certain former Aspen Avionics shareholders pursuant to the Aspen Merger Agreement (as defined herein), which we intend to convert upon the completion of this offering into an aggregate of 34,018 shares of our common stock (the “Aspen Carveout Contingency”), (vi) an aggregate of 87,226 shares of our common stock issuable pursuant to a one-time stock payment of $2.0 million pursuant to the 2021 ~~Management~~Option ~~Carveout~~ Plan ~~that we adopted in December 2021 (as defined below and as described in “Executive and Director Compensation—Management Carveout Plan”)~~, which ~~establishes~~was arenamed ~~benefit pool for designated employees and consultants payable upon~~ the ~~occurrence~~AIRO ofGroup ~~certain change in control events (the “Aspen Carveout Stock Obligation”)~~Holdings, ~~(vii) the conversion of $1.4 million of the principal owed to New Generation Aerospace,~~ Inc. ~~(“NGA”)~~Option ~~under~~Plan ~~that certain Amended and Restated Success Fee Agreement~~ (~~as described in “Certain Relationships and Related Party Transactions—Success Fee Arrangement”), which we intend to convert upon~~ the completion of this offering into an aggregate of 57,792 shares of our common stock, (viii) the conversion of $7.8 million of the principal amounts owed to various holders under deferred salary arrangements, which we intend to convert upon the completion of this offering into an aggregate of 332,499 shares of our common stock (the obligations described in (i) through (viii), collectively, the “~~Fixed~~Legacy ~~Conversion Obligations~~Plan”), ~~(ix) shares~~with of our common stock issuable to Dangroup ApS (“Dangroup”) pursuant to the Incentive Agreement, dated June 28, 2024, as amended (the “Dangroup Incentive Agreement” and as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Dangroup Incentive Agreement”), assuming shares of our common stock are outstanding immediately prior to the completion of this offering, and (x) shares of our common stock issuable upon a ~~one~~weighted-~~time~~average ~~interest~~exercise ~~payment~~price of $118.559 ~~million for contingent interest payable pursuant to the notes issued to certain investors (the “Investor Notes”), assuming an initial public offering price of $~~ per share~~, which is the midpoint of the price range set forth on the cover page of this prospectus, and excludes:~~;

● ~~519~~254,~~131~~010 shares of our common stock issuable upon the exercise of stock options outstanding as of December 31, 2024, under the Jaunt Air Mobility, LLC 2021 Option Plan, which was renamed the AIRO Group Holdings, Inc. Option Plan (the “Legacy Plan”), with a weighted-average exercise price of $5.05 per share; ● 431,818 shares of contingent restricted stock awards outstanding as of ~~December~~June 3130, 2024; ● 112,246 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of December 31, 2024 at a weighted average exercise price of $9.90 per share; ● shares of our common stock, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, issuable upon the exercise of warrants to purchase our common stock issued after December 31, 2024 at an exercise price of $0.01 per share; ● shares of our common stock issuable upon the exercise in full by the underwriters of the Underwriters’ Warrants; ● shares of our common stock reserved for future issuance under the Legacy Plan, which number of shares will be added to the shares of our common stock reserved under the AIRO Group Holdings, Inc. 2025 ~~Equity Incentive Plan (the “2025 Plan”) upon its effectiveness, at which time we will cease granting awards under the Legacy Plan~~; ● shares of our common stock reserved for future issuance under the 2025 Plan, as well as any future increases, including annual automatic evergreen increases in the number of shares of our common stock reserved for future issuance under the 2025 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering (as more fully described in the section titled “Executive and Director Compensation—Equity Incentive Plans”); and ● shares of our common stock reserved for future issuance under the AIRO Group Holdings, Inc. 2025 Employee Stock Purchase Plan (the “ESPP”), as well as any annual automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.

●

66,026 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of June 30, 2025 at a weighted average exercise price of $16.83 per share;

●

87,941 shares of our common stock issuable upon the vesting of restricted stock awards under the AIRO Group Holdings, Inc. 2025 Equity Incentive Plan (the “2025 Plan”);

●

345,000 shares of our common stock issuable upon the exercise in full of warrants issued to certain underwriters in connection with the closing of our IPO (the “Underwriters’ Warrants”);

●

1,812,059 shares of our common stock reserved for future issuance under the 2025 Plan as of June 30, 2025, as well as any future increases, including annual automatic evergreen increases in the number of shares of our common stock reserved for future issuance under the 2025 Plan;

	●	204,574 shares of our common stock issued subsequent to June 30, 2025 under the 2025 Plan as deferred compensation to certain employees; and

	●	71,319 shares of our common stock issued subsequent to June 30, 2025, pursuant to the Aspen Carveout Plan.

Unless otherwise indicated, all information contained in this prospectus reflects and assumes the following:

● 3,753,244 shares of our common stock to be issued pursuant to the Fixed Conversion Obligations; ● shares of our common stock to be issued pursuant to the Investor Notes; ● shares of our common stock to be issued pursuant to the Dangroup Incentive Agreement; ● no exercise of the outstanding options described above; ● no vesting or settlement of the contingent restricted stock awards described above; ● no exercise by the underwriters of (i) their option to purchase up to a total of additional shares of our common stock or (ii) the Underwriters’ Warrants; ● the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the closing of this offering and the adoption of our amended and restated bylaws to become effective immediately prior to the closing of the offering; and ● a 1-for- reverse stock split of our common stock to be effected prior to the closing of this offering.

13● no exercise of the outstanding warrants described above; and

●

no exercise by the underwriters of their option to purchase up to a total of 525,000 additional shares of our common stock.

Summary Consolidated Financial Data

The following tables summarize our consolidated financial data as of and for the periods indicated. We have derived the summary ~~consolidated~~ consolidated statements of operations data for the years ended December 31, 2024 and 2023 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary of the unaudited condensed consolidated statements of operations data for the three and six months ended June 30, 2025 and 2024, and the summary condensed consolidated balance sheet data as of June 30, 2025, from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with our audited consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information set forth in those statements. Our historical results presented below are not necessarily indicative of the results to be expected for any future period. The following summary consolidated financial data should be read in conjunction with the ~~sections~~section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” ~~“Unaudited Pro Forma Condensed Consolidated Financial Information”~~ and our consolidated financial statements and related notes included elsewhere in this prospectus.

	Year Ended December 31						Three Months Ended June 30						Six Months Ended June 30
	2024			2023			2025			2024			2025			2024
(in thousands, except share and per share amounts)
Consolidated Statements of Operations Data:
Revenue	$	86,935		$	43,254		$	24,550		$	9,780		$	36,345		$	23,520
Cost of revenue		28,618			18,340			9,515			4,005			14,378			9,258
Gross profit		58,317			24,914			15,035			5,775			21,967			14,262
Operating expenses:
Research and development		13,133			11,871			4,102			3,161			7,768			6,318
Sales and marketing		6,422			5,374			1,758			1,409			3,191			2,660
General and administrative		18,201			17,601			28,864			3,898			33,778			8,441
Goodwill impairment		37,994			-			-			-			-			-
Total operating expenses		75,750			34,846			34,724			8,468			44,737			17,419
Loss from operations		(17,433	)		(9,932	)		(19,689	)		(2,693	)		(22,770	)		(3,157	)
Other income (expense):
Interest expense, net		(14,225	)		(2,137	)		(8,010	)		(954	)		(9,277	)		(1,242	)
Other income (expense), net		2,173			(18,093	)
Gain on extinguishment of debt		-			-			15,559			-			15,559			-
Total other expense		(12,052	)		(20,230	)
Other income (expense), net		2,173			(18,093	)		20,068			(1,514	)		22,730			(1,782	)
Loss before income tax expense		(29,485	)		(30,162	)
Total other (expense) income		(12,052	)		(20,230	)		27,617			(2,468	)		29,012			(3,024	)
Income tax expense		(9,209	)		(2,294	)
(Loss) income before income tax expense		(29,485	)		(30,162	)		7,928			(5,161	)		6,242			(6,181	)
Net loss	$	(38,694	)	$	(32,456	)
Income tax expense		(9,209	)		(2,294	)		(2,057	)		(439	)		(2,344	)		(1,429	)
Net loss per share, basic and diluted (1)	$	(1.39	)	$	(1.17	)
Net income (loss)	$	(38,694	)	$	(32,456	)	$	5,871		$	(5,600	)	$	3,898		$	(7,610	)
Weighted-average common shares outstanding used in computing net loss per share, basic and diluted		27,858,276			27,858,276
Net income (loss) per share, basic (1)	$	(2.36	)	$	(1.98	)	$	0.32		$	(0.34	)	$	0.22		$	(0.46	)
Pro forma net loss per share, basic and diluted (unaudited)(2)	$			$
Net income (loss) per share, diluted (1)	$	(2.36	)	$	(1.98	)	$	0.30		$	(0.34	)	$	0.20		$	(0.46	)
Pro forma weighted-average shares of common stock, basic and diluted (unaudited)(2)
Weighted-average common shares outstanding used in computing net income (loss) per share, basic (1)		16,387,180			16,387,180			18,490,316			16,387,180			17,444,558			16,387,180
Weighted-average common shares outstanding used in computing net income (loss) per share, diluted (1)		16,387,180			16,387,180			19,472,648			16,387,180			19,592,255			16,387,180

(1) ~~See~~Prior ~~Note~~year 1share toand ~~our~~per ~~consolidated~~share ~~financial~~amounts ~~statements~~have ~~included~~been ~~elsewhere~~retroactively inadjusted ~~this~~to ~~prospectus~~reflect ~~for~~the animpact ~~explanation~~ of ~~the~~a ~~method~~1-for-1.7 ~~used~~reverse tostock ~~calculate~~split ~~historical~~effected ~~net~~on ~~loss~~March ~~per~~7, ~~share~~2025, ~~basic~~as discussed in Note 1 to our consolidated financial statements and ~~diluted~~our condensed consolidated financial statements included elsewhere in this prospectus.

(2) Pro forma net loss per share and the pro forma weighted-average number of shares used in computation of the per share amounts for the year ended December 31, 2024 have been computed to give effect to (i) the conversion of the Fixed Conversion Obligations into an aggregate of 3,753,244 shares of our common stock in connection with the closing of this offering, (ii) the issuance of an aggregate of shares of our common stock pursuant to the Investor Notes, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, in connection with the closing of this offering, (iii) the issuance of an aggregate of shares of our common stock pursuant to the Dangroup Incentive Agreement, assuming shares of our common stock are outstanding immediately prior to the completion of this offering, and (iv) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the closing of this offering. Pro forma net loss per share and the pro forma weighted-average number of shares used in computation of the per share amounts for the year ended December 31, 2024 do not include the shares of common stock expected to be sold in this offering.

	As of June 30, 2025
(in thousands)
Consolidated Balance Sheet Data:
Total current assets	$	79,164
Working capital⁽¹⁾		12,647
Total assets		747,850
Total liabilities		68,290
Accumulated deficit		(202,556	)
Total stockholders’ equity		679,560

14(1) We define working capital as current assets less current liabilities. See our condensed consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

	As of December 31, 2024
	Actual			Pro Forma(1)	Pro Forma As Adjusted(2)
(in thousands)
Consolidated Balance Sheet Data:
Total current assets	$	42,594
Working capital(3)		(54,013	)
Total assets		700,999
Total liabilities		152,270
Accumulated deficit		(206,453	)
Total stockholders’ equity		548,729

(1) The pro forma consolidated balance sheet data gives pro forma effect to (i) the conversion of the Fixed Conversion Obligations into an aggregate of 3,753,244 shares of our common stock in connection with the closing of this offering, (ii) the issuance of an aggregate of shares of our common stock pursuant to the Investor Notes, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, in connection with the closing of this offering, (iii) the issuance of an aggregate of shares of our common stock pursuant to the Dangroup Incentive Agreement, assuming shares of our common stock are outstanding immediately prior to the completion of this offering, and (iv) the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the closing of this offering. For more detailed information with respect to the pro forma adjustments, please see the section titled “Unaudited Pro Forma Condensed Consolidated Financial Information” elsewhere in this prospectus.

(2) The pro forma as adjusted consolidated balance sheet data gives pro forma effect to (i) the pro forma adjustments set forth in footnote (1) above, (ii) our receipt of $ million in estimated net proceeds from the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us and (iii) the use of approximately $22.5 million of the net proceeds from this offering to repay (1) an aggregate of $10.8 million in Fixed Conversion Obligations that are not being converted into shares of our common stock in connection with this offering and (2) an aggregate of $11.7 million of principal, cash premiums and interest under the Investor Notes.

(3) We define working capital as current assets less current liabilities. See our consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all of the other information contained in this prospectus, including our consolidated financial statements and related notes included elsewhere in this prospectus, and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before making an investment decision. The risks described below are not the only ones facing us. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, prospects, financial condition or results of operations. In such case, the trading price of our common stock could decline, and you may lose part or all of your investment.

Risks Related to Our Limited Operating History, Financial Position and Need for Additional Capital

We have a limited operating history in new and evolving markets, which may make it difficult to evaluate our current business and future prospects and increase the risk of your investment.

We were organized in August 2021 for the purpose of acquiring and integrating various companies in the aerospace and defense industry and the history of operating each of our businesses together is relatively short. Our limited operating history and rapidly evolving business make it difficult to evaluate our current business, future prospects and plan for growth. In addition, our drones, eVTOL aircraft and other products are sold or will be sold in new and rapidly evolving markets. Accordingly, our business and future prospects may be difficult to evaluate, the extent to which demand for our products and services will increase, if at all, could be impacted by our ability to do the following:

●

attract new customers to our products or services;

●

develop, renew and expand contracts;

●

acquire and maintain market share;

●

attract, integrate, train and retain leadership and other highly qualified personnel;

●

achieve or manage growth in our operations;

●

acquire new technologies;

●

adapt to required redirection or changes in services or direction caused by geopolitical crises;

●

successfully develop and commercially market new products and services;

●

keep pace with technological developments;

●

timely address the increasingly sophisticated needs of our customers, including as a result of changes in government regulation related to our products and services;

●

secure sufficient quantities or cost-effective production of our products due to supply chain challenges;

●

adapt to new or changing policies and spending priorities of governments and government agencies;

●

generate sufficient revenue to achieve or maintain profitability; and

●

access initial and additional capital when required and on reasonable terms.

If we fail to address these and other challenges, risks and uncertainties successfully, our business, results of operations, prospects and financial condition would be materially harmed.

~~We are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses for the foreseeable future.~~12

We ~~have~~are ~~incurred~~an ~~significant~~early-stage ~~net~~company ~~losses~~with toa ~~date~~history of losses, and we expect ~~that we will continue~~ to incur ~~net~~significant ~~losses~~expenses for the foreseeable future. We have incurred net losses in each period since our inception, including $38.7 million and $32.5 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $206.5 million.

~~Developing~~We ~~products~~have ~~and~~incurred ~~services~~significant innet ~~the~~losses ~~defense~~since ~~and~~inception, ~~broader~~with ~~aerospace~~the ~~industry~~exception isof ~~very~~the ~~time-consuming,~~six ~~and~~months ~~expensive~~of ~~and~~June 30, ~~to date~~2025, weduring ~~have~~which ~~devoted~~we reported anet ~~significant~~income ~~amount~~ of ~~our~~$3.9 ~~resources to our R&D programs~~million. ~~These~~In ~~programs~~contrast, ~~may~~we ~~not~~incurred ~~produce~~net ~~successful~~losses ~~results,~~of ~~and~~$7.6 ~~our~~million ~~new~~for ~~products and~~the ~~services~~six ~~may~~months ~~not~~ended ~~achieve~~June ~~market~~30, ~~acceptance~~2024, ~~create~~and ~~additional~~$38.7 ~~revenue~~million and ~~or become profitable~~$32.5 Wemillion ~~expect~~for ~~our~~the ~~expenses~~years toended ~~increase~~December ~~in connection with our ongoing activities~~31, ~~particularly~~2024 asand ~~we aim to significantly increase our headcount in the near-term~~2023, ~~advance the~~respectively. ~~development~~As of ~~our~~June ~~aircraft and other products~~30, ~~seek regulatory approvals~~2025, ~~and~~we ~~launch~~had ~~and~~an ~~commercialize~~accumulated ~~our~~deficit ~~products~~of $202.6 ~~at scale~~million.

InAlthough ~~addition~~we toraised ~~the~~approximately ~~expected~~$69 ~~costs~~million toin ~~grow~~gross ~~our~~proceeds ~~business~~from the IPO, weincluding ~~also~~the ~~expect~~full toexercise ~~incur~~of ~~significant~~the ~~additional~~over-allotment ~~legal~~option, ~~accounting~~we ~~and other expenses~~expect asto acontinue ~~newly~~incurring ~~public~~net ~~company.~~losses Ifas we ~~fail~~invest toin ~~increase~~scaling ~~our~~and ~~revenue~~expanding ~~to offset the increases in~~ our ~~operating~~operations. ~~expenses,~~Developing weand ~~may~~commercializing ~~not~~products ~~achieve~~and orservices ~~sustain profitability~~ in the ~~future.~~defense Weand ~~will~~broader ~~need~~aerospace toindustry ~~generate~~is ~~substantial~~capital ~~additional~~intensive ~~revenue to achieve~~ and ~~then~~subject ~~sustain~~to ~~profitability, and~~long ~~even~~development ~~if we achieve profitability, we cannot be sure that we will remain profitable for any period of time~~timelines. ~~Even~~We ifhave ~~this~~allocated ~~offering~~significant isresources ~~successful, we will require substantial additional capital~~ to ~~finance~~ our ~~operations and fund our~~ R&D programs~~. If we are unable to raise capital when needed or on acceptable terms~~, ~~then~~and we may benot ~~forced~~ultimately togenerate ~~delay,~~products ~~reduce~~that orachieve ~~eliminate~~market ~~our~~acceptance ~~R&D~~or ~~activities~~meaningful ~~as well as our commercialization efforts, which could have a material adverse effect on our business, growth prospects and financial condition~~revenue.

Looking ahead, we expect our operating expenses to increase substantially in connection with:

●

Expansion of our headcount;

●

Acceleration of product development, including aircraft and related technologies;

●

Regulatory and compliance activities; and

●

Scaling our manufacturing and commercialization infrastructure.

In addition, as a newly public company, we expect to incur increased legal, accounting and compliance costs.

To achieve and sustain profitability, we must generate substantial additional revenue. Our ability to do so depends on a number of factors, including the successful development, approval, and market adoption of our products. If our revenue does not grow sufficiently to offset our operating expenses, we may not achieve or maintain profitability. Furthermore, while we believe our current capital position provides us with a strong foundation, we may need to raise additional capital to support our R&D and commercialization efforts. If we are unable to obtain financing on acceptable terms when needed, we may be forced to delay or reduce our operations, which could materially and adversely affect our business, financial condition, and results of operations.

Our failure to comply with covenants under our debt instruments could adversely affect our business and financial condition.

We have incurred significant indebtedness, including in connection with the Put-Together Transaction, and may incur additional debt for acquisitions, operations, R&D and capital expenditures, or for other reasons related to our overall capital deployment strategy. As of June 30, 2025 and December 31, 2024, we had outstanding indebtedness of $29.0 million and $105.7 million, respectively. The agreements governing our indebtedness contain restrictive covenants, including but not limited to, our ability to incur additional indebtedness, grant liens and pay any dividends or make distributions, as well as financial maintenance covenants, including debt service coverage ratios, that will limit our and our subsidiaries’ ability to engage in activities that may be in our and their long-term best interests. Any additional debt, to the extent we are able to incur it, may further restrict the manner in which we conduct business. Such restrictions, prohibitions and limitations could impact our ability to implement elements of our strategy, including in the following ways:

● our flexibility to plan for, or react to, competitive challenges in our business and ~~the pharmaceutical and~~ in the aerospace and defense industry may be compromised;

1713

●

we may be put at a competitive disadvantage relative to competitors that do not have as much debt as we have, and competitors that may be in a more favorable position to access additional capital resources;

●

our ability to make acquisitions and execute business development activities through acquisitions will be limited and may, in future years, continue to be limited; and

●

our ability to resolve regulatory and litigation matters may be limited.

Furthermore, the creditors who hold our debt have in the past, and may in the future, accelerate amounts due in the event that we default on these covenants, which has in the past, and may in the future, trigger a default or acceleration of the maturity of our other debt. For example, civil actions were filed against CDI and individual guarantors in the Tioga County Court, State of Pennsylvania, in July 2023. The claimant, First Citizens Community Bank (“FCCB”), ~~alleges~~alleged that payment under certain promissory notes iswas due, and FCCB ~~seeks~~ ~~recovery~~sought recovery of the outstanding amounts. FCCB obtained judgments against all named defendants. ~~and~~On March 27, 2025, we ~~intend~~and FCCB agreed to ~~negotiate~~payment terms and a ~~resolution with~~release ~~FCCB~~whereby ~~and,~~$0.2 million in ~~the~~amounts ~~meantime~~due would be paid by April 30, ~~have~~2025. ~~negotiated~~As ~~forbearance~~of ~~agreements~~June to30, ~~prevent~~2025, ~~FCCB~~all ~~from~~amounts ~~enforcing~~due ~~the~~to ~~judgments~~FCCB were paid. The acceleration of significant indebtedness may cause us to renegotiate, repay, or refinance the affected obligations, and there is no assurance that such efforts would be successful or on terms we deem attractive. In addition, any acceleration could result in a downgrade of any credit ratings then applicable to us, which could result in additional events of default or limit our ability to obtain additional financing.

In addition, we entered into the Put-Together Transaction Notes with the equity holders of certain of the businesses we acquired as part of the Put-Together Transaction. The Put-Together Transaction Notes with AIRO Drone, Agile Defense and CDI were amended to be convertible, in part, into shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed to such holders to be paid upon the closing of the BCA Transactions. We also agreed to assume other Fixed Conversion Obligations, which were also amended to be convertible, in part, into shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed to such holders to be paid upon the closing of the BCA Transactions. Given that the BCA Transactions were not consummated, we intend to issue approximately 3,753,244 shares and use proceeds of $10.8 million from this offering to satisfy the Fixed Conversion Obligations. As of December 31, 2024, we have third party obligations of $3.0 million of Investor Notes as described within Note 2 to our consolidated financial statements included elsewhere in this prospectus, $4.2 million of Investor Notes as described in Note 18 to our consolidated financial statements included elsewhere in this prospectus, and $13.8 million of certain Investor Notes by which we determined it appropriate to choose the fair value option going forward due to the significant modification, which was determined to be an extinguishment of such Investor Notes in the fourth quarter of 2024 in accordance with Accounting Standards Codification (“ASC”) and as further described in Note 1 to our consolidated financial statements included elsewhere in this prospectus, collectively which total $21.0 million. The Investor Notes are in the form of unsecured promissory notes with no collateral and no guarantees. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investor Notes” for additional information regarding the promissory notes. If we are unable to satisfy our existing obligations, our business and financial condition could be adversely affected.

18Given that the BCA Transactions were not consummated, in conjunction with the IPO, we issued approximately 2.0 million shares and used IPO proceeds of $3.3 million to partially satisfy the Fixed Conversion Obligations during the six months ended June 30, 2025. We will continue to fund the remaining $8.5 million to satisfy the Fixed Conversion Obligations during 2025. As of June 30, 2025, we have third party obligations of $3.0 million of Investor Notes as described within Note 2—Revolving Lines of Credit and Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, $3.8 million of Investor Notes as described in Note 12—Related Party Transactions to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, and $3.8 million of Investor Notes at fair value as described in Note 2—Revolving Lines of Credit and Long-Term Debt to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, collectively which total $10.6 million. The Investor Notes are in the form of unsecured promissory notes with no collateral and no guarantees. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations” for additional information regarding the promissory notes. If we are unable to satisfy our existing obligations, our business and financial condition could be adversely affected.

Risks Related to Our Business

We have made and may in the future make acquisitions, ~~and~~form joint ventures or make investments in companies or technologies, which involve numerous risks.

We have made certain acquisitions, including our acquisitions of the Acquired Companies in connection with the Put-Together Transaction, and continue to routinely evaluate potential acquisitions, joint ventures, investments and strategic alliances involving complementary technologies, teams, products and companies. We expect to continue to pursue such transactions if appropriate opportunities arise. and a portion of the proceeds of this offering may be used to fund ~~acquisitions~~such transactions. See the section titled “Use Ofof Proceeds” . For example, in September 2025, we entered into the LOI for the Proposed Joint Venture with the objective of developing, manufacturing, and commercializing UAS in the U.S., Ukraine, NATO countries, and other agreed territories. In November 2023, we signed non-binding letters of intent to acquire two businesses for the Training segment, including a flight training school. The parties have ~~undertaken~~ undertaken due diligence to determine whether a binding purchase agreement will be negotiated. The total anticipated purchase price for the acquisitions is expected to range from $5.1 million to $7.7 million, which would be paid in a combination of cash and shares of our common stock, and if consummated on the terms anticipated, would result in dilution to ~~the~~current investors and investors in this offering. As of ~~the~~June ~~date~~30, ~~of this prospectus~~2025, we dodid not have any binding agreements or commitments to enter into any material acquisitions.

Moreover, we may not be able to identify other potentially suitable transactions in the future or if we do identify such transactions, we may not be able to complete them on commercially acceptable terms or at all and may face intense competition for such opportunities. In pursuing transactions, we have and will continue to face numerous risks, including diverting management’s attention from normal daily operations of our business; difficulties in integrating the financial reporting capabilities and operating systems of any acquired operations to maintain effective internal control over financial reporting and disclosure controls and procedures; potential loss of key personnel of the acquired company as well as their know-how, relationships and expertise; challenges successfully integrating acquired personnel, operations and businesses; failing to realize the anticipated synergies and benefits of an acquisition; maintaining favorable business relationships of acquired operations; generating insufficient revenue from completed transactions to offset expenses associated with our efforts; acquiring material or unknown liabilities associated with any acquired operations; litigation associated with merger and acquisition transactions; and increasing expense associated with amortization or depreciation of intangible and tangible assets we acquire.

Our acquisitions, including the Put-Together Transaction, have required and continue to require significant management time and attention relating to the transactions. Past transactions, whether completed or abandoned by us, have resulted, and in the future may result, in significant time and attention, costs, expenses, liabilities and charges to earnings. The accounting treatment for any future transaction may result in significant amortizable intangible assets which, when amortized, will negatively affect our consolidated results of operations. The accounting treatment may also result in significant goodwill, which, if impaired, will negatively affect our consolidated results of operations. Furthermore, we may incur additional debt or issue equity securities to pay for transactions. The incurrence of additional debt could limit our operating flexibility and be detrimental to our profitability, and the issuance of equity securities would be dilutive to our existing stockholders. Any or all of the above factors may differ from the investment community’s expectations in a given quarter, which could negatively affect our stock price. In the event we make future investments, the investments may decline in value, we may lose all or part of our investment.

We may not be able to realize the expected benefits from acquisitions, including the Put-Together Transaction, because of integration difficulties or other challenges. The success of our acquisitions will depend, in part, on our ability to realize all or some of the anticipated synergies and other benefits from integrating the acquired businesses with our existing businesses. Integration activities can be costly, complex and time consuming. The potential difficulties we may face in integrating the operations of our acquisitions include, among others: the failure to implement our business plans for the combined businesses and consolidation or expansion of production capacity as planned and where applicable; unexpected losses of key employees, customers or suppliers of our acquired companies and businesses; unanticipated issues in conforming our acquired companies’ and businesses’ standards, processes, procedures and controls with our operations; coordinating new product and process development; increasing the scope, geographic diversity and complexity of our operations; diversion of management’s attention from other business concerns; adverse effects on our ~~or our~~ acquired companies’ and businesses’ existing business relationships; unanticipated changes in applicable laws and regulations; operating risks inherent in our acquired companies’ and businesses’ business and operations; unanticipated expenses and liabilities; potential unfamiliarity with our acquired companies and businesses technology, products and markets, which may place us at a competitive disadvantage; and other difficulties in the assimilation of our acquired companies and businesses operations, technologies, products and systems.

Any acquired companies and businesses may have unanticipated or larger than anticipated liabilities for patent and trademark infringement claims, violations of applicable laws, rules and regulations, commercial disputes, taxes and other known and unknown types of liabilities. There may be liabilities that we underestimated or did not discover in the course of performing our due diligence investigation of our acquired companies and businesses. We may have no recourse or limited recourse under the applicable acquisition-related agreement to recover damages relating to the liabilities of our acquired companies and businesses.

We may not be able to maintain or increase the levels of revenue, earnings or operating efficiency that we, and each of our acquired companies and businesses, had historically achieved or might achieve separately. In addition, we may not accomplish the integration smoothly, successfully or within the anticipated costs or timeframe. If we experience difficulties with the integration process or if the business of our acquired companies or businesses deteriorates, the anticipated cost savings, growth opportunities and other synergies of our acquired companies and businesses may not be realized fully or at all, or may take longer to realize than expected. If any of the above risks occur, our business, financial condition, results of operations and cash flows may be materially and adversely impacted, we may fail to meet the expectations of investors or analysts, and our stock price may decline as a result.

2015

We face significant competition from other companies, many of which have substantially greater resources than we do.

The defense and broader aerospace industry is highly competitive and generally characterized by intense competition to win contracts. While we expect to be one of the pioneering companies to market eVTOL aircraft, we expect this industry to be increasingly competitive, and it is possible that our competitors could get to market before us, either generally or in specific markets. Our current principal competitors include the following: (i) for our Drones segment: Da Jiang Innovations, Elbit Systems Ltd., Lockheed Martin Corporation, L3Harris Technologies, Inc.’s FVR-90, L3 Technologies, Inc., Martin UAV, LLC, Northrop Grumman Corporation’s V-Bat, Teledyne Technologies, Inc., and Textron Inc.’s Aerosonde; (ii) for our Training segment: Airborne Tactical Advantage Company, LLC, Draken International, Inc., Tactical Air Defense Services Inc. and Top Aces Inc.; (iii) for our Avionics segment: Avidyne Corporation, Collins Aerospace, Dynon Avionics, Inc., Garmin Ltd., Honeywell International Inc., L3Harris Technologies, Inc., and uAvionix Corporation; and (iv) for our Electric Air Mobility segment: Archer Aviation Inc., BETA Technologies, Inc., Eve Holding, Inc., Joby Aviation, Inc., ~~Lilium N.V.,~~ Vertical Aerospace Ltd., Volocopter GmbH, and Wisk Aero LLC, in addition to ground transportation services, such as Lyft, Inc. and Uber Technologies, Inc., and incumbent aircraft carrier services, such as ~~Blade Air Mobility, Inc. and~~ NetJets Inc.

Many of these companies have substantially greater financial, management, research and marketing resources than we do. Our competitors may be able to provide customers with different or greater capabilities or benefits than we can provide in areas such as technical qualifications, past contract performance, geographic presence, price and the availability of key professional personnel, including those with security clearances. Furthermore, many of our competitors may be able to utilize their substantially greater resources and economies of scale to develop competing products and technologies, manufacture in high volumes more efficiently, divert sales away from us by winning broader contracts or hire away our employees by offering more lucrative compensation packages. In particular, our competitors may be able to obtain the relevant certification and approvals for their aircraft before us. Small business competitors may be able to offer more cost competitive products and services, due to their lower overhead costs, and take advantage of small business incentives and set-aside programs for which we are ineligible. In order to secure contracts successfully when competing with larger, well-financed companies, we may be forced to agree to contractual terms that provide for lower aggregate payments to us over the life of the contract, which could adversely affect our margins.

We may not be able to keep pace with technological advances and we depend on advances in technology by other companies.

The defense and broader aerospace industry continues to undergo significant changes, primarily due to technological developments. Because of the rapid growth and advancement of technology, shifting consumer tastes and the popularity and availability of other forms of activities, it is impossible to predict the overall effect these factors could have on potential revenue from, and profitability of, the defense and broader aerospace industry. The development of specialized software and hardware is a costly, complex and time-consuming process, and investments in product development often involve a long wait until a return, if any, can be achieved on such investment. We might face difficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market, which might allow competing products to emerge during the development and certification process. We anticipate making significant investments in R&D relating to our products and technology, but such investments are inherently speculative and require substantial capital expenditures. Any unforeseen technical obstacles and challenges that we encounter in the R&D process could result in delays in or the abandonment of product commercialization, may substantially increase development costs, and may negatively affect our results of operations. In the time it takes to develop or improve upon a product, that product may become obsolete.

2116

It is impossible to predict the overall effect these factors could have on our ability to compete effectively in a changing market, and if we are not able to keep pace with these technological advances, then our revenues, profitability and results of operations may be materially adversely affected. However, if we struggle to adapt to an industry-shifting technological advancement or competitor offerings that render our products relatively less attractive or obsolete, including due to competitive pressures we face relative to other drone companies, it could have a material adverse effect on our business.

Further, we rely on and will continue to rely on components of our products that are developed and produced by other companies over which we have limited control. The commercial success of certain of our planned future products will depend in part on advances in these and other technologies by other companies, and our ability to procure them from such third parties in a timely manner and on economically feasible terms. We may, from time-to-time, contract with and support companies developing key technologies in order to accelerate the development of such products for our specific uses. Such activities might not result in useful technologies or components for us.

We may be unable to acquire additional aircraft to support our Training segment on acceptable terms or at all.

The success of our Training segment, including our ability to bid and complete future task orders under certain multiple awards and IDIQ contracts issued by the U.S. military, is dependent on our financing or leasing additional aircraft that meet our customers’ needs. To date, a lack of funding has inhibited our ability to independently finance or lease potential aircraft. Even if we receive sufficient funding, there are a limited number of aircraft available that meet our customers’ needs and potential seller countries have been retaining aircraft in light of the Ukrainian conflict and instability in other areas of the world as well as delayed deliveries from manufacturers of new aircraft, creating more limited supply. In addition, as a result of policy changes regarding aircraft transfers to the United States, purchased aircraft often need to be disassembled, imported into the United States, and appropriately modified to meet customer needs. This requires significant capital and lead time to put an aircraft into operation. Delays or failure in obtaining suitable aircraft could adversely impact financial results and growth plans due to missed task order bidding opportunities.

Our products and services are highly sophisticated and specialized, involve complex advanced technologies, are often integrated with third-party products and services, and are utilized for specific purposes that require precision, reliability, and durability. Many of our products and services include both hardware and software that involve industrial machinery and intricate aviation and defense systems, including commercial and military jet engines, power and control systems, and other aircraft parts, and military sensors and command and control systems. Technical, mechanical, quality, electronic, and other failures may occur from time to time, whether as a result of manufacturing or design defect, operational process, or production issue attributable to us, our customers, suppliers, partners, third party integrators, or others. Product design changes and updates could also have associated cost and schedule impacts. In addition, our products could fail as a result of cyber-attacks, such as those that seize control and result in misuse or unintended use of our products, or other intentional acts. The impact of a catastrophic product or system failure or similar event affecting our or our customers’ or suppliers’ products or services could be significant, and could result in injuries or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative effects. A product or system failure, or perceived failure, could lead to negative publicity, a diversion of management attention, and damage to our reputation that could reduce demand for our products and services. It could also result in product recalls and product liability and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, labor and material costs, customer support costs, significant damages, and other costs, including fines and other remedies, and regulatory and environmental liabilities. We may also incur increased costs, delayed payments, reputational harm, or lost equipment or services revenue in connection with a significant issue with a third party’s product with which our products are integrated. Further, our insurance coverage may not be adequate to cover all related costs and we may not otherwise be fully indemnified for them. Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or liquidity.

Our customers may experience service failures or interruptions due to defects in the software, infrastructure, components or engineering system that compromise our products and services, or due to errors in product installation, any of which could harm our business.

Our products and services may contain undetected defects in the software, infrastructure, components or engineering system. Sophisticated software and applications, such as those adopted and offered by us in connection with or as a part of our eVTOL, drone, and avionics offerings, may contain “bugs” that can unexpectedly interfere with the software and applications’ intended operations. Our communication services may from time to time experience outages, service slowdowns or errors. Defects may also occur in components or processes used in our products or for our services.

There can be no assurance that we will be able to detect and fix all defects in the hardware, software and services we offer. Failure to do so could result in decreases in sales of our products and services, lost revenues, significant warranty and other expenses, decreases in customer confidence and loyalty, losing market share to our competitors, and harm to our reputation.

Our future success depends on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management.

Due to the specialized nature of our business, our future performance is highly dependent upon the continued services of our key technical personnel and executive officers, including the contributions of Captain Joseph D. Burns, our Chief Executive Officer, Dr. Chirinjeev Kathuria, our Executive Chairman, and John Uczekaj, our President and Chief Operating Officer, as well as other members of our management team, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management personnel for our operations. The loss of services of any of these individuals could make it more difficult to achieve our business plans. Although we have executed employment agreements or offer letters with each member of our senior management team, these agreements are terminable at will with or without notice and, therefore, we may not be able to retain their services. We do not currently maintain “key person” life insurance on the lives of our executives. This lack of insurance means that we may not have adequate compensation for the loss of the services of these individuals.

We aim to significantly increase our headcount in the near-term, but have experienced, and continue to experience, challenges hiring highly qualified personnel including engineers, pilots, skilled laborers, and security clearance holders. Currently, there is a shortage of pilots that could exacerbate over time as more pilots in the industry approach mandatory retirement age which will affect our Training segment. We expect these difficulties to continue in the future. In addition, the cost of labor remains high. Some candidates and new personnel may have job-related expectations that differ from our current workforce and are inconsistent with our corporate culture. With respect to existing personnel, some may become required to receive various security clearances and substantial training in order to work on certain programs or perform certain tasks. Necessary security clearances may be delayed, which may impact our ability to perform on our U.S. government contracts. We also may not be successful in training or developing qualified personnel with the requisite relevant skills or security clearances. Moreover, some of our employees are covered by collective bargaining agreements. If we have additional challenges renegotiating agreements or if our employees pursue new collective representation, then we could experience additional costs and/or be subject to work stoppages. Any of the above factors could seriously harm our business.

We rely on a limited number of suppliers in Canada and Europe for critical components and raw materials used to manufacture and develop our products. If we are forced to use suppliers outside these jurisdictions and, as a result, such materials become scarce or unavailable, or such suppliers fail, then we may incur delays in development, manufacture and delivery of our products, which could damage our business.

We obtain hardware components, raw materials, and various systems and subsystems from a limited group of suppliers located in Canada and Europe, some of which are sole source suppliers. We do not have long-term agreements with any of these suppliers that obligate them to continue to sell such components, materials, systems or subsystems to us. Our reliance on these suppliers involves significant risk and uncertainty, including whether such suppliers will provide an adequate supply of products of sufficient quality, will increase prices for the products and will perform their obligations on a timely basis. Changes in business conditions, wars, governmental changes, political intervention, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability to deliver components to us on a timely basis. For instance, global supply chain disruptions in 2021 and 2022 impacted our ability to procure raw materials, microelectronics, and certain commodities. These disruptions were driven by supply chain market constraints and macroeconomic conditions, including inflation and geopolitical conditions. In addition, current high inflation levels have increased material and component prices, labor rates, and supplier costs, and put pressure on our margins. Credit market conditions, including higher interest rates and the availability of credit, have impacted some of our suppliers and subcontractors as well. As a result of these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn, hindered our ability to perform on our commitments to customers and negatively affected our results of operations.

24The timing of the impacts of these supply chain risks and issues and our ability to mitigate them are uncertain and difficult to predict. However, we expect the current supply chain, inflation, price issues and potential tariffs and their negative impacts on our business to continue through the remainder of 2025. We expect to experience intermittent delays throughout 2025. Furthermore, the existing supply chain issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy, or financial difficulties; price increases for various reasons; and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition, and liquidity.

The timing of the impacts of these supply chain risks and issues and our ability to mitigate them are uncertain and difficult to predict. However, we expect the current supply chain, inflation, price issues and potential tariffs and their negative impacts on our business to continue into 2025. While we saw some easing of these issues in late 2024, we expect to experience intermittent delays throughout 2025. Furthermore, the existing supply chain issues could be compounded by other events, such as an economic downturn; supplier capacity constraints for other reasons; supplier quality issues (for example, defects or fraudulent parts); supplier closing, bankruptcy, or financial difficulties; price increases for various reasons; and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster (including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect our results of operations, financial condition, and liquidity.

Furthermore, if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are acceptable to us, or at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. In addition, certain components and raw materials used in the development and manufacture of our products are periodically at risk of supply shortages, and our business is subject to the risk of price increases and periodic delays in delivery. If shortages occur and we are unable to obtain components from third party suppliers in the quantities and of the quality we require, on a timely basis and at acceptable prices, then we may not be able to timely complete development of or deliver our products on a timely or cost effective basis to our customers, which could cause customers to terminate their contracts with us, increase our costs and seriously harm our business, results of operations, prospects and financial condition. Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us with raw materials or components, then we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers. Even if we are successful at locating alternative suppliers the costs of the components may be higher than the original supplier’s components or we may be required to purchase in larger quantities than we normally would, which may result in higher inventory levels than desired. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our products. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable cost, if at all.

We do not control our suppliers’ labor or other compliance practices, including environmental, health and safety practices. If our current suppliers, or any other suppliers we may use in the future, violate U.S. or foreign laws or regulations, we may be subjected to extra duties, significant monetary penalties, adverse publicity, the seizure and forfeiture of products that we are attempting to import or the loss of our import privileges. The effects of these factors could render the conduct of our business in a particular country undesirable or impractical and have a negative impact on our operating results.

2519

We rely on independent dealers and distributors to sell our Avionics products, and disruption to these channels would harm our business.

A significant portion of aftermarket sales in our Avionics segment are made through a worldwide network of independent dealers and distributors, which subjects us to many risks, including risks related to their inventory levels and support for our products. If dealers and distributors attempt to reduce their levels of inventory or if they do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.

Many of our dealers and distributors also sell products offered by our competitors. If our competitors offer our dealers and distributors more favorable terms, those dealers and distributors may de-emphasize or decline to carry our products. In the future, we may not be able to retain or attract a sufficient number of qualified dealers and distributors. If we are unable to maintain successful relationships with dealers and distributors or to expand our distribution channels, our business will suffer.

We use AI, machine learning and automated decision-making technologies, including proprietary AI and machine learning algorithms and models (“AI Technologies”) in our business. For example, AIRO Drone expects to operate drones in an AI-based commercial inspection service known as DaaS and build and operate a worldwide drone datacom network known as “AIRO-NET.” As with many technological innovations, there are significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance that the usage of, or our investments in, such technologies will always enhance our products or services or be beneficial to our business, including our efficiency or profitability. In particular, if the models underlying our AI Technologies are incorrectly designed or implemented; trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data or on data to which we do not have sufficient rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures; used without sufficient oversight and governance to ensure their responsible use; and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats or material performance issues, the performance of our products, services and business, as well as our reputation, and the reputations of our customers, could suffer or we could incur liability resulting from the violation of laws or contracts to which we are party or civil claims. Finally, the overall regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign government bodies and agencies have introduced, or are currently considering, additional laws and regulations. Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.

In the ordinary course of our business, we and the third parties with whom we work may process proprietary, confidential, and sensitive data, including personal data, and third-party intellectual property.

In conjunction with defense procurements, some international customers require contractors to comply with industrial cooperation regulations, including entering into industrial participation, industrial development or localization agreements, sometimes referred to as offset agreements or offset contracts, as a condition to obtaining orders for our products and services. These offset agreements generally extend over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers, local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects, and preference for local suppliers or subcontractors. The customer’s expectations in respect of the scope of offset commitments can be substantial, including high-value content, and may exceed existing local technical capability. Failure to meet these commitments, which can be subjective and outside of our control, may result in significant penalties, and could lead to a reduction in sales to a country. Furthermore, some of our existing offset agreements are dependent upon the successful operation of joint ventures that we do not control and involve products and services that are outside of our core business, which may increase the risk of breaching our obligations, exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment. For more information on our industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties for non-compliance, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Commitments”.

Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect and as a government contractor, these security threats are amplified. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), “hacktivists,” organized criminal threat actors, sophisticated nation-states, and nation-state-supported actors. Some actors now engage and are expected to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our products. We and the third parties with whom we work may be subject to a variety of other evolving threats, including, but not limited to, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated by artificial intelligence, and other similar threats. In particular, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, ability to provide our products and services, loss of data, loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws prohibit such payments).

Additionally, hybrid and remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit, and in public locations. Future or past business transactions (such as acquisitions or integrations) could also expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.

We rely upon third parties and technologies to operate critical business systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption and authentication technology, employee email, and other functions. Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place. While we may be entitled to damages if the third parties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award. In addition, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have not been compromised. We may share or receive sensitive information with or from third parties.

While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We take steps designed to detect, mitigate and remediate vulnerabilities in our information security systems (such as our hardware and/or software, including that of third parties with whom we work), but we may not be able to detect, mitigate, and remediate all such vulnerabilities including on a timely basis. It may also be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident. Further, we may experience delays in developing and deploying remedial measures and patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in a security incident. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages, data losses, and disruptions of our business. Threat actors may also gain access to other networks and systems after a compromise of our networks and systems.

Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third parties with whom we work) to provide our products and services. We may expend significant resources or modify our business activities to try to protect against security incidents. Certain data privacy and security obligations require us to implement and maintain specific industry-standard or otherwise reasonable security measures to protect our information technology systems and sensitive information.

2721

Applicable data security and public company disclosure obligations may require us, or we may voluntarily choose, to notify relevant stakeholders of certain security incidents, including affected individuals, customers, regulators and investors, or to take other actions, such as providing credit monitoring and identity theft protection services. Such disclosures and related actions can be costly, and the disclosures or the failure to comply with such applicable requirements, could lead to adverse consequences. If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; diversion of management attention; interruptions in our operations (including availability of data); financial loss and other similar harms.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. In addition, our insurance coverage may not be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices or that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position. Sensitive information of us or our customers could also be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s, or vendor’s with whom we work use of generative AI Technologies.

Our commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively impact our financial results.

The operating results of our commercial aviation products, systems and services businesses – particularly our Electric Air Mobility and Avionics segments – have been and may in the future be adversely affected by downturns in the global demand for air travel, which impacts new aircraft production and orders, and global flying hours, which impacts air transport, regional and business aircraft utilization rates and pilot training needs. The aviation industry is highly cyclical, and the level of demand for air travel is correlated to the strength of the U.S. and international economies and is impacted by long-term trends in airline passenger and cargo traffic. The results of our commercial aviation businesses also depend on other factors, including general economic growth, political stability in both developed and emerging markets, pricing pressures, trends in capital goods markets and changes in OEM production rates.

Extreme weather, natural disasters and other adverse events could have a material adverse effect on our business, results of operations and financial condition.

Adverse weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant delays. Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater degree than our competitors who may be able to recover more quickly from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition to a greater degree than other air carriers.

The sizes of the markets for our current and future solutions may be smaller than we estimate.

Our estimates of the total addressable market for our current products and services are based on a number of internal and third-party estimates. While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors. As a result, our estimates of the total addressable market for our current or future products and services may prove to be incorrect. If the actual number of customers who will use our products and services, the price at which we can sell our products and services or the total addressable market for our products and services is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business, financial condition and results of operations.

The electric air mobility market is still emerging and has not been clearly defined. We are uncertain as to what extent market acceptance will grow, if at all. Our customers will likely initially launch operations in a limited number of metropolitan areas. The success of these markets, if any, and the opportunity for future growth in these and other markets may not be representative of the potential market for electric air mobility in other metropolitan areas. Our success will depend to a substantial extent on regulatory approval and availability of eVTOL technology, as well as the willingness of commuters and travelers to widely adopt air mobility as an alternative for ground transportation. If the public does not perceive electric air mobility as beneficial, or chooses not to adopt electric air mobility as a result of concerns regarding safety, affordability, value proposition or for other reasons, then the market for our aircraft may not develop, may develop more slowly than we expect or may not achieve the growth potential we expect. Any of the foregoing could materially adversely affect our business, financial condition, prospects, and results of operations.

We have a limited operating history in designing, developing, and working to certify an eVTOL aircraft. Our eVTOL aircraft is in the development stage, and we do not expect our first passenger production aircraft to be certified by the TCCA under existing CAR 529 Transport Category Rotorcraft airworthiness rules until 2031 or later and certification of our 33% ~~scaled~~downscaled cargo version to be certified under drone rules until 2027 or later. As a result, we have no experience as an organization in volume manufacturing of aircraft. Many of our current and potential competitors are larger and have substantially greater resources than we currently have or expect to have in the future. As a result, those competitors may be able to allocate greater resources to the development of their current and future technologies, the promotion and sale of their offerings, and/or offer their technologies at lower prices. Notably, our competitors may be able to receive Type, Airworthiness or Production certification from the FAA covering their eVTOL aircraft prior to us receiving such certifications. Our current and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties that may further enhance their resources and offerings. Further, it is possible that domestic or foreign companies or governments, some with greater experience in the aerospace industry or greater financial resources than we possess, will seek to provide products or services that compete directly or indirectly with ours in the future. Any such foreign competitor, for example, could benefit from subsidies from, or other protective measures by, its home country.

We cannot assure you that we or our partners will successfully develop manufacturing and supply chain capabilities that will enable us to meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully commercialize our aircraft.

There may be reluctance by consumers to adopt a new form of mobility, or an unwillingness to pay aircraft operators’ projected prices.

Our growth is highly dependent upon the adoption by consumers of an entirely new form of mobility offered by eVTOL aircraft and the electric air mobility market. If consumers do not adopt this new form of mobility or are not willing to pay the projected prices for the aerial ridesharing services provided by our customers, our prospects, financial condition and operating results will be harmed. This market is new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, new aircraft announcements and changing consumer demands and behaviors. There may be heightened public skepticism of this nascent technology and its adopters. In particular, there could be negative public perception surrounding eVTOL aircraft, including the overall safety and the potential for injuries or death occurring as a result of accidents involving eVTOL aircraft, regardless of whether any such safety incidents involve our aircraft. Any of the foregoing risks and challenges could adversely affect our prospects, business, financial condition, and results of operations.

Our success in a given market will depend on our customers’ ability to develop a network of passengers and accurately assess and predict passenger demand and price sensitivity. Demand and price sensitivity may fluctuate based on a variety of factors, including macroeconomic factors, quality of service, negative publicity, safety incidents, corporate reporting related to safety, quality of customer support, perceived political or geopolitical affiliations, or dissatisfaction with our products and offerings in general. If the operators of our aircraft fail to attract passengers or fail to accurately predict demand and price sensitivity, it could reduce demand for our aircraft and harm our financial performance.

In addition, while our aircraft will be operating within the existing aviation airspace and infrastructure, long-term continued adoption of electric air mobility will depend on operators’ ability to develop and operate vertiports in desirable locations in metropolitan locations. Developing and operating vertiport locations will require permits and approvals from federal, state, and local regulatory authorities and government bodies, and operation of our aircraft will depend on such permits and approvals. If our operators are prohibited, restricted, or delayed from developing and operating desirable vertiport locations, then demand for our aircraft could decline and our business could be adversely affected.

We expect that a large driver of passenger demand for electric air mobility will be time savings when compared with alternative modes of transportation. Should operators of our aircraft be unable to deliver a sufficient level of time savings for passengers, or if expected time savings are impacted by delays or cancellations, it could reduce consumer demand and, in turn, demand for our aircraft. If demand does not materialize or falls, our business, financial conditions, prospects, and results of operations could be adversely affected.

Operators of our aircraft may be unable to reduce end-user pricing over time at rates sufficient to stimulate demand for our aircraft, drive expected growth and accomplish planned production.

Operators of our aircraft may not be able to successfully reduce end-user pricing over time to increase demand, address new market segments and develop a significantly broader customer base. We expect that initial end-user pricing may be most applicable to relatively affluent consumers, and operators will need to address additional markets and expand their customer demographic in order to further grow their electric air mobility business. If operators are unable to meet their end-user pricing projections, then demand for our aircraft will decline and we will be unable to meet our production plans, resulting in an increase in our per-unit costs, adversely affecting our results of operations.

Our aircraft may not perform at the level we expect, and may have design or manufacturing deficiencies, such as higher than expected noise profiles, lower payloads than initially estimated, shorter ranges and/or shorter useful lives than we anticipate.

Our aircraft may contain defects in design or manufacture that may cause them not to perform as expected or that may require repair. For example, our aircraft may have a higher noise profile than we expect or carry a lower payload or have a shorter maximum battery range than we estimate. Our aircraft also use a substantial amount of software code to operate. Software products are inherently complex and often contain defects and errors when first introduced. There can be no assurance that we will be able to detect and fix any such defects in these products prior to their use. While we have performed extensive testing, in some instances we are still relying on projections and models to validate the projected performance of our aircraft. To date, we have been unable to validate the performance of our aircraft over the expected lifetime of the aircraft.

Accidents or safety incidents involving eVTOL aircraft, us or our competitors could have a material adverse effect on our business, financial condition, and results of operations.

Test flying prototype aircraft is inherently risky, and accidents or incidents involving our aircraft are possible. Urban environments may present particular challenges to the operators of UAS, such as an increased risk of collisions resulting in property damage, injury or death. As the usage of UAS has increased, the danger of such collisions has increased. Any such occurrence would negatively impact our development, testing and certification efforts, and could result in re-design, certification delay and/or postponements or delays to the sales of our aircraft. In addition, such occurrences could significantly damage the reputation of and support for UAS in general.

3124

The operation of aircraft is subject to various risks, and we expect demand for our aircraft to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft. Such accidents or incidents could also have a material impact on our ability to obtain certification from the Civil Aviation Authorities for our aircraft, or to obtain such certification in a timely manner. Such events could impact confidence in a particular aircraft type or the air transportation services industry as a whole, particularly if such accidents or disasters were due to a safety fault. We believe that regulators and the general public are still forming their opinions about the safety and utility of aircraft that are highly reliant on lithium-ion batteries and/or advanced flight control software capabilities. An accident or other safety incident involving either our aircraft or a competitor’s aircraft during these early stages of opinion formation could have a disproportionate impact on the longer-term view of the emerging electric air mobility market.

Further, if our personnel, our aircraft or other types of aircraft are involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational harm and potential legal liability. The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe or action. In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident or accident, which would adversely impact our business, results of operations and financial condition.

If we experience harm to our reputation and brand by customers, employees or operators, our business, financial condition, and results of operations could be adversely affected.

Continuing to increase the strength of our reputation and brand for high-performing, sustainable, safe and cost-effective electric air mobility is critical to our ability to attract and retain customers and partners. In addition, our growth strategy includes international expansion through joint ventures or other partnerships with local companies that would benefit from our reputation and brand recognition. The successful development of our reputation and brand will depend on several factors, many of which are outside of our control. Negative perception of our aircraft or company may harm our reputation and brand, including as a result of:

●

complaints or negative publicity or reviews about us, independent third-party aircraft operators, passengers, or other brands or events that we associate with, even if factually incorrect or based on isolated incidents;

● our involvement during times of war and other major conflicts, including the current conflicts between Russia and Ukraine and ~~between~~in ~~Israel~~the ~~and~~Middle ~~Hamas~~East;

●

changes to our operations, safety and security or other policies that customers, end-users or others perceive as overly restrictive, unclear or inconsistent with our values;

●

illegal, negligent, reckless or otherwise inappropriate behavior by operators or independent third parties involved in the operation of our business or by our management team or other employees;

●

actual or perceived disruptions or defects in our aircraft;

●

litigation over, or investigations by regulators into, our operations or those of our independent third-party aircraft operators;

●

a failure to operate our business in a way that is consistent with our values;

●

negative responses by independent third-party aircraft operators to new mobility offerings; or

●

any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.

Any of the foregoing could adversely affect our business, financial condition, and results of operations.

We anticipate that our aircraft will use a substantial amount of sophisticated software and hardware to operate. The development of such advanced technologies is inherently complex, and we will need to coordinate with our partners and suppliers in order to reach production for our aircraft. Defects and errors may be revealed over time and our control over the performance of third-party services and systems may be limited. If any of our partners and suppliers fail to adequately fulfill their obligations towards us or experience interruptions or disruptions in production or provision of services due to, for example, bankruptcy, natural disasters, labor strikes or disruption of its supply chain, we may experience a significant delay in the delivery of or fail to receive previously ordered systems and parts, which would adversely affect our revenue and profitability and could jeopardize our ability to meet the demands of our program participants or develop the necessary software and technology systems may harm our competitive position.

We are relying on third-party partners to develop a number of emerging technologies for use in our products. These technologies are not currently, and may not ever be, commercially viable. There can be no assurances that our partners will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. In addition, the technology may not comply with the cost, performance, useful life, and warranty characteristics that we anticipate in our business plan or may have performance problems related to mechanical or software defects. As a result, our business plan could be significantly adversely impacted, and we may incur significant liabilities under warranty claims, which could adversely affect our business, prospects, and results of operations.

We may not be able to produce aircraft in the volumes or on the timelines that we anticipate.

There are significant challenges associated with mass producing aircraft in the volumes that we are anticipating. The aerospace industry has traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing and manufacturing aircraft, long lead times to bring aircraft to market from the concept and design stage, the need for specialized design and development expertise, extensive regulatory requirements, difficulty establishing a brand name and image, and the need to establish maintenance and service locations. As a manufacturer of electric aircraft, we face a variety of added challenges to entry that a traditional aircraft manufacturer would not encounter, including additional costs of developing and producing an electric powertrain, regulations associated with the transport of lithium-ion batteries and unproven high-volume consumer demand for a fully electric aerial mobility service. Additionally, we are developing production lines for components and at volumes for which there is little precedent within the traditional aerospace industry. If we are not able to overcome these barriers, our business, prospects, operating results and financial condition will be negatively impacted, and our ability to grow our business will be harmed.

There can also be no assurance that our operator customers will not experience operational or process failures and other problems, including pilot error, cyberattacks or other intentional acts, that could result in potential safety risks. Any actual or perceived safety issues may result in significant reputational harm to the electric air mobility industry and, accordingly, our business, in addition to tort liability, increased safety infrastructure and other costs that may arise. Such issues could result in increased regulation or other systemic consequences. Adverse publicity affecting the industry and our reputation as a result of accidents, operational failures, or other safety incidents could have a material adverse effect on our business, financial condition, prospects, and results of operation. In addition, our aircraft may be grounded by regulatory authorities due to safety concerns that could have a material adverse impact on our business, financial condition, operating results and prospects.

We will also need to do extensive testing to ensure that the aircraft is in compliance with applicable TCCA safety regulations and other relevant regulations prior to beginning mass production. In addition to certification of the aircraft, we will be required to obtain TCCA approval to manufacture completed aircraft pursuant to a TCCA-approved type design (e.g., type certificate). Production approval involves initial TCCA manufacturing approval and extensive ongoing oversight of mass-produced aircraft. If we are unable to obtain production approval for the aircraft, or if TCCA imposes unanticipated restrictions as a condition of approval, our projected costs of production could increase substantially.

The timing of our production ramp is dependent upon finalizing certain aspects of the design, engineering, component procurement, testing, build out, and manufacturing plans in a timely manner and upon our ability to execute these plans within the current timeline. It is also dependent on being able to timely obtain TCCA certification. If we experience any delays in the execution of these plans or in obtaining TCCA certification, our business, ~~prospectus~~prospects, operating results and financial condition will be negatively impacted.

Risks Related to Our U.S. Government Contracts

As a contractor to the U.S. government and provider of various technologies, we are subject to and must comply with various government regulations that impact our revenue, operating costs, profit margins and the internal organization and operation of our business. We also need special security clearances and regulatory approvals to continue working on certain projects with the U.S. government. Our failure to comply with applicable regulations, rules and approvals, changes in the government’s interpretation of such regulations, rules and approvals as have been and are applied to our contracts, proposals or business or misconduct by any of our employees could result in financial liability, the imposition of fines and penalties, the loss of security clearances, a decrease in profitability, the loss of our government contracts or our suspension or debarment from contracting with the U.S. government generally, any of which could harm our business, financial condition, and results of operations. We are also subject to certain regulations of comparable government agencies in other countries, and our failure to comply with these non-U.S. regulations could also harm our business, financial condition or results of operations.

U.S. government agencies, including the FAA, the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency Inspectors General, routinely audit and investigate government contractors. These agencies review a contractor’s compliance with applicable laws, regulations and contract terms, regarding, among other things, contract pricing, contract performance, cost structure and business systems. U.S. government audits and investigations often take years to complete, and many result in no adverse action against us. Like many U.S. government contractors, we have received audit and investigative reports recommending the reduction of certain contract prices or that certain payments be repaid, delayed, or withheld, and may involve substantial amounts. Similarly, like other U.S. government contractors, audits and investigations also occur related to cost reimbursements that are based upon our final allowable incurred costs for each year. We have unaudited or unsettled incurred cost claims related to past years, which limits our ability to issue final billings on contracts for which authorized and appropriated funds may be expiring or can result in delays in final billings and our ability to close out a contract.

If an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension of payments, penalties, fines or suspension or debarment from doing business with the U.S. government. Suspension or debarment could have a material adverse effect on us because of our dependence on contracts with the U.S. government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us. Similar government oversight and risks to our business and reputation exist in most other countries where we conduct business.

U.S. government contracts are frequently awarded only after formal, protracted competitive proposal processes and, in many cases, unsuccessful offerors for U.S. government contracts are provided the opportunity to protest contract awards through various agency, administrative and judicial channels. Competing for U.S. government contracts presents a number of risks, including the following:

●

the need to bid on programs in advance of the completion of their design, which may result in unforeseen technological difficulties and cost overruns;

●

the substantial cost and managerial time and effort that must be spent to prepare bids and proposals for contracts that may not be awarded to us;

●

the need to estimate accurately the resources and cost structure that will be required to service any contract we are awarded; and

●

the expense and delay that may arise if our competitors protest or challenge contract awards made to us pursuant to competitive bidding.

The U.S. military chooses winning proposals based on such factors as cost, certainty of fulfilling the needs of a specific task order, safety records, and other criteria stated in solicitations. For example, while our Training segment is an approved provider under U.S. military contracts with a limited number of competitors, the U.S. military periodically releases task order solicitations requesting specific services pursuant to a competitive process.

U.S. government contracts typically involve long lead times for design and development, and are subject to significant changes in scheduling. Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program. In addition, U.S. government contracts generally contain provisions permitting termination, in whole or in part, at the government’s convenience. Because a substantial majority of our revenue is dependent on the procurement, performance and payment under our U.S. government contracts, the termination of one or more critical government contracts could have a negative impact on our results of operations and financial condition.

We rely to a significant degree on sales to the U.S. government, particularly to agencies of the DoD and a decline in government budgets, funding, changes in spending or budgetary priorities, or delays in contract awards may materially adversely affect our future revenue, business, financial condition, results of operations, cash flow and equity.

We derive a significant portion of our total sales from the U.S. government and its agencies, either as a prime contractor or subcontractor, particularly in connection with our Drones and Training segments. The DoD is our principal U.S. government customer. We believe that the success and growth of our business for the foreseeable future will continue to depend to a significant degree on our ability to win government contracts, in particular from the DoD. Additionally, the military and defense market is significantly dependent upon government budget trends, particularly the DoD budget. In addition to normal business risks, our supply of products to the U.S. government is subject to unique risks largely beyond our control. DoD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of the presidential election or otherwise, the U.S. government’s budget deficits, spending priorities (for example, shifting funds to efforts to combat the impact of the pandemic or efforts to assist Ukraine in the Russia and Ukraine conflict), the cost of sustaining the U.S. military presence internationally, possible political pressure to reduce U.S. government military spending and the ability of the U.S. government to enact appropriations bills and other relevant legislation, each of which could cause the DoD budget to remain unchanged or to decline. In recent years, the U.S. government has been unable to complete its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only enough funds for U.S. government agencies to continue operating at prior- year levels. Further, if the U.S. government debt ceiling is not raised and the national debt reaches the statutory debt ceiling, the U.S. government could default on its debts. A significant decline in U.S. military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations of the U.S. government.

3528

The U.S. government may modify, curtail or terminate one or more of our contracts.

The U.S. government contracting party may modify, curtail or terminate its contracts with us, without prior notice and either at its convenience or for default based on performance. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of the U.S. Congressional appropriations process due to fiscal constraints, changes in U.S. national security strategy and/or priorities or other reasons. Historically, our Training segment has received some U.S. government contract funding under programs designed to benefit “small businesses” as defined under certain provisions of the U.S. Small Business Administration (“SBA”) regulations. The SBA regulations address multiple different programs that have varying eligibility requirements. Moreover, the SBA regulations are subject to different interpretations, and the U.S. government may determine, under a changed interpretation, that we should no longer be classified as small. If the U.S. government made such a determination, it could terminate, cancel, or decide not to award options on existing agreements.

Any loss or anticipated loss or reduction of expected funding and/or modification, curtailment, or termination of one or more of our U.S. government contracts could have a material adverse effect on our earnings, cash flow and/or financial position, as well as our access to government testing facilities and/or our ability to secure pre-certification operating experience and/or revenues.

Our business may benefit in part from government funding, and our inability to receive such financial support could harm our business.

We may receive subsidies and grants from governments in some countries. These programs are subject to periodic review by the relevant governments, and if any of these programs are curtailed or discontinued, this could have a material adverse effect on our business, financial condition and results of operations. As the availability of government funding is outside our control, we cannot guarantee that we will continue to benefit from government support or that sufficient alternative funding will be available if we lose such support. For example, we previously entered into discussions with the federal and the provincial government of Quebec to provide funding for our aircraft development program and Quebec’s Minister of Economy and Innovation has conditionally agreed to financially support the program. The funding mechanisms have not yet been determined but it is anticipated that they would include grants and/or tax rebates. If we do not receive this funding, our aircraft development program could be adversely affected.

36Additionally, a U.S. government contracting party may modify, curtail or terminate its contracts and subcontracts with us, without prior notice and either at its convenience or for default based on performance. In addition, funding pursuant to our U.S. government contracts may be reduced or withheld as part of the U.S. Congressional appropriations process due to changes in U.S. national security strategy and/or priorities, fiscal constraints, including enforceable spending caps, a sequester or a lack of funding available to pay incurred obligations, or for other reasons. Further uncertainty with respect to ongoing programs could result in the U.S. government financing its operations through temporary funding measures such as continuing resolutions rather than full-year appropriations. Any loss or anticipated loss or reduction of expected funding and/or modification, curtailment or termination of one or more large programs could have a material adverse effect on our financial position, results of operations and/or cash flows.

Shutdowns of the U.S. federal government could materially impair our business and financial condition.

The U.S. Congress may fund U.S. government departments and agencies with one or more continuing resolutions, which could delay new programs or competitions and/or negatively impact the execution of certain program activities. A lapse in appropriations for government departments or agencies would result in a full or partial government shutdown, which could impact our operations. In the event of a prolonged shutdown, requirements to furlough employees in the U.S. DoD, the Department of Transportation, including the FAA, or other government agencies could result in an impact to our operations, negatively impact future contracts, and/or cause other disruptions or delays. There is uncertainty regarding which government functions would shut down or continue operations during a lapse in appropriations, and corresponding uncertainty regarding the extent or magnitude of potential impacts to our operations. In March 2025, President Trump signed a continuing resolution that funds federal agencies through September 30, 2025. A continuing resolution authorizes federal agencies to operate generally at the same funding levels from the prior year, but typically does not authorize new spending initiatives during this period. If Congress is unable to enact formal fiscal year 2026 appropriation bills by September 30, 2025, it may pass another continuing resolution. However, if Congress fails to pass the formal appropriations bills or a continuing resolution, then the U.S. government would shut down during which federal agencies would cease all non-essential functions.

Risks Related to Legal and Regulatory Requirements

Many of the products we develop and manufacture are highly dependent on our ability to meet local, state, federal and international regulations. In particular, our ability to meet the certification requirements for our products in the United States and abroad could determine the ability to sell, deliver, and manufacture our products, and therefore, could impact our operating results. These regulations include design and manufacture of products and components. While a common framework exists among many regulatory authorities allowing for recognition of different regulatory approvals by other regulatory entities, often times there are differences that require additional validation to meet the requirements of a specific entity. The risk not only lies in the viability of a particular product but also the time to market. Delays in the process are not unusual and can lead to delays in bringing product to market. These delays could result in financial and competitive impacts on ~~AIRO’s~~our operations. For a description of the regulatory frameworks that apply to our products and services, see the section titled “Business— Government Regulation.”

Aerospace manufacturers and aircraft operators are subject to extensive regulatory and legal requirements that involve significant compliance costs. The Civil Aviation Authorities may issue regulations relating to the operation of aircraft that could require significant expenditures. Implementation of the requirements created by such regulations may result in increased costs for our electric air mobility passengers and us. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of our operations or reduce the demand for air travel. If adopted, these measures could have the effect of raising fares, reducing revenue and increasing costs. Moreover, the nature of and the speed with which these regulations are completed and implemented pose a risk for our financial performance and condition, timing of growth and overall potential. As a result, we cannot ensure that these and other laws or regulations enacted in the future will not have a negative impact on our business, financial condition, and results of operations.

Governments and regulatory agencies in the markets where we manufacture and sell drone products may enact additional regulations relating to product safety and consumer protection in the future, and may also increase the penalties for failure to comply with product safety and consumer protection regulations. In addition, one or more of our customers might require changes in our products, such as the non-use of certain materials, in the future. Complying with any such additional regulations or requirements could impose increased costs on our business. Similarly, increased penalties for non-compliance could subject us to greater expenses in the event any of our products were found to not comply with such regulations. Such increased costs or penalties could have a negative impact on our business, financial condition, and results of operations.

We are subject to the risks associated with conducting international business operations.

In addition to our U.S. operations, we also have international operations in Canada and Denmark, sell our products and services to international dealers and customers, including foreign governments and engage in sales and marketing efforts in many foreign jurisdictions. In international sales, we face substantial competition from both U.S. manufacturers and international manufacturers whose governments sometimes provide R&D assistance, marketing subsidies and other assistance for their products and services. International sales present risks that are different and potentially greater than those encountered in our U.S. business. In ~~2023~~2024, a majority of our total net sales were from international customers. International sales are subject to numerous political and economic factors, including changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates, the possibility of trade sanctions and other government actions, regulatory requirements, significant competition, taxation, and other risks associated with doing business outside the United States. Sales of military products and services and any associated industrial development (offset) agreements are subject to U.S. export regulations and foreign policy, and there could be significant delays or other issues in reaching definitive agreements for announced programs. See “—We cannot predict the consequences of future macroeconomic conditions or geopolitical events, but they may adversely affect market and economic conditions, the markets in which we operate, our ability to insure against risks, our operations or our profitability.”

Our international business is conducted through foreign military sales (“FMS”) contracted through the U.S. government and by direct commercial sales (“DCS”) to international customers. FMS contracts with the U.S. government are subject to the FAR and the DFARS. Because the U.S. government functions as an intermediary in FMS sales, we are reliant on the capacity and speed of the DoD’s administration of requests from non-U.S. countries to convert requests to sales. In contrast, DCS transactions represent sales directly to international customers and are subject to U.S. and foreign laws and regulations, including product testing, import-export control, economic sanctions, technology transfer restrictions, investments, taxation, repatriation of earnings, exchange controls, the Foreign Corrupt Practices Act and other anti-corruption laws and regulations, and the anti-boycott provisions of the U.S. Export Control Reform Act of 2018. While we have extensive policies in place to comply with such laws and regulations, failure by us, our employees or others working on our behalf to comply with these laws and regulations could result in administrative, civil, or criminal liabilities, including suspension, debarment from bidding for or performing government contracts, or suspension of our export privileges, which could have a material adverse effect on us. We frequently team with international subcontractors and suppliers who also are exposed to similar risks.

We believe DCS transactions present a higher level of potential risks because they involve direct commercial relationships with parties with which we typically have less familiarity. Additionally, international procurement and local country rules and regulations, contract laws and judicial systems differ from those in the United States and, in some cases, may be less predictable than those in the United States, which could impair our ability to enforce contracts and increase the risk of adverse or unpredictable outcomes, including the possibility that certain matters that would be considered civil matters in the United States are treated as criminal matters in other countries.

Additionally, changes in regulatory, geopolitical, social, economic, or monetary policies and other factors, ~~including those which~~ may ~~result from the outcome of the 2024 U.S. presidential election, if any, may~~ have a material adverse effect on our business in the future, or may require us to exit a particular market or significantly modify our current business practices. Abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, including economic sanctions and export license requirements, which could also result in an adverse effect on our business and results of operations.

We and the third parties with whom we work are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security. Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.

In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential business data, intellectual property, and sensitive third-party data. Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations relating to data privacy and security.

In conjunction with defense procurements, some international customers require contractors to comply with industrial cooperation regulations, including entering into industrial participation, industrial development or localization agreements, sometimes referred to as offset agreements or offset contracts, as a condition to obtaining orders for our products and services. These offset agreements generally extend over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers, ~~local~~ local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects, and preference for local suppliers or subcontractors. The customer’s expectations in respect of the scope of offset commitments can be substantial, including high-value content, and may exceed existing local technical capability. Failure to meet these commitments, which can be subjective and outside of our control, may result in significant penalties, and could lead to a reduction in sales to a country. Furthermore, some of our existing offset agreements are dependent upon the successful operation of joint ventures that we do not control and involve products and services that are outside of our core business, which may increase the risk of breaching our obligations, exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment. For more information on our industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties for non-compliance, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations.”

3931

In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws). In the past few years, numerous U.S. states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services. Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages. Similar laws are being considered in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

Outside the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security. For example, the European Union’s General Data Protection Regulation, the United Kingdom’s General Data Protection Regulation (collectively, the “GDPR”), and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law No. 13,709/2018) impose strict requirements for processing personal data. In Canada, the Personal Information Protection and Electronic Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, may apply to our operations.

Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits. If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages. We use AI/machine learning to assist us in making certain decisions, which is regulated by certain privacy laws. Due to inaccuracies or flaws in the inputs, outputs, or logic of the AI/machine learning, the model could be biased and could lead us to make decisions that could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain pricing, products, services, or benefits.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. In particular, the European Economic Area (the “EEA”) and the United Kingdom (the “UK”) have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate. Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws. Although there are currently various mechanisms that may be used to transfer personal data from the EEA and the United Kingdom to the United States in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S. Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States. If there is no lawful manner for us to transfer personal data from the EEA, the United Kingdom or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business. Additionally, companies that transfer personal data out of the EEA and the United Kingdom to other jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist groups. Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly violating the GDPR’s cross-border data transfer limitations.

In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are, or may become subject to such obligations in the future. We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We publish privacy policies, marketing materials and other statements regarding data privacy and security. If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent, and creating uncertainty. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources, which may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal data on our behalf. We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy and security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such obligations, which could negatively impact our business operations.

If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal data; and orders to destroy or not use personal data. In particular, plaintiffs have become increasingly active in bringing privacy-related claims against companies, including class claims and mass arbitration demands. Some of these claims allow for the recovery of statutory damages on a per violation basis, and, if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to, loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.

Our international operations require us to comply with U.S. and certain foreign anti-corruption laws and regulations, export and import controls, economic sanctions and embargoes. We could face liability and other serious consequences for violations, which could materially adversely affect our business and reputation.

We are subject to anti-corruption laws and regulations, including the Foreign Corrupt Practices Act (“FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act and other state and national anti-bribery laws in the countries in which we currently conduct activities, as well as those of any countries in which we may conduct activities in the future. Anti-corruption laws are interpreted broadly and generally prohibit companies and their employees, agents, contractors and other third-party collaborators from offering, promising, giving, soliciting, receiving, or authorizing others to give, solicit, or receive anything of value, either directly or indirectly through third parties, to any person in the public or private sector to obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. We may engage third parties to sell our products or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals outside the United States. We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other partners, even if we do not explicitly authorize or have actual knowledge of such activities. Any violation of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

We are also subject to export control and import laws and regulations and economic and financial sanctions and trade embargoes, including the U.S. Export Administration Regulations (“EAR”) administered and enforced by the U.S. Department of Commerce, the International Traffic in Arms Regulations (“ITAR”) administered and enforced by the U.S. Department of State, U.S. Customs regulations, and various economic and financial trade sanctions regulations administered and enforced by the U.S. Treasury Department’s Office of Foreign Assets Controls, the U.S. Department of State, the United Nations Security Council, the EU and other relevant export controls and sanctions authorities.

Pursuant to these laws and regulations, we ~~are~~may be required, among other things, to (i) maintain a registration under the ITAR (which controls the export of defense-related items and services), (ii) determine the proper licensing jurisdiction and export classification of products, software, and technology under U.S., EU and other applicable laws, and (iii) obtain licenses or other forms of government ~~authorization~~ authorization to engage in the conduct of our business. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of certain products and services to countries, governments and persons targeted by U.S. sanctions. EU sanctions and export controls operate in a similar manner. Changes in U.S., EU or foreign trade control laws and regulations, or reclassifications of our products or technologies, may restrict our operations. Compliance with applicable regulatory requirements regarding the export of our products may create delays in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries altogether. The inability to secure and maintain necessary licenses and other authorizations could negatively impact our ability to compete successfully or to operate our business as planned. Any changes in export control laws and regulations or U.S., EU and other government licensing policy may restrict our operations. For example, given the great discretion the government has in issuing or denying such authorizations to advance U.S. national security and foreign policy interests, there can be no assurance we will be successful in our future efforts to secure and maintain necessary licenses, registrations, or other U.S. government regulatory approvals.

Although we maintain ~~written~~ policies, and have implemented procedures and safeguards, that are reasonably designed to maintain compliance with ~~export~~ export controls, import laws, and economic and financial sanctions, there is no certainty that all of our employees or agents for which we may be held responsible, suppliers, manufacturers, contractors or collaborators, or those of our affiliates, will comply with all ~~applicable~~ applicable anti-corruption, export and import control, and sanctions laws and regulations. Our global operations expose us to the risk of violating, or being accused of violating, export controls and economic and trade sanctions laws and regulations. Violations of these laws and regulations could result in significant penalties, including: civil fines; criminal sanctions against us, our officers, or our employees; imprisonment; the closing down of facilities, including those of our suppliers and manufacturers; disgorgement of profits; injunctions and debarment from government contracts; requirements to obtain export licenses; cessation of business activities in sanctioned countries; ~~implementation~~ implementation of compliance programs; and prohibitions on the conduct of our business. Any such violations could include prohibitions on our ability to offer our products in one or more countries, as well as difficulties in manufacturing or continuing to develop our products, and could materially adversely affect our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results and financial condition.

We may be unable to source and sell our products profitably or at all if new trade protections are imposed or existing protections become more burdensome.

The United States and the countries in which our products are produced or sold have imposed and may impose additional quotas, duties, tariffs, or other measures, or may adversely adjust prevailing quota, duty, or tariff levels. Such actions could have an adverse effect on our financial statements for the period or periods for which the applicable final determinations are made. Countries impose, modify, and remove tariffs and other trade measures in response to a diverse array of factors, including global and national economic and political conditions, which make it impossible for us to predict future developments regarding tariffs, customs, and other trade measures. Trade protections, including tariffs, quotas, safeguards, duties, and customs restrictions, could increase the cost or reduce the supply of products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition, and results of operations.

4234

Risks Related to Our Intellectual Property

Our success depends, in large part, on our ability to protect our intellectual property and other proprietary rights. We rely primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions, to protect our intellectual property and other proprietary rights. In addition, a portion of our technology is not patented, and we may be unable or may not seek to obtain patent protection for this technology. In addition, the U.S. government has licenses for certain of our patents and certain other intellectual property that are developed or used in performance of government contracts, and it may use or authorize others to use such patents and intellectual property for government and other purposes. We co-own, with Centro Italiano Ricerche Aerospaziali Spca, US patents 9,983,023; 10,782,146; and 11,639,858, which describe technology related to determining angle of attack of an aircraft without a dedicated angle of attack sensor. As co-owner, Centro Italiano Ricerche Aerospaziali Spca may make, use, sell, offer for sale, or import the technology protected by these patents or authorize others to do so. If Centro Italiano Ricerche Aerospaziali Spca chooses to compete with us or sells any or all of these patents and/or grants licenses to any or all of such patents to our competitors, we would not be able to enforce our rights to the technology protected by these patents against such lawful owners or licensees. A subset of our patents are co-owned, and our co-owner may use or authorize others to use technology protected by such patents. Moreover, existing U.S. legal standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only limited protection, may not provide us with any competitive advantages, and our rights may be challenged by third parties. The laws of countries other than the United States may be even less protective of our intellectual property rights. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise gaining access to our technology. Unauthorized third parties may try to copy or reverse engineer our products or portions of our products or otherwise obtain and use our intellectual property. Moreover, many of our employees have access to our trade secrets and other intellectual property. If one or more of these employees leave our employment to work for one of our competitors, then they may disseminate this proprietary information despite our established procedures and policies to prevent such dissemination, which may as a result damage our competitive position. If we fail to protect our intellectual property and other proprietary rights, then our business, results of operations or financial condition could be materially harmed.

In addition, affirmatively defending our intellectual property rights and investigating whether any of our products or services violate the rights of others may entail significant expense. Our intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. If we resort to legal proceedings to enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant expense to us and divert the attention and efforts of our management and technical employees, even if we prevail.

We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.

We may become subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. Defending against, or otherwise addressing, any such claims, whether they are with or without merit, could be time-consuming and expensive, and could divert our management’s attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from these claims could require us to pay substantial amounts or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit our use of the technology. We cannot ensure that we would be able to: obtain from the third party asserting the claim a license on commercially reasonable terms, if at all; develop alternative technology on a timely basis, if at all; or obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product. An adverse determination also could prevent us from offering our products to others. Infringement claims asserted against us may have a material adverse effect on our business, results of operations or financial condition.

Risks Related to Tax and Accounting Matters

Our ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

As of December 31, 2024 and 2023, we had aggregate U.S. federal and state net operating loss carryforwards of $79.0 million and $67.3 million, respectively, which may be available to offset future taxable income for U.S. income tax purposes. If not utilized, a portion of the net operating loss carryforwards may expire. Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, (the “Code”) an “ownership change” may limit the amount of our pre-change net operating loss carryforwards and certain other pre-change tax attributes that could be utilized annually to offset our future taxable income, if any. This limitation would generally apply in the event of a cumulative change in the equity ownership of certain stockholders of our company of more than 50 percentage points within a rolling three-year period. We have experienced, and may in the future experience, ownership changes as a result of shifts in our stock ownership. As a result, if we earn net taxable income, our ability to use our pre-change U.S. net operating loss carryforwards and other tax attributes to offset U.S. taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. Sales of our common stock by our existing stockholders or additional sales of our common stock by us could further limit our ability to use our U.S. net operating loss carryforwards and other tax attributes and have a material adverse effect on our results of operations in future years. Similar provisions of state tax law may also apply to limit our use of accumulated state tax net operating losses. Net operating losses arising in taxable years beginning after December 31, 2017 are not subject to expiration, but may not be carried back to prior taxable years, except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years. Additionally, the deductibility of such U.S. federal net operating losses is limited to no more than 80% of our taxable income (with certain adjustments) in any taxable year beginning after December 31, 2020.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Any failure to maintain effective internal control over financial reporting could cause us to fail to accurately or timely report our financial condition or results of operations to meet our reporting obligations. 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 our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

InAs of June 30, 2025, December 31, 2024 and 2023, we had limited accounting personnel and other resources to address our internal control over financial reporting. In connection with the preparation of our consolidated financial statements for the years ended December 31, 2024 and 2023, material weaknesses were identified ain the design and operating effectiveness of our internal control over financial reporting. In 2024, we identified material ~~weakness~~weaknesses due to ineffective information and communication controls, resulting in lack of timely identification and accounting for certain key debt and other agreements. During the course of the audit for the fiscal year ended December 31, 2024, a significant audit adjustment was identified due to improper application of the guidance under ASC 606, Revenue From Contracts With Customers. Further, we did not timely review our debt agreements and amendments for potential accounting implications, including debt extinguishments and modifications, as well as the potential accounting for other terms such as the stock interest charge. In 2023, we identified a material weakness in our internal control over financial reporting. As further discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we acquired six subsidiaries during the first two fiscal quarters of 2022. Several of these subsidiaries did not have adequate personnel to manage their accounting functions and did not maintain a segregation of duties between different roles at their organizations. In addition, in the course of preparing our consolidated financial statements for the periods in which the acquisitions occurred, we did not have an effective risk assessment process that successfully identified and assessed risks of material misstatement to ensure controls were designed and implemented to respond to those risks, and we did not have an effective monitoring process to assess the consistent operation of internal control over financial reporting and remediate known control deficiencies. As a result of these deficiencies, we did not effectively implement and operate process-level control activities related to the accounting and reporting for the six acquisitions, including the fair value of our common stock issued in certain of the transactions, resulting in the restatement of our consolidated financial statements as of and for the year ended December 31, 2022, as well as our unaudited condensed consolidated financial statements for the six-month period ended June 30, 2022, the nine-month period ended September 30, 2022, the three-month period ended March 31, 2023, the six-month period ended June 30, 2023 and the nine-month period ended September 30, 2023. Due to the delays we have experienced in securing funding, we have not been able to hire and train sufficient staff at certain subsidiaries to remediate the previously identified material ~~weakness~~weaknesses in our internal control over financial reporting.

While we have made changes to our accounting processes and other internal controls and engaged additional accounting personnel in an effort to remediate the foregoing material weaknesses and in preparation for operating as a public company, we cannot assure that the measures we have taken to date, actions we continue to take, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to these material weaknesses and restatement of our consolidated financial statements or to avoid potential future material weaknesses. If the steps we take do not correct the material weaknesses in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis.36

IfWhile we ~~fail~~have tomade ~~remediate~~changes to our ~~existing~~accounting ~~material~~processes ~~weaknesses~~and orother ~~identify new material weaknesses in our~~ internal controls ~~over~~and ~~financial reporting,~~engaged ifadditional weaccounting ~~are~~personnel ~~unable~~in an effort to ~~comply~~remediate ~~with~~ the ~~requirements~~foregoing ofmaterial ~~Section~~weaknesses ~~404~~and ofin ~~the~~preparation ~~Sarbanes-Oxley~~for ~~Act~~operating inas a ~~timely~~public ~~manner~~company, if we ~~are~~cannot ~~unable to~~assure ~~conclude~~ that ~~our~~the ~~internal~~measures we ~~controls~~have ~~over~~taken ~~financial~~to ~~reporting are effective~~date, oractions ifwe ~~our~~continue ~~independent~~to ~~registered~~take, ~~public~~and ~~accounting~~actions ~~firm is~~we ~~unable~~may totake ~~express~~in ~~an opinion as to~~ the ~~effectiveness~~future, ofwill ~~our~~be ~~internal~~sufficient ~~controls~~to ~~over~~remediate ~~financial~~the ~~reporting~~control deficiencies ~~when~~that weled ~~are~~to nothese ~~longer~~material anweaknesses ~~emerging growth~~and ~~company,~~restatement ~~investors~~of ~~may~~our ~~lose~~condensed ~~confidence~~consolidated infinancial ~~the~~statements ~~accuracy~~or ~~and~~to ~~completeness~~avoid ofpotential future ~~our~~material ~~financial~~weaknesses. ~~reports~~If ~~and~~ the ~~market~~steps ~~price~~we oftake ~~our~~do ~~common stock~~not ~~could~~correct bethe ~~negatively~~material ~~affected.~~weaknesses Asin a ~~result~~timely ~~of such failures~~manner, we ~~could~~will ~~also~~be ~~become~~unable ~~subject~~ to ~~investigations~~conclude that bywe ~~Nasdaq,~~maintain ~~the~~effective ~~Securities and~~internal ~~Exchange~~control ~~Commission~~over ~~(“SEC”)~~financial orreporting. ~~other regulatory authorities~~Accordingly, ~~and~~there ~~become~~could ~~subject~~continue to ~~litigation~~be ~~from~~a ~~investors~~reasonable ~~and stockholders,~~possibility ~~which~~that ~~could~~a ~~harm~~material ~~our~~misstatement ~~reputation~~of ~~and~~our consolidated financial ~~condition~~statements orwould ~~divert~~not ~~financial~~be ~~and~~prevented ~~management~~or ~~resources~~detected ~~from~~on ~~our~~a ~~regular~~timely ~~business activities~~basis.

45If we fail to remediate our existing material weaknesses or identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting when we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by Nasdaq, the Securities and Exchange Commission (“SEC”) or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.

A failure to establish and maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations.

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time consuming, and costly, and place significant strain on our personnel, systems, and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act, is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal ~~controls~~control over financial reporting. For example, as we have prepared to become a public company, we have worked to improve ~~controls~~ controls around our key accounting processes and quarterly close process. To maintain and enhance the effectiveness of our disclosure ~~controls~~ controls and internal control over financial reporting, we anticipate allocating significant resources, including accounting-related costs and investments, to strengthen our accounting systems.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems, and controls to accommodate such changes. We have limited experience with implementing the systems and controls that will be necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by the relevant regulatory bodies. Additionally, if these new systems, controls or standards and the associated process changes do not give rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes, our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting. Moreover, our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation or increased costs to correct any post-implementation issues that may arise.

4637

Further, weaknesses in our disclosure controls and internal control over financial reporting have occurred in the past and may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our condensed consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business, results of operations, and financial condition and could cause a decline in the trading price of our common stock.

Our corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, which are subject to change, and we could be obligated to pay additional taxes, which would harm our results of operations.

We are or may be subject to income and non-income taxation in the United States under federal, state, and local jurisdictions and in certain foreign jurisdictions in which we operate. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new or revised tax laws or revised interpretations of existing tax laws (which may have retroactive effect), policies and precedents by taxing authorities and courts in various jurisdictions. The authorities in these jurisdictions could review our tax returns or require us to file tax returns in jurisdictions in which we are not currently filing and could impose additional tax, interest and penalties. In addition, the authorities could claim that various withholding requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing. The relevant taxing authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences. If such a determination were to be made, we could be required to pay additional taxes and interest and penalties. Any increase in the amount of taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.

Future changes in financial accounting standards or practices may cause adverse and unexpected revenue fluctuations and adversely affect our reported results of operations.

Future changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our reported financial position or results of operations. Financial accounting standards in the United States are constantly under review and new pronouncements and varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future. As a result, we may be required to make changes in our accounting policies. Those changes could affect our financial condition and results of operations or the way in which such financial condition and results of operations are reported. Compliance with new accounting standards may also result in additional expenses. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from business activities to compliance activities. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—~~Recent~~Critical Accounting ~~Pronouncements~~Policies and Estimates.” As an emerging growth company, the JOBS Act allows us to delay adoption of new or revised accounting standards applicable to public companies until such pronouncements are made applicable to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and as a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates. However, we may elect to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies. We may take advantage of these exemptions up until the time that we are no longer an emerging growth company.

Risks Related to this Offering and Ownership of Our Common Stock

AsAn aactive ~~result~~trading ofmarket ~~our~~for ~~history of losses and negative cash flows from operations,~~ our ~~audited~~common ~~consolidated~~stock ~~financial~~may ~~statements~~not ~~contain~~continue ~~a statement regarding a substantial doubt about our ability~~ to ~~continue~~develop asor abe ~~going concern~~sustained.

~~Our~~Prior ~~history~~to ofthe ~~operating~~IPO, ~~losses~~there ~~and~~was ~~negative~~no ~~cash~~public ~~flows~~market ~~from~~for ~~operations~~our ~~combined~~common ~~with~~stock. An active trading market for our ~~anticipated~~shares ~~use~~may ofnot ~~cash~~continue to ~~fund~~develop ~~operations~~or ~~raises~~be ~~substantial~~sustained. ~~doubt~~The ~~about~~lack ~~our~~of an active market may impair the value of your shares, your ability to ~~continue~~sell asyour ashares ~~going~~at ~~concern~~the ~~for~~time ~~the~~you ~~12-month~~wish ~~period~~to sell ~~from~~them and the ~~date~~prices ~~when~~that you may obtain for your shares. Further, an inactive trading market for our ~~audited~~shares ~~consolidated~~may also impair our ~~financial~~ability ~~statements~~to ~~included~~raise ~~elsewhere~~capital inby ~~this~~selling ~~prospectus~~shares ~~are~~of ~~issued.~~our ~~Our~~common ~~future~~stock ~~viability~~or asenter aninto ~~ongoing~~strategic ~~business~~partnerships isand ~~dependent~~transactions onby issuing our shares ~~ability~~of tocommon ~~generate~~stock ~~cash~~as ~~from~~consideration. If an active trading market for our ~~operating~~common ~~activities~~stock does not continue to develop, or is not sustained, you may not be able to ~~raise~~sell ~~additional~~your ~~capital~~shares quickly or at the market price, or at all, and it may be difficult for you to ~~finance~~sell your shares without depressing the market price for our ~~operations~~common stock.

If we are unable to raise additional capital as and when needed, our business, financial condition and results of operations will be materially and adversely affected, and we may be forced to delay our development efforts, limit our activities and reduce research and development costs. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements. The inclusion of a going concern explanatory paragraph by our independent registered public accounting firm, our lack of cash resources and our potential inability to continue as a going concern may materially adversely affect our share price, following the completion of this offering and receiving approval for listing on Nasdaq, and our ability to raise new capital, enter into contractual relationships with third parties and otherwise execute our business strategy.

An active trading market for our common stock may not develop or be sustained.

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on Nasdaq under the symbol “AIRO.” An active trading market for our shares may never develop or be sustained after the closing of this offering. In addition, the initial price for our common stock in this offering was determined through negotiations with the underwriters and may vary from the market price of our common stock after the closing of this offering. The lack of an active market may impair the value of your shares, your ability to sell your shares at the time you wish to sell them and the prices that you may obtain for your shares. Further, an inactive trading market for our shares may also impair our ability to raise capital by selling shares of our common stock or enter into strategic partnerships and transactions by issuing our shares of common stock as consideration. If an active trading market for our common stock does not develop, or is not sustained, you may not be able to sell your shares quickly or at the market price, or at all, and it may be difficult for you to sell your shares without depressing the market price for our common stock.

The trading price of our common stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock has been, and after the closing of this offering, is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control~~, including limited trading volume~~. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this prospectus, these factors include:

●

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

●

our ability to effectively manage our growth;

●

actual or anticipated variations in quarterly operating results;

●

our cash position;

●

our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

●

changes in the market valuations of similar companies;

●

overall performance of the equity markets;

●

sales of our common stock by us or our stockholders in the future;

●

low trading volume of our common stock, which may impair our ability to raise capital or enter into strategic collaborations and acquisitions by using our common stock as consideration;

●

changes in accounting practices;

●

ineffectiveness of our internal controls;

●

disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;

●

significant lawsuits, including patent or stockholder litigation;

●

general political and economic conditions; and

●

other events or factors, many of which are beyond our control.

In addition, the stock market in general, and the market for aerospace and defense companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors, as well as local or global socio-economic and political factors, including the conflicts between Russia and Ukraine and ~~between~~in ~~Israel~~the ~~and~~Middle ~~Hamas~~East, may negatively affect the market price of our common stock, regardless of our actual operating performance. If the market price of our common stock after the closing of this offering does not exceed the price you paid for them, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Furthermore, future debt or other financing arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Any return to stockholders will therefore be limited to the appreciation of their stock. See the section titled “Dividend Policy” for additional information.

49Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval.

Our ~~principal~~executive ~~stockholders~~officers, directors and ~~management~~their ~~will~~affiliates, ~~own~~as awell ~~significant~~as ~~percentage~~our principal stockholders will beneficially hold approximately 42.5% of our outstanding voting stock as of June 30, 2025, after ~~the~~giving ~~closing~~effect ofto ~~this~~the ~~offering~~Stock ~~and~~Repurchase. ~~will~~These bestockholders, ~~able~~acting together, toare ~~exert~~able ~~significant~~to ~~control~~significantly ~~over~~influence all matters ~~subject~~requiring stockholder approval. For example, these stockholders are able to ~~stockholder~~significantly influence elections of directors, amendments of our governing documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

Based on shares outstanding as of and immediately following the closing of this offering, our executive officers, directors, director nominees and their affiliates, as well as our principal stockholders will beneficially hold, in the aggregate, approximately % of our outstanding voting stock, excluding any shares purchased in this offering. These stockholders, acting together, would be able to significantly influence all matters requiring stockholder approval. For example, these stockholders would be able to significantly influence elections of directors, amendments of our governing documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

Our management team has limited experience managing a public company.

Most of the members of our management team have limited to no experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team has not worked together at prior companies that were publicly traded. Our management team may not successfully or efficiently manage their new roles and responsibilities. Our transition to being a public company subjects it to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could have a material adverse effect on our business, financial condition and results of operations.

Future issuances of debt or equity securities may adversely affect us, including the market price of our common stock, and may be dilutive to existing stockholders.

In the future, we may incur debt or issue equity-ranking senior to our common stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock. Because our decision to issue debt or equity in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of our common stock and be dilutive to existing stockholders.

Any issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plan, ~~employee stock purchase plan~~ or otherwise will dilute all other stockholders.

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors, and consultants under our stock incentive plan ~~and employee stock purchase plan~~. We may also raise capital through equity financings in the future. As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock, including as a result of the exercise of any warrants to purchase shares of common stock, may cause stockholders to experience significant dilution of their ownership interests and the per share value of our common stock to decline.

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of stockholders intend to sell shares of our common stock, could reduce the market price of our common stock. ~~After~~In connection with this offering, Cantor, as representative of the ~~closing~~several underwriters of the IPO, has agreed to waive the IPO lock-up restrictions applicable to us for purposes of this offering. Also in connection with this offering and the entry into a stock purchase agreement among the Company and certain of the Company’s stockholders relating to the Stock Repurchase (the “Purchase Agreement”), Cantor has waived the restrictions under the IPO lock-up agreements applicable to the stockholders participating in the Stock Repurchase, including certain of our directors and executive officers and their affiliates, solely with respect to the sale of shares to the Company pursuant to the Purchase Agreement. The remaining shares held by such participants and not sold pursuant to the Purchase Agreement will be locked up under new lock-up agreements that will expire 120 days after the date of this prospectus. After the closing of this offering, we will have 29,710,503 shares of common stock outstanding, after giving effect to the Stock Repurchase. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Substantially all of the remaining 11,430,163 shares of common stock ~~initially~~outstanding ~~will~~are be restricted as a result of securities laws, market standoff provisions or lock-up agreements, but will become eligible to be sold ~~after~~on ~~the~~December ~~closing~~9, of2025 ~~this~~pursuant ~~offering~~to asthe ~~described~~lock-up agreement inentered ~~the~~into ~~section~~in ~~titled~~connection ~~“Shares~~with ~~Eligible~~the ~~for Future Sale~~IPO.”

~~Moreover,~~We ~~after the closing of this offering, holders of an aggregate of shares of common stock will~~ have ~~rights,~~registered subject to specified conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders, until such shares can otherwise be sold without restriction under Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), or until the rights terminate pursuant to the terms of the stockholders agreement between us and such holders. We also intend to register all shares of common stock subject to equity awards issued or reserved for future issuance under our equity compensation plans on a registration statement on Form S-8. ~~Once we~~These ~~register these~~ shares, ~~they~~ can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates under Rule 144 under the Securities Act, ~~and the~~ market standoff provisions and lock-up agreements ~~described above~~. Any sales of securities by these stockholders could have a negative impact on the trading price of our common stock.

If you purchase common stock in this offering, you will suffer immediate and substantial dilution of your investment.

The ~~initial~~ public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. ~~Net~~ Net tangible book value represents the amount by which our total assets (net of goodwill, right-of-use operating lease assets and deferred offering costs) exceed our liabilities. Based on an assumed ~~initial~~ public offering price of $ 20.94 per share (the ~~midpoint~~last ofreported ~~the~~ sale price ~~range~~of ~~set~~our ~~forth~~common stock on ~~the~~Nasdaq ~~cover~~on ~~page~~September of5, ~~this prospectus~~2025), you will experience immediate dilution of $ 18.59 per share as of ~~December~~June 3130, ~~2024~~ 2025 representing the difference between our ~~pro forma~~ as adjusted ~~net~~ tangible book value per share, after giving effect to this offering and the ~~assumed~~Stock ~~initial public offering price~~Repurchase. This dilution is due to our investors who purchased shares prior to this offering having paid a price for their shares that is substantially less than the price offered to the public in this offering, as well as the exercise of stock options granted to our employees. To the extent any outstanding options are exercised, you will experience further dilution. As a result of this dilution, investors purchasing stock in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation. See the section titled “Dilution” for additional information.

5141

Future sales, or the perception of future sales, by us or our stockholders in the public market after this offering could cause the market price for our common stock to decline.

The sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of our common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Pursuant to our 2025 Plan, ~~which will become effective in connection with this offering,~~ our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants. Additionally, the number of shares of our common stock reserved for issuance under our 2025 Plan will automatically increase on January 1 of each calendar year, beginning on January 1, 2026 and continuing through and including January 1, 2035, by 3% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our ~~board of directors.~~ In addition, pursuant to our ESPP, which will become effective in connection with this offering, the number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2026 (through January 1, 2035), by the lesser of (i) % of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of the automatic increase, and (ii) shares; provided that before the date of any such increase, our board of directors ~~may determine that such increase will be less than the amount set forth in clauses (i) and (ii)~~. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our stock price to fall.

In addition, up to shares of our common stock may be issued upon the exercise in full by the underwriters of the Underwriters’ Warrants (see “Underwriting—Underwriters’ Warrants”).

In the future, we may also issue our securities in connection with investments or acquisitions. The amount of our securities issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of our common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.

We are an emerging growth company and a smaller reporting company and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company until ~~the~~December ~~last day~~31, ~~of the fiscal year following the fifth anniversary of the closing of this offering~~2030. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include, but are not limited to:

●

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

●

not being required to comply with the requirement of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the financial statements;

●

the ability to elect to defer compliance with new or revised accounting standards until such standards would apply to private companies;

●

reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and

●

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

We have taken advantage of the reduced reporting burdens in this prospectus and the information we provide to stockholders will be different than the information that is available with respect to other public companies that are not emerging growth companies. For example, in this prospectus we have only included two years of audited financial statements and have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. It is possible that this may cause investors to find our common stock less attractive. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be reduced or more volatile.

Even following the termination of our status as an emerging growth company, we may be able to take advantage of the reduced disclosure requirements applicable to “smaller reporting companies,” as that term is defined in Rule 12b-2 of the Exchange Act, and, in particular, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. To the extent that we are no longer eligible to use exemptions from various reporting requirements, we may be unable to realize our anticipated cost savings from these exemptions, which could have a material adverse impact on our operating results.

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering, after giving effect to the Stock Repurchase, and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our common stock. We expect that we will use the net proceeds of this offering as set forth in the section titled “Use of Proceeds.” However, our use of these proceeds may differ substantially from our current plans. The failure by our management to apply these funds effectively could result in financial losses that could have a negative impact on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

53Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.

~~Delaware~~Provisions ~~law~~of ~~and provisions in~~ our amended and restated certificate of incorporation and amended and restated bylaws ~~that~~may ~~will~~delay beor indiscourage ~~effect~~transactions atinvolving ~~the~~an ~~completion~~actual ofor ~~this~~potential ~~offering~~change ~~could~~in ~~make~~our acontrol ~~merger~~or change in our management, ~~tender~~including ~~offer~~transactions in which stockholders might otherwise receive a premium for their shares or ~~proxy~~transactions ~~contest~~that ~~difficult~~our stockholders might otherwise deem to be in their best interests. Therefore, these ~~thereby~~provisions ~~depressing~~could ~~the~~adversely ~~trading~~affect the price of our common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws:

~~Provisions of~~● permit our ~~amended~~board ~~and restated certificate~~ of ~~incorporation~~directors ~~and~~to ~~amended~~issue ~~and~~up ~~restated~~to ~~bylaws~~10,000,000 ~~which~~shares ~~will become effective immediately prior to the completion~~ of ~~this~~preferred ~~offering~~stock, ~~respectively,~~with ~~may~~any ~~delay~~rights, orpreferences ~~discourage~~and ~~transactions~~privileges ~~involving~~as anthey ~~actual~~may ordesignate ~~potential change in our control or change in our management,~~ (including ~~transactions~~the inright ~~which~~to ~~stockholders~~approve ~~might~~an ~~otherwise~~acquisition ~~receive a premium for their shares~~ or ~~transactions~~other ~~that~~change ~~our stockholders might otherwise deem to be~~ in ~~their best interests. Therefore, these provisions could adversely affect the price of~~ our ~~common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:~~control);

● permit our board of directors to issue up to shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control);

●

provide that the authorized number of directors may be changed only by resolution of the board of directors;

●

provide that the board of directors or any individual director may only be removed with cause and the affirmative vote of the holders of at least 66-2/3% of the voting power of all of our then outstanding common stock;

●

provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

●

divide our board of directors into three classes;

●

require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent;

●

provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;

●

do not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose; and

●

provide that special meetings of our stockholders may be called only by the Chairman of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, ~~would~~requires ~~require~~ approval by the holders of at least 66-2/3% of our then-outstanding common stock.

In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time. A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or bylaws approved by its stockholders. However, we have not opted out of this provision.

These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult or costly for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving our company. The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.

For information regarding these and other provisions, see the section titled “Description of Capital Stock.”

Our amended and restated certificate of incorporation ~~will~~provides ~~provide~~ that the Court of Chancery of the State of Delaware and any appellate ~~court~~ court therefrom ~~will~~are be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation ~~will~~provides ~~provide~~ that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (i) any derivative claim or cause of action brought on our behalf; (ii) any claim or cause of action that is based upon a violation of a duty owed by any current or former director, officer, other employee or stockholder, to us or our stockholders; (iii) any claim or cause of action against us or any current or former director, officer or other employee, arising out of or pursuant to any provision of the Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of our Certificate of Incorporation or our Bylaws (including any right, obligation, or remedy thereunder); (v) any claim or cause of action as to which the Delaware General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; and (vi) any claim or cause of action against us or any current or former director, officer or other employee, governed by the internal-affairs doctrine or otherwise related to our internal affairs, in all cases to the fullest extent permitted by applicable law and subject to the court having personal jurisdiction over the indispensable parties named as defendant; provided, however, that if the designation of such court as the sole and exclusive forum for a claim or action referred to in foregoing clauses (i) through (vi) would violate applicable law, then the United States District Court for the District of Delaware shall be the sole and exclusive forum for such claim or cause of action. These provisions ~~would~~do not apply to suits brought to to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. Additionally, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation ~~will~~ further ~~provide~~provides that unless we consent in writing to the selection of an alternative forum, to the ~~fullest~~ fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant named in such complaint. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there is uncertainty as to whether the provisions will be enforced by a court in those other jurisdictions.

5544

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits and result in increased costs for investors to bring a claim. If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, our common stock price and trading volume could decline.

The trading market for our common stock ~~will~~relies ~~rely~~ in part on the research and reports that industry or financial analysts publish about us or or our business. We ~~will~~do not control these analysts. In addition, some financial analysts may have limited expertise with our model and operations. Furthermore, if one or more of the analysts who do cover us downgrade our common stock or industry, or the stock of any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our common stock could decline. If one or more of these analysts ceases to cover us or fails to initiate coverage or publish reports on us regularly, we could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline.

General Risk Factors

We will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, ~~accounting~~ accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, the Dodd-Frank Act, Nasdaq listing ~~requirements~~ requirements and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management and other personnel ~~will~~ need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of directors.

We are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act we will be required to furnish a report by our management on our internal control over financial reporting beginning with our second filing of an Annual Report on Form 10-K with the SEC after we become a public company. However, while we remain an emerging growth company or smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 of the Sarbanes-Oxley Act within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. In addition, if we identify one or more material weaknesses as a result of this implementation and evaluation process, it could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

Our business and financial performance could be adversely affected by inflation.

Until recently, the inflation rate has generally been low in the geographies where we operate. However, recently, the inflation rate in the United States reached a 40-year high, primarily as a result of higher energy costs and global supply chain disruptions. In the event of a significant increase in consumer prices, particularly over an extended period of time, customer demand for our products and services could be adversely affected and we could experience lower than expected sales. In addition, if any of our suppliers implemented price increases in response to higher raw material, labor, and energy costs or otherwise, we may not be able to pass along such price increased to our customers and our profitability may be reduced. The occurrence of any of these events could have a material adverse effect on our business, financial condition, and results of operations.

We cannot predict the consequences of future macroeconomic conditions or geopolitical events, but they may adversely affect market and economic conditions, the markets in which we operate, our ability to insure against risks, our operations or our profitability.

The global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, supply chain constraints, labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks and uncertainty about economic stability. For instance, ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East and Asia, and the potential for other conflicts and future terrorist activities, as well as other recent geopolitical events throughout the world, including new or increased tariffs and potential trade wars, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability. We have not experienced, and do not anticipate, any disruption in our supply chain or other business operations due to the ongoing conflict in Ukraine. As the conflict expands or contracts, diminished sales would have little or no impact on our financial position, while increased sales would be reflected in increased revenue. Sanctions imposed by the United States and other countries in response to military conflicts, including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. If credit in financial markets outside of the United States tightened, it could adversely affect the ability of our international customers and suppliers to obtain financing and could result in a decrease in or cancellation of orders for our products, systems and services or impact the ability of our customers to make payments. In addition, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. However, notwithstanding our current and anticipated position, these types of matters can cause uncertainty in financial markets and may significantly increase the political, economic and social instability in geographic areas in which we operate now or may operate in the future. The extent of the impact of these conditions on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected timeframe, as well as that of third parties upon whom we rely, will depend on future developments which are uncertain and cannot be predicted. There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current suppliers or other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.

Our quarterly results of operations, revenues and cash flows may fluctuate from period to period due to a number of factors, which makes predicting financial results difficult.

We expect our quarterly results of operations to continue to fluctuate due to a number of factors, including as a result of supply chain issues, product introduction schedules, competitive products entering the market and the seasonality and uneven sales patterns of our OEM customers.

For example, a portion of sales in our Avionics segment is ~~expected to be~~ made to OEMs ~~beginning in 2025~~, and we expect that a large portion of the Avionics segment’s OEM sales in the future will consist of sales of products to a customer operating in the eVTOL market. We are subject to changes in buying patterns among our OEM customers, including unpredictable circumstances such as failed certifications and delayed production schedules. Significant delays to the certification and production of the OEM aircraft could delay revenues to future years and may result in cancelled orders by the OEM’s customers, which could have a material adverse effect on our business, results of operations and financial condition. As a result of these and other factors, quarter-to-quarter comparisons of our results of operations may not be reliable indicators of our future performance.

Conflicts of interest may arise because some members of our board of directors are representatives of our principal stockholders.

Certain of our principal stockholders or their affiliates are venture capital funds or other investment vehicles that could invest in entities that directly or indirectly compete with us. As a result of these relationships, when conflicts arise between the interests of the principal stockholders or their affiliates and the interests of other stockholders, members of our board of directors that are representatives of the principal stockholders may not be disinterested.

5946

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to substantial risks and uncertainties and are based on estimates and assumptions. All statements other than statements of historical facts, including statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to markets, and business trends and other information contained in this prospectus are forward-looking statements, including statements about:

●

our ability to grow and manage growth profitably;

●

our financial and business performance and business metrics;

●

our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

●

the implementation, market acceptance and success of our business model;

●

our market opportunity and the potential growth of that market;

●

our ability to compete effectively in a competitive industry;

●

our ability to protect and enhance our corporate reputation and brand;

●

the impact from future regulatory, judicial, and legislative changes in our industry;

● our ability to effect our growth strategies, and make acquisitions, form joint ventures or make investments in companies and technologies successfully; and

●

our future capital requirements and sources and uses of cash.

These statements are subject to known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected or otherwise implied by the forward-looking statements. The following factors, among others, may cause actual results to differ materially from those expressed or implied in our forward-looking statements:

● our failure to comply with covenants under debt instruments; ● our ability to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired in the Put-Together Transaction, and our ability to realize the anticipated synergies and benefits of such acquisitions; ● our ability to keep pace with technological advances and our dependance on advances in technology by other companies, many of which have substantially greater resources than we do; ● our inability to acquire additional aircraft to support our Training segment on acceptable terms or at all; ● the impact that our customers may experience from service failures or interruptions due to defects in the software, infrastructure, components or engineering system that comprise our products and services, or due to errors in product installation; ● our dependence on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management; ● that we have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements;

60● our ability to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired in the Put-Together Transaction, and our ability to realize the anticipated synergies and benefits of such acquisitions;

●

our ability to keep pace with technological advances and our dependance on advances in technology by other companies, many of which have substantially greater resources than we do;

●

our inability to acquire additional aircraft to support our Training segment on acceptable terms or at all;

●

the impact that our customers may experience from service failures or interruptions due to defects in the software, infrastructure, components or engineering system that comprise our products and services, or due to errors in product installation;

●

our dependence on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel and senior management;

●

that we have identified material weaknesses in our internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements;

●

our failure to comply with applicable government regulations;

●

any disruptions or threatened disruptions to our relationships with our distributors, suppliers, customers and employees, including shortages in components for our products;

● our significant reliance on sales to the U.S. government, particularly to agencies of the DoD and a decline in government budgets, funding, changes in spending or budgetary priorities, or delays in contract awards~~, and the effect of the outcome of the 2024 U.S. presidential election~~;

●

changes in the supply, demand and/or prices for our products and services and our ability to perform under existing contracts and obtain new contracts;

●

the complexities and uncertainty of obtaining and conducting international business, including export compliance and other reporting and compliance requirements;

●

the impact of potential security and cyber threats or the risk of unauthorized access to our, our customers’ and/or our suppliers’ information and systems;

●

our ability to respond and adapt to changes in economic, capital market, and political conditions in the U.S. and globally, such as from the global sanctions and export controls with respect to Russia, and any changes therein, and including changes related to financial market conditions, banking industry disruptions, fluctuations in commodity prices or supply (including energy supply), inflation, interest rates and foreign currency exchange rates, disruptions in global supply chain and labor markets, and geopolitical risks, including in the Middle East and Ukraine;

●

failure to develop new products or integrate new technology into current products;

●

unfavorable results in legal proceedings;

●

our anticipated use of the net proceeds from this offering;

●

the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and

●

our expectations regarding the period during which we qualify as an emerging growth company and smaller reporting company.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “continue” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target” or “will” or the negative of these terms or other similar expressions intended to identify statements about the future. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements in this prospectus by these cautionary statements.

6148

MARKET, INDUSTRY AND OTHER DATA

This prospectus contains statistical data, estimates and forecasts that are based on independent industry publications or other publicly available information, as well as other information based on our internal sources. While we believe the industry and market data included in this prospectus are reliable and are based on reasonable assumptions, these data involve many assumptions and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or completeness of the data contained in these industry publications and other publicly available information. None of the industry publications referred to in this prospectus were prepared on our or on our affiliates’ behalf or at our expense. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements.”

The sources of certain statistical data, estimates and forecasts contained in this prospectus are the following independent industry publications, reports and other publicly available information:

●

Drone Market Size, Share & Trends Analysis Report By Component (Hardware, Software, Services), By Product, By Technology, By Payload Capacity, By Power Source, By End-use, By Region, And Segment Forecasts, 2024–2030, Grand View Research, 2024 (the “Grand View Drone Report”).

●

U.S. Pilot Training Market Size, Share & COVID-19 Impact Analysis, By Type (Fixed-wing Pilot Training, Rotary-wing Pilot Training, and UAV Pilot Training), By Application (Civil and Military), and Regional Forecast, 2023–2030, Fortune Business Insights, updated December 30, 2024 (the “Fortune U.S. Pilot Training Report”).

●

Military Drones Market Size, Share, and Trends Analysis: 2024–2034, Precedence Research, updated November 5, 2024 (the “Precedence Military Drones Report”).

●

Urban Air Mobility eVTOL/Urban Air Mobility TAM Update: A Slow Take-Off, But Sky’s the Limit, Morgan Stanley, May 6, 2021 (the “Morgan Stanley Report”).

6249

DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, in the foreseeable future, any cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant.

6350

USE OF PROCEEDS

We estimate that the net proceeds to us from this offering will be approximately $ 67.5 million (or approximately $ ~~million~~77.8 ifmillion if the underwriters exercise their option to purchase additional shares in full) from the sale of the shares of our common stock offered by us in this offering, assuming ana ~~initial~~ public offering price of $ 20.94 per share, ~~which is~~ the ~~midpoint~~last ofreported ~~the~~sale price ~~range~~of ~~set~~our ~~forth~~common stock on ~~the~~Nasdaq ~~cover~~on ~~page~~September of5, ~~this prospectus~~2025, ~~and~~ after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

~~Each~~We currently ~~$1.00~~intend ~~increase~~to use (~~decrease~~i) inapproximately ~~the assumed initial public offering price of~~ $ ~~per~~16.0 ~~share,~~million ~~which is the midpoint~~ of the ~~price~~net ~~range~~proceeds ~~set~~from ~~forth on the cover page of~~ this ~~prospectus,~~offering ~~would~~to ~~increase~~effect ~~(decrease)~~ the ~~net~~Stock Repurchase, ~~proceeds~~assuming toa uspublic ~~from this~~ offering byprice ~~approximately~~of $ ~~million,~~20.94 ~~assuming~~per ~~that~~share, the ~~number~~last ofreported ~~shares~~share ~~offered~~price byof ~~us,~~our ascommon ~~set~~stock ~~forth~~ on ~~the~~Nasdaq ~~cover~~on ~~page~~September ~~of this prospectus~~5, ~~remains the same~~ 2025, ~~and~~ after deducting estimated underwriting discounts and commissions, and ~~estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each one million share increase~~ (~~decrease~~ii) in the ~~number~~remainder ofprimarily ~~shares offered by us would increase (decrease) the net proceeds~~ to usfund ~~from this offering by approximately $~~ growth ~~million,~~initiatives ~~assuming~~and ~~that~~pursue ~~the~~opportunistic ~~assumed~~acquisitions ~~initial offering price~~ of ~~$ per~~complementary ~~share~~businesses, ~~which~~products, isservices ~~the~~or ~~midpoint~~technologies ofthat ~~the~~algin ~~price~~with our ~~range~~strategic ~~set~~objectives. ~~forth~~At ~~on the cover page of~~ this ~~prospectus~~time, ~~remains~~we ~~the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We~~ do not ~~expect~~have ~~that~~any abinding ~~change~~agreements inor ~~the~~commitments ~~initial price~~ to ~~the~~enter ~~public~~into orany ~~the number of shares by these amounts would have a~~ material acquisitions. ~~effect~~Any onremaining ~~the~~proceeds ~~uses~~will ofbe ~~the~~used ~~proceeds~~for ~~from~~general ~~this~~corporate ~~offering~~purposes, ~~although it~~including ~~may~~working ~~accelerate~~capital ~~the~~and ~~time~~ongoing ~~at which we will need to seek additional capital~~operational needs.

~~We currently~~In ~~intend~~addition, ~~to use the net proceeds from this offering as follows: (i) approximately $~~ if ~~to scale operations of our Avionics segment and to support~~ the ~~production~~underwriters ~~and~~exercise ~~design~~their ofoption ~~Avionics products; (ii) approximately $~~ to ~~support~~purchase ~~our~~additional ~~Electric~~shares, ~~Air~~we ~~Mobility~~intend ~~segment’s business operations and~~ to ~~fund~~use ~~the~~a ~~eVTOL~~portion ~~aircraft development program over the next 12 months; (iii) approximately $ to fund acquisitions in the areas~~ of ~~drone vehicles, AI and networking service in our Drones segment; (iv) approximately $ to acquire~~ the ~~aircraft~~net ~~and~~proceeds ~~support equipment that is necessary~~ to ~~meet the additional demand under the IDIQ contracts for our Training~~purchase ~~segment~~up ~~and~~ to ~~fund acquisitions for the Training segment in the areas of training and aircraft maintenance; (v) to repay~~ an ~~aggregate of~~additional ~~$10.8~~301,312 ~~million in Fixed Conversion Obligations that are not being converted into~~ shares ~~of our common stock~~ in ~~connection with this offering, which are payable at~~ the ~~closing~~Stock ~~of this offering; (vi) to repay an aggregate of $11~~Repurchase.7 ~~million~~Any ofremaining ~~principal,~~proceeds ~~cash premiums~~after ~~and~~effecting ~~interest under~~ the ~~Investor~~Stock ~~Notes,~~Repurchase ~~which~~will ~~bear~~be ~~interest~~used atfor rates ranging from 10.5% to 15% and are payable on dates ranging from the closing of this offering to 190 days following the closing of this offering; and (vii) the remainder to fund working capital and other general corporate purposes~~. As of the date of this prospectus~~, weincluding ~~do not have any binding agreements or commitments to enter~~working ~~into~~capital ~~any~~and ~~material~~ongoing ~~acquisitions~~operational needs.

~~The~~Our ~~amounts~~management will have broad discretion in the application of the net proceeds from this offering after giving effect to the Stock Repurchase, and investors will be ~~repaid~~relying ~~pursuant~~on tothe judgment of our management regarding the ~~Fixed~~application ~~Conversion~~of ~~Obligations~~those ~~consist~~net proceeds. Pending these uses, we plan to invest these net proceeds in short-term, interest bearing obligations, investment-grade instruments, medium term securities, certificates of: deposit or direct or guaranteed obligations of the United States.

(i) approximately $0.6 million to satisfy our obligations in full pursuant to the AIRO Drone Promissory Note (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which do not accrue interest and mature at the closing of this offering; (ii) $5.0 million to satisfy our obligations in full pursuant to the Jaunt Satisfaction of Indebtedness and Satisfaction of Covenant Agreement (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which accrues interest at the prime interest rate and matures within five days of the closing of this offering; (iii) $2.2 million to satisfy our obligations in full pursuant to the Aspen Satisfaction of Indebtedness and Satisfaction of Covenant Agreement (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which does not accrue interest and matures at the closing of this offering; (iv) $1.0 million to satisfy our obligations in full pursuant to the CDI Promissory Note (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which do not accrue interest and mature at the closing of this offering; (v) $1.0 million to satisfy our obligations in full pursuant to the Agile Promissory Note (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”), which does not accrue interest and matures at the closing of this offering; (vi) $0.1 million to satisfy our obligations in full pursuant to the Amended and Restated Success Fee Arrangement (as described in “Certain Relationships and Related Party Transactions—Success Fee Arrangement”), which does not accrue interest and is payable at the closing of this offering; and (vii) $0.9 million to satisfy certain of our obligations pursuant to deferred salary arrangements, which do not accrue interest and are payable at the closing of this offering.51

For more information, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations” and Notes 2, 4, 10 and 18 to our consolidated financial statements included elsewhere in this prospectus.

The amounts to be repaid pursuant to the Investor Notes consist of:

	(i)	$4.9 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 110% of the principal to be paid at maturity, accrue interest at a rate of 12% per annum from the closing of this offering and mature 190 days after the closing of this offering;
	(ii)	$2.0 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 100% of the principal to be paid at maturity, accrue interest at a rate of 12% per annum from the closing of this offering and mature 190 days after the closing of this offering;
	(iii)	$0.2 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 115% of the principal to be paid at maturity, accrue interest at a rate of 15% per annum from the closing of this offering and mature 190 days after the closing of this offering;
	(iv)	$0.6 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 100% of the principal to be paid at maturity, accrue interest at a rate of 10.5% per annum and mature at the earlier of five days after the closing of this offering or the closing of one or more financing transactions with an aggregate value of at least $35 million;
	(v)	$0.1 million to satisfy our obligations in full pursuant to a certain Investor Note, which provides for 100% of the principal to be paid at maturity, which accrues an interest charge equal to $50,000, payable in shares of common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus), and is to be paid immediately prior to closing of this offering;
	(vi)	$0.1 million to satisfy our obligations in full pursuant to a certain Investor Note, which provides for 110% of the principal to be paid at maturity, accrues interest at a rate of 12% per annum and matures 30 days after the closing of this offering;
	(vii)	$1.7 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 100% of the principal to be paid at maturity (which is the earlier of thirty days after the closing of this offering or March 31, 2025), and accrue interest at a rate of 15% per annum; and
	(viii)	$2.1 million to satisfy our obligations in full pursuant to certain Investor Notes, which provide for 100% of the principal to be paid at maturity, accrue interest at a rate of 12% per annum commencing on March 7, 2024 or April 5, 2024 through the fifth day after the closing of this offering or a financing transaction of at least $10 million or March 31, 2025.

For more information, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investor Notes” and Notes 2 and 18 to our consolidated financial statements included elsewhere in this prospectus.

Based on our current operating plan, we estimate that our existing cash and restricted cash as of the date of this prospectus, together with the estimated net proceeds from this offering, will be sufficient to fund our operating expenses and capital expenditures through . After this offering, we will require substantial capital in order to advance the development of our aircraft and other products, seek regulatory approvals, and launch and commercialize our products at scale. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we expect.

This expected use of existing cash and restricted cash and our net proceeds from this offering represent our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including our progress against certification and manufacturing milestones, the speed at which we grow our workforce, government grants and other incentives for which we may qualify, consumer demand, as well as the amount of cash used in our operations. We therefore cannot estimate with certainty the amount of net proceeds to be used for the purposes described above.

Our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of those net proceeds. Pending these uses, we plan to invest these net proceeds in short-term, interest bearing obligations, investment-grade instruments, medium term securities, certificates of deposit or direct or guaranteed obligations of the United States.

CAPITALIZATION

The following table sets forth our cash and restricted cash and capitalization as ~~December~~June 3130, ~~2024~~2025:

● on an actual basis; and

● on aan ~~pro~~as ~~forma~~adjusted basis, giving effect to ~~(i)~~ the ~~conversion~~sale of ~~the Fixed Conversion Obligations into an aggregate of~~ 3,~~753~~500,~~244~~000 shares of our common stock in ~~connection with the closing of~~ this offering, ~~(ii)~~at ~~the issuance of~~ an ~~aggregate~~assumed ~~of shares of our common stock pursuant to the Investor Notes, assuming an initial~~ public offering price of $20.94 per share, ~~which is~~ the ~~midpoint~~last ofreported ~~the~~sale price ~~range~~of ~~set~~our ~~forth~~common stock on ~~the~~Nasdaq ~~cover~~on ~~page~~September of5, ~~this prospectus~~2025, inafter ~~connection~~deducting ~~with~~underwriting ~~the~~discounts ~~closing~~and ofcommissions ~~this~~and estimated offering, ~~(iii)~~expenses ~~the~~payable ~~issuance~~by ofus anand ~~aggregate~~application of ~~shares of our common stock pursuant to~~ the ~~Dangroup~~net ~~Incentive Agreement~~proceeds, ~~assuming~~including ~~shares of our common stock are outstanding immediately prior to~~ the ~~completion~~Stock ~~of this offering~~Repurchase, and ~~(iv)~~assuming ~~the~~no ~~filing~~exercise ~~and~~by ~~effectiveness~~the ofunderwriters ~~our amended and restated certificate~~ of ~~incorporation,~~the ~~which~~option ~~will occur immediately prior~~ to ~~the~~purchase ~~closing~~additional ~~of this offering; and~~shares.

~~● on a pro forma~~ The as adjusted ~~basis~~information tobelow ~~reflect~~is ~~(i)~~illustrative ~~the~~only, ~~pro~~and ~~forma~~our ~~adjustments~~cash ~~set~~and ~~forth~~restricted ~~above,~~cash ~~(ii)~~and ~~our~~capitalization ~~sale~~following ofthe ~~shares~~closing of ~~our common stock in~~ this offering atwill anbe ~~assumed~~adjusted ~~initial~~based ~~public~~on ~~offering price of $ per share, which is~~ the ~~midpoint~~actual ofoffering ~~the~~ price ~~range~~and ~~set~~other ~~forth~~terms ~~on the cover page~~ of this ~~prospectus, after deducting underwriting discounts and commissions and estimated~~ offering ~~expenses~~determined ~~payable~~at bypricing. usYou ~~and~~should ~~(iii)~~ read the ~~use~~information ofin ~~approximately~~this ~~$22.5~~table ~~million~~together ofwith ~~the~~our ~~net~~consolidated ~~proceeds~~financial ~~from~~statements ~~this~~and ~~offering~~related tonotes ~~repay~~included ~~(1)~~elsewhere ~~an aggregate of $10.8 million~~ in ~~Fixed~~this ~~Conversion~~prospectus and ~~Obligations~~the ~~that~~sections ~~are~~titled ~~not~~“Management’s ~~being~~Discussion ~~converted~~and ~~into~~Analysis ~~shares~~ of ~~our~~Financial ~~common~~Condition ~~stock in connection with this offering~~ and ~~(2)~~Results ~~an aggregate~~ of ~~$11.7 million of principal~~Operations,” ~~cash premiums~~ and other ~~interest~~financial ~~under~~information ~~the~~contained ~~Investor~~in ~~Notes~~this prospectus.

The pro forma and pro forma as adjusted information below is illustrative only, and our cash and restricted cash and capitalization following the closing of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the information in this table together with our consolidated financial statements and related notes included elsewhere in this prospectus and the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Consolidated Financial Information” and other financial information contained in this prospectus.

	As of June 30, 2025
	Actual			As Adjusted
	(in thousands, except share and per share data)
Cash	$	40,342		$	91,792
Restricted Cash		194			194
Current indebtedness⁽¹⁾	$	28,192		$	28,192
Long term indebtedness		848			848
Stockholders’ equity:
Common stock, par value $0.000001 per share; 1,000,000,000 authorized, 27,025,503 shares issued and outstanding, actual; 30,525,503 shares issued and 29,710,503 shares outstanding, as adjusted		-			-
Additional paid-in capital		873,380			940,872
Accumulated other comprehensive loss		8,736			8,736
Treasury stock, at cost; zero shares actual; 815,000 shares, as adjusted		-			(16,042	)
Accumulated deficit		(202,556	)		(202,556	)
Total stockholders’ equity		679,560			731,010
Total capitalization⁽²⁾	$	708,600		$	760,050

	As of December 31, 2024
	Actual			Pro Forma	As Adjusted(1)
	(in thousands, except share and per share data)
Cash and restricted cash	$	20,911		$	$
Current indebtedness(2)	$	51,057		$	$
Long term indebtedness(3)		54,689
Stockholders’ equity:
Common stock, par value $0.000001 per share; 35,000,000 shares authorized, 27,858,276 shares issued and outstanding, actual; shares authorized, issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted		—
Additional paid-in capital		764,691
Accumulated other comprehensive loss		(9,509	)
Accumulated deficit		(206,453	)
Total stockholders’ equity		548,729
Total capitalization(4)	$	654,475		$	$

(1)

Reflects $5.6 million of related party borrowings, $8.1 million of current maturities of debt, $3.8 million of investor notes at fair value, $9.7 million of accrued deferred compensation, and $1.0 million due to the sellers of Sky-Watch.

(12) ~~The~~Includes ~~pro~~current ~~forma as adjusted information set forth above is illustrative only~~ and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of our cash and restricted cash, additional paidlong-interm ~~capital,~~indebtedness ~~total stockholders’ equity~~ and total capitalization by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each one million share increase (decrease) in the number of shares offered by us at the assumed initial public offering price per share of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of our cash and restricted cash, additional paid-in capital, total stockholders’ ~~(deficit)~~ equity ~~and total capitalization by approximately $ million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us~~.

(2) Actual column reflects $6.0 million of related party borrowings, $0.1 million of revolving lines of credit, $28.0 million of current maturities of debt, $13.8 million of investor notes at fair value and $3.1 million due to the sellers of Sky-Watch.

(3) Actual column reflects $0.7 million of long-term debt, $11.2 million of accrued deferred compensation and $42.8 million of contingent consideration.

(4) Includes current and long-term indebtedness and stockholders’ equity.

The information in the table above excludes:

● ~~519~~305,~~131~~367 shares of our common stock issuable upon the exercise of stock options outstanding as of ~~December~~June 3130, ~~2024~~2025, under the Legacy Plan, with a weighted-average exercise price of $58.0559 per share; ● 431,818 shares of contingent restricted stock awards outstanding as of December 31, 2024; ● 112,246 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of December 31, 2024 at a weighted average exercise price of $9.90 per share; ● shares of our common stock, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, issuable upon the exercise of warrants to purchase our common stock issued after December 31, 2024 at an exercise price of $0.01 per share; ● shares of our common stock issuable upon the exercise in full by the underwriters of the Underwriters’ Warrants; ● shares of our common stock reserved for future issuance under the Legacy Plan, which number of shares will be added to the shares of our common stock reserved under the 2025 Plan upon its effectiveness, at which time we will cease granting awards under the Legacy Plan; ● shares of our common stock reserved for future issuance under the 2025 Plan, as well as any future increases, including annual automatic evergreen increases in the number of shares of our common stock reserved for future issuance under the 2025 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering (as more fully described in the section titled “Executive and Director Compensation—Equity Incentive Plans”); and ● shares of our common stock reserved for future issuance under the ESPP, as well as any annual automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.

66● 254,010 shares of contingent restricted stock awards outstanding as of June 30, 2025;

●

66,026 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of June 30, 2025 at a weighted average exercise price of $16.83 per share;

●

87,941 shares of our common stock issuable upon the vesting of restricted stock awards under the 2025 Plan;

●

345,000 shares of our common stock issuable upon the exercise in full of the Underwriters’ Warrants;

●

	●	204,574 shares of our common stock issued subsequent to June 30, 2025 under the 2025 Plan as deferred compensation to certain employees; and

	●	71,319 shares of our common stock issued subsequent to June 30, 2025, pursuant to the Aspen Carveout Plan.

DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the ~~initial~~ public offering price per share of our common stock and the ~~pro forma~~ as adjusted net tangible book value per share of our common stock after this offering.

As of ~~December~~June 3130, ~~2024~~2025, our historical net tangible book ~~deficit~~value was $~~(103~~18.4)5 million, or $(30.~~71)~~68 per share of our common stock. Our historical net tangible book ~~deficit~~value per share represents the amount of our total assets (net of goodwill, intangible assets, right-of-use operating lease assets and deferred offering costs) less our total liabilities, divided by the total number of shares of our common stock outstanding as of ~~December~~June 3130, ~~2024~~2025.

AsAfter ofgiving ~~December~~effect ~~31,~~to ~~2024,~~the ~~our~~sale ~~pro~~of ~~forma~~3,500,000 ~~net~~shares ~~tangible~~in ~~book~~this ~~deficit~~offering ~~was~~at ~~$ million,~~an orassumed ~~$ per~~public ~~share~~offering price of ~~our common stock~~$20.94 ~~Our pro forma net tangible book deficit~~ per share ~~represents the amount of our total assets (net of goodwill~~, ~~right-of-use operating lease~~ ~~assets and deferred offering costs) less our total liabilities, divided by~~ the ~~total~~last ~~number~~reported ofsale ~~shares~~price of our common stock ~~outstanding as~~on ofNasdaq ~~December~~on 31September 5, ~~2024~~2025, ~~after~~and ~~giving~~further ~~pro~~assuming ~~forma effect to (i)~~ the ~~conversion~~receipt of the ~~Fixed Conversion Obligations into an aggregate~~estimated ofnet ~~3,753,244~~proceeds ~~shares~~ of ~~our~~$67.5 ~~common~~million ~~stock~~(after indeducting ~~connection~~underwriting ~~with~~discounts ~~the~~and ~~closing~~commissions ofand ~~this~~estimated offering, ~~(ii~~expenses) ~~the~~and ~~issuance of an aggregate of~~ consummation ~~shares~~ of ~~our common stock pursuant to~~ the ~~Investor~~Stock ~~Notes~~Repurchase, ~~assuming~~our anas ~~initial~~adjusted ~~public~~net ~~offering~~tangible ~~price~~book value as of ~~$ per~~June ~~share~~30, ~~which~~2025, iswould ~~the~~have ~~midpoint~~been ofapproximately ~~the~~$70.0 ~~price~~million, or ~~range~~$2.35 ~~set~~per ~~forth~~share. onThis ~~the~~represents ~~cover~~an ~~page~~immediate ofincrease ~~this prospectus,~~ in ~~connection with~~ the ~~closing~~net ~~of this~~tangible ~~offering,~~book ~~(iii)~~value ~~the issuance~~ of an$1.67 ~~aggregate~~per ~~of shares~~share ofto our ~~common~~existing stockholders ~~stock~~and ~~pursuant~~an toimmediate ~~the~~dilution ~~Dangroup Incentive Agreement~~(i.e., ~~assuming shares~~the ofdifference ~~our~~between ~~common stock are outstanding immediately prior to~~ the ~~completion of this~~ offering, price and ~~(iv)~~ the ~~filing~~as ~~and~~adjusted ~~effectiveness of~~net ~~our~~tangible ~~amended~~book ~~and~~value ~~restated~~after this ~~certificate~~offering) ofto ~~incorporation,~~new ~~which~~investors ~~will~~purchasing ~~occur~~shares ~~immediately~~in ~~prior~~this tooffering ~~the closing~~ of ~~this~~$18.59 ~~offering~~per share.

~~Net~~The ~~tangible~~following ~~book~~table ~~value~~illustrates ~~dilution per share to new investors represents~~ the ~~difference between the amount~~ per share paid by purchasers of shares of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after closing of this offering. After giving further effect to the sale of shares of our common stock that we are offering at the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2024 would have been $ million, or approximately $ per share. This amount represents an immediate increase in pro forma net tangible book value of $ per share to our existing stockholders and an immediate dilution ~~in pro forma net tangible book value of approximately $ per share~~ to new investors ~~participating~~purchasing shares in this offering.:

Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution:

Assumed offering price per share			$	20.94
Historical net tangible book value per share as of June 30, 2025	$	0.68
Increase in historical net tangible book value per share as of June 30, 2025 attributable to investors participating in this offering and the Stock Repurchase		1.67
As adjusted net tangible book value per share after this offering and the Stock Repurchase				2.35
Dilution per share to new investors participating in this offering			$	18.59

Assumed initial public offering price per share				$
Historical net tangible book deficit per share as of December 31, 2024	$	(3.71	)
Pro forma increase in historical net tangible book deficit per share as of, December 31, 2024, attributable to the pro forma adjustments described above	$
Pro forma net tangible book value per share as of December 31, 2024 before this offering
Increase in pro forma net tangible book value per share attributable to investors participating in this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors participating in this offering				$

If the underwriters exercise their option to purchase additional shares of our common stock in full in this offering, and assuming a portion of the net proceeds are used to consummate the additional Stock Repurchase, the net tangible book value after the offering would be $2.48 per share, the increase in as adjusted net tangible book value per share to existing stockholders would be $1.80 per share, and the dilution per share to new investors would be $18.46 per share, in each case assuming the public offering price of $20.94 per share, the last reported sales price of our common stock on the Nasdaq Global Market on September 5, 2025, remains the same and after deducting the underwriting discounts and commissions payable by us.

The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value per share after this offering by approximately $ , and dilution in pro forma net tangible book value per share to new investors by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $ and decrease the dilution to investors participating in this offering by approximately $ per share, assuming that the assumed initial public offering price remains the same, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. Similarly, each decrease of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease the pro forma as adjusted net tangible book value per share after this offering by approximately $ and increase the dilution to investors participating in this offering by approximately $ per share, assuming the assumed initial public offering price of $ per share remains the same, and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

If the underwriters exercise their option to purchase up to additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $ per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $ per share and the dilution per share to new investors would be $ per share, in each case, assuming an initial public offering price of $ per share.

To the extent that outstanding options with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, or if any restricted stock awards vest and settle, new investor will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The following table summarizes, on a pro forma as adjusted basis as of December 31, 2024, the number of shares of our common stock purchased or to be purchased from us, the total consideration paid or to be paid to us in cash and the average price per share paid by existing stockholders for shares issued prior to this offering and the price to be paid by new investors in this offering. The calculation below is based on the assumed initial public offering price of $ per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us. As the table below shows, investors participating in this offering will pay an average price per share substantially higher than our existing stockholders paid.

	Shares Purchased				Total Consideration				Weighted- Average Price Per Share
	Number	Percent			Amount	Percent
Existing stockholders				%	$			%	$
Investors participating in this offering									$
Total			100.0	%	$		100.0	%

Each $1.00 increase in the assumed initial public offering price of $ per share would increase total consideration paid by new investors, total consideration paid by all stockholders and the weighted-average price per share paid by all stockholders by $ million, $ million and $ , respectively, while each $1.00 decrease in the assumed initial public offering price of $ per share, would decrease total consideration paid by new investors, total consideration paid by all stockholders and the average price per share paid by all stockholders by $ million, $ million and $ , respectively, and assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Similarly, each one million share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the weighted-average price per share paid by all stockholders by approximately $ million, $ million and $ , respectively, assuming the assumed initial public offering price of $ per share remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

The above table assumes no exercise of (i) the underwriters’ option to purchase additional shares or (ii) the Underwriters’ Warrants. If the underwriters exercise their option to purchase additional shares of our common stock in full in this offering, the pro forma as adjusted net tangible book value after the offering would be $ per share, the increase in pro forma as adjusted net tangible book value per share to existing stockholders would be $ per share, and the dilution per share to new investors would be $ per share, in each case assuming the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions payable by us.

Except as otherwise indicated, the discussion and the tables above exclude:

	●	431,818 shares of contingent restricted stock awards outstanding as of December 31, 2024;
	●	112,246 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of December 31, 2024 at a weighted average exercise price of $9.90 per share;

●

254,010 shares of contingent restricted stock awards outstanding as of June 30, 2025;

	●	shares of our common stock, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, issuable upon the exercise of warrants to purchase our common stock issued after December 31, 2024 at an exercise price of $0.01 per share;
	●	shares of our common stock issuable upon the exercise in full by the underwriters of the Underwriters’ Warrants;

●

66,026 shares of our common stock issuable upon the exercise of warrants to purchase our common stock outstanding as of June 30, 2025 at a weighted average exercise price of $16.83 per share;

69● 87,941 shares of our common stock issuable upon the vesting of restricted stock awards under the 2025 Plan;

● ~~shares of our common stock reserved for future issuance under the Legacy Plan~~345,000 ~~which number of~~ shares ~~will be added to the shares~~ of our common stock ~~under~~issuable ~~the 2025 Plan~~ upon ~~its~~the ~~effectiveness,~~exercise atin ~~which~~full ~~time~~of ~~we will cease granting awards under~~ the ~~Legacy~~Underwriters’ ~~Plan~~Warrants;

● 1,812,059 shares of our common stock reserved for future issuance under the 2025 Plan as of June 30, 2025, as well as any future increases, including annual automatic evergreen increases in the number of shares of our common stock reserved for future issuance under the 2025 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering (as more fully described in the section titled “Executive and Director Compensation—Equity Incentive Plans”); ~~and~~

● shares of our common stock reserved for future issuance under the ESPP, as well as any annual automatic increases in the number of shares of our common stock reserved for future issuance under the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.

	●	204,574 shares of our common stock issued subsequent to June 30, 2025 under the 2025 Plan as deferred compensation to certain employees; and

	●	71,319 shares of our common stock issued subsequent to June 30, 2025, pursuant to the Aspen Carveout Plan.

We may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that stock options are exercised, restricted stock awards are vested and settled or we issue additional shares of our common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

7053

UNAUDITED PRO FORMA Condensed Consolidated FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial information has been prepared in accordance with Article 11 of Regulation S-X. We derived the following unaudited pro forma condensed consolidated financial information by applying pro forma adjustments to the audited consolidated financial statements included elsewhere in this prospectus. All defined terms used throughout this unaudited pro forma condensed consolidated financial information have the meanings ascribed to such terms elsewhere in this prospectus.

The unaudited pro forma condensed consolidated balance sheet as of December 31, 2024 and unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2024 have been presented:

● On a pro forma basis to reflect payments and issuances of our common stock that will occur in connection with the consummation of this offering, including:

● the conversion of the Fixed Conversion Obligations into an aggregate of 3,753,244 shares of our common stock in connection with the closing of this offering, ● the issuance of an aggregate of shares of our common stock pursuant to the Investor Notes, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, in connection with the closing of this offering, ● the issuance of an aggregate of shares of our common stock pursuant to the Dangroup Incentive Agreement, assuming shares of our common stock are outstanding immediately prior to the completion of this offering,

	●	the receipt of $ million in estimated net proceeds from the sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, and
	●	the use of approximately $22.5 million of the net proceeds from this offering to repay (1) an aggregate of $10.8 million in Fixed Conversion Obligations that are not being converted into shares of our common stock in connection with this offering and (2) an aggregate of $11.7 million of principal, cash interest and interest under the Investor Notes.

The unaudited pro forma condensed consolidated balance sheet gives effect to the pro forma adjustments as if they occurred on December 31, 2024 and the and the unaudited pro forma condensed consolidated statement of operations gives effect to the pro forma adjustments as if they occurred on January 1, 2024.

The pro forma adjustments set forth below were based on available information and certain assumptions made by our management and may be revised as additional information becomes available. The pro forma adjustments assume that this offering is completed on the terms described elsewhere in this prospectus.

The unaudited pro forma condensed consolidated financial information also reflects a for reverse stock split of our common stock to be effected prior to the consummation of this offering.

The unaudited pro forma condensed consolidated financial information is presented for informational purposes only, and does not purport to represent what our balance sheet and results of operations would actually have been if the offering and related transactions described above had occurred on the dates indicated, nor does it purport to project our results of operations or financial condition that we may achieve in the future.

You should read our unaudited pro forma condensed consolidated financial information and the accompanying notes in conjunction with all of the historical financial statements and related notes included elsewhere in this prospectus and the financial and other information appearing elsewhere in this prospectus, including information contained in “Risk Factors,” “Use of Proceeds,” “Capitalization,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

AIRO GROUP HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2024

(in thousands)

	Actual			Unaudited Pro Forma Adjustments				Unaudited Pro Forma As Adjusted
Assets
Current assets:
Cash	$	20,741		$	(13,391	)	(1)	$
					(19,555	)	(2)
							(4)
Restricted cash		170			—
Accounts receivable, net		8,961			—
Related party receivables		791			—
Inventory		8,823			—
Prepaid expenses and other current assets		2,309			—
Deferred offering costs		799			(799	)	(2)
Total current assets		42,594
Property and equipment, net		6,834			—
Right-of-use operating lease assets		352			—
Goodwill		557,508			—
Intangible assets, net		93,502			—
Other assets		209			—
Total assets	$	700,999		$				$
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	16,440		$	(9,977	)	(1)	$
Related party payables		1,100			(520	)	(2)
Accrued expenses		17,457			(1,656	)	(1)
Operating lease liabilities, current		213			—
Deferred revenue		10,340			—
Related party borrowings		5,971			(240	)	(2)
Revolving lines of credit		127			(127	)	(2)
Current maturities of debt		27,992			(20,694	)	(2)
Investor notes at fair value		13,819			(2,053	)	(2)
							(6)
Due to sellers of Sky-Watch		3,148			—
Total current liabilities		96,607
Long-term debt, net of current maturities		688			—
Deferred compensation		11,219			(11,219	)	(2)
Deferred tax liability		767			—
Long-term deferred revenue		10			—
Operating lease liabilities, noncurrent		147			—
Other long-term liabilities		50			—
Contingent consideration		42,782			(42,782	)	(2)
Total liabilities		152,270
Stockholders’ equity:
Common stock, $0.000001 par value		—			—
Additional paid-in capital		764,691			83,338		(2)
					7,502		(3)
							(4)
							(5)
							(6)
Stockholder loan		—			—
Accumulated other comprehensive loss		(9,509	)		—
Accumulated deficit		(206,453	)		(1,758	)	(1)
					(26,057	)	(2)
					(7,502	)	(3)
							(4)
							(5)
							(6)
Total stockholders’ equity		548,729
Total liabilities and stockholders’ equity	$	700,999		$				$

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

AIRO GROUP HOLDINGS, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2024

(in thousands, except share and per share amounts)

	Actual			Unaudited Pro Forma Adjustments				Unaudited Pro Forma As Adjusted
Revenue	$	86,935		$	-			$
Cost of revenue		28,618			-
Gross profit		58,317			-
Operating expenses:
Research and development		13,133			-
Sales and marketing		6,422			-
General and administrative		18,201			1,758		(1)
					4,801		(5)
							(7)
Goodwill impairment		37,994
Total operating expenses		75,750
Loss from operations		(17,433	)
Other income (expense):
Interest expense, net		(14,225	)		(7,502	)	(2)
							(4)
Other income (expense), net		2,173			(21,256	)	(3)
Total other expense		(12,052	)
Loss before income tax expense		(29,485	)
Income tax expense		(9,209	)		-
Net loss	$	(38,694	)	$				$
Net loss per share, basic and diluted	$	(1.39	)	$				$
Weighted-average shares of common stock used in computing net loss per share, basic and diluted		27,858,276			6,263,469		(6)

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

1. Basis of Presentation

The unaudited pro forma condensed consolidated balance sheet as of December 31, 2024 assumes this offering occurred on December 31, 2024. The unaudited pro forma condensed consolidated statement of operation for the year ended December 31, 2024 presents the pro forma effect of this offering as if it had been completed on January 1, 2024, the beginning of the earliest period presented.

The unaudited pro forma condensed consolidated balance sheet as of December 31, 2024 has been prepared using, and should be read in conjunction with, our consolidated balance sheet as of December 31, 2024 and the related notes for the year ended December 31, 2024, included elsewhere in this prospectus.

The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2024 has been prepared using, and should be read in conjunction with, our consolidated statement of operations for the year ended December 31, 2024 and the related notes included elsewhere in this prospectus.

Management has made significant estimates and assumptions in its determination of the pro forma adjustments. As the unaudited pro forma combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented. Significant assumptions include conversions of debt to equity as further described in the notes to the unaudited pro forma combined financial information. These conversion agreements have been executed but do not take effect until no later than two days prior to this offering. As part of the pro forma adjustments, we included adjustments to recognize interest, contingent consideration expense, and additional sales and marketing expense related to the 2021 Management Carveout Plan.

The unaudited pro forma condensed consolidated financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with this offering. The unaudited pro forma adjustments, which are described in these notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible the difference may be material.

2. Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet

The pro forma adjustments included in the unaudited pro forma condensed consolidated balance sheet as of December 31, 2024 are as follows:

(1) Represents estimated direct and incremental transaction costs incurred by us related to this offering. This includes the payment of $11.6 million in accounts payable and accrued expenses recognized by us and a $1.8 million payment for advisory services, for a total of $13.4 million.

(2) The following is a detail of the adjustments marked with footnote (2) (in thousands):

				Net Changes
Cash	Recording of a 10% payment of the Aspen Carveout Contingency	(280	)		(19,555	)
	Recording of the payment of the Put-Together Transaction Notes	(2,582	)
	Recording of a 10% payment of the Carter Aviation debt	(4,953	)
	Recording of a 10% payment of the Aspen Notes	(1,944	)
	Recording of 10% payment of the NGA Success Fee Arrangement	(150	)
	Royalty payment by Aspen Avionics	(520	)
	Payment of Jaunt Satisfaction of Indebtedness and Satisfaction of Covenant Agreement	(240	)
	Payment of a portion of deferred compensation	(3,452	)
	Payment of the Muncy Bank & Trust (“Muncy”) promissory notes and the First Citizens Community Bank notes payable	(1,254	)
	Payment of lines of credit with First Citizens Community Bank	(127	)
	Recording Cantor payment	(2,000	)
	Investor Note cash payment, including principal, premiums, interest and other required payments due within 5 days of this offering	(2,053	)
Deferred offering cost	Recording Cantor offering cost	2,000			(799	)
	Recording of the NGA Success Fee Arrangement	1,500
	Reclassifying deferred offering cost	(4,299	)
Contingent consideration
	Recording of the Put-Together Transaction Notes due to now being deemed probable	5,128			(42,782	)
	Recording of the Carter Aviation debt due to now being deemed probable	16,126
	Recording of the Aspen Carveout Contingency	2,803
	Recording of a 10% payment of the Aspen Carveout Contingency	(280	)
	Conversion of 90% of the Aspen Carveout Contingency to equity	(2,523	)
	Conversion of the Put-Together Transaction Notes to equity	(11,928	)
	Conversion of 90% of the Carter Aviation debt to equity	(44,573	)
	Recording of payment of the Put-Together Transaction Notes	(2,582	)
	Recording of a 10% payment of the Carter Aviation debt	(4,953	)
Related party payables	Royalty payment by Aspen Avionics	(520	)		(520	)
Revolving lines of credit	Payment of the lines of credit with First Citizens Community Bank	(127	)		(127	)
Related party borrowings	Payment of Jaunt Satisfaction of Indebtedness and Satisfaction of Covenant Agreement	(240	)		(240	)
Current maturities of debt	Conversion of 90% of the Aspen Notes	(17,496	)		(20,694	)
	Payment of 10% of the Aspen Notes	(1,944	)
	Payment of the Muncy promissory note and the First Citizens Community Bank notes payable	(1,254	)
Investor notes at fair vale	Cash payment of Investor Notes due within 5 days of this offering	(2,053	)		(2,053	)
Deferred compensation	Conversion of accrued compensation to equity	(7,767	)		(11,219	)
	Payment of accrued compensation	(3,452	)
Additional paid-in capital	Conversion of the Put-Together Transaction Notes to equity	11,928			83,338
	Conversion of 90% of the Carter Aviation debt to equity	44,573
	Conversion of 90% of the NGA fee	1,350
	Conversion of 90% of the Aspen Notes	17,496
	Conversion of 90% of the Aspen Carveout Contingency to equity	2,523
	Conversion of 90% of accrued compensation to equity	7,767
	Issuance of stock portion of Aspen Carveout Contingency	2,000
	Reclassifying deferred offering costs	(4,299	)
Accumulated deficit
	Recording of the Put-Together Transaction Notes due to now being deemed probable	(5,128	)		(26,057	)
	Recording of the Carter Aviation debt due to now being deemed probable	(16,126	)
	Recording of the Aspen Carveout Contingency	(4,803	)

(3)	Reflects $7.5 million of contingent stock premiums on certain Investor Notes that will become payable at the closing of this offering.
(4)	Reflects $ million of estimated net proceeds from this offering.
(5)	Reflects $ million related to the modification of the restricted stock awards, the vesting of which will become probable at the closing of this offering and $ million pursuant to the Dangroup Incentive Agreement, both assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus.
(6)	Reflects settlement of interest feature on Investor Notes at fair value.

3. Adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of Operations (in thousands, except share and per share data)

The pro forma adjustments included in the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2024 are as follows:

(1)	Recording our estimated costs that were contingent upon this offering of $1.8 million, which are payable in cash and which had not been deemed probable as of December 31, 2024 and thus had not been recorded as of December 31, 2024.
(2)	Recording $7.5 million of expense for contingent stock premiums on Investor Notes payable in stock at the closing of this offering.
(3)	Recording of a $5.1 million charge for contingent promissory notes to the Merger Entities and $16.1 million under the Jaunt Contingent Arrangement. Obligations under the Jaunt Contingent Arrangement total $49.5 million, of which only $33.4 million had been recorded as of December 31, 2024. Contingent promissory note obligations total $14.5 million, of which only $9.4 million had been recorded as of December 31, 2024.
(4)	Reflecting settlement of interest feature on Investor Notes at fair value.
(5)	Recording of contingent charges of $1.9 million attributable to Aspen Contingent Debt, $2.0 million related to the Aspen Carveout Stock Obligation, and $0.9 million related to the Aspen Carveout Contingency for a total of $4.8 million.
(6)	Change in shares outstanding is due to (i) the conversion of the Fixed Conversion Obligations into an aggregate of 3,753,244 shares of our common, (ii) the issuance of an aggregate of shares of our common stock pursuant to the Investor Notes, (iii) the issuance of an aggregate of shares of our common stock pursuant to the Dangroup Incentive Agreement, (iv) the issuance of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and (v) a one- for reverse stock split of our common stock to be effected prior to the consummation of this offering.
(7)	Reflecting $ million of expense related to the modification of restricted stock awards, the vesting of which will become probable at the closing of this offering

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 audited consolidated financial statements as of December 31, 2024 and 2023 and for each of the two years in the period ended December 31, 2024, together with related notes thereto, and the unaudited condensed consolidated financial statements as of June 30, 2025 and for the three and six-month periods ended June 30, 2025 and 2024 which have been prepared in accordance with GAAP. Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Training. The Training segment currently provides military pilot training and will provide commercial pilot training in the future. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, and JTAC, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and USAF Air Combat Command, and are a mandated recipient on a $5.7 billion IDIQ contract. Our personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to bid on mandates. We also plan to offer commercial pilot training and plan to expand our non-military capabilities in response to the global pilot shortage.

Electric Air Mobility. The Electric Air Mobility segment is developing a rotorcraft eVTOL for cargo and passenger use through our Jaunt brand for fixed route flights, on-demand trips, and cargo operations. Our R&D efforts are focused on developing a cargo eVTOL platform, which will be a scaled-down version of our passenger eVTOL platform, and will target the attractive middle mile delivery cargo market. Meanwhile, our long-term R&D efforts are focused on developing a full-scale multi-role eVTOL platform, which will be able to serve both the cargo and passenger markets. We plan to certify our eVTOLs through existing CAR 529 Rotorcraft standards, with our platform including the best attributes of both rotary and fixed wing aircraft. Our patented compound rotorcraft technology, a core point of technological differentiation that will underpin our cargo eVTOL’s commercial capability, has over 300 piloted flight hours on multiple Jaunt demonstrator aircraft. We believe the range and payload capabilities driven by this technology uniquely position us to provide a compelling commercial solution for the eVTOL cargo market. Once developed and certified, we expect our cargo eVTOL program will serve as the foundation of our commercialization efforts, with passenger applications serving as a longer-term secondary initiative.

78Initial Public Offering

On June 16, 2025, we completed the IPO of 6.9 million shares of our common stock, which included an additional 0.9 million shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares, at an initial public offering price of $10.00 per share. Our common stock began trading on the Nasdaq Global Market under the ticker symbol “AIRO” on June 13, 2025. Net proceeds from the IPO, after deducting $7.5 million of underwriting discounts and commissions and issuance costs paid, were $61.5 million.

Business Combination Agreement

On March 3, 2023, we entered into the Business Combination Agreement. On August 5, 2024, the Business Combination Agreement was terminated and, as a result, none of the BCA Transactions were effectuated. We incurred expenses of $1.4 million and $4.1 million in the years ended December 31, 2024 and 2023, respectively, in connection with the entry into the Business Combination Agreement and steps to prepare for the BCA Transactions.

Business Combinations

We were formed in August 2021 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry. During the year ended December 31, 2022, we completed our Put-Together Transaction to acquire six companies which are now organized into our four reportable segments, each with a diverse set of partners and customers: (i) Drones, through our subsidiaries, AIRO Drone and Sky-Watch; (ii) Avionics, through our subsidiary, Aspen Avionics; (iii) Training, through our subsidiaries, Agile Defense and CDI; and (iv) Electric Air Mobility, through our subsidiary, Jaunt.

We acquired Agile Defense on February 25, 2022, pursuant to the terms and conditions of an Agreement and Plan of Merger by and among Agile Defense, AIRO Group, Inc., n/k/a Old AGI, Inc., a Delaware corporation (“Legacy AIRO”), us, Agile Defense Merger Sub, LLC, and Joseph Burns as target representative, dated as of October 6, 2021, as amended, in exchange for consideration in the form of a promissory note in the amount of $2.3 million (the “Agile Defense Promissory Note”). The Agile Defense Promissory Note bears no interest and was originally payable within five business days following the commencement of public trading of our common stock. On October 2, 2023, the parties signed a promissory note termination agreement (the “Agile Defense Promissory Note Termination Agreement”) whereby six of the seven note holders agreed to convert $1.4 million of the principal owed to them under the Agile Defense Promissory Note into 58,417 shares of our common stock immediately prior to the closing of the BCA Transactions, with the remaining principal of $0.2 million owed to such holders to be paid at the closing of the BCA Transactions. Given that the BCA Transactions were not consummated, in connection with the closing of this offering, we intend to issue 58,417 shares of our common stock and use proceeds of $1.0 million from this offering to satisfy our obligations to the remaining holder under the Agile Defense Promissory Note and the other holders pursuant to the Agile Defense Promissory Note Termination Agreement.55

We acquired ~~AIRO~~Agile ~~Drone~~Defense on February 25, 2022, pursuant to the terms and conditions of an Agreement and Plan of Merger by and among Agile Defense, AIRO ~~Drone~~Group, Inc., n/k/a Old AGI, Inc., a Delaware corporation (“Legacy AIRO”), us, ~~AIRO~~Agile ~~Drone~~Defense Merger Sub, LLC , and Joseph Burns as target representative, dated as of October 6, 2021, as amended, in exchange for consideration in the form of a promissory note in the amount of $2.13 million (the “~~AIRO~~Agile ~~Drone~~Defense Promissory Note”). The ~~AIRO~~ ~~Drone~~Agile Defense Promissory Note bears no interest and was originally payable within five business days following the commencement of public trading of our common stock. On October 2, 2023, the parties signed a promissory note termination agreement (the “~~AIRO~~Agile ~~Drone~~Defense Promissory Note Termination Agreement”) whereby ~~nine~~six of the ~~ten~~seven note holders agreed to convert ~~approximately~~ $1.54 million of the principal owed to them under the ~~AIRO~~Agile ~~Drone~~Defense Promissory Note into 6334,~~043~~360 shares of our common stock immediately prior to the closing of the BCA Transactions, with the remaining principal of $0.2 million owed to such holders to be paid at the closing of the BCA Transactions. Given that the BCA Transactions were not consummated, in connection with the closing of ~~this~~the ~~offering~~IPO, we ~~intend~~issued ~~to issue 63~~34,~~043~~ 360 shares of our common stock to partially satisfy our obligations pursuant to the Agile Defense Promissory Note Termination Agreement and ~~use~~used proceeds of $0.68 million from ~~this~~the ~~offering~~IPO to satisfy our obligations to the remaining holder under the ~~AIRO~~Agile ~~Drone~~Defense Promissory Note ~~and~~during the ~~other~~quarter ended June 30, 2025. In July 2025, we used proceeds of $0.2 million to satisfy the remaining obligations to the holders pursuant to the ~~AIRO~~Agile ~~Drone~~Defense Promissory Note Termination Agreement.

We acquired ~~Jaunt~~AIRO Drone on ~~March~~February 1025, 2022, pursuant to the terms and conditions of an Agreement and Plan of Merger by and among ~~Jaunt,~~AIRO ~~Legacy~~Drone, Legacy AIRO, us, ~~Jaunt~~AIRO Drone Merger Sub, LLC and ~~Martin~~Joseph ~~Peryea~~Burns as ~~member~~target representative, dated as of October 6, 2021, as amended, in exchange ~~for~~ for consideration in the form of ~~5,343,124 shares of our common stock. As part of this acquisition, we acquired~~ a ~~contingent~~promissory ~~obligation originating~~note ~~from Jaunt’s acquisition of certain patents, licenses, and other intellectual property from Carter Aviation, a former member of Jaunt,~~ in ~~April 2019 (~~the ~~“Jaunt~~amount ~~Contingent Arrangement”). Under the Jaunt Contingent Arrangement, 10%~~ of ~~any cash receipt, including all income, receipts, proceeds, debt or equity investment, earnings, sales, or winnings, up to~~ $~~50 million is payable to Carter Aviation~~2.1 Asmillion of (the ~~acquisition~~“AIRO ~~date,~~Drone ~~$49.6~~Promissory ~~million in future payments remained on this obligation~~Note”). The ~~original~~AIRO ~~terms~~Drone ofPromissory ~~the~~Note ~~Jaunt~~bears ~~Contingent~~no ~~Arrangement~~interest ~~provided~~and ~~that~~was ~~upon~~originally ~~the~~payable ~~completion~~within offive a business ~~combination,~~days ~~the~~following ~~contingent consideration assumed from Jaunt would be replaced by promissory notes,~~ the ~~first~~commencement of ~~which would be for $23.0 million due one day~~public ~~after~~trading ~~the closing~~ of ~~such~~our ~~business~~common ~~combination, and the second would be for the remaining portion of the contingent consideration and would be paid over three years subsequent to such closing~~stock. On October 272, 2023, wethe parties signed a ~~satisfaction~~promissory ofnote ~~indebtedness~~termination ~~and satisfaction of covenant~~ agreement (the “~~Jaunt~~AIRO ~~Satisfaction~~Drone ofPromissory Note ~~Indebtedness~~Termination ~~and Satisfaction of Covenant~~ Agreement”), whereby nine of the ~~holder~~ten note holders agreed to convert approximately $441.65 million of the ~~obligations~~ principal owed to itthem asunder ~~part~~the ofAIRO ~~the~~Drone ~~Jaunt~~Promissory ~~acquisition~~Note into 137,~~908,143~~ 080 shares of our common stock immediately prior to the closing of the BCA Transactions, with the remaining ~~portion~~principal of ~~the contingent consideration of~~ $5.0.2 million owed to such holders to be paid at the closing of the BCA Transactions. Given that the BCA Transactions were not consummated, in connection with the closing of ~~this~~the ~~offering~~IPO, we ~~intend~~issued ~~to issue 1~~37,~~908,143~~080 shares of our common stock to partially satisfy our obligations pursuant to the AIRO Drone Promissory Note Termination Agreement and ~~use~~used proceeds of $5.0.4 million from ~~this~~the ~~offering~~IPO to satisfy our obligations to the ~~holders~~remaining holder under the ~~Jaunt Satisfaction~~AIRO ofDrone ~~Indebtedness~~Promissory Note and ~~Satisfaction~~the other holders pursuant to the AIRO Drone Promissory Note Termination Agreement during the quarter ended June 30, 2025. In July 2025, we used proceeds of ~~Covenant~~$0.2 million to satisfy the remaining obligations to the holders pursuant to the AIRO Drone Promissory Note Termination Agreement.

We acquired ~~Sky-Watch~~Jaunt on March 2810, 2022, pursuant to the terms and conditions of an ~~Equity~~Agreement ~~Purchase~~and ~~Agreement~~Plan of Merger by and among ~~Sky-Watch~~Jaunt, Legacy AIRO, us, ~~Dangroup~~Jaunt ~~ApS~~Merger ~~and~~Sub, ~~Mekan~~LLC ~~I/S~~and ~~v/Per~~Martin ~~Pedersen~~Peryea &as ~~Claus~~member ~~Bo Jensen~~representative, dated as of October 6, 2021, as amended, in exchange for ~~consideration~~ consideration in the form of ~~a promissory note in the amount of $12.9 million (the “Sky-Watch Promissory Note”)~~3, ~~890~~143,~~909~~001 shares of our common stock ~~and an earnout of up to $6~~.5 ~~million~~As ~~based~~part ~~on performance commencing on the closing date~~ of ~~the~~this acquisition, ~~through~~we ~~June 2024.~~acquired ~~The~~a ~~$6.5~~contingent ~~million~~obligation ~~earnout~~originating from ~~was~~Jaunt’s ~~made~~acquisition up of $3certain ~~million~~patents, ~~that~~licenses, ~~was~~and ~~payable~~other onintellectual aproperty ~~dollar-for-dollar~~from ~~basis~~Carter onAviation, ~~revenue~~a ~~earned~~former ~~within~~member ~~the first~~of ~~two-year~~Jaunt, ~~anniversary~~in ofApril 2019 (the ~~acquisition~~“Jaunt ~~and~~Contingent $3Arrangement”).5 ~~million~~Under ~~would~~the ~~become~~Jaunt ~~due~~Contingent ~~and~~Arrangement, ~~payable~~10% ~~if Sky-Watch earns a minimum~~ of ~~$13.8~~any ~~million~~cash inreceipt, ~~revenue~~including ~~during~~all ~~the~~income, ~~period~~receipts, ~~from~~proceeds, ~~the~~debt ~~acquisition~~or ~~date~~equity ~~through~~investment, ~~June~~earnings, ~~2024.~~sales, Inor ~~December 2022~~winnings, ~~the~~up ~~Equity~~to ~~Purchase~~$50 ~~Agreement~~million ~~was~~is ~~amended~~payable to Carter ~~increase~~Aviation. ~~the~~As ~~second~~of ~~earnout~~the ~~amount~~acquisition ~~from~~date, $349.56 million toin ~~$7.5~~future ~~million~~payments ~~and~~remained toon ~~extend~~this ~~the~~obligation. ~~earnout~~The ~~period~~original toterms ~~include~~of the ~~full~~Jaunt ~~fiscal year~~Contingent ~~periods~~Arrangement ofprovided ~~2022~~that ~~through~~upon ~~2024. In March 2023,~~ the ~~Equity~~completion ~~Purchase~~of ~~Agreement~~a ~~was~~business ~~further~~combination, ~~amended~~the tocontingent ~~add~~consideration aassumed ~~third~~from ~~earnout~~Jaunt ofwould ~~$4.0~~be ~~million~~replaced ifby ~~revenue~~promissory ~~during~~notes, the ~~full~~first ~~fiscal year periods~~ of ~~2022~~which ~~through~~would ~~2024~~be ~~reaches~~for $1723.0 million~~. In~~ ~~March~~due ~~2024,~~one ~~the~~day ~~parties~~after ~~further amended~~ the ~~Equity~~closing ~~Purchase~~of ~~Agreement,~~such ~~pursuant~~business tocombination, ~~which~~and the second ~~former~~would ~~shareholders~~be ~~of Sky-Watch became eligible~~ for anthe ~~additional~~remaining ~~earnout~~portion of ~~$1.0 million~~the ifcontingent ~~Sky-Watch~~consideration ~~achieves earnings before interest, taxes, depreciation~~ and ~~amortization~~would ~~(“EBITDA”) of~~be ~~DKK~~paid ~~127,107,500~~over orthree ~~above~~years ~~for~~subsequent ~~fiscal~~to ~~year~~such ~~2024~~closing. On ~~June~~October 2827, ~~2024~~2023, ~~the~~we ~~parties~~ signed ana ~~amendment~~satisfaction toof ~~the~~indebtedness ~~promissory~~and ~~notes~~satisfaction of covenant agreement (the “~~Sky-Watch~~Jaunt Satisfaction of ~~Promissory~~Indebtedness ~~Note~~and ~~Amendment~~Satisfaction of Covenant Agreement”), whereby ~~(i)~~ the ~~remaining~~holder ~~principal~~agreed ofto convert $544.76 million ~~payable~~of ~~within~~the ~~five~~obligations ~~business~~owed to ~~days~~it as part of the ~~date~~Jaunt ~~that we~~acquisition orinto 1,122,437 shares of our ~~successor~~common ~~closes~~stock ~~one~~immediately orprior ~~more~~to ~~financing~~the ~~transactions~~closing of the BCA Transactions, with anthe ~~aggregate~~remaining ~~value~~portion of atthe ~~least~~contingent consideration of $355.0 million ~~and~~owed ~~(ii)~~to ~~the~~such ~~remaining earnout~~holders ~~liability~~to isbe ~~payable~~paid ~~within~~at ~~five~~the ~~business~~closing ~~days~~of ~~following~~ the ~~date~~BCA Transactions. Given that the ~~we,~~BCA orTransactions ~~our~~were ~~successor~~not consummated, ~~closes~~in ~~one~~connection orwith ~~more~~the ~~financing transactions~~closing ~~with~~of anthe ~~aggregate~~IPO, ~~value~~we issued 1,122,437 shares of atour ~~least~~common ~~$45.0~~stock ~~million~~to ~~with~~partially ~~interest~~satisfy ~~continuing~~our toobligations ~~accrue~~pursuant onto the ~~earned~~Jaunt ~~but~~Satisfaction ~~unpaid~~of ~~earnout~~Indebtedness ~~amounts~~and Satisfaction of Covenant atAgreement during the ~~federal~~quarter ~~discount~~ended ~~rate~~June ~~plus 5.0%~~30, ~~compounded quarterly~~2025. In ~~December~~July ~~2024~~2025, we ~~made~~used aproceeds of $133.9 million ~~payment~~from inthe ~~full~~IPO ~~satisfaction~~to partially satisfy our ofobligations to the ~~Sky-Watch~~holders ~~Promissory~~under ~~Note~~the ~~with~~Jaunt ~~the~~Satisfaction ~~remainder~~of ~~partially~~Indebtedness ~~funding~~and ~~the~~Satisfaction ~~earnout~~of ~~consideration.~~Covenant AsAgreement ofand ~~December~~signed ~~31,~~an ~~2024,~~agreement weto ~~have~~fund ~~accrued~~the remaining $31.1 million, insubject ~~connection~~to ~~with~~10% ~~the~~per ~~unpaid~~year ~~earnout~~in ~~consideration~~interest, ~~related~~on toSeptember ~~this~~10, ~~acquisition~~2025.

7956

We acquired ~~Aspen~~Sky-Watch ~~Avionics~~ on ~~April~~March 128, 2022, pursuant to the terms and conditions of an ~~Agreement~~Equity ~~and~~Purchase ~~Plan of Merger (the “Aspen Merger~~ Agreement”) by and among ~~Aspen~~Sky-Watch, Legacy AIRO, us, ~~Aspen~~Dangroup ~~Merger~~ApS ~~Sub,~~and ~~Inc.~~Mekan ~~and~~I/S ~~John~~v/Per ~~Uczekaj~~Pedersen as& ~~target~~Claus ~~representative~~Bo Jensen, dated as of October 6, 2021, as amended, in exchange for consideration in the form of 2a promissory note in the amount of $12.9 million (the “Sky-Watch Promissory Note”),~~575~~ 524,~~758~~064 shares of our common stock and an earnout of up to $6.5 Asmillion ~~part~~based on performance commencing on the closing date of the acquisition through June 2024. The $6.5 million earnout was made up of ~~this~~$3 ~~transaction,~~million wethat ~~agreed~~was topayable ~~assume~~on a dollar-for-dollar basis on revenue earned within the first two-year anniversary of the acquisition and $~~25.~~3.5 million would become due and payable if Sky-Watch earns a minimum of ~~obligations~~$13.8 million in revenue during the period from the acquisition date through June 2024. In December 2022, ~~which~~the ~~primarily~~Equity ~~included~~Purchase Agreement was amended to increase the second earnout amount from $193.45 million ~~related~~to $7.5 million and to extend the earnout period to include the full fiscal year ~~Aspen~~periods ~~Notes~~of 2022 through 2024. In March 2023, the Equity Purchase Agreement was further amended to add a third earnout of $24.90 million if ~~related~~revenue toduring the ~~Aspen~~full ~~Carveout~~fiscal ~~Contingency~~year ~~and~~periods of 2022 through 2024 reaches $117.90 million. ~~attributable~~In March 2024, the parties further amended the Equity Purchase Agreement, pursuant to ~~future~~which ~~allowable~~the former shareholders of Sky-Watch became eligible for an additional earnout of $1.0 ~~services~~million if Sky-Watch achieves earnings before interest, taxes, depreciation and amortization (“EBITDA”) of DKK 127,107,500 or above for fiscal year 2024. On June 28, 2024, the parties signed an amendment to bethe promissory notes (the “Sky-Watch Promissory Note Amendment”) whereby (i) the remaining principal of $5.7 million payable within five business days of the date that we or our successor closes one or more financing transactions with an aggregate value of at least $35.0 million and (ii) the remaining earnout liability is payable within five business days following the date that the we, or our successor, closes one or more financing transactions with an aggregate value of at least $45.0 million with interest continuing to accrue on the ~~former~~earned ~~Aspen~~but ~~Avionics~~unpaid ~~shareholders~~earnout amounts at the federal ~~closing~~discount rate plus 5.0%, compounded quarterly. In December 2024, we made a $13.9 million payment which resulted in a remaining balance of ~~this~~$3.1 ~~offering~~million ~~(“Aspen~~as ~~Contingent~~of ~~Debt”)~~December 31, 2024. During the quarter ended June 30, 2025, we funded $2.3 million and funded the remaining $1.0 million related to the final earnout in July 2025.

OnWe ~~October~~acquired 6Aspen Avionics on April 1, ~~2023~~2022, wepursuant ~~signed~~to athe ~~satisfaction~~terms and conditions of ~~indebtedness~~an Agreement and ~~satisfaction~~Plan of ~~covenant~~Merger ~~agreement~~ (the “Aspen ~~Satisfaction of Indebtedness~~Merger ~~and Satisfaction of Covenant~~ Agreement”), ~~whereby~~by ~~all~~and ofamong ~~the~~Aspen, ~~holders~~Legacy ~~agreed~~AIRO, tous, ~~convert~~Aspen ~~various~~Merger ~~amounts due~~Sub, ~~which~~Inc. ~~included~~and ~~$17.5 million~~John ~~under~~Uczekaj ~~the~~as ~~Aspen~~target ~~Notes~~representative, ~~$0.8~~dated ~~million~~as ~~related to the cash portion~~ of October ~~Aspen~~6, ~~Carveout Contingency~~2021, ~~and~~as ~~$1.7~~amended, ~~million~~in ~~attributable to~~exchange ~~the~~for ~~Aspen~~consideration ~~Contingent~~in ~~Debt~~the ~~into~~form ~~749,007~~of ~~shares~~1, 73515,~~971~~151 shares ~~and 34,018 shares, respectively,~~ of our common stock ~~immediately~~. ~~prior~~As topart ~~the closing~~ of ~~the~~this ~~BCA Transactions~~transaction, we ~~with~~agreed ~~the~~to ~~remaining~~assume ~~amount of~~ $225.23 million ~~owed~~of toobligations, ~~such~~which ~~holders~~primarily toincluded be$19.4 ~~paid~~million ~~at the~~related ~~closing~~to of the ~~BCA~~Aspen ~~Transactions.~~Notes, ~~The 2021 Management Carveout Plan also provides for a~~ $2.09 million ~~Aspen Carveout Stock Obligation~~related ~~which equates~~ to ~~87,226 shares that is also due at~~ the ~~closing~~Aspen ofCarveout aContingency ~~business~~and ~~combination~~$1.9 ~~Given~~million ~~that~~attributable ~~the~~to ~~BCA~~future ~~Transactions~~allowable ~~were not~~services ~~consummated,~~or into ~~connection~~be ~~with~~payable ~~the closing of this offering, we intend~~ to ~~issue~~the anformer ~~aggregate~~Aspen ~~of 944,222 shares of our common~~Avionics ~~stock~~shareholders ~~and~~at ~~use~~the ~~proceeds~~closing of ~~$2.2 million from this offering to satisfy our obligations to~~ the ~~holders~~IPO ~~under the~~ (“Aspen ~~Satisfaction~~Contingent ~~of Indebtedness and Satisfaction of Covenant Agreement~~Debt”).

WeOn ~~acquired~~October ~~CDI on April 26~~6, ~~2022~~2023, ~~pursuant~~we tosigned ~~the~~a ~~terms~~satisfaction of indebtedness and ~~conditions~~satisfaction of ancovenant ~~Agreement~~agreement ~~and~~(the ~~Plan~~“Aspen Satisfaction of ~~Merger by~~ Indebtedness and ~~among~~Satisfaction ~~CDI,~~of ~~Legacy~~Covenant ~~AIRO~~Agreement”), ~~us,~~ ~~Coastal~~whereby ~~Merger~~all ~~Sub,~~of ~~Inc.~~the ~~and~~holders ~~Jeffrey~~agreed ~~Parker~~to asconvert ~~target~~various ~~representative~~amounts due, ~~dated~~which asincluded of$17.5 million ~~October~~under 6,the ~~2021,~~Aspen ~~as amended~~Notes, in$0.8 ~~exchange~~million ~~for~~related ~~consideration in~~to the ~~form~~cash portion of aAspen ~~promissory~~Carveout ~~note~~Contingency, inand ~~the amount of~~ $~~10.~~1.7 million (attributable to the ~~“CDI~~Aspen ~~Promissory~~Contingent ~~Note”)~~Debt ~~and~~into 1440,~~818~~584 shares,~~182~~ 43,512 shares and 20,010 shares, respectively, of our common stock. ~~The~~immediately ~~CDI~~prior to ~~Promissory~~the ~~Note~~closing ~~bears~~of nothe ~~interest~~BCA ~~and~~Transactions, ~~was~~with ~~originally~~the ~~payable~~remaining ~~within~~amount ~~five~~of ~~business~~$2.2 ~~days~~million ~~following~~owed to such holders to be paid at the ~~commencement~~closing of ~~public~~the ~~trading~~BCA ofTransactions. ~~our~~The ~~common~~2021 ~~stock.~~Management OnCarveout ~~October~~Plan ~~17,~~also ~~2023,~~provides ~~the~~for ~~parties~~a ~~signed~~$2.0 amillion ~~promissory~~Aspen ~~note~~Carveout ~~termination~~Stock ~~agreement~~Obligation ~~(the~~which ~~“CDI~~equates ~~Promissory~~to ~~Note~~51,309 ~~Termination~~shares ~~Agreement”)~~that ~~whereby~~is ~~all~~also ofdue at the ~~holders~~closing ~~agreed~~of toa ~~convert~~business $9combination.1 ~~million~~Given ofthat the ~~principal~~BCA ~~owed~~Transactions towere ~~them~~not ~~under~~consummated, ~~the~~in connection ~~CDI~~with ~~Promissory~~the ~~Note~~closing ~~into~~of ~~389~~the IPO,~~128~~ we issued an aggregate of 484,096 shares of our common stock ~~immediately~~to ~~prior~~partially tosatisfy ~~the~~our ~~closing~~obligations ofto the holders ~~BCA~~under ~~Transactions, with~~ the ~~remaining~~Aspen ~~principal~~Satisfaction of ~~$1.0~~Indebtedness ~~million~~and ~~owed~~Satisfaction toof ~~such~~Covenant ~~holders~~Agreement. toDuring beJuly ~~paid~~2025, atwe issued the ~~closing~~71,319 shares of ~~the~~our ~~BCA~~common ~~Transactions.~~stock ~~Given~~based ~~that~~on the ~~BCA~~amended ~~Transactions were~~Satisfaction ~~not~~of ~~consummated,~~Indebtedness inand ~~connection~~Satisfaction ~~with~~of ~~the~~Covenant ~~closing~~Agreement ofdated ~~this~~June ~~offering~~30, we2025 ~~intend~~and used toproceeds ~~issue~~of ~~389,128~~$0.1 ~~shares~~million ofto satisfy our ~~common~~obligations ~~stock~~to ~~and~~the participants in the Aspen Carveout Plan. During August 2025, we funded ~~use~~$1.5 ~~proceeds~~million of the $1.09 million ~~from~~remaining ~~this~~balance ~~offering~~of tothe ~~satisfy~~Aspen ~~our~~Notes ~~obligations~~and tosigned ~~the~~an ~~holders~~agreement ~~under~~to fund the ~~CDI Promissory~~remaining ~~Note~~$0.2 ~~pursuant~~million related to the ~~CDI~~Aspen ~~Promissory~~Contingent ~~Note~~Debt ~~Termination~~by ~~Agreement~~October 1, 2025.

We acquired CDI on April 26, 2022, pursuant to the terms and conditions of an Agreement and Plan of Merger by and among CDI, Legacy AIRO, us, Coastal Merger Sub, Inc. and Jeffrey Parker as target representative, dated as of October 6, 2021, as amended, in exchange for consideration in the form of a promissory note in the amount of $10.1 million (the “CDI Promissory Note”) and 1,069,514 shares of our common stock. The CDI Promissory Note bears no interest and was originally payable within five business days following the commencement of public trading of our common stock. On October 17, 2023, the parties signed a promissory note termination agreement (the “CDI Promissory Note Termination Agreement”), as amended on March 7, 2025, whereby all of the holders agreed to convert $8.1 million of the principal owed to them under the CDI Promissory Note into 203,707 shares of our common stock immediately prior to the closing of an initial public offering, with the remaining principal of $2.0 million owed to such holders to be paid at the closing of an initial public offering. During the quarter ended June 30, 2025, we issued 203,707 shares and funded $2.0 million to fully satisfy our obligations to the holders of the CDI Promissory Note Termination Agreement.

Key Factors Affecting Our Performance

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors, including the following.

Global Supply Chain

We are dependent on a global supply chain and in recent years have experienced supply chain disruptions that resulted in delays and increased costs which adversely affected our performance. ~~The supply chain disruptions discussed above did not materially impact our outlook, business goals, results of operations or capital resources during 2024.~~ These disruptions impacted our ability to procure raw materials, microelectronics, and certain commodities on a timely basis and/or at expected prices, and have been driven by supply chain market constraints and macroeconomic conditions, including inflation and labor market shortages. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictive activities, continue to contribute to these issues. Furthermore, our suppliers and subcontractors have been impacted by these same issues. We also experience periodic shortages of electronic and mechanical parts. Management continues to proactively manage the supply and transportation of parts during regular sales inventory and operations meetings. This proactive planning is an integral part of our normal operations and has allowed us to anticipate potential shortages and introduce redundancy along our supply chain. These mitigation efforts have not introduced new material risks related to product quality, reliability or regulatory approval of products. We continue to monitor the condition of our supply chain and evaluate our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations. We have implemented actions and programs designed to mitigate the impacts of supply chain disruptions, but anticipate that we and others in our industry will continue to face such challenges for the foreseeable future. The supply chain disruptions discussed above did not materially impact our outlook, business goals, results of operations or capital resources during 2024 or the first six months of 2025.

Geopolitical Matters

We operate in a complex and evolving global security environment, and our business is affected by geopolitical and security issues. Conflicts, including the conflict between Russia and Ukraine, conflicts in the Middle East and heightened tension in the Pacific region, have elevated global security concerns resulting in increased interest for our products and services as countries seek to improve their security posture. In addition, security assistance provided by NATO and its allies to Ukraine has increased demand to replenish NATO stockpiles, resulting in additional and potential future orders, including for the ramp-up in production capacity for certain products. We continue to expect additional orders over the next several years attributable to the global threat environment.

Economic Environment

Our business and financial performance is also affected by elevated levels of inflation and interest rates. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. Due to the nature of our government and commercial aerospace businesses, and their respective customer and supplier contracts, we are not always able to offset cost increases by increasing our contract value or pricing, in particular on our fixed-price contracts. Increasing material, component, and labor prices could subject us to losses in our fixed price contracts in the event of cost overruns. In addition, higher interest rates have increased the cost of borrowing and tightened the availability of capital. Among other things, these effects can affect our ability to acquire equipment and constrain our customers’ purchasing power and decrease orders for our products and services and impact the ability of our customers to make payments and of our suppliers to perform. Moreover, volatility in interest rates and financial markets can lead to economic uncertainty, an economic downturn or recession and impact the demand for our products and services as well as our supply chain.

U.S. Government’s Continuing Resolution

In ~~December~~March ~~2024~~2025, President ~~Biden~~Trump signed a continuing resolution that funds federal agencies through ~~March~~September 1430, 2025. A continuing ~~resolution~~ resolution authorizes federal agencies to operate generally at the same funding levels from the prior year, but typically does not authorize ~~new~~ new spending initiatives during this period. If Congress is unable to enact formal fiscal year ~~2025~~2026 appropriation bills by ~~March~~September 1430, 2025, it may pass another continuing resolution. However, if Congress fails to pass the formal appropriations bills or a continuing resolution, then the U.S. government would shut down during which federal agencies would cease all non-essential functions.

In the event of a U.S. government shutdown, our business, program performance and results of operations could be impacted by the resulting disruptions to federal government offices, workers, and operations, including risks relating to the funding of certain programs, stop work orders, as well as delays in contract awards, new program starts, payments for work performed, and other actions. We also may experience similar impacts in the event of an extended period of continuing resolutions. Generally, the significance of these impacts will primarily be based on the length of the continuing resolution or shutdown. Furthermore, under the Fiscal Responsibility Act of 2023, which imposes limits on discretionary spending for defense and non-defense programs in exchange for the lifting of the debt ceiling in June 2023, if Congress fails to enact appropriation bills by April 30, 2025, then the budget caps will be reduced and corresponding automatic reductions to agency budget accounts will be enforced through sequestration.

Development of the Electric Air Mobility Market

Our revenue will be tied to the continued development of short distance aerial transportation. While we believe the global market for electric air mobility will be large, it remains undeveloped and there is no guarantee of future demand. We anticipate receiving certification of our 33% downscaled cargo eVTOL under drone rules as early as 2027 and expect our first passenger production aircraft to be certified by the TCCA under existing CAR 529 Transport Category Rotorcraft airworthiness rules as early as 2031. Our business will require significant investment leading up to launching these services, including, but not limited to, final engineering designs, prototyping and testing, manufacturing, software development, certification, pilot training, infrastructure and commercialization. We benefit from supplier cost sharing, whereby our suppliers have agreed to defer their non-recurring engineering costs until commercialization, which has reduced our initial funding requirements prior to commercialization.

Key Components of Results of Operations

Revenue

Revenue consists primarily of product sales, fees for consulting services, licensing revenue, warranty sales and after sale services. A majority of our revenue is derived from the Drones segment. To date, our Electric Air Mobility segment has not generated material revenue.

Cost of Revenue

Cost of revenue includes direct labor (including salary, benefits and taxes), material costs and indirect production costs. Indirect production costs include indirect labor, purchasing, quality and manufacturing leadership, consumables, freight, charges for inventory reserves and amortization of intangible assets. We expect our cost of revenue to fluctuate based on a number of factors including, among others, availability and ability to obtain suitable aircraft, availability and cost of raw materials, such as lithium, and fluctuations in the labor market, in particular with respect to individuals who are highly skilled and specialized, such as pilots, and foreign currency exchange rates.

Operating Expenses

Research and Development

R&D expenses consist primarily of personnel expenses, including salaries, benefits, costs of consulting, equipment and materials, direct allocable overhead costs, including staff development cost, travel costs and technology costs, and amortization of intangible assets. We expect our R&D expenses to increase as we continue to invest in our infrastructure and technology and seek to develop new products and services.

Sales and Marketing

Sales and marketing expenses include salary, benefits and taxes, commissions, travel, costs of leased airplanes, advertising, trade shows and amortization of intangible assets. We expect our sales and marketing expenses to increase as we seek to build out our capabilities in these areas to acquire new customers.

General and Administrative

General and administrative expenses include costs of executive leadership, corporate governance, consulting fees, ~~the~~ accounting and finance operations, travel, and support functions, including human resources and information technology. We expect our general and administrative ~~expenses~~ expenses to increase as we incur additional costs associated with being a public company and certain terms of our consulting and incentive ~~agreements~~ agreements become effective.

Goodwill Impairment

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. We manage our business primarily based upon four operating segments: (i) Drones, (ii) Avionics, (iii) Training and (iv) Electric Air Mobility, each of which represents a reportable segment. See “—Critical Accounting Policies and Estimates—Goodwill” for additional information.

Other Income (Expense)

Interest Expense, Net

Interest expense, net consists primarily of the interest expense from borrowings relating to revolving lines of credit with external banks and third-party notes, net of interest income earned on invested cash balances.

83Gain on Debt Extinguishment, Net

Gain on debt extinguishment, net includes gains and losses on debt extinguishments.

Other Income (Expense), Net

Other income (expense), net includes changes in fair value on contingent consideration obligations and foreign currency exchange adjustments based on the terms of payments related an earnout obligation.

Income Tax (Expense) Benefit

Income tax (expense) benefit primarily consists of income taxes in certain foreign jurisdictions in which we conduct business.

Non-GAAP Financial Measures

To supplement our consolidated financial statements prepared and presented in accordance with GAAP, we use EBITDA, Adjusted EBITDA and Adjusted EBITDA margin, as described below, to facilitate analysis of our financial and business trends and for internal planning and forecasting purposes.

We define (1) EBITDA as net income (loss) before interest expense, income tax expense or provision, depreciation and amortization, (2) Adjusted EBITDA as net income (loss) before interest expense, income tax expense or provision, depreciation and amortization, gain on extinguishment of debt, stock-based compensation, contingent consideration fair value adjustments, warrant fair value adjustment, IPO contingencies and impairments, and (3) Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. The above items are excluded from our Adjusted EBITDA measure because these items are either non-cash in nature, or because the amount and timing of these items is unpredictable, or because they are not driven by core results of operations, thereby rendering comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this prospectus because it is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

These non-GAAP financial measures should not be considered as alternatives to performance measures derived in accordance with GAAP. Our presentation of these non-GAAP financial measures should not be construed to imply that our future results will be unaffected by items that are excluded from these metrics. In addition, our definitions of these non-GAAP financial measures may be different from similarly titled non-GAAP measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool, and you should not consider any of these non-GAAP financial measures in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that our non-GAAP financial measures:

●

do not reflect our interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

●

exclude depreciation and amortization expense, and although these are non-cash expenses, the assets being depreciated may have to be replaced in the future, increasing our cash requirements; and

●

do not reflect provision for or benefit from income taxes that reduces cash available to us.

Because of these limitations, we consider, and you should consider, the non-GAAP financial measures alongside other financial performance measures, including net loss and our other GAAP results. A reconciliation of EBITDA and Adjusted EBITDA to net loss, and Adjusted EBITDA Margin to net loss margin, the most directly comparable financial measures stated in accordance with GAAP, is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measure to their most directly comparable GAAP financial measure.

	Year Ended						Six Months Ended						Three Months Ended
(in thousands, except percentages)	December 31, 2024			December 31, 2023			June 30, 2025			June 30, 2024			June 30, 2025			June 30, 2024
Net loss	$	(38,694	)	$	(32,456	)
Net income (loss)	$	(38,694	)	$	(32,456	)	$	3,898		$	(7,610	)	$	5,871		$	(5,600	)
Depreciation and amortization		12,640			12,731			6,126			6,344			2,988			3,108
Income tax expense		9,209			2,294			2,344			1,429			2,057			439
Interest expense, net		14,225			2,137			9,277			1,242			8,010			954
EBITDA		(2,620	)		(15,294	)		21,645			1,405			18,926			(1,099	)
Stock-based compensation		716			1,815
Gain on extinguishment of debt		-			-			(15,559	)		-			(15,559	)		-
Contingent consideration fair value adjustments		(2,400	)		18,009
Stock-based compensation		716			1,815			18,763			471			18,638			179
Impairments		37,994			—
Contingent consideration fair value adjustments		(2,400	)		18,009			(20,272	)		1,700			(17,534	)		1,500
Adjusted EBITDA	$	33,690		$	4,530
Warrant fair value adjustment		-			-			(1,843	)		-			(1,843	)		-
Net loss margin		(44.5	)%		(75.0	)%
IPO contingencies1		-			-			2,070			-			2,070			-
Adjusted EBITDA Margin		38.8	%		10.5	%
Impairments		37,994			-			-			-			-			-
Adjusted EBITDA	$	33,690		$	4,530		$	4,804		$	3,576		$	4,698		$	580
Net income (loss) margin		(44.5	)%		(75.0	)%		10.7	%		(32.4	)%		23.9	%		(57.3	)%
Adjusted EBITDA Margin		38.8	%		10.5	%		13.2	%		15.2	%		19.1	%		5.9	%

841 IPO contingencies are made up of $1.0 million in fees paid to KippsDeSanto & Co. related to financial advisory services, $0.8 million related to the legal settlement, $0.5 million of accrued legal expenses, $0.2 million for the contingent fee arrangement with New Generation Aerospace, LLC (“NGA”), $0.3 million transaction bonus awarded to Persistent LLC, a $0.6 million contingency recorded related to the Aspen Contingent Debt (as defined below) and $0.1 million cash portion of the Aspen Carveout Plan (as defined below), net of a $1.4 million gain on deferred compensation.

Results of Operations

Three and Six Months Ended June 30, 2025 and 2024

The following tables shows our consolidated financial results for the three and six months ended June 30, 2025 and 2024:

	Three Months Ended June 30,						Period over period change
(in thousands)	2025			2024			($)			(%)
Revenue	$	24,550		$	9,780		$	14,770			151.0	%
Cost of revenue		9,515			4,005			5,510			137.6	%
Gross profit		15,035			5,775			9,260			160.3	%
Operating expenses:
Research and development		4,102			3,161			941			29.8	%
Sales and marketing		1,758			1,409			349			24.8	%
General and administrative		28,864			3,898			24,966			640.5	%
Total-operating expenses		34,724			8,468			26,256			310.1	%
Loss from operations		(19,689	)		(2,693	)		(16,996	)		(631.1	)%
Other income (expense):
Interest expense, net		(8,010	)		(954	)		(7,056	)		(739.6	)%
Gain (loss) on extinguishment of debt		15,559			-			15,559			100	%
Other income (expense), net		20,068			(1,514	)		21,582			N.M.
Total other income (expense)		27,617			(2,468	)		30,085			N.M.
Income (loss) before income tax expense		7,928			(5,161	)		13,089			253.6	%
Income tax expense		(2,057	)		(439	)		(1,618	)		(368.6	)%
Net income (loss)	$	5,871		$	(5,600	)	$	11,471			204.8	%

N.M. – Not meaningful

	Six Months Ended June 30,						Period over period change
(in thousands)	2025			2024			($)			(%)
Revenue	$	36,345		$	23,520		$	12,825			54.5	%
Cost of revenue		14,378			9,258			5,120			55.3	%
Gross profit		21,967			14,262			7,705			54.0	%
Operating expenses:
Research and development		7,768			6,318			1,450			23.0	%
Sales and marketing		3,191			2,660			531			20.0	%
General and administrative		33,778			8,441			25,337			300.2	%
Total operating expenses		44,737			17,419			27,318			156.8	%
Loss from operations		(22,770	)		(3,157	)		(19,613	)		(621.3	)%
Other income (expense):
Interest expense, net		(9,277	)		(1,242	)		(8,035	)		(646.9	)%
Gain (loss) on extinguishment of debt		15,559			-			15,559			100	%
Other income (expense), net		22,730			(1,782	)		24,512			N.M.
Total other income (expense)		29,012			(3,024	)		32,036			N.M.
Income (loss) before income tax expense		6,242			(6,181	)		12,423			201.0	%
Income tax expense		(2,344	)		(1,429	)		(915	)		(64.0	)%
Net income (loss)	$	3,898		$	(7,610	)	$	11,508			151.2	%

N.M. – Not meaningful

Years Ended December 31, 2024 and 2023

The following table shows our consolidated financial results for the years ended December 31, 2024 and 2023:

	Year Ended December 31,						Period over period change
(in thousands)	2024			2023			($)			(%)
Revenue	$	86,935		$	43,254		$	43,681			101.0	%
Cost of revenue		28,618			18,340			10,278			56.0	%
Gross profit		58,317			24,914			33,403			134.1	%
Operating expenses:
Research and development		13,133			11,871			1,262			10.6	%
Sales and marketing		6,422			5,374			1,048			19.5	%
General and administrative		18,201			17,601			600			3.4	%
Impairment		37,994			-			37,994			N/A
Total operating expenses		75,750			34,846			40,904			117.4	%
Loss from operations		(17,433	)		(9,932	)		(7,501	)		(75.5	)%
Other income (expense):
Interest expense, net		(14,225	)		(2,137	)		(12,088	)		(565.7	)%
Other income (expense), net		2,173			(18,093	)		20,266			112.0	%
Total other expense		(12,052	)		(20,230	)		8,178			40.4	%
Loss before income tax expense		(29,485	)		(30,162	)		677			2.2	%
(Loss) income before income tax expense		(29,485	)		(30,162	)		677			2.2	%
Income tax expense		(9,209	)		(2,294	)		(6,915	)		(301.4	)%
Net loss	$	(38,694	)	$	(32,456	)	$	(6,238	)		(19.2	)%

Revenue

For the ~~year~~three months ended ~~December~~June 3130, ~~2024~~2025 compared to ~~the year ended December 31~~2024, ~~2023,~~ the $4314.78 million increase in revenue was ~~primarily~~ due to a $4615.70 million increase in the Drones segment, ~~largely~~and ~~caused~~a by$0.5 anmillion increase in ~~drone shipments~~the ~~and~~Training ~~support~~segment ~~revenue.~~offset ~~Increased~~by ~~drone~~a ~~sales~~$0.8 ~~were~~million ~~driven~~decrease byin ~~market~~the ~~entry~~Avionics ~~strategies~~segment. toFor ~~target~~the six ~~NATO~~months ~~member~~ended ~~countries~~June 30, as2025 ~~we believe~~compared ~~that~~to ~~drones~~2024, ~~can~~the be$12.8 amillion ~~key~~increase ~~component~~in ofrevenue ~~NATO~~was ~~countries’~~due ~~defense~~to ~~spending~~a ~~plans~~$14.1 tomillion ~~meet~~increase ~~their~~in 2%the ~~GDP~~Drones segment ~~contribution~~and ~~target~~a $0. ~~This~~3 million increase ~~was~~in ~~partially~~the ~~offset~~Training ~~primarily~~segment offset by a $2.1.5 million decrease ~~from~~in the ~~Training~~Avionics segment. The increase in revenue in the Drones segment was due to athe ~~decrease~~continued insuccess of market entry strategies that target NATO member countries that have ~~contracts~~resulted ~~resulting~~in ~~from~~increased ~~our~~shipments. ~~inability~~The toincrease ~~obtain~~in ~~assets~~the ~~required~~Training tosegment ~~conduct~~was ~~trainings~~largely due to ~~lack~~a ofspecific ~~funding~~government ascontract ~~well~~which occurs every two years that has higher profit margins as ~~timing~~we of provide training ~~exercises~~using ~~and~~ground atarget $0vehicles.7 ~~million~~The decrease in revenue in the Avionics segment ~~due~~reflects our strategic decision to ~~product~~delay ~~mix~~investments in R&D and athe commercialization of higher-margin products, particularly those targeting the general ~~reduction~~aviation and multi-engine aircraft markets, while prioritizing resources toward drone production. Training segment revenue continues to be impacted by our decision to defer aircraft acquisitions necessary to conduct certain programs as we focus capital on scaling our drone operations in response to growing market demand. ofWe ~~existing~~expect ~~products~~to resume investment in the Avionics and Training segments now that we have completed the IPO.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, the $43.7 million increase in revenue was primarily due to a $46.7 million increase in revenue in the Drones segment, largely caused by an increase in drone shipments and support revenue. Increased drone sales were driven by market entry strategies to target NATO member countries, as we believe that drones can be a key component of NATO countries’ defense spending plans to meet their 2% GDP contribution target. The overall increase was partially offset by a $2.1 million decrease in revenue in the Training segment and a $0.7 million decrease in revenue in the Avionics segment. These declines were the result of the same capital prioritization described above — namely, the deferral of asset purchases and R&D investments in both segments while we focused near-term efforts on scaling drone production, which offered the most immediate revenue and margin opportunity. We expect to accelerate growth in both Avionics and Training once sufficient capital is deployed.

Cost of Revenue

For the ~~year~~three months ended ~~December~~June 3130, ~~2024~~2025 compared to ~~the year ended December 31~~2024, ~~2023,~~ cost of revenue increased by $105.3 5 million primarily due to ana $116.50 million and a $0.1 million increase in cost of revenue within the Drones ~~segment~~and ~~due~~Training tosegment, ~~increased sales~~respectively, ~~partially~~ offset by a decrease of $0.96 million within ~~decrease from~~ the ~~Training~~Avionics segment. ~~due~~Gross tomargin ~~the~~was ~~decrease~~61.2% induring ~~revenue~~the ~~described~~three ~~above.~~months ~~Gross~~ended ~~margin~~June ~~was~~30, ~~67.1%~~2025 ~~in 2024~~ compared to 5759.60% during the same period in ~~2023~~2024. This 92.52% -point ~~improvement~~increase in gross margin was primarily attributable to a 30.5% increase in the ~~Drones~~ Training segment ~~which~~margin ~~improved~~due ~~its~~to the ~~margin~~higher byprofitability 3of the ground target vehicles contract and a 7.12% ~~points~~increase in the Avionics segment margin due to ~~economies~~favorable ofoperating variances. ~~scale~~These ~~with~~increases ~~both~~were ~~production~~offset ~~efficiencies~~by ~~and~~an ~~negotiating~~8.7% ~~better~~decrease in the margin within the Drones segment primarily due to product discounting ~~pricing~~and ~~with~~the ~~suppliers~~mix of products sold during the period.

For the six months ended June 30, 2025 compared to 2024, cost of revenue increased by $5.1 million primarily due to a $6.1 million and a $0.1 million increase in cost of revenue within the Drones and Training segment, respectively, offset by a decrease of $1.1 million within the Avionics segment. Gross margin remained relatively flat at approximately 60.4% and 60.6% during the six months ended June 30, 2025 and 2024, respectively, with the increases in margins within the Training and Avionics segment being partially offset by the decrease in the Drones segment margin as discussed above.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, cost of revenue increased by $10.3 million primarily due to an $11.5 million increase in the Drones segment due to increased sales, partially offset by a $0.9 million decrease from the Training segment due to the decrease in revenue described above. Gross margin was 67.1% in 2024 compared to 57.6% in 2023. This 9.5%-point improvement in gross margin was primarily attributable to the Drones segment which improved its margin by 3.1% points due to economies of scale with both production efficiencies and negotiating better pricing with suppliers.

Operating Expenses

Research and Development

For the ~~year~~three months ended ~~December~~June 3130, ~~2024~~2025 compared to 2024, R&D expense increased $0.9 million primarily due to a $1.1 million increase in personnel costs within the ~~year~~Drones segment with offsetting decreases in personnel costs within the Electric Air Mobility and Avionics segments. For the six months ended ~~December~~June 3130, ~~2023~~2025 compared to 2024, R&D expense increased $1.35 million primarily due to a $01.97 million increase in personnel costs ~~and~~within athe ~~$0.2~~Drones ~~million~~segment ~~increase in~~with ~~consulting~~offsetting ~~fees~~decreases ~~for~~in ~~product~~personnel ~~development~~costs within the ~~Drones~~Electric ~~segment~~Air Mobility and Avionics segments.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, R&D expense increased $1.3 million primarily due to a $1.0 million increase in personnel costs and a $0.2 million increase in consulting fees for product development within the Drones segment.

Sales and Marketing

For the three months ended June 30, 2025 compared to 2024, sales and marketing expense increased $0.3 million primarily due to a $0.3 million increase in personnel costs within the Drones segment. For the six months ended June 30, 2025 compared to 2024, sales and marketing expense increased $0.5 million primarily due to a $0.5 million increase in personnel costs within the Drones segment.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, sales and marketing expense increased $1.0 million primarily due to a $0.5 million increase in personnel costs and a $0.8 million increase in sales commissions and bonuses within the Drones segment, partially offset by a $0.3 million decrease within Avionics due to cost reduction initiatives in the business.

General and Administrative

For the ~~year~~three months ended ~~December~~June 3130, ~~2024~~2025 compared to ~~the year ended December 31~~2024, ~~2023,~~ general and administrative expense increased $025.60 million primarily due to a $513.03 million increase ~~within~~due ~~the~~to ~~Drones~~corporate ~~segment,~~costs ~~partially~~which ~~offset~~included ~~by a~~ $06.48 million ~~decrease~~ ~~within~~of ~~the~~equity ~~Avionics segment~~compensation, a $0.75 million ~~decrease~~of ~~within~~bonus ~~the~~compensation, $1.0 ~~Training~~million ~~segment,~~of aadvisory services and $1.23 million ~~decrease within~~of ~~the~~legal ~~Electric~~settlement ~~Air~~accruals, ~~Mobility~~all ~~segment~~of ~~and~~which awere contingent upon the IPO, $2.10 million increase ~~decrease~~ in incentive and consulting fees at the corporate ~~costs.~~level ~~Increases~~related ~~within~~to the ~~Drones~~expansion ~~segment~~of ~~were primarily~~the ~~due~~Drones tosegment aand $1.27 million ~~increase~~of inother corporate ~~personnel~~ costs,. There was also a $110.41 million increase inwithin ~~bonuses,~~the Training segment that was primarily attributable to equity compensation, a $1.06 million increase ~~in consulting~~within ~~fees~~the ~~for~~Avionics ~~assistance~~segment inthat ~~branding~~was ~~and~~primarily ~~rolling~~attributable ~~out~~to ~~products~~equity ~~and~~compensation, ~~services into new markets~~ and ~~other~~a ~~expansion costs~~$0. ~~Decreases~~4 million increase within the ~~Avionics~~Drones segment, ~~Training~~partially ~~and~~offset ~~Electric~~by ~~Air~~a ~~Mobility~~$0.4 ~~segments~~million ~~and~~decrease ~~corporate~~within ~~costs~~the ~~were~~Electric ~~due~~Air toMobility ~~cost reduction initiatives in the business~~segment.

For the six months ended June 30, 2025 compared to 2024, general and administrative expense increased $25.3 million primarily due to a $13.1 million increase due to corporate costs which included $6.8 million of equity compensation, $0.5 million of bonus compensation, $1.0 million of advisory services and $1.3 million of legal settlement accruals, all of which were contingent upon the IPO, $2.6 million increase in incentive and consulting fees at the corporate level related to the expansion of the Drones segment and $0.9 million of other corporate costs. There was also a $1.5 million increase within the Drones segment, a $10.0 million increase within the Training segment, and a $1.5 million increase within the Avionics segment partially offset by a $0.8 million decrease within the Electric Air Mobility segment. Increases within the Drones segment were primarily due to a $1.5 million increase in personnel and other costs. Increases within the Avionics segment and Training segment were primarily attributable to equity compensation. The $0.8 million decrease within the Electric Air Mobility segment was due to cost reduction initiatives in the business.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, general and administrative expense increased $0.6 million primarily due to a $5.0 million increase within the Drones segment, partially offset by a $0.4 million decrease within the Avionics segment, a $0.7 million decrease within the Training segment, a $1.2 million decrease within the Electric Air Mobility segment and a $2.1 million decrease in corporate costs. Increases within the Drones segment were primarily due to a $1.3 million increase in personnel costs, a $1.4 million increase in bonuses, a $1.1 million increase in consulting fees for assistance in branding and rolling out products and services into new markets and other expansion costs. Decreases within the Avionics, Training and Electric Air Mobility segments and corporate costs were due to cost reduction initiatives in the business.

Goodwill Impairment

For the year ended December 31, 2024, we recorded $38.0 million of goodwill impairment. Primary factors leading to the impairment were the continuation of funding delays which resulted in the change of projected cash flows within the Training and Electric Air Mobility segments. See “—Critical Accounting Policies and Estimates—Goodwill” for additional information.

Interest Expense, Net

For the ~~year~~three months ended ~~December~~ 31June 30, ~~2024~~2025 ~~compared~~and ~~to the year ended December 31~~2024, ~~2023,~~we had interest expense, net, ~~increased~~of $128.10 million ~~primarily due to a $10.5 million debt extinguishment charge~~ and a $01.30 million, ~~fair value adjustment on Investor Notes at fair value~~respectively. ~~During~~For ~~2024,~~the ~~certain~~six ~~Investor~~months ~~Notes~~ended ~~were~~June ~~amended which resulted in significant modifications of these Investor Notes. In accordance with ASC 470-50~~30, as2025 ~~this significant modification created an election date for the fair value option~~ and ~~as the fair value election is applied on an instrument-by-instrument basis~~2024, we ~~chose~~had tointerest ~~record~~expense, ~~such~~net, ~~Investor Notes at fair value beginning on the modification date in October 2024. See further details~~ of ~~the Investor Notes at fair value in Note 2 to our consolidated financial statements included elsewhere in this prospectus~~$9.3 ~~Remaining~~million ~~changes~~and ~~included a~~ $1.92 million ~~increase in interest within the Drones segment~~, ~~offset~~respectively. ~~primarily~~The by2025 ainterest ~~$0.5~~was ~~million~~primarily ~~decrease~~attributable into the ~~Electric~~interest ~~Air~~paid ~~Mobility~~in ~~segment~~shares ~~for~~on ~~non-recurring accretion of deferred compensation assumed as part of~~ the ~~Jaunt~~investor ~~acquisition~~notes ~~and~~which atotaled $06.37 million ~~decrease in both the Training~~ and ~~Avionics~~additional ~~segments~~interest aspaid on ~~amounts~~borrowings ~~owed~~with toWebBank ~~FCCB~~ and ~~amounts owed~~Libertas ~~under~~Funding, ~~Aspen’s~~LLC ~~credit facility were reduced by payments during 2024~~(“Libertas”). The 2024 interest inwas ~~the~~primarily ~~Drones segment is~~ attributable to ~~amendments~~ ~~to the Sky-Watch Promissory Note, entered into in March and June of 2024, and earnouts requiring us to pay~~ interest on ~~the~~accrued ~~amounts due to the holders of the Sky-Watch Promissory Note beginning~~ on ~~January~~investor 1, 2024 and payments to the holders of the Sky-Watch earnouts beginning on April 1, 2024, as well as the accretion of the most recent earnout as described in Note 18 to our consolidated financial statements included elsewhere in this prospectusnotes.

For the year ended December 31, 2024 compared to the year ended December 31, 2023, interest expense, net, increased $12.1 million primarily due to a $10.5 million debt extinguishment charge and a $0.4 million fair value adjustment on Investor Notes at fair value. During 2024, certain Investor Notes were amended which resulted in significant modifications of these Investor Notes. In accordance with ASC 470-50, as this significant modification created an election date for the fair value option and as the fair value election is applied on an instrument-by-instrument basis, we chose to record such Investor Notes at fair value beginning on the modification date in October 2024. See further details of the Investor Notes at fair value in Note 2 to our consolidated financial statements included elsewhere in this prospectus. Remaining changes included a $1.9 million increase in interest within the Drones segment, offset primarily by a $0.5 million decrease in the Electric Air Mobility segment for non-recurring accretion of deferred compensation assumed as part of the Jaunt acquisition and a $0.3 million decrease in both the Training and Avionics segments as amounts owed to FCCB and amounts owed under Aspen’s credit facility were reduced by payments during 2024. The interest in the Drones segment is attributable to amendments to the Sky-Watch Promissory Note, entered into in March and June of 2024, and earnouts requiring us to pay interest on the amounts due to the holders of the Sky-Watch Promissory Note beginning on January 1, 2024 and payments to the holders of the Sky-Watch earnouts beginning on April 1, 2024, as well as the accretion of the most recent earnout as described in Note 18 to our consolidated financial statements included elsewhere in this prospectus.

Gain on extinguishment of debt, net

For the three months and six months ended June 30, 2025, we had a gain on debt extinguishment, net of $15.6 million which was the result of the partial settlement in equity of the Aspen Notes which resulted in a $13.1 million gain and a $5.7 million gain on settlement of the Investor Notes at fair value, partially offset by losses on debt extinguishment of a combined $3.2 million for WebBank and Libertas.

Other Income (Expense), Net

For the ~~year~~three months ended ~~December~~ 31June 30, 2025 compared to 2024, we had $220.21 million of other income, primarily due to ~~the~~$17.5 ~~decrease~~million inof ~~the~~income from fair value ofadjustments ~~the~~on ~~Jaunt~~contingent ~~Contingent Arrangement,~~consideration asthat ~~compared~~was toresolved in conjunction with the IPO and $~~18.~~1.8 million of ~~other~~income ~~expense~~from a ~~during~~fair value adjustment on the ~~year~~warrants ~~ended~~to ~~December~~purchase ~~31,~~our ~~2023,~~common ~~which~~stock ~~was~~at ~~primarily~~an ~~due~~exercise toprice ~~the increase~~of in$0.02 per share (the ~~fair~~“Libertas ~~value~~Warrants”), net of a $0.6 million contingency recorded related to the ~~Sky-Watch~~Aspen ~~earnouts~~Contingent Debt as compared to $1.5 ~~Other~~million ~~income~~of (other expense), ~~net~~during ~~also~~the three ~~includes~~months ~~the~~ended ~~change~~June in30, ~~the~~2024, ~~fair~~which ~~value~~was ofprimarily due to the ~~contingent~~ ~~promissory~~increase ~~notes~~in ~~with~~the ~~certain~~fair value of the ~~Acquired~~Jaunt ~~Companies~~Contingent Arrangement.

For the six months ended June 30, 2025 compared to 2024, we had $22.7 million of other income, primarily due to $20.3 million of income from fair value adjustments on contingent consideration, $1.8 million of income from a fair value adjustment on the Libertas Warrants, net of a $0.6 million contingency recorded related to the Aspen Contingent Debt as compared to $1.8 million of other expense during the six months ended June 30, 2024, which was primarily due to the increase in the fair value of the Jaunt Contingent Arrangement.

For the year ended December 31, 2024, we had $2.2 million of other income, primarily due to a decrease in the fair value of the Jaunt Contingent Arrangement, as compared to $18.1 million of other expense during the year ended December 31, 2023, which was primarily due to an increase in the fair value of the Sky-Watch earnouts. Other income (expense), net also includes the change in the fair value of the contingent promissory notes with certain of the Acquired Companies.

Income Tax Expense

For the three months ended June 30, 2025 and 2024, our income tax expense was $2.1 million and $0.4 million, respectively. For the six months ended June 30, 2025 and 2024, our income tax expense was $2.3 million and $1.4 million, respectively. Tax expense for both periods was primarily attributable to Sky-Watch generating positive pre-tax income.

For the year ended December 31, 2024, our income tax expense was $9.2 million and our effective tax rate was 39.9%. The $9.2 million tax expense for the year ended December 31, 2024 was primarily attributable to Sky-Watch generating positive pre-tax income. The primary drivers of our effective tax rate consisted of the full valuation allowance positions taken by our U.S. and Canadian entities and the profit generated by our entities in other jurisdictions, mainly Denmark. On a worldwide basis, while our profit before tax was minimal, it represented significant losses in the United States and significant profits in Denmark, resulting in a high effective tax rate. For the year ended December 31, 2023, the Company’s income tax expense was $2.3 million and the effective tax rate was 7.6%.

Liquidity and Capital Resources

As of ~~December~~June 3130, ~~2024~~2025, we had cash and restricted cash of $2040.95 million, of which $0.2 million was either restricted or was designated exclusively for Sky-Watch operations, and a working capital ~~deficit~~ of $4712.6 million. ~~These conditions raise substantial doubt about our ability to continue as a going concern.~~

Over the next twelve months, we expect to finance our operations with operating revenue from our commercial operations, subsidiary financing of operations, short-term debt financing, private sales of equity securities, and the proceeds from this offering. Additionally, pursuant to the terms of their acquisition agreements, our subsidiaries are obligated to obtain independent financing, such as through credit facilities, as necessary for their operations on a subsidiary level. Debt at the subsidiary level ~~will~~was be refinanced and consolidated in in connection with ~~this~~the ~~offering~~IPO.

87Pending the closing of this offering, we will continue to operate with nominal cash flow, as we have historically. We believe the proceeds of this offering, together with our cash and restricted cash, is expected to fund our growth strategies and business objectives into through the next 12 months. If we are unable to obtain a sufficient amount of financing to support all of our operations, we will prioritize deploying resources to the segments that generate the most revenue and have the potential for the greatest long-term growth. Specifically, we will focus on Drones, Avionics and Training for short-term revenue production and Electric Air Mobility as the driver of long-term growth.

Pending the closing of this offering, we will continue to operate with nominal cash flow, as we have historically. We believe the proceeds of this offering, together with our cash and restricted cash, is expected to fund our growth strategies and business objectives into . If we are unable to obtain a sufficient amount of financing to support all of our operations, we will prioritize deploying resources to the segments that generate the most revenue and have the potential for the greatest long-term growth. Specifically, we will focus on Drones, Avionics and Training for short-term revenue production and Electric Air Mobility as the driver of long-term growth.

Investor Notes

As of ~~December~~June 3130, ~~2024~~2025, our Investor Notes ~~include~~had third party obligations of $3.0 million of Investor Notes as described within Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus, of which $40.2 million was repaid in July of 2025 and the remaining $2.8 million is due 190 days from the IPO; $3.8 million of Investor Notes as described in Note 1812 ofto our unaudited condensed consolidated financial statements included elsewhere in this prospectus, which are due 190 days from the IPO; and $133.8 million of Investor Notes which we have elected to record using the fair value election as further described in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this prospectus. ~~These~~During July 2025, we repaid $2.1 million of the Investor Notes at ~~consist~~fair value and amended the remaining notes such that the remaining $1.8 million, inclusive of a $0.1 million extension fee, is due December 16, 2025. During the quarter ended June 30, 2025, we issued 1.1 million shares and paid $0.6 million related to the Investor ~~following:~~Notes.

● Notes totaling $4.2 million that include a one-time interest charge equal to 100% of the principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with 110% of the principal to be paid in cash on the maturity date, which is 190 days following the closing of this offering, and accruing interest at a rate of 12% per annum from the closing of this offering. ● Notes totaling $0.6 million that include a one-time interest charge equal to 100% of the principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with 100% of the principal to be paid in cash on the maturity date, which is 190 days following the closing of this offering and accruing interest at a rate of 12% per annum from the closing of this offering. ● Notes totaling $0.2 million that include a one-time interest charge equal to 115% of the principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with the principal to be paid on the maturity date, which is 190 days following the closing of this offering and accruing interest at a rate of 15% per annum from the closing of this offering. ● Notes totaling $0.5 million that include a one-time interest charge equal to 125% of the aggregate principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with the principal to be paid on the maturity date, which is 190 days following the closing of this offering and accruing interest at a rate of 12% per annum from the closing of this offering. ● Notes totaling $0.6 million that include a one-time interest charge equal to 50% of the principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with the principal, to be paid on the maturity date, which is 190 days following the closing of this offering and accruing interest at a rate of 12% per annum from the closing of this offering. ● Notes totaling $0.2 million that include a one-time interest charge equal to 150% of the aggregate principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with the principal to be paid on the maturity date, which is 190 days following the closing of this offering and accruing interest at a rate of 12% per annum from the closing of this offering. ● Notes totaling $0.1 million that include a one-time interest charge equal to 100% of the aggregate principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with 110% of the principal to be paid on the maturity date, which is 30 days following the closing of this offering and accruing interest at a rate of 12% per annum from the closing of this offering. ● A note totaling $0.1 million that includes a one-time interest charge equal to 100% of the aggregate principal amount, contingently payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering, with 120% of the principal to be paid on the earlier of a March 31, 2025 maturity date or 30 days subsequent to the closing of this offering, and accruing interest at a rate of 15% per annum from either the date of the note through March 31, 2025 if this offering is not completed or for the 30 days subsequent to the closing of this offering. ● Notes with a fair value of $2.9 million, of which 120% of the $1.0 million principal is due at the earlier of March 31, 2025 or 30 days subsequent to the closing of this offering, with a stock premium of , payable in shares of our common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) immediately prior to the closing of this offering. Interest accrues at a rate of 15% per annum from the date of the note through March 31, 2025 and is payable 30 days after the closing of this offering. An additional 0.4 million shares of our common stock will be issued if we do not complete this offering by March 31, 2025.

● Notes with a fair value of $11.0 million, of which include a one-time interest charge equal to $9.4 million, payable in shares of our common stock immediately prior to the closing of this offering, with $1.6 million in principal to be paid on the earlier of (a) 5 days subsequent the closing of this offering or capital raise of at least $10 million and (b) March 31, 2025 and with interest accruing from the date of the notes at a rate of 12% per annum through the maturity date. Such notes at fair value have a term whereby the number of shares issued as interest charge is calculated using an enterprise value of $770 million, which shall be increased by a factor of 1.25x if our valuation is less than $770 million at the closing of this offering. An additional 0.1 million shares of our common stock will be issued if this offering is not completed prior to March 31, 2025. ● Notes totaling $0.5 million, which accrue interest at a rate of 10.5% per annum, with the principal and interest to be paid in cash on the maturity date, which is the earlier of the fifth business day following the closing of this offering or the closing of one or more financing transactions with an aggregate value of at least $35 million. ● A note totaling $0.1 million with a maturity date of March 31, 2025, which includes a contingent interest charge equal to $50,000 payable in shares of common stock (assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus) which is to be paid immediately prior to the closing of this offering.

Dangroup Incentive Agreement

In June 2024, we entered the Dangroup Incentive Agreement with Dangroup, whereby we agreed to pay Dangroup 20% of Sky-Watch’s EBITDA as as an incentive bonus for their continued involvement in Sky-Watch’s governance, management and/or other operations, commencing on on January 1, 2025 for an initial term of five years, which shall renew upon mutual agreement of the parties. In December 2024, we ~~amended~~ amended the Dangroup Incentive Agreement, whereby we agreed to transfer to Dangroup shares of our common stock immediately prior to the completion of ~~this~~the ~~offering~~IPO such that Dangroup’s ownership would be increased to 5% of our capital stock on a fully diluted basis. During the six months ended June 30, 2025, we issued 0.5 million shares to Dangroup as a result of this agreement.

Cash Flows

The following summarizes our cash flows for the periods indicated:

	Year Ended December 31,						Six Months Ended June 30,
(in thousands)	2024			2023			2025			2024
Net cash provided by operating activities	$	21,485		$	22,106
Net cash provided by (used in) operating activities	$	21,485		$	22,106		$	(30,755	)		(7,829	)
Net cash used in investing activities		(789	)		(836	)		(1,067	)		(454	)
Net cash used in financing activities		(10,583	)		(9,288	)
Net cash provided by (used in) financing activities		(10,583	)		(9,288	)		49,614			746

~~Net Cash Provided by Operating Activities~~67

Net Cash Provided by (Used in) Operating Activities

Net cash used in operations for the six months ended June 30, 2025 totaled $30.8 million, and was primarily due to net income of $3.9 million and positive non-cash adjustments including stock-based compensation, non-cash interest, legal settlement, and depreciation and amortization, offset by negative non-cash adjustments of gains of IPO transactions, debt extinguishment and fair value adjustments of contingent consideration and warrant liability and working capital adjustments, primarily consisting of the changes in accounts receivable, accounts payable, accrued expenses and other long-term liabilities and deferred revenue. Net cash used in operations for the six months ended June 30, 2024 totaled $7.8 million which was due to a net loss of $7.6 million and a change in working capital adjustments, primarily the change in deferred revenue, which was partially offset primarily by a positive non-cash adjustment of depreciation and amortization.

Net cash provided by operations for the year ended December 31, 2024 totaled $21.5 million, and was primarily due to positive non-cash adjustments, including goodwill impairment, depreciation and amortization, non-cash loss on debt extinguishment, and stock-based compensation, net of a negative non-cash adjustment for change in fair value of contingent consideration, offset by working capital adjustments, primarily consisting of the changes in accounts receivable, inventory, prepaid expenses, net of changes in accounts payable, accrued expenses and other long-term liabilities and deferred compensation partially offset by a net loss of $38.7 million. Net cash provided by operations of $22.1 million during the year ended December 31, 2023 was primarily due to positive non-cash adjustments, primarily the change in fair value of contingent consideration and depreciation and amortization, and working capital adjustments, primarily from increases in deferred revenue and accounts payable, accrued expenses and other long-term liabilities, partially offset by a net loss of $32.5 million.

Net Cash Used in Investing Activities

Cash of $1.0 million and $0.5 million was used in investing activities during the six months ended June 30, 2025 and 2024, respectively, to purchase property and equipment and intangible assets.

Cash of $0.8 million was used in investing activities during the years ended December 31, 2024 and 2023 to purchase property and equipment and intangible assets.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities during the six months ended June 30, 2025 was $49.6 million primarily due to $61.5 million of proceeds from the IPO, net of issuance costs, $8.5 million of proceeds from the Libertas Warrants and WebBank loans that were partially offset by $14.8 million of debt repayments on borrowings and related borrowings, $3.3 million of contingent consideration payments and $2.2 million in payments due to seller. Net cash provided by financing activities during the six months ended June 30, 2024 of $0.7 million was primarily due to $2.5 million proceeds from Investor Notes offset by repayments on borrowings and amounts paid to seller.

Net cash used in financing activities during the year ended December 31, 2024 was $10.6 million, primarily due to payments made to the sellers of Sky-Watch that were partially offset primarily by the proceeds from borrowings (including related party borrowings), net of repayments. Net cash used in financing activities during the year ended December 31, 2023 of $9.3 million was primarily due to payments on contingent consideration and amounts due to the sellers of Sky-Watch.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions. We believe that of our significant accounting policies, which are described in Note 1 “The Company and Summary of Significant Accounting Policies” to our consolidated financial statements included elsewhere in this prospectus, the following accounting policies and specific estimates involve a greater degree of judgment and complexity. Accordingly, these are the policies and estimates we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations:

● the standalone selling price (“SSP”) of performance obligations for revenue contracts with multiple performance obligations; ~~● the fair value of assets acquired and liabilities assumed for business combinations;~~

●

the fair value of assets acquired and liabilities assumed for business combinations;

●

goodwill impairment;

● impairment of indefinite lived and long-lived assets; ~~● valuation of debt;~~

91● valuation of debt;

● stock-based compensation; ~~● inventory valuation; and~~

●

inventory valuation; and

●

the recognition, measurement and valuation of current and deferred income taxes and uncertain tax positions.

As described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. We base our estimates and judgments on historical experience, industry benchmarking information, and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from these estimates and any such differences may be material to our consolidated financial statements.

Revenue Recognition

We recognize revenue when, or as, we satisfy performance obligations by transferring promised products or services to our customers in an amount that reflects the consideration we expect to receive. We apply the following five steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when a performance obligation is satisfied. We account for a contract with a customer when there is a legally enforceable contract, the rights of the parties are identified, the contract has commercial terms, and collectability of the contract consideration is probable.

For certain sales, we have contracts with customers that include multiple performance obligations. For these contracts, we account for individual performance obligations separately, by allocating the contract’s total transaction price to each performance obligation in an amount based on the relative SSP of each distinct good or service in the contract. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions. Determining whether products or services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Revenue is recognized when control of the promised services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to receive in exchange for those services. Our contracts do not include highly variable components. The timing of revenue recognition, billings, and cash collections can result in billed accounts receivable, unbilled receivables (contract assets), and deferred revenue (contract liabilities). The costs to obtain contracts, primarily commission expenses, are expensed when incurred.

Amounts that are invoiced are recorded in accounts receivable and revenue or deferred revenue, depending on whether the revenue recognition criteria have been met. A large portion of our sales result in partial prepayments prior to shipment from customers. Otherwise, customer invoices generally have payment terms of net 30 days and do not have a significant financing component.

Our revenue is derived from various sources: (i) avionics products consisting primarily of hardware with embedded firmware sold to an authorized dealer network and avionics and GNSS products sold to OEMs, (ii) R&D projects, (iii) sales-based royalties related to GNSS technology licensed to OEMs, (iv) consultation and training services related to aerial integration and close air support providing the latest tactics, technique, and procedures to incorporate contract close air support/intelligence surveillance reconnaissance with video downlink systems into tactical operations, (v) technology and equipment sales (vi) mUAS, commonly referred to as “commercial drones,” sales, including hardware, software, training, support and product service, and (vii) drone services, including surveys, imaging, security, and other drone applications.

Business Combinations

We account for acquired businesses using the purchase method of accounting. Under the purchase method, our consolidated financial statements include the financial results of an acquired business starting from the date the acquisition is completed. In addition, the assets acquired, liabilities assumed, and any contingent consideration must be recorded at the date of acquisition at their respective estimated fair values, with any excess of the purchase price over the estimated fair values of the net assets acquired recorded as goodwill. Significant judgment is required in estimating the fair value of contingent consideration and intangible assets and in assigning their respective useful lives. Accordingly, we typically obtain the assistance of third-party valuation specialists for significant acquisitions. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain.

We use a discounted cash flow analysis given probability and estimated timing of payout to determine the fair value of contingent consideration on the date of acquisition. Significant changes in the discount rate used could affect the accuracy of the fair value calculation. Contingent consideration is adjusted based on experience in subsequent periods and the impact of changes related to assumptions are recorded in operating expenses as incurred.

We typically use an income method to estimate the fair value of intangible assets, which is based on forecasts of the expected future cash flows attributable to the respective assets. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows (including expected growth rates and profitability), the underlying product or technology life cycles, the economic barriers to entry, and the discount rate applied to the cash flows. Unanticipated market or macroeconomic events and circumstances may result in a triggering event for which we would test for impairment.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. We manage our business primarily based upon four operating segments: (i) Drones, (ii) Avionics, (iii) Training and (iv) Electric Air Mobility, each of which represents a reportable segment. We have determined that each reportable segment represents a reporting unit and, in accordance with ASC 350, each reporting unit requires an allocation of goodwill. We will continue to reevaluate reportable and operating segments.

Goodwill is not amortized and is tested at the reporting unit level for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We have selected October 1st as the date to perform our annual impairment test. In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from our business. If these estimates or their related assumptions change in the future, we may be required to record an impairment for these assets. Management may first evaluate qualitative factors to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if an impairment test is necessary. Management may choose to proceed directly to the evaluation, bypassing the initial qualitative assessment. The impairment test involves comparing the fair value of the reporting unit to which goodwill is allocated to its net book value, including goodwill. A goodwill impairment loss would be the amount by which a reporting unit’s carrying value exceeds its fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We recorded goodwill impairment charges of $38.0 million during the year ended December 31, 2024 as described ~~within~~ within Note 5 to our consolidated financial statements included elsewhere in this prospectus. No goodwill impairment charges were recorded for the six months ended June 30, 2025 and 2024 or for the year ended December 31, 2023.

2023 Impairment Test

In 2023, due to delays we experienced in securing financing, we performed a quantitative assessment on goodwill for all of our reporting units except Avionics, as no goodwill had been allocated to this reporting unit. The fair value of the reporting units for which we performed quantitative impairment tests was estimated using an income approach, which incorporates the use of the discounted cash flow (“DCF”) method. Financial projections used by management in performing quantitative impairment tests required the use of significant estimates and assumptions specific to the reporting unit as well as those based on general economic conditions. Factors specific to each reporting unit included revenue growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management.

The table below displays the fair value for each reporting unit tested in the 2023 annual impairment test. We determined that the fair value of the Drones and Training reporting units substantially exceeded their respective carrying values. While the Electric Air Mobility reporting unit fair value was not substantially in excess of its carrying value, the fair value of the Electric Air Mobility reporting unit exceeded its carrying value by $1211.38 million, or 2.32%, and accordingly, our goodwill was not impaired.

Drones

Electric Air

Mobility

Training

Goodwill carrying value as of October 1, 2023

109.9 million

451.4 million

36.5 million

Fair value of reporting unit as of October 1, 2023

151.3 million

545.2 million

97.0 million

Carrying value of reporting unit as of October 1, 2023

96.1 million

533.4 million

46.6 million

Drones

Electric Air Mobility

Training

Goodwill carrying value as of October 1, 2023

109.9 million

451.4 million

36.5 million

Fair value of reporting unit as of October 1, 2023

151.3 million

545.2 million

97.0 million

Carrying value of reporting unit as of October 1, 2023

96.1 million

532.9 million

46.6 million

Specific to the Electric Air Mobility segment’s projections as of our October 1, 2023 testing date, projected revenue was primarily updated from our initial revenue estimates to reflect projected aircraft production from 2027 to 2028. As of our October 1, 2023 testing date, no R&D revenue was assumed for the period 2024 to 2027 as the Electric Air Mobility segment had been informed that it was not selected for the Defense Advanced Research Projects Agency program. Our projected revenue estimates in years 1 and 2 of commercialization as of October 1, 2023 increased as compared to initial revenue estimates for the same two-year period. Current projections were updated to reflect an assumed selling price in line with the negotiated pricing noted in nonbinding letters of intent and revised production levels based on expected capacity over the same two-year period.

Revenue projections were based on increasing production quantities year-over-year that max out at approximately 3,000 units per year at a single facility, and a per-unit sales price that increases over time, assuming a 1.5% escalation rate per year.

EBITDA projections as of October 1, 2023 during the two years post commercialization were developed using revised estimates of manufacturing costs, production hours per unit, learning curves and subsequent efficiencies, and operating costs.

Mid-term and long-term EBITDA projections incorporated economies of scale and synergies, however, changes between projections as of October 1, 2023 and our initial projections are not significant once maximum manufacturing conditions are reached.

As to the degree of uncertainty associated with our assumptions, we believed our long-term projected revenue was reasonable given a sales price supported by non-binding letters of intent and a relatively small number of units in comparison to, according to the Morgan Stanley Report, an anticipated global market ranging between an expected $1 trillion with an upside of $4.4 trillion by 2040. There was a higher degree of uncertainty in projected EBITDA as compared to projected revenue, as projected EBITDA included estimates as to future labor and material costs, efficiency rates as to the number of production hours required over time, and synergies.

The most sensitive factor in our analysis was the WACC discount rate. As of October 1, 2023, a 35% WACC discount rate was applied to the Electric Air Mobility segment, which was fairly consistent but still more conservative than the 34% WACC discount rate used as of the acquisition date. The 100 basis-point increase was deemed appropriate due to the development stage of the Electric Air Mobility segment, however, a larger increase was not deemed appropriate due to positive market changes including proof of concept in the market and observations of timing to certification by TCCA. As to the sensitivity of the WACC rate, another hypothetical 100 basis-point increase in the WACC discount rate would have yielded an estimated fair value for the Electric Air Mobility segment below carrying value.

We believe the factors considered in the impairment analysis were reasonable; however, significant changes in any one of our assumptions could have produced a different result and resulted in impairment charges that could have been material to our consolidated financial statements. The fair value of the Electric Air Mobility segment exceeded the carrying value as of October 1, 2023 by $1211.38 million, or 2.32%. While the goodwill of this reporting unit was not currently impaired, we noted that there could be an impairment in the Electric Air Mobility segment in the future as a result of changes in certain assumptions. For example, the fair value of the Electric Air Mobility segment could be adversely affected and may result in an impairment of goodwill if this reporting unit is not able to advance the development of our aircraft and other products, obtain regulatory approvals, and launch and commercialize our products at scale, if the estimated production costs are significantly higher than estimated or if the WACC discount rate is increased.

2024 Impairment Test

As a result of the BCA Transactions being terminated in August 2024 and the continued delays in securing financing, we determined it appropriate to test the fair value of each reporting unit for goodwill impairment as of September 30, 2024 for all of our reporting units except Avionics as no goodwill had been allocated to this reporting unit. We determined that the fair value of the Drones reporting unit substantially exceeded its respective carrying value. The Electric Air Mobility and Training reporting unit fair values indicated goodwill impairment as detailed below.

Drones

Electric Air

Mobility

Training

Goodwill carrying value as of September 30, 2024

115.8 million

451.4 million

36.5 million

Fair value of reporting unit as of September 30, 2024

185.1 million

510.2 million

25.1 million

Carrying value of reporting unit as of September 30, 2024

133.5 million

527.2 million

46.1 million

Impairment as of September 30, 2024

—

17.0 million

21.0 million

Estimates and assumptions varied between each reporting unit depending on the facts and circumstances specific to that reporting unit. The discount rate for each reporting unit is influenced by general market conditions as well as factors specific to the reporting unit. The fair value of the reporting units for which we performed quantitative impairment tests was estimated using an income approach, which incorporates the use of the discounted cash flow method. Projections used require the use of significant estimates and assumptions specific to the reporting unit as well as those based on general economic conditions. Factors specific to each reporting unit include revenue growth, profit margins, terminal value growth rates, capital expenditures projections, assumed tax rates, discount rates and other assumptions deemed reasonable by management. For the 2024 impairment test, the WACC discount rates we used for our reporting units was 30%-35% and the terminal value growth rate was 4%. The terminal value growth rate represents the expected long-term growth rate for our industry, which incorporates the type of services each reporting unit provides as well as the global economy. Other factors influencing the revenue growth rates include the nature of the services the reporting unit provides for its clients, the geographic locations in which the reporting unit conducts business and the maturity of the reporting unit.

Specific to the Electric Air Mobility segment’s projections as of September 30, 2024, projected revenue was revised to include projected aircraft production timing for the Jaunt Journey in 2031 as compared to a previous estimate of 2028 and further incorporated production of a cargo UAV (a smaller cargo derivative of the Jaunt Journey) in 2027. Projected revenue in years 1 and 2 of commercialization of the cargo UAV as of September 30, 2024 were added to our September 30, 2024 projections based on an estimated assumed selling price and expected production levels of approximately 240 units over the two-year period. Projected revenue in years 1 and 2 of commercialization (i.e., 2028 and 2029) of the Jaunt Journey as of October 1, 2023 was based on a sales price that was in line with the negotiated pricing contained in our non-binding letters of intent and projected volume of 630 units over the same two-year period. Following the revision of the estimated commercialization date to 2031, the escalation rate utilized in our original projections continued to be consistently applied. Accordingly, such escalation rate was applied to the original estimated selling price in 2028 for a period of three additional years (i.e., 2028 to 2031). As a result, the sales price in the revised estimated first year of commercialization (2031) increased compared to prior projections. Revenue projections for both programs were based on increasing production quantities year-over-year that max out at approximately 400 units per year for the cargo UAV and 3,000 units per year for the Jaunt Journey at a single production facility, and a per-unit sales price that increases over time assuming a 1.5% escalation rate. The foregoing escalation rate and production volume of the Jaunt Journey remained consistent with prior year projections.

EBITDA projections as of September 30, 2024 and October 1, 2023 were developed using estimates of manufacturing costs, production hours per unit, learning curves and subsequent efficiencies, and operating costs. While mid-term and long-term EBITDA projections at maximum capacity have not significantly changed compared to our prior year testing date of October 1, 2023, the impact of delaying the projected cash flows from the Jaunt Journey as a result of a later expected commercialization date resulted in a decrease in the fair value of the Electric Air Mobility segment, which indicated impairment. Projected EBITDA as of October 1, 2023 gave effect to net research and development costs expected to be incurred between 2024 and 2027 leading up to the commercialization of the Jaunt Journey aircraft and assumed positive EBITDA during the two years following commercialization. Projected EBITDA as of September 30, 2024 gave effect to net research and development costs expected to be incurred (i) between 2025 and 2028 leading up to the commercialization of the cargo UAV and (ii) between 2029 and 2031 leading up to the commercialization of the Jaunt Journey and assumed positive EBITDA during the two years following commercialization. Mid-term and long-term EBITDA margin projections at full rate production were reduced slightly (1-2%) compared to our prior year testing date of October 1, 2023.

EBITDA projections as of September 30, 2024 were also revised to incorporate estimates of manufacturing costs of the cargo UAV, which reduced mid-term and long-term gross margins by approximately 2% at full rate production, as well as estimated efficiencies, which resulted in reduced operating expenses slightly (0.5%-1%) as a percentage of revenue as compared to the October 1, 2023 projections.

While the timing of projected cash flows from the Jaunt Journey has been delayed and as operations now include a plan to produce a cargo UAV, profitability of the Electric Air Mobility segment post-commercialization of the Jaunt Journey has always been part of our projections. We anticipate profitability in the Electric Air Mobility segment commencing in year two following commercialization of the cargo UAV. As to the degree of uncertainty associated with our assumptions, we believe our long-term projected revenue is reasonable given a sales price supported by non-binding letters of intent and a relatively small number of units in comparison to, according to the Morgan Stanley Report, an anticipated global market ~~ranging~~of ~~between an expected~~ $1 trillion ~~and~~ with ana potential upside scenario of $4.4 trillion by 2040. There is a higher degree of uncertainty in projected EBITDA, as compared to projected revenue as projected EBITDA includes estimates as to future labor and material costs, efficiency rates as to the number of production hours required over time, and synergies.

The most sensitive factor in our analysis was the WACC discount rate. As of September 30, 2024, a 33% WACC discount rate was applied to the Electric Air Mobility segment, which is fairly consistent with the 35% WACC discount rate used as of our prior year testing date of October 1, 2023. The 200 basis-point decrease from prior year was deemed appropriate due to more conservative projected long term EBITDA margins as compared to sales in the prior year, regulatory harmonization that has occurred for the industry between the FAA, TCCA, and EASA, advances in electric propulsion, battery density, and autonomous systems which lower remaining technical development risk. While these factors reduce risk to the Electric Air Mobility segment, a larger decrease in the WACC was not deemed appropriate due to delays in funding for development efforts and overall implementation risk that remains similar to October 1, 2023. As to the sensitivity of the WACC rate, another hypothetical 100 basis-point increase in the WACC discount rate would have yielded an additional $46.0 million in goodwill impairment.

We believe the factors considered in the impairment analysis are reasonable; however, significant changes in any one of our assumptions could produce a different result and result in additional impairment charges that could be material to our consolidated financial statements. For example, the fair value of the Electric Air Mobility segment could be adversely affected and may result in an additional impairment of goodwill if this reporting unit is not able to advance the development of our aircraft and other products, obtain regulatory approvals, and launch and commercialize our products at scale, if the estimated production costs are significantly higher than estimated or if the WACC discount rate is increased.

Specific to the Training segment’s projections as of September 30, 2024, we noted a significant decrease in sales and gross margins as a result of not being able to meet contractual demands due to delays in the funding of aircraft. In prior years, government ISR aircraft contracts did not require that the aircraft be able to employ weapons. As those contracts have aged-out, the new requirements for the re-competitions require assets that have the ability to employ training munitions and have been approved by the government to do so. CDI does not possess aircraft that can achieve this requirement; thus, we have either not been awarded or chose not to bid on certain contracts. The projected revenue and margins were revised to include the timing of projected aircraft and investments to be made in flight schools in the short-term (between 2025 and 2028) and then the acquisition of additional aircraft beginning in years after 2029.

EBITDA projections as of September 30, 2024 have not significantly changed compared to our prior year testing date of October 1, 2023, and we do not anticipate any changes until we are able to make more significant investments in aircraft, and at which time we can better leverage our operating expenses. At that point, we anticipate that mid-term and long-term EBITDA margins would increase. The shifting and corresponding discounting of these projections resulted in a significant decrease in the fair value of the Training segment, which indicated impairment.

As to the degree of uncertainty associated with our assumptions, we believe our short-term projected revenue is reasonable given our history with military contract practices and the historical results of flight schools, while our long-term projected revenue is subject to a higher degree of uncertainty. To mitigate this risk, a 30% WACC discount rate was applied to these projections which was consistent with our prior year testing date of October 1, 2023. As to the sensitivity of the WACC rate, another hypothetical 100-basis-point increase in the WACC discount rate would have yielded an additional $3.4 million in goodwill impairment.

We believe the factors considered in the impairment analysis are reasonable; however, significant changes in any one of our assumptions could produce a different result and result in additional impairment charges that could be material to our consolidated financial statements. For example, the fair value of the Training segment could be adversely affected and may result in an additional impairment of goodwill if this reporting unit is not able to purchase the needed aircraft, if the estimated costs for managing the flight schools are significantly higher than estimated or if the WACC discount rate is increased.

Intangible Assets

We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of the acquired business to the respective net tangible and intangible assets. We determine the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses. Intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits are consumed. We capitalize third-party legal costs and filing fees, if any, associated with obtaining patents. Once the patent asset has been placed in service, we amortize these costs over the shorter of the asset’s legal life, generally 20 years from the initial filing date, or its estimated economic life using the straight-line method.

9774

The estimated useful lives for our intangible assets are as follows:

		Estimated useful life
Developed technology		8 to 13 years
Tradenames – definite-lived		4 to 8 years
Customer relationships		3 to 7 years
Patents		up to 20 years

In addition to the long-lived intangible assets, we also had $8.8 million of indefinite lived intangible assets which is primarily the $8.7 million tradename obtained in conjunction with the Jaunt acquisition.

Impairment of Indefinite Lived Assets

Under ASC 350-30-35-18, an intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. In testing for impairment, we define our Asset Groups at the reporting unit level. Under ASC 360-10-35-26 when an asset group is a reporting unit, the asset group includes goodwill. When goodwill and indefinite lived intangibles are included in the long-lived asset group being tested for impairment, the indefinite-lived intangible assets are tested for impairment in accordance with ASC 350-30 first, then the long-lived assets (groups) are tested for impairment in accordance with ASC 360-10, and goodwill is tested for impairment at the reporting unit level in accordance with ASC 350-20 last.

ASC 350-30-35-18A specifies that an entity may first perform a qualitative assessment, as described in this paragraph and paragraphs 350-30-35-18B through 35-18F, to determine whether it is necessary to perform the quantitative impairment test.

When performing the annual impairment test in 2023, we used a qualitative assessment to determine if any facts or circumstances during the period could require a quantitative analysis. When performing a qualitative assessment, we considered factors listed in ASC 350 which includes cost factors, financial performance, legal, regulatory, contractual, political, business, or other factors. Based on our review of these factors, there was no impairment of indefinite lived assets recorded during the years ended December 31, 2022 or 2023.

As a result of the BCA Transactions being terminated in August 2024 and the continued delays in financing, we determined it appropriate to perform a qualitative assessment considering factors listed in ASC 350, which includes cost factors, financial performance, legal, regulatory, contractual, political, business, or other factors. Based on our review of these factors, there was no indication of impairment for the Avionics or Drones segments. However, we determined it appropriate to perform a quantitative analysis on intangible and long-lived assets within the Electric Air Mobility and Training segments. The fair value of the undiscounted cashflows of both the Electric Air Mobility and Training segments was significantly higher than the respective asset group’s carrying value and therefore no impairment charges were required to be recorded for the year ended December 31, 2024.

No impairment charges were recorded during the three or six months ended June 30, 2025 or 2024.

Impairment of Long-Lived Assets

We evaluate long-lived assets, including property and equipment and intangible assets, for impairment in accordance with ASC 360 whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value. Our 2023 evaluation was performed in accordance with ASC 360 and included considerations related to market price, use and condition of the asset, business climate, projections of losses and other factors. While each of these reporting units had an operating loss through October 1, 2023, they continued to project increases in operating performance.

9875

We therefore determined that, given this fact pattern and other considerations, the financial performance did not indicate that it is more likely than not that the long-lived assets of the reporting units were impaired. As such, there was no impairment recorded during the year ended 2023.

As a result of the BCA Transactions being terminated in August 2024 and the continued delays in financing, we determined it was appropriate to perform a qualitative assessment considering factors listed in ASC 350 Intangibles—Goodwill and Other (“ASC 350”) which includes cost factors, financial performance, legal, regulatory, contractual, political, business, or other factors. Based on our review of these factors, there was no indication of impairment for the Avionics or Drones segments. However, we determined it was appropriate to perform a quantitative analysis on intangible and long-lived assets within the Electric Air Mobility and Training segments. The fair value of the undiscounted cashflows of both the Electric Air Mobility and Training segments was significantly higher than the respective asset group’s carrying value and therefore no impairment charges were required to be recorded in 2024.

No impairment charges were recorded during the three or six months ended June 30, 2025 or 2024.

Valuation of Debt

During 2024, certain Investor Notes were amended which resulted in significant modifications of debt. In accordance with ASC 470-50, as ~~this~~ this significant modification was considered an extinguishment and created an election date for the fair value option and as the fair value election is applied on an instrument-by-instrument basis, we chose to record these Investor Notes at fair value beginning on the ~~modification~~ modification date in October 2024. Investor Notes have historically included various interest features in the form of both stock and cash upon the closing of an initial public offering or qualified financing. In conjunction with the IPO, common stock was issued to partially settle the Investor Notes at fair value. As of June 30, 2025, the valuation of the Investor Notes was limited to unpaid cash amounts.

Significant judgment is required in estimating the fair value of debt. Accordingly, we typically obtain the assistance of third-party valuation specialists for valuations. The fair value estimates are based on available historical information and on future expectations and assumptions deemed reasonable by management but are inherently uncertain.

To determine the fair value of Investor Notes, we incorporated the probability of both an IPO and non-IPO scenario and estimated stock pricing through a lattice model. Significant estimates and assumptions inherent in the valuations reflect a consideration of other marketplace participants and include the amount and timing of future cash flows. Significant changes to our assumptions used could affect the accuracy of the fair value calculation.

Inventory Valuation

We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and market conditions. Reductions to the carrying value of inventory are charged to cost of revenue and a new, lower cost basis for that inventory is established. Subsequent changes to facts or circumstances do not result in the restoration or increase in the related inventory value. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Stock-based Compensation

We recognize compensation expense for stock-based awards based on the grant-date estimated fair value of the awards. Options and restricted stock awards may be granted as time-based awards, performance-based awards or combinations of the time-based and performance-based awards. We expense the fair value of its options to employees and non-employees on a straight-line basis over the associated service period for time-based awards, which is generally the vesting period. The performance-based awards begin their period of ratable vesting at the time that we determine that the achievement of the performance thresholds is probable. We account for forfeitures as they occur and does not estimate forfeitures at the time of grant. Ultimately, the actual expense recognized over the vesting period will be for only those options that vest.

Income Taxes

We account for income taxes in accordance with the asset and liability approach method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating losses and tax credit carryforwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more-likely-than-not to be realized.

We evaluate our tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions will more-likely-than-not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. Interest and penalties, if applicable, are recorded in the period assessed as income tax expense.

Off-Balance Sheet Arrangements

As of ~~December~~June 3130, ~~2024~~2025 and ~~2023~~December 31, 2024, we have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets. We do not ~~participate~~ participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable ~~interest~~ interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

9976

BUSINESS

Overview

100

Training. The Training segment currently provides military pilot training and will provide commercial pilot training in the future. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, and JTAC, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and USAF Air Combat Command and are a mandated recipient on a $5.7 billion IDIQ contract. Our personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to bid on mandates. We also plan to offer commercial pilot training and plan to expand our non-military capabilities in response to the global pilot shortage.

Electric Air Mobility. The Electric Air Mobility segment is developing a rotorcraft eVTOL for cargo and passenger use through our Jaunt brand for fixed route flights, on-demand trips, and cargo operations. Our R&D efforts are focused on developing a cargo eVTOL platform, which will be a scaled-down version of our passenger eVTOL platform, and will target the attractive middle mile delivery cargo market. Meanwhile, our long-term R&D efforts are focused on developing a full-scale multi-role eVTOL platform, which will be able to serve both the cargo and passenger markets. We plan to certify our eVTOLs through existing CAR 529 Rotorcraft standards, with our platform including the best attributes of both rotary and fixed wing aircraft. Our patented compound rotorcraft technology, a core point of technological differentiation that will underpin our cargo eVTOL’s commercial capability, has over 300 piloted flight hours on multiple Jaunt demonstrator aircraft. We believe the range and payload capabilities driven by this technology uniquely position us to provide a compelling commercial solution for the eVTOL cargo market. Once developed and certified, we expect our cargo eVTOL program will serve as the foundation of our commercialization efforts, with passenger applications serving as a longer-term secondary initiative.

Our Platform

Our business is thoughtfully interconnected as we seek to leverage each segment’s full capabilities and drive synergies, creating a significant competitive advantage. We are synergistically leveraging our field-proven product track record – particularly through our Drone and Avionics brands – to drive opportunities across our platform. The manufacturing capabilities of our Avionics segment enable us to supply most of our own components for our drone and aircraft systems, including our eVTOL aircraft, which enhances our product quality and reduces production costs. Our deep, long-term relationships with the U.S. government and NATO countries that underpin our Training and Drones segments provide us with access to key decisionmakers, which provides us with new business opportunities. Our Electric Air Mobility platform represents a significant future growth opportunity to expand into cargo and passenger eVTOLs while also providing an OE platform for new products and services across our other segments.

In addition, we are able to utilize our certification capabilities to improve time to market for the introduction of products and services. These offerings leverage our U.S. and international sales and manufacturing capabilities to reduce costs and expand our market footprint. This capability also helps us swiftly integrate new avionics, electronics, and AI into our products, all while sharing the intra-segment R&D insights that drive our high-quality, interconnected products and services.

101

Our Competitive Strengths

We are an at scale, integrated aerospace and defense platform with multiple solutions and services in the high-growth aerospace and defense categories. Our competitive advantages include:

Cross-Platform Strategy Generates Operational and Product Synergies

Fulsome Product Assortment Targeting Actionable Market Opportunities

Talented Management Team Possesses Robust Operational Experience and Deep Private and Public Sector Relationships

102

Exceptional Research and Development that Supports the Potential for Industry-Leading Products

Market Opportunity

The defense industry is affected by geopolitical and security issues. Conflicts in Ukraine, the Middle East, and heightened geopolitical tension in the Pacific region have elevated global security concerns. This has caused many governments to increase their focus on defense and security, leading to a rise in defense spending and a growing willingness to adopt new technologies and solutions. Specifically, beginning in 2014 in response to Russia’s illegal annexation of Crimea and amid broader instability in the Middle East, NATO countries agreed to commit 2% of their national GDP to defense spending to help ensure the continued military readiness of NATO allies. According to NATO, 23all NATO countries are expected to meet or exceed the target of investing at least 2% of GDP in defense in 2024, compared to to only three NATO countries in 2014. Over the past decade, European allies of the United States and Canada have steadily increased their collective investment in defense by 41.3%, and are investing a combined total of more than $430 billion in defense spending in 2024. Moreover, NATO has recently signaled it will increase its defense spending benchmark from its current 2% of GDP target. ~~Current~~Moreover, at the 2025 NATO Summit in The Hague, NATO members adopted a new long-term defense investment commitment: by 2035, member states aim to allocate 5% of GDP annually on combined defense and security-related spending, with at least 3.5% of GDP dedicated to core defense requirements and up to 1.5% of GDP directed to critical infrastructure protection, cyber defense, innovation, and strengthening the defense industrial base. NATO has also reaffirmed its guideline that at least 20% of defense expenditures should go toward major equipment, including associated research and development, to ensure modernization and interoperability. These commitments reflect NATO’s recognition that the “2% guideline” alone is no longer sufficient to meet emerging threats and technological demands. NATO leaders have signaled that higher, sustained investment levels are needed to close capability gaps, accelerate modernization, and support innovation across domains such as artificial intelligence, autonomous systems, and advanced defense technologies. Current NATO Secretary General, Mark Rutte, has acknowledged the “goal of 2%, set a decade ago, will not be enough to meet the challenges of tomorrow” and that NATO members will have to increase spending by “considerably more than 3%.” In order to ensure that these funds are spent in the most effective and efficient way to acquire and deploy modern capabilities, NATO countries have also agreed that at least 20% of defense expenditure should be devoted to major new equipment, including associated R&D perceived as a crucial indicator for the scale and pace of modernization. These tailwinds support the development of a new market leader in the aerospace and defense market, with the emergence of new technologies such as 5G, artificial intelligence, and advanced autonomous vehicles creating new commercial opportunities.

103

In addition, commercial drone use is gaining momentum as multiple industries are incorporating drones into their daily business functions, given the wide range of applications, including monitoring, inspection and surveillance. According to the Grand View Drone Report, it is anticipated that worldwide commercial drone revenues will reach $163.5 billion by 2030. For example, farmers are using drones to inspect and spray their crops, which improves yields, construction sites are adopting drones to survey and monitor land, which improves workplace safety, and companies are using drones to inventory product in factories and warehouses, which improves efficiency. Additionally, drones are being used increasingly to transport and deliver goods. For example, hospitals are deploying drones to deliver critical medicine and other medical supplies to remote and underserved regions, while logistics companies are using drones to transport cargo between locations, expediting deliveries. As the commercial drone industry matures, we believe that aircraft and their components subsystems will become more commoditized, with additional pockets of growth expected in services and service-derivative revenues. The trajectory of commercial drone applications is well-aligned with our business strategy, which includes a focus on commercializing multiple types of value-added drone solutions to meet various end user and industry needs.

Electric Air Mobility. According to the Morgan Stanley Report, it is estimated that the global electric air mobility market may grow to be approximately $55 billion by 2030 and to approximately $1 trillion by 2040. We believe that autonomous aerial cargo is one of the largest unaddressed segments within the EAM market, with an additional actionable opportunity in passenger transportation. We expect both of these segments will provide a substantial market opportunity. While the electric air mobility market is in its nascent stage, we believe that the growing prevalence of e-commerce, rising labor costs in traditional ground transportation, traffic congestion and the continued advancement in AAV technology will lead to growing demand for cargo solutions based on AAVs. In addition, the implementation of government regulations and creation of federal and state incentives has started to meaningfully influence consumer behavior by increasing the focus on emissions standards and targets and leading to greater interest in aircraft electrification. Ultimately, cargo represents the most actionable near-term end market owing to its large commercial opportunity and reduced technological hurdles.

Our Growth Strategies

We are a growing platform built off a successful M&A strategy, with a robust pipeline of future commercial opportunities. Our growth strategies are rooted in a bold and focused vision for the future, with a mix of organic and inorganic growth initiatives. Within each of our segments, there are several opportunities to increase market share and penetrate new business areas.

~~104~~80

Organically grow existing business line capabilities.

Develop and commercialize new products and services and expand certification of new and future products and services.

Our segment specific initiatives are as follows:

●

Drones. We intend to launch U.S. production of our military drones and subsequently seek DoD Blue UAS drone certification, which we currently estimate will take approximately six months to achieve and will allow us to sell drones to the DoD. This certification process involves sponsors in various U.S military branches supporting our product, with full certification essentially contingent on U.S-domiciled production. In addition, we intend to expand our drone and DaaS offerings into new verticals, including agricultural, security, and industrial applications, leveraging our GPS denied technology proposition as the leading edge of our value proposition owing to its inherent product-market fit.

●

105

Leverage Public Sector Relationships and Security Clearances to Drive Business.

Our deep public sector relationships and security clearances enable us to bid on government RFPs and drive brand awareness of our drone, eVTOL, avionics, and training solutions with key military decision makers. For example, members of our management team maintain close relationships with the highest levels of government around the world, including military leaders, ambassadors, and defense attachés from NATO and its allies. Our senior leadership team has also held and/or currently holds positions on various government committees across the FAA, Pentagon, and White House. Key employees also possess extensive military leadership experience having served in U.S. special forces units. This competitive moat grants us enviable access to key growth end markets and unlocks commercial synergies between our various segments.

Partnering with other firms on commercial ventures to drive technology convergence.

Partnerships allow us to expedite development of customer solutions by bringing together critical technologies across the aerospace and defense marketplace. For example, our Sky-Watch brand has critical partnerships with companies such as Palantir and Helsing that have boosted our drone’s capabilities. For our Electric Air Mobility segment, partnerships with have been and will be at the forefront of our eVTOL platform’s integrated and convergent technology advantage - not only for the end-product but also in the areas of manufacturing, engineering and supply chain. New partnerships in AI and machine learning are also being explored in the Drones segment as well as virtual training system partnerships in the Training segment.

Strategically acquire businesses and technologies to enhance our offerings.

Continual investment in software, AI, and machine learning to expand solutions capabilities and increase operational efficiencies.

106

Segment Summary

Drones

The Drones segment develops, manufactures and sells drones and will provide drone services, such as DaaS, for military and commercial end users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. Military applications include reconnaissance, surveillance, and defense services, while commercial applications currently include inspection, survey, mapping, and photography, with future potential expansion into agriculture, weather analysis, conservation, healthcare, search and rescue and construction applications. A critical point of differentiation lies in our drones’ ability to perform in a GPS denied environment, which has numerous military and commercial applications. Moreover, our close feedback loop with in-field operators supports a battlefield relevant capability set. Key market tailwinds include heightened geopolitical instability, increased defense spending, and the evolving realities of the 21^st century battlefield. Our core future initiatives include military manufacturing in the United States to sell our drones to the DoD and expansion of the DaaS business.

Our primary military product, the RQ-35 Heidrun, offers significant advantages over existing micro-ISR drones, because of the combination of its full-autonomy, demonstrated ability to operate in harsh electronic warfare and GPS-denied battlespaces, its long flight time, ease of operation, and robust supply chain. Our RQ-35 Heidrun drones operate in EU and NATO countries, having been tested and deployed in international markets in the EMEA region, including in the ongoing Ukraine conflict. These drones have hundreds of thousands of hours operating successfully in these harsh environments, and via integrations with other battlespace partners, and has proven to be an essential link between intelligence gathering and decision making for military customers around the world.

We also have three cargo drone platforms, including the Sentinel 30 km short-distance drone, the Chaos 60 km medium distance drone, and a downscaled cargo version of the Electric Air Mobility segment’s Jaunt Journey that can carry up to 250 pounds. All of these platforms are currently in the prototype stage and we are working to obtain FAA certification, which has been granted by the FAA for cargo oriented drones, for our cargo drones before going to market.

Our drone assortment has critical points of parity with other drones along parameters such as wingspan, weight, payload, and endurance, with our critical point of differentiation being our drone’s ability to autonomously operate in GPS-denied environments. This core attribute expands the solutions scope of our offerings while reducing the need for human input. This technology has critical applications across military and commercial use cases, and we believe we are uniquely suited to capitalize on this opportunity.

We also plan to provide DaaS offerings, including surveillance services for businesses interested in monitoring, surveying, and evaluating their properties. Our DaaS strategy is rooted in our GPS-denied technology, which has strong commercial potential in agriculture, security, and industrials applications. We plan to offer an extensive suite of capabilities for a wide range of commercial use cases, including mapping, surveying, inspecting, photographing and filming, dispensing and spraying, warehousing, monitoring. We will expand our commercial capabilities by offering drone maintenance, repair, and overhaul services, which would allow us expand the breadth of our commercial offerings.

Sales of our drones to the DoD is a key future initiative. Our production facilities in Albuquerque and Phoenix are currently in the process of obtaining Blue UAS certification, which will enable us to manufacture and sell our RQ-35 drone to the DoD. This certification process involves sponsors in various U.S military branches supporting our product, with full certification essentially contingent on U.S.-domiciled production. A version of the RQ-35 intended for Blue UAS certification, the RQ-35 v.251, is currently in our development plan, along with a follow-on certification program. We currently estimate that it will take approximately six months to achieve Blue UAS certification. We are leveraging the full breadth of our product development excellence, public sector relationships, and our platform to penetrate the U.S. military drone market.

107

To support future new product development, we are designing and engineering efficient, reliable, and low-carbon-emission unmanned aircraft systems for both commercial and military markets. We are actively developing improvements for our existing RQ-35 Heidrun drone while also designing the next generation of fully autonomous, fixed-wing mini drones.

Finally, we are developing a global command, control and communications network for safe, efficient and seamless air platform interoperability called “AIRO Link.” This network would be designed to enable ground operators to establish a data link to unmanned aircraft systems, providing valuable flight analytics and support the development of drone flights performed in BVLOS. Currently, we are researching the requirements and framework that will enable multiple BVLOS drone operations at low altitudes in airspace where FAA air traffic services are not provided. We are also working to demonstrate the feasibility of using small radio or communication links on drone airframes.

Avionics

The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our advanced avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy military aircraft and general aviation platforms. With technology constantly advancing and general aviation fleets aging, we believe there is considerable potential for military and general aviation aircraft to be upgraded with our solutions. Key market tailwinds include technological advancements, robust general aviation delivery numbers, and an aging general aviation fleet.

Our Aspen Avionics brand provides avionics solutions to the general aviation aftermarket, including Connected Panels and OEM displays and integrations for select partners. Our Aspen Avionics brand is well-known in the avionics market, given its extensive presence on older military, general aviation, and rotary wing platforms. In addition, our Aspen Avionics brand possesses over 20 years of experience and strong, long-term customer acceptance of its value proposition. We also supply parts to OEMs, including displays to Robinson Helicopters, our Connected Panels to Pilatus and Honeywell, and are developing solutions for our Jaunt eVTOL platforms and other eVTOL operators like Joby Aviation.

~~108~~83

Our product assortment is built on our Connected Panels, Evolution Flight Display System, and NexNAV offerings depicted below:

The Avionics segment uses a book and bill model, leveraging our strong relationships with more than 650 dealers worldwide. We primarily use contract manufacturers based in the United States for our advanced avionics product. Product-market fit has been robust with our flight display system, our Connected Panels, and NexNav, which have been well received by consumers.

Our solutions demonstrate strong points of parity with products manufactured by competitors Garmin Ltd., Dynon Avionics, Inc., and Avidyne Corporation along many core product functionality attributes such as Primary Flight (“PFD”) and Multi-functional Displays, PFD Backup, Vacuum Removal, Small Form Factor, and GPS / GNSS Integration. Our key point of differentiation is our products’ easy-use, low-cost installation, and unique upgradeability, with our avionics engineered ground-up to allow for value-added features to be added seamlessly throughout the ownership lifecycle.

We are developing new avionics systems with additional capabilities. These systems are being designed to improve detection and avoidance with obstacles that could enable manned and unmanned BVLOS operations and enhance connectivity and health monitoring between ground-based and flight-based systems. We are also developing sensor payloads for specific missions and researching the use of advanced light field and near-eye optics for display systems.

We are also developing larger screen displays which will allow us to serve as an OEM supplier for a variety of platforms. Additionally, these larger screen displays will also be used on our Jaunt cargo and passenger aircraft, which we expect will significantly reduce total eVTOL and Avionics production costs.

~~109~~84

Training

The Training segment provides military and commercial pilot training for the military and commercial sectors. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, JTAC training, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and USAF Air Combat Command. Our top security clearances and established relationships at the Pentagon provide us a differentiated ability to bid on mandates. We also offer commercial pilot training for individuals looking to satisfy their training requirements to earn their commercial pilot license and are actively expanding our non-military capabilities. Our leased aircraft platforms include the Cessna-310, Cessna-206, and L-39 Albatros with plans to also procure the Marchetti S-211, enabling us to provide a wide variety of training services.

Coastal Defense Incorporated. CDI provides a full suite of services including close air support, intelligence surveillance and reconnaissance and simulated ground strike training. We are highly experienced in special forces and possess top secret clearance for our facility, which enables us to bid on contracts with special clearance requirements. CDI is an approved participant under certain multiple award IDIQ contracts issued by the U.S. military. Approved IDIQ contract participants such as CDI bid on task orders as they are issued by the U.S. military pursuant to such IDIQ contracts. The U.S. military chooses winning bids based on such factors as cost, certainty of fulfilling the requirements of a specific task order, safety records, and other factors.

CDI is a current participant under two such IDIQ contracts. The first is for Combat Air Force CAS services, which was awarded in September 2024 and expected to be completed by September 2029, with a combined not-to-exceed aggregate award of $5.7 billion across all task orders and participants. The Combat Air Force CAS contract is still active and is expected to continue through 2029. We plan to compete for task orders under this contract that we qualify for based on our fleet of aircraft. The second contract is for terminal air attack controller trainer services (“TAACTS”). The TAACTS contract will be active through 2028, with a combined not-to-exceed aggregate award of $249 million across all task orders and participants. We plan to compete for task orders under this contract as they are released. In addition to the IDIQ contracts, CDI also bids quarterly on individual contracts and purchase orders to provide ISR support services, including a current contract award until April 30, 2029.

Our staff includes a large network of Air Force, Navy, and Marine Corps pilots. CDI is a mandated participant in a $5.7 billion IDIQ contract from 2024 through 2029 as one of seven companies approved by U.S. Air Force Air Combat Command to bid for contract military training contracts. Key market tailwinds include a persistent military pilot shortage and the DoD outsourcing pilot training to the private sector.

Commercial Flight School. In November 2023, we signed non-binding letters of intent to acquire two businesses for the Training segment, including a flight training school. Over time, we plan to expand into other airports by leveraging the flight school’s FAA certification and grow our base of flight instructors, while competing with other commercial pilot training centers in the United States. There can be no assurance that we will acquire the flight school on the terms described herein or at all.

110

Electric Air Mobility

The Electric Air Mobility segment is developing a rotorcraft eVTOL for cargo and passenger applications through our Jaunt brand. Use cases including fixed route flights, on-demand trips, and cargo operations. Our R&D efforts are focused on developing the cargo eVTOL platform, targeting the attractive middle mile delivery cargo market. We plan to certify our platforms through existing CAR 529 Rotorcraft standards, with our eVTOL platform including the best attributes of both rotary and fixed wing aircraft. This certification process does not require us to modify existing rules to get certified, which we believe is a distinct advantage versus our competitors who are certifying under FAA Part 21.17(B) rules. Our patented compound rotorcraft technology is a core point of technological differentiation that will underpin our cargo eVTOL’s commercial capability and it has over 300 piloted flight hours on multiple Jaunt demonstrator aircraft. We believe the range and payload capabilities driven by this technology uniquely positions us to provide a compelling commercial solution for the eVTOL cargo market. Once developed and certified, our cargo eVTOL will serve as the foundation of our commercialization efforts, with passenger applications as a longer-term secondary initiative.

Our R&D efforts are focused on designing efficient energy management systems, flight control computers, and fly-by-wire systems capable of delivering cargo and passengers. Additionally, we are collaborating with other technology companies to provide high-fidelity virtual-reality flight simulators to eventually support eVTOL aircraft testing and pilot training. We are also researching robotic automation technologies for thermoplastic airframe manufacturing to accelerate the mass production of electric air mobility aircraft and reduce overall production costs. Key growth tailwinds include increasing demand for mid mile cargo, urban mobility access, and the inherent commercial efficiency advantages of electric platforms vis-à-vis traditional propulsion systems. Our four big target markets include cargo, passenger, emergency response, and the military, with cargo being our initial focus due to its readily addressable market potential.

We believe we are well-positioned to penetrate the eVTOL cargo market due to our certification approach and funding support. We anticipate that our certification strategy under CAR 529 Rules through the TCCA will significantly expedite the certification process. Once certified, our cargo aircraft will immediately be recognized by U.S. and European aviation authorities via FAA/EASA reciprocity, allowing us to bring our eVTOL aircraft to market in both the United States, Europe, and Canada concurrently. We expect to receive significant funding support from multiple sources, including the Canadian government, suppliers, and customer deposits. Additionally, we benefit from supplier cost sharing, whereby our suppliers have agreed to defer the costs of non-recurring engineering expenses until commercialization, which reduces our initial funding requirements prior to commercialization. As a result, we believe we have access to funding to cover most of our aircraft development.

We started developing our cargo eVTOL platform in 2024 and ~~expect~~anticipate toentering ~~enter~~ the preliminary design review phase in the fourth quarter of 2025, with completion expected in the first quarter of 2026. Following completion of preliminary design review, we expect to enter the critical design review phase as early as 2027 and then plan to obtain cargo UAS certification as early as 2028. Once we receive cargo UAS certification, we expect to begin production of our cargo eVTOL. In parallel, we are planning to develop our passenger eVTOL platform, ~~but~~which we estimate will overlap with approximately 75% of our cargo eVTOL platform. Nevertheless, we expect the timeline from program launch through production to take longer. This is due to both our initial focus on launching our cargo eVTOL platform and the generally more stringent development requirements for a passenger version. We expect our initial product will be a downscaled cargo-only eVTOL, to be followed by a fullscale multi-role cargo and passenger eVTOL.

We have approximately 300 aircraft in our backlog to date, all of which are for our dual-use model that is configurable for both cargo and passenger transportation. Configuration change can be accomplished in less than 15 minutes, which gives operators flexibility to perform either mission from any base of operation.

111

Customers

Our customer relationships underpin the strength and growth potential of our business. We service a wide variety of end markets, with a diverse mix of customers ranging from blue-chip OEMs to NATO. Our track record of success, innovative products, tight customer relationships, and excellent service have driven strong customer retention.

Drones. We We sell our drones to military and defense entities worldwide, including NATO member countries such as the Netherlands, Denmark, ~~and~~ and Germany, which procure the drones through their sovereign funds at the country level, and then donate the majority of the drones to to Ukraine. European demand is robust, as NATO countries continue to procure RQ-35s for their own use with the majority of drones ~~subsequently~~ subsequently donated to Ukraine for in-field use. We have over $200 million of bookings in process for the RQ-35 over 2025 and 2026, which will be spread among several countries. These bookings are not dependent on additional U.S. funding to Ukraine. We believe that drones can be a key component of NATO countries’ defense spending plans to meet their 2% GDP contribution target and that we have a unique opportunity for our products to take a share of these countries’ defense spending, particularly with our mUAS. Expansion of the RQ-35 into the U.S. market is in process, and we believe we will obtain certification as we have already demonstrated the RQ-35’s capabilities to U.S. forces overseas in Europe. We plan to use a portion of the funds from ~~this~~the ~~offering~~IPO to begin manufacturing in the United States to certify for sales to the DoD. In the future, we aim to serve the commercial end markets through our drone services and AIRO Link offerings, targeting Fortune 500 companies.

Avionics. We sell our avionics solutions through our network of more than 650 dealers to sell products to owner-operators of general aviation aircraft and directly as an OEM solution to Robinson Helicopters, Pilatus, and Honeywell. In addition, the Drones and Electric Air Mobility segments use our avionics and electronics components on their platforms.

Training. We have contracts with the U.S. government to provide military training and simulation services.

Electric Air Mobility. We intend to sell directly to middle mile cargo logistics providers and UAM operators.

Corporate History

We were formed on August 30, 2021 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry. During the year ended December 31, 2022, we completed our “Put-Together Transaction” to acquire six companies which are now organized into our four reportable segments: (i) Drones, through our subsidiaries, AIRO Drone and Sky-Watch; (ii) Avionics, through our subsidiary, Aspen Avionics; (iii) Training, through our subsidiaries, Agile Defense and CDI; and (iv) Electric Air Mobility, through our subsidiary, Jaunt.

112

Competition

We operate in highly competitive markets that are sensitive to technological advances. In each of our market segments, some of our competitors are larger and can maintain higher levels of expenditures for R&D. In each of our markets, we concentrate on the opportunities that we believe suit our resources, overall technological capabilities, and objectives. Principal competitive factors in these markets are product quality and reliability; technological capabilities, including reliable, resilient, and innovative cyber capabilities; service; past performance; ability to develop and implement complex, integrated solutions; ability to meet delivery schedules; the effectiveness of third-party sales channels in international markets; and cost-effectiveness. We frequently “partner” or are involved in subcontracting and teaming relationships with companies that are, from time to time, competitors on other programs.

Avionics. We have several competitors in the avionics market. Those major competitors include companies such as Honeywell International Inc. (HON), Avidyne Corporation, Collins Aerospace, Dynon Avionics, Inc., uAvionix Corporation, L3Harris Technologies, Inc., and Garmin Ltd. (“Garmin”). In the display and integrated avionics segment, the primary competitor is Garmin, which has the largest market share in the aftermarket segment. Garmin, Honeywell, and Collins Aerospace are the leaders in the OEM segment. As the eVTOL market emerges, we expect new market competitors as well as the existing competitors in the avionics segment. Our primary competitors in the Connected Panel market include Honeywell, Garmin, and Teledyne. In the GPS market space, the NexNav system has few direct competitors. NexNav products include licensing, Circuit Card Assemblies (“CCA”), and Line Replaceable Units or boxes (“LRU”). Competitors include Honeywell’s wholly owned division, Bendix/King, CMC Electronics Inc./Esterline Technologies Corp., FreeFlight Systems Inc. (“FreeFlight”) Trig Avionics Ltd. (“Trig Avionics”), and uAvionix Corporation. FreeFlight and Trig Avionics also license our design. Other manufacturers of GPS components such as Garmin, Honeywell, and Collins Aerospace do not sell standalone GPS devices in our markets and typically provide that functionality embedded in an integrated product.

Training. Our Training segment is part of an industry that is highly concentrated with several well capitalized competitors including, without limitation, Draken International, Inc. (“Draken”), Top Aces Inc. (“Top Aces”), Airborne Tactical Advantage Company, LLC (“ATAC”), and Tactical Air Defense Services Inc. (“TacAir”). Draken has a large inventory of domestic and foreign-built aircraft including A4 Skyhawk, L-159G Alca, Aermacchi MB 339, MiG 21, L-39 Albatros, F1 Mirage, and Atlas Cheetah. A current contractor with the U.S. Air Force (“USAF”) and the U.S. Navy (“Navy”), Top Aces, is a Canadian-based company with an inventory of domestic and foreign-built aircraft, including A4 Skyhawk and Dornier Alpha Jet, and is set to acquire F-16 Falcons through its acquisition of Advanced Training Systems International in Mesa, Arizona. ATAC is a current contractor with the USAF and Navy, and has a large inventory of foreign-built fighter jets, including F21 Kfir, MK-58 Hawker, L-39 Albatros, and F1 Mirage, of which the newest aircraft was operational in 1968. TacAir has a medium inventory of domestic built F-5 Freedom Fighters and also operates customer-owned domestic and foreign-built aircraft, including F-16 Falcon and SU-27. We also compete with simulation training.

~~113~~87

Drones. We anticipate the defense market for sUAS continues to evolve in response to changing technologies, shifting customer needs and expectations, and the potential introduction of new products. We believe that a number of established domestic and international defense contractors have developed or are developing sUAS that continue to compete, or will compete, directly with our products. Some of these contractors have significantly greater financial and other resources than we possess. Our current principal sUAS competitors include Elbit Systems Ltd., Teledyne Technologies, Inc., L3 Technologies, Inc., and Lockheed Martin Corporation. The U.S. defense market for mUAS has been addressed primarily by Boeing’s ScanEagle and Textron Inc.’s Shadow UAS. Our current principal mUAS competitors include those competing with us for the U.S. Army’s Future Tactical UAS Program: Martin UAV, LLC and Northrop Grumman Corporation’s V-Bat, Textron Inc.’s Aerosonde, and L3Harris Technologies, Inc.’s FVR-90. International mUAS competitors include Elbit Systems Ltd. and Israel Aircraft Industries International, Inc. We do not view large UAS, such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives, as direct competitors to the sUAS because they perform different missions, do not typically deliver their information directly to front-line ground forces, and are not hand launched and controlled. However, we cannot be certain that these platforms will not become direct competitors in the future. Potential competition from consumer-focused drone manufacturers is emerging as their capabilities increase and their prices remain low relative to existing defense solutions, which is resulting in some level of military consideration even if such drones do not meet traditional military performance or security specifications. Such potential competitors include Skydio Inc. and Shield AI, Inc.

The market for commercial UAS products and services is in an early stage of development, but is evolving rapidly, generating a great deal of interest as government regulations evolve to accommodate commercial UAS operations in the NAS and in the airspace systems of other countries. Given the breadth of applications and the diversity of industries that could benefit from UAS technology, a growing number of potential competitors in this market include consumer drone manufacturers such as Da Jiang Innovations (although regulation is trending toward further restrictions against Chinese made drones, Da Jiang Innovations remains a global industry leader and continues to serve markets on which we are focused), who seek to enhance their systems’ capabilities over time; other sUAS manufacturers, including large aerospace companies such as Lockheed Martin Corporation, and drone and aerial surveying and mapping service providers such as PrecisionHawk, Inc., Sentera LLC, and SlantRange, Inc.; ground-based surveying and mapping service providers; satellite imagery providers; and specialty system manufacturers, software as a service and other service providers aiming to address specific market segments. The emerging non-military market is attracting numerous additional competitors and significant venture capital funding given perceived lower barriers to entry and a much more fragmented marketplace as compared to the military market. Potential additional competitors include start-up companies providing low-cost solutions.

Electric Air Mobility. Unlike our competitors, we anticipate utilizing existing certification rules for our aircraft configuration, which we believe will give us a clearer path to commercial service. The Jaunt Journey air taxi is certifying at the highest level of commercial transport, allowing it to fly under existing rotorcraft rules and to utilize existing aviation infrastructure.

114

Our main sources of competition in the Electric Air Mobility segment fall into three categories:

● companies, including other eVTOL manufacturers and UAM service providers, that have entered, or plan to enter, the commercial electric vehicle market, such as publicly traded competitors Archer Aviation Inc., Eve ~~UAM~~Holding, ~~LLC (an Embraer S~~Inc.~~A. company)~~, Joby Aviation, Inc., ~~Lilium N.V.,~~ and Vertical Aerospace Ltd.; ● incumbent aircraft charter services that have served a similar market for years with hydro-carbon-based combustion engines; and ● ground vehicle transportation, including personal vehicles and asset-light businesses, such as Uber Technologies, Inc. and Lyft, Inc., with whom we expect some amount of competitive overlap despite our belief that the traditional ground vehicle will be largely complementary to our electric air mobility offerings.

●

incumbent aircraft charter services that have served a similar market for years with hydro-carbon-based combustion engines; and

●

ground vehicle transportation, including personal vehicles and asset-light businesses, such as Uber Technologies, Inc. and Lyft, Inc., with whom we expect some amount of competitive overlap despite our belief that the traditional ground vehicle will be largely complementary to our electric air mobility offerings.

We believe the principal competitive factors in this market include, but are not limited to:

● certification approach and timeline; ● cost; ● customer experience; ● integrated business model; ● manufacturing efficiency; ● product quality, reliability, and safety; ● product performance; ● service capabilities; ● supplier partnerships and cost sharing; and ● technological innovation.

●

cost;

●

customer experience;

●

integrated business model;

●

manufacturing efficiency;

●

product quality, reliability, and safety;

●

product performance;

●

service capabilities;

●

supplier partnerships and cost sharing; and

●

technological innovation.

Because of our focus on eVTOL aircraft design for safety and commercialization, we believe that we are able to compete favorably across these factors.

Research and Development

We benefit from the intellectual experience and capacity of visionary leadership and a robust R&D culture linked directly to our operating business model. We leverage this to continue our thought and innovation leadership among industries, government, military, academic, aviation, and other market segments.

Business survival and evolution of best systems demand comprehensive self-assessment and disruption analysis to be a true leader in the industry. Accordingly, we characterize our company and our people as an “innovation and invention machine.”

115

To this end, we promote company-wide experimentation, partnering and client/customer collaboration to assimilate and harness the best ideas. We plan to induce R&D through big data collection, an internal architecture for participation and an enablement process to absorb external innovation resources extensively and assimilate them into our indigenous business. Our R&D process is matrixed internally with operating segments and engineering efforts. It involves management and oversight from idea conception to prototyping, to commercialization and sales; then cycles to improve products and services continuously.

Additionally, we partner with appropriate industry leaders, scientific and technology communities, academia, government entities and others to foster simultaneous research, design, development, and maintenance of both new and existing products.

Our R&D focuses in five areas that correspond to government and industry needs: (1) Advanced Avionics and Sensors, Displays and Integrations; (2) Electric Air Mobility System; (3) UAS and sUAS Critical Systems; (4) Drone Command, Control, and Communication Systems; and (5) U.S. and Global Standards.

Advanced Avionics and Sensors, Displays and Integration. We design and engineer advanced systems that include, but are not limited to:

● Cockpit display system functions for primary flight and multi-functional devices installed in general aviation cockpits; ~~● connectivity and health monitoring between ground-based and flight-based systems; and ● sensor payloads for specific missions.~~

~~116~~89

●

connectivity and health monitoring between ground-based and flight-based systems; and

●

sensor payloads for specific missions.

Electric Air Mobility Systems. We design and engineer safe, efficient, low-carbon, reliable and functional platforms and systems for passengers through stringent flight testing and evaluation. This includes, but is not limited to the research, development or analysis of:

● efficient energy management system, flight control computers, and fly-by-wire systems with industry partners to enable the development of our all-electric aircraft; and ~~● robotic automation technologies for thermoplastic airframe manufacturing to accelerate the mass production of electric air mobility aircraft and reduce production costs.~~

●

robotic automation technologies for thermoplastic airframe manufacturing to accelerate the mass production of electric air mobility aircraft and reduce production costs.

UAS and sUAS Critical Systems. We design and engineer safe, efficient, low-carbon-emission, reliable and functional platforms and systems for multi-mission roles through stringent flight testing and evaluation. This includes, but is not limited to the research, development or analysis of:

● sense and avoid systems and standards necessary to comply with the Code of Federal Regulations that apply to operating and flight rules (14 C.F.R. pt. 91); ● de-risking operations by AI-enhanced on-board autonomy and decision-making for collision avoidance, mapping and path-planning, particularly in confined and largely inaccessible areas; ● enabling the scale of UAS missions and services by minimizing UAS training lead-time via on-board AI/algorithm modification and hardware modularity to enhance flight safety and performance across broader applications; ● disposable and recyclable drones; and ● partner to design leading-edge vertiports and operations.

●

de-risking operations by AI-enhanced on-board autonomy and decision-making for collision avoidance, mapping and path-planning, particularly in confined and largely inaccessible areas;

●

enabling the scale of UAS missions and services by minimizing UAS training lead-time via on-board AI/algorithm modification and hardware modularity to enhance flight safety and performance across broader applications;

●

disposable and recyclable drones; and

●

partner to design leading-edge vertiports and operations.

Drone Command, Control and Communications Systems. We develop a global Command, Control and Communications network for safe, efficient and seamless air platform interoperability termed, “AIRO-NET;” through which we will:

● explore operation, data exchange requirements and the supporting framework to enable multiple BVLOS drone operations at low altitudes (under 400 feet above ground level) in airspace where FAA air traffic services are not provided; ● demonstrate and prove the feasibility of using a small radio or communications link in sUAS, UAS, and UAM airframes, while evaluating the operating compatibility with existing avionics equipment; ● develop secure Command and Control links with interference mitigation among satellite, drone-to-drone, and drone-to-controllers; ● design command centers for BVLOS Drone and Advanced Air Mobility missions and services; and ● absorb, assimilate and develop best services, roles and responsibilities, information architecture, data exchange protocols, software functions, infrastructure, and performance requirements systems for a drone “traffic management” ecosystem for uncontrolled operations complementary to FAA’s Air Traffic Management system.

~~117~~● demonstrate and prove the feasibility of using a small radio or communications link in sUAS, UAS, and UAM airframes, while evaluating the operating compatibility with existing avionics equipment;

●

develop secure Command and Control links with interference mitigation among satellite, drone-to-drone, and drone-to-controllers;

●

design command centers for BVLOS Drone and Advanced Air Mobility missions and services; and

●

absorb, assimilate and develop best services, roles and responsibilities, information architecture, data exchange protocols, software functions, infrastructure, and performance requirements systems for a drone “traffic management” ecosystem for uncontrolled operations complementary to FAA’s Air Traffic Management system.

U.S. and Global Standards. Our goal is to be a leader of standard setting in the new aerosphere, such that it will support the development of regulations, policies, procedures, guidance, and standards for manned and unmanned aircraft operations, including but not limited to function allocation, control station requirements, pilot training and certification requirements. To accomplish that goal, we:

● provide information from flight tests, modeling and simulation, technology evaluations, risk assessments, and data gathering and analysis to provide the FAA and other global authorities with critical information in areas such as Detect and Avoid, UAS communications, Human Factors, System Safety, and Certification; ● support the FAA and industry with ongoing participation with the General Aviation Manufacturers Association and the American Society for Testing and Materials in the development of standards for UAS and electric aircraft systems; and ● address human factors, maintenance and safety concerns that are unique to manned and unmanned aircraft.

●

support the FAA and industry with ongoing participation with the General Aviation Manufacturers Association and the American Society for Testing and Materials in the development of standards for UAS and electric aircraft systems; and

●

address human factors, maintenance and safety concerns that are unique to manned and unmanned aircraft.

Intellectual Property and Brand Protection

Our success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary rights, we rely on a combination of intellectual-property rights (e.g., patents, trademarks, copyrights, and trade secrets including know-how and expertise) and contracts (e.g., license agreements, confidentiality and non-disclosure agreements with third parties, and employee and contractor disclosure and invention assignment agreements).

We own or have exclusive rights to patents, trademarks, copyrights, trade secrets, and/or other intellectual property rights in the United States and abroad that support us and the respective brands, products and services of each of our four segments. We have 34 issued patents worldwide (of which 27 are U.S. patents and 7 of which are British, French, German, and Italian validations of European patents). Without accounting for any potential patent term adjustments or extensions or other forms of exclusivity with respect to our U.S. issued patents, 4 expire before 2026, 13 expire between the beginning of 2026 and the end of 2030, and 10 expire between the beginning of 2031 and the end of 2039. The European patents are expected to expire between the beginning of 2027 and the end of 2032.

Of the above referenced patents and applications, approximately 20 of the issued U.S. patents are related to electronic flight display technologies. Approximately 7 of the issued U.S. patents are related to vertical take-off and landing aircraft technologies. We also have 5 U.S. trademark registrations and 1 pending U.S. trademark ~~applications~~ application. Our various portfolio companies regularly file for patent and trademark protection, and we have also acquired intellectual property by way of corporate acquisition.

118

We believe that our differentiated and balanced portfolio of intellectual property rights in the aerospace, defense and drone technologies spaces, our diversified product portfolio, ranging from established and mature product offerings to innovative drone and eVTOL solutions, and the brand reputation of our companies, provide us with a competitive advantage.

In the future, we intend to continue to seek intellectual property protection for our new products, technologies and designs, and exercise our rights to exclusively use these valuable assets.

Properties

Our corporate headquarters and U.S. manufacturing plant are located in Albuquerque, New Mexico. Our manufacturing plant is leased and comprises approximately 18,000 square feet and primarily supports our Avionics segment. In addition, our Drones segment leases property in Soevring, Denmark that is used for office space, manufacturing and inventory storage which comprises approximately 43,185 square feet. Over time, we expect that we will need additional engineering and manufacturing facilities to support the design and production of our Electric Air Mobility and Avionics segments products.

Employees and Human Capital Management

As of ~~December~~June 3130, ~~2024~~2025, we had ~~151~~188 full-time employees across our platform, including 99130 in the Drones segment, 3431 in the Avionics segment, ~~nine~~seven in the Training segment, and nine in the Electric Air Mobility segment. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating existing and new employees, advisors and consultants. We anticipate additional hiring activity across our four segments as we continue to scale our operations.

Fifty-one employees based in Denmark in the Drones segment are covered by a collective bargaining agreement with the Danish Industry union. Apart from such employees, no other employees are currently covered by collective bargaining agreements or represented by labor unions.

We anticipate increased hiring activity as we continue to scale operations. In particular, our Electric Air Mobility segment anticipates substantial hiring activity, although it will also augment staffing using third-party service providers. We intend to hire operational management and engineering staff for R&D.

Government Regulation

We are subject to various local, state, federal and international laws and regulations relating to the development, manufacturing, sale and distribution of our products, systems and services, and it is our policy to comply with the applicable laws in each jurisdiction in which we conduct business. Regulations include but are not limited to those related to import and export controls, corruption, bribery, environment, government procurement, wireless communications, competition, product safety, workplace health and safety, employment, labor and data privacy.

119

Drones

Because it contracts with the DoD and other agencies of the U.S. government—and, for certain of those contracts, requires access to classified information—our Drones segment is subject to extensive federal statutes and regulations, including the FAR, the DFARS, the Truthful Cost and Pricing statute, the Foreign Corrupt Practices Act, the False Claims Act, and the regulations implementing the National Industrial Security Program Operating Manual (“NISPOM”). The NISPOM regulations establish the security requirements applicable to classified contracts and programs, facility security clearances, and personnel security clearances. The federal government audits and reviews contractors’ performance on contracts, pricing practices, cost accounting systems and practices, and compliance with applicable laws, regulations and standards. Like most government contractors, the Drones segment’s contracts are audited and reviewed regularly by federal agencies, including the Defense Contract Management Agency and the Defense Contract Audit Agency.

Certain of these statutes and regulations impose substantial penalties for violations, including significant financial liability and suspension or debarment from government contracting or subcontracting for a period of time. Our management monitors its government business to reduce the risk of such violations occurring.

In addition, the Drones segment is subject to industry-specific regulations due to the nature of the products and services it provides. For example, certain aspects of its business are subject to further regulation by additional U.S. government authorities, including: (i) the FAA, which regulates airspace for all air vehicles in the NAS; (ii) the National Telecommunications and Information Administration and the Federal Communications Commission, which regulate the wireless communications upon which its UAS depend in the U.S.; (iii) the Directorate of Defense Trade Controls of the U.S. Department of State, which administers the International Traffic in Arms Regulations that regulate the export of controlled technical data, defense articles and defense services and (iv) the Bureau of Industry and Security of the U.S. Department of Commerce, which regulates matters relating to U.S. national security and technology.

On June 21, 2016, the FAA released its final rules that allow routine use of certain sUAS in the NAS. The FAA rules, which went into effect in August 2016, provide safety rules for sUAS (under 55 pounds) conducting non-recreational operations. The rules limit flights to visual-line-of-sight daylight operation, unless the UAS has anti-collision lights in which case twilight operation is permitted. The final rule also addresses height and speed restrictions, operator certification, optional use of a visual observer, aircraft registration and marking and operational limits, including prohibiting flights over unprotected people on the ground who are not directly participating in the operation of the UAS. Current FAA regulations require drone operators to register their systems with the FAA and secure operating licenses for their drones as per the Part 107 specifications. These regulations continue to evolve to accommodate the integration of UAS into the NAS for commercial applications, including High-Altitude Pseudo-Satellite UAS.

120

In December 2019, the FAA proposed rules requiring the remote identification of UAS. Remote identification, which provides for a UAS in flight to provide identification that can be received by other parties, is designed to enhance safety and security by allowing the FAA and other agencies to identify a UAS that appears to be flying unsafely or in an area in which flight is not permitted. The public comment period for the proposed rules expired on March 2, 2020. On April 21, 2021, the final rule for remote identification of UAS went into effect. On the same day, the final rule for operation of sUAS over people also went into effect. This rule permits routine operations of sUAS over people, moving vehicles, and at night under certain conditions. The final rule also makes changes to the recurrent testing framework and expands the list of persons who may request the presentation of a remote pilot certificate. Additionally, in February 2020, the FAA issued a public request for comment on its proposed policy for the creation of a new type certification of certain UAS as a special class of aircraft under FAA regulations. Currently the Part 107 Rules allow for the operation of sUAS without the need for FAA airworthiness certification as long as the UAS meets certain specified criteria and certain flight rules are followed; larger UAS and operations of sUAS outside the scope of the Part 107 Rules require a waiver from the FAA. The FAA’s proposed policy proposes a new special class of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate. Further rulemaking by the FAA is anticipated regarding the particular criteria for the airworthiness certification standards under the new special class proposed by the new policy. The comment period for the FAA’s proposed policy expired on March 4, 2020.

While it is currently anticipated that the enactment of remote identification, operation of sUAS over people, and a new airworthiness certification process for a newly created special class of UAS will help formalize the process for manufacturing and obtaining airworthiness certification for UAS within the newly created class and accelerate the development of commercial UAS in the U.S., it is uncertain whether the FAA’s actions, if any, will have such effects. Additionally, it is unclear when, if ever, the FAA will implement final rules regarding remote UAS identification and whether they will differ from the proposed rules. It is also unclear when, if at all, the FAA will create a new class of UAS and what the final rules regarding the certification of such UAS will look like. We cannot be certain as to how its business will be affected by the FAA’s proposals until the final rules for such matters are issued by the FAA.

Furthermore, our non-U.S. operations are subject to the laws and regulations of foreign jurisdictions, which may include regulations that are more stringent than those imposed by the U.S. government on our U.S. operations.

The defense and security mUAS segment, most often represented by government clients, has, in our opinion, the best possibility to utilize mUAS systems, as both armed forces and security agencies often times have access to restricted airspace in which to train, build capabilities, and operate. Nevertheless, the extent to which the mUAS market—defense, security and civilian professional—can be accessed, expanded, and commercially exploited is tied to clients’ ability to fly in non-restricted airspace and, moreover, the ability to fly BVLOS. National and international regulation, such as the Unmanned Aircraft System Traffic Management initiative implemented by the FAA and NASA in the U.S. or the “U-Space” initiative implemented by the EASA to address UAS traffic management in the EU, is still underway, as is standardization of operator certification and platform (airworthiness) certification. Until these standards, certifications, and traffic management are effectively clarified and ratified systematically and internationally, certain clients of the targeted customer segment may be hesitant, or even prevented, in acquiring and utilizing our mUAS solutions. Accordingly, the nature of and the speed with these regulations are completed and implemented pose a risk for both our financial performance and condition, timing of growth and (short-term) growth potential.

~~121~~93

Government Contracting Process

Our Drones segment sells the significant majority of its small and medium UAS and traffic management system products and services as the prime contractor under contracts with the U.S. government. Certain important aspects of its government contracts are described below.

Proposal Process

Most of the Drones segment’s current government contracts were awarded through a competitive proposal process. The U.S. government awards competitive contracts based on solicitations that describe the procuring agency’s needs and establish proposal evaluation and source selection criteria. Each interested supplier prepares a proposal in response to the agency’s solicitation. Proposals usually must be prepared in a short time period in response to a deadline identified in the solicitation, and the proposal effort requires extensive involvement of numerous technical and administrative personnel. Following award announcements, unsuccessful offerors may challenge the agency’s award decision in a proceeding known as a “bid protest.”

Funding

The funding of U.S. government programs is subject to congressional appropriations. Although multi-year contracts may be authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may continue for many years. Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

The U.S. military funds its contracts for full-rate production UAS either through operational need statements or as programs of record. Operational need statements require allocations of discretionary spending or reallocations of funding from other government programs. We define a program of record as a program that, after undergoing extensive DoD review and product testing, is included in the five-year government budget cycle, meaning that funding is allocated for purchases under these contracts during the five-year cycle, absent affirmative action by the customer or Congress to change the budgeted amount. Despite being included in the five-year budget cycle, funding for these programs is subject to annual approval.

Material Government Contract Clauses

All contracts with the U.S. government contain clauses, and are subject to laws and regulations, that give the government rights and remedies not typically found in commercial contracts, including rights that allow the government to:

● terminate existing contracts for convenience, in whole or in part, when it is in the interest of the government to do so; ● terminate contracts for default upon the occurrence of certain enumerated events; ● unilaterally modify contracts with regard to certain performance requirements; ● terminate contracts (including multi-year contracts) and related orders if funds for contract performance become unavailable; ● obtain rights in, or potentially ownership of, intellectual property developed or delivered by a contractor as a result of its performance of the contract; ● adjust contract costs and fees on the basis of audits completed by its agencies; ● suspend or debar a contractor from doing business with the U.S. government; and ● control or prohibit the export of certain items.

~~122~~● terminate contracts for default upon the occurrence of certain enumerated events;

●

unilaterally modify contracts with regard to certain performance requirements;

●

terminate contracts (including multi-year contracts) and related orders if funds for contract performance become unavailable;

●

obtain rights in, or potentially ownership of, intellectual property developed or delivered by a contractor as a result of its performance of the contract;

●

adjust contract costs and fees on the basis of audits completed by its agencies;

●

suspend or debar a contractor from doing business with the U.S. government; and

●

control or prohibit the export of certain items.

Generally, government contracts are subject to oversight audits by government representatives. Compensation, if any, in the event of a termination for default is limited to payment for work completed at the time of termination. In the event of a termination for convenience, the contractor may receive the contract price for completed work, as well as its costs of performance of terminated work including an allowance for profit and reasonable termination settlement costs.

NATO Foreign Drone Contracting Process

While similar to U.S. government processing, the NATO acquisition process for defense products and services differs in a few key ways, as discussed below. NATO coordinates capability development and engagement with the defense industry through the Conference of National Armaments Directors (“CNAD”), the principal committee that brings together the top national officials responsible for defense procurement in NATO member and partner countries. The CNAD is the senior NATO committee responsible for promoting cooperation between countries in the armaments field. The CNAD implements decisions taken by member countries as part of the NATO Defense Planning Process (“NDPP”). Through the NDPP, NATO identifies the capabilities that it requires and promotes their development and acquisition by member countries. It facilitates the timely identification, development and delivery of the necessary range of forces that are interoperable and adequately prepared, equipped, trained and supported, as well as the associated military and non-military capabilities, to undertake NATO’s full spectrum of missions.

The Defense Industrial Production Board (“DIPB”), created as a result of the Defense Production Action Plan in 2023, brings together experts from NATO member countries on defense industrial planning and procurement, to share best practices on defense planning and other relevant issues such as procurement and supply chains. The DIPB meets regularly and reports to the CNAD. The DIPB addresses challenges related to defense industrial capacity, integration of industry into defense planning, as well as broader obstacles related to enhancing defense industrial cooperation. The DIPB also serves as a forum for identifying measures to step up defense production and increase national capabilities for deterrence and defense, replenish depleted stockpiles and operationalize NATO’s support for Ukraine.

The NATO Industrial Advisory Group is a high-level consultative body comprised of senior industrialists from NATO member countries and partner countries. It advises the CNAD on how to foster government-to-industry and industry-to-industry armaments co-operation within NATO. Furthermore, it provides advice to the CNAD on how to foster government-to-industry and industry-to-industry armaments co-operation within NATO.

The NATO Support and Procurement Agency (“NSPA”) also plays a role in NATO’s logistics and procurement activities. It acquires, operates and maintains a wide range of capabilities that support NATO, its member countries, partners and other international organizations. The NSPA brings together NATO’s logistics support and procurement activities, providing effective and cost-efficient multinational support solutions. The NSPA is a sponsoring country customer-funded agency, operating on a “no profit - no loss” basis.

Government Contract Categories

There are three primary types of government contracts in the commercial drones industry, each of which involves a different payment methodology and level of risk related to the cost of performance. These basic types of contracts are typically referred to as fixed-price contracts, cost reimbursable contracts (including cost-plus-fixed fee, cost-plus-award fee, and cost-plus-incentive fee), and time-and-materials contracts.

In some cases, depending on the urgency of the project and the complexity of the contract negotiation, one of our Drones segment subsidiaries will enter into a Letter Contract prior to finalizing the terms of a definitive fixed-price, cost reimbursable or time-and-materials contract. A Letter Contract is a written preliminary contractual instrument that provides limited initial funding and authorizes the contractor to begin immediately performing while negotiating the definitive terms of the definitive contract.

Fixed-Price. These contracts are not subject to adjustment by reason of costs incurred in the performance of the contract. With this type of contract, the contractor assumes the risk that it will not be able to perform at a cost below the fixed price, except for costs incurred because of contract changes ordered by the customer. Upon the U.S. government’s termination of a fixed-price contract, generally the contractor would be entitled to payment for items delivered to and accepted by the U.S. government and, if the termination is at the U.S. government’s convenience, for payment of fair compensation for work performed plus the costs of settling and paying claims by any terminated subcontractors, other settlement expenses and a reasonable allowance for profit on the costs incurred.

Cost Reimbursable. Cost reimbursable contracts include cost-plus-fixed fee contracts, cost-plus-award fee contracts and cost-plus-incentive fee contracts, each of which is described below. Under each type of cost reimbursable contract, the contractor may recover allowable and allocable costs incurred in performing the contract, but it assumes the risk that it may not be able to recover costs if they are not allowable or allocable under the contract terms or applicable regulations, or if the costs exceed the contract funding.

~~123~~● A cost-plus-fixed fee contract is a cost reimbursable contract that provides for payment of a negotiated fee that is fixed at the inception of the contract. This fixed fee does not vary with actual cost of the contract, but may be adjusted as a result of changes in the work to be performed under the contract. This contract type poses less risk of loss than a fixed-price contract, but a contractor’s ability to win future contracts from the procuring agency may be adversely affected if it fails to perform within the maximum cost set forth in the contract.

● A cost-plus-fixed fee contract is a cost reimbursable contract that provides for payment of a negotiated fee that is fixed at the inception of the contract. This fixed fee does not vary with actual cost of the contract, but may be adjusted as a result of changes in the work to be performed under the contract. This contract type poses less risk of loss than a fixed-price contract, but a contractor’s ability to win future contracts from the procuring agency may be adversely affected if it fails to perform within the maximum cost set forth in the contract. ● A cost-plus-award fee contract is a cost reimbursable contract that provides for a fee consisting of a base amount, which may be zero, fixed at inception of the contract and an award amount, based upon the government’s satisfaction with the performance under the contract. With this type of contract, the contractor assumes the risk that it may not receive the award fee, or only a portion of it, if it does not perform satisfactorily. ● A cost-plus-incentive fee contract is a cost reimbursable contract that provides for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs.

~~Our Drones~~● ~~segment~~A ~~typically experiences lower profit margins and lower risk under~~ cost ~~reimbursable contracts than under fixed~~-~~price~~plus-incentive ~~contracts. Upon~~fee ~~the~~contract ~~termination~~is of a cost reimbursable contract, ~~generally~~that ~~the~~provides ~~contractor~~for ~~would~~an beinitially ~~entitled~~negotiated fee to ~~reimbursement~~be ofadjusted ~~its~~later ~~allowable~~by ~~costs and,~~a ifformula ~~the~~based ~~termination~~on ~~is at~~ the ~~U.S.~~relationship ~~government’s~~of ~~convenience, a~~ total ~~fee~~allowable ~~proportionate~~costs to ~~the~~total ~~percentage~~target ~~of work completed under the contract~~costs.

Time-and-Materials. Under a time-and-materials contract, compensation is based on a fixed hourly rate established for specified labor or skill categories. Contractors are paid at the established hourly rates for the hours it expends performing the work specified in the contract. Labor costs, overhead, general and administrative costs and profit are included in the fixed hourly rate. Materials, subcontractors, travel and other direct costs are reimbursed at actual costs plus an amount for material handling. Contractors make critical pricing assumptions and decisions when developing and proposing time-and-materials labor rates, risking reduced profitability if actual costs exceed the costs incorporated into the fixed hourly labor rate. One variation of a standard time-and-materials contract is a time-and-materials, award fee contract. Under this type of contract, a positive or negative incentive can be earned based on achievement against specific performance metrics.

Electric Air Mobility

A transport category type certification is the highest level in safety provided by the Civil Aviation Authorities. Jaunt intends to certify under CAR 529, single pilot IFR (instrument flight rules) and comply with Category Enhanced of EASA SC-VTOL-01 by:

● using System Safety Assessment processes (Aerospace Recommended Practice “ARP” 4761 with ARP 4754A) that are industry standard for commercial transport aircraft (Exposure Draft (ED) 79A); ● designing flight critical systems to meet the requirements of a probability of catastrophic failure of less than 10-9 per flight hour (less than once every billion flight hours); ● developing robust software design processes to meet Development Assurance Level A for functions that could exhibit catastrophic failures; and ● meeting requirements for bird strike, fatigue and damage tolerance, lightning strike, fire protection, and designing and incorporating elements for crashworthiness right from conceptual stage.

~~124~~● designing flight critical systems to meet the requirements of a probability of catastrophic failure of less than 10-9 per flight hour (less than once every billion flight hours);

●

developing robust software design processes to meet Development Assurance Level A for functions that could exhibit catastrophic failures; and

●

meeting requirements for bird strike, fatigue and damage tolerance, lightning strike, fire protection, and designing and incorporating elements for crashworthiness right from conceptual stage.

We believe that this approach puts the design of the Jaunt Journey air taxi in line with the commercial transport category aircraft and rotorcraft in terms of safety and robustness. We also believe it provides Jaunt with a clear, low risk path to certification by using existing eVTOL regulations, thereby removing any guesswork from the certification approach.

Government Regulations and Compliance

In the near-term, the efforts of the Electric Air Mobility segment will focus on obtaining FAA certification of its aircraft and engaging with key decision makers in the cities in the United States in which it anticipates its aircraft and UAM service will initially operate. Its aircraft will be required to comply with regulations governing aircraft design, production and airworthiness. In the United States, this primarily includes regulations put forth by the FAA and the Department of Transportation (“DOT”). Outside the United States, similar requirements are generally administered by the national civil aviation and transportation authorities of each country.

Producing the Aircraft

Production certification is the FAA’s approval for aircraft manufacturers to be able to manufacture aircraft under an FAA approved type design. To obtain production certification from the FAA, the manufacturer must demonstrate that its organization and its personnel, facilities, and quality system can produce the aircraft such that they conform to the approved design. Jaunt is working to develop the systems and processes it will need to obtain FAA production certification with the goal of obtaining such certification shortly following completion of the aircraft type certificate.

Operating the Aircraft

Airworthiness certification from the FAA signifies that an aircraft meets its approved type design and is in a condition for safe operation in the NAS. As is the industry standard, each of the aircraft manufactured by Jaunt will need to be issued an airworthiness certificate. We expect that the airworthiness certificates issued to Jaunt’s aircraft will be a Standard Airworthiness certificate in the Normal Category, as such terms are defined by the FAA.

Operating the UAM Service

The DOT and the FAA have regulatory authority over air transportation operations in the United States. To operate its UAM in air taxi service, Jaunt will be required to hold an FAA Air Carrier Certificate and operate under Part 135 of the FARs and register as an air taxi operator at the DOT. In addition, takeoff and landing locations (e.g., airports and heliports) typically require state and local approval for zoning and land use and their ongoing use are subject to regulations by local authorities. We expect that as Jaunt builds out its UAM service there will be additional local, state and federal laws, regulations and other requirements that will cover its operations. Therefore, Jaunt has already begun and will continue to grow its engagement and collaboration with the cities in which it intends to operate its service in an effort to ensure that it operates in a safe and sustainable manner.

125

Regulatory Approvals Relating to Passenger-grade AAVs

Jaunt operates in a new and rapidly evolving industry, which is subject to extensive legal and regulatory requirements. While regulations governing this industry are evolving, currently in the jurisdictions where Jaunt plans to sell its products, the commercial use of its passenger-grade AAVs, if approved, and in some cases its non-passenger-grade AAVs, is subject to an uncertain or lengthy approval process. In order for customers to use Jaunt’s passenger-grade AAVs, Jaunt is working on obtaining, or working closely with customers to obtain, relevant approvals and permits in the jurisdictions where it sells and plans to sell its products. We are unable to estimate the average length of time required to obtain the applicable regulatory approvals due to the nascent nature of AAV-related regulations and the lack of relevant precedents. For example, we are not aware of any operator having been granted all required approvals for the commercial operations of passenger-grade AAVs in China or the United States. See the section titled “Risk Factors—Risks ~~Relating~~ Related to Our Business.” In the jurisdictions where Jaunt plans to sell its products, the commercial use of its passenger-grade AAVs, and in some cases of its non-passenger-grade AAVs, is subject to an uncertain or lengthy approval process. We cannot predict when regulations will change, and any new regulations may impose onerous requirements and restrictions with which Jaunt, its AAVs and its potential customers may be unable to comply. As a result, Jaunt may be limited in, or completely restricted from, growing its business in the foreseeable future.

Avionics

Aspen Avionics designs and manufactures equipment under worldwide aviation regulatory agency approvals. These include but are not limited to FAA, EASA, TCCA, and ENAC (Brazil) regulations. These govern the design test, certification, installation, and manufacturing of Aspen’s equipment.

The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. Similar rules apply in other countries. All aircraft must be maintained under a continuous condition monitoring program and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repair procedures for the various types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians. Certification and conformance is required prior to installation of a part on an aircraft. Aircraft operators must maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes. In addition, the FAA requires that various maintenance routines be performed on aircraft engines, some engine parts, and airframes at regular intervals based on cycles or flight time. Engine maintenance must also be performed upon the occurrence of certain events, such as foreign object damage in an aircraft engine or the replacement of life-limited engine parts. Such maintenance usually requires that an aircraft engine be taken out of service. Aspen Avionics’ operations may in the future be subject to new and more stringent regulatory requirements. In that regard, Aspen Avionics closely monitors the FAA and industry trade groups in an attempt to understand how possible future regulations might impact it. Our businesses that sell defense products directly to the U.S. government or for use in systems delivered to the U.S. government can be subject to various laws and regulations that govern pricing and other factors.

126

Import/Export Regulations. Aspen Avionics sells products and solutions to customers all over the world and is required to comply with U.S. Export Administration Regulations and U.S., EU and other economic and trade sanctions programs limiting or banning sales into certain countries. Countries outside of the United States have implemented similar controls and sanction regulations. Together these controls and regulations may impose licensing requirements on exports of certain technology and software from the United States and the EU and may impact Aspen Avionics’ ability to transact business in certain countries or with certain customers. Aspen Avionics has developed compliance programs and training to prevent violations of these programs and regulations, and regularly monitors changes in the law and regulations and create strategies to deal with changes. Changes in the law may restrict or further restrict Aspen’s ability to sell products and solutions.

Anti-Corruption Regulations. Because Aspen Avionics has significant international operations, it must comply with complex regulations, including U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to governmental officials, and anticompetition regulations. Aspen Avionics has compliance policies, programs and training to prevent non-compliance with such anti-corruption regulations in the United States and outside the United States. Aspen Avionics monitors pending and proposed legislation and regulatory changes that may impact its business and develops strategies to address the changes and incorporate them into existing compliance programs.

Environmental Regulations. Aspen Avionics’ facilities and operations are subject to numerous domestic and international laws and regulations designed to protect the environment, particularly with regard to waste and emissions. The applicable environmental laws and regulations are common within the industries and markets in which Aspen Avionics operates and serves. Aspen Avionics believes that it has complied with these requirements and that such compliance has not had a material adverse effect on its financial condition, results of operations, cash flows or equity. Aspen Avionics has installed waste treatment facilities and pollution control equipment to satisfy legal requirements and to achieve its waste minimization and prevention goals.

Electronic products are subject to governmental environmental regulation in a number of jurisdictions, such as domestic and international requirements requiring end-of-life management and/or restricting materials in products delivered to customers, including the European Union’s Directive 2012/19/EU on Waste Electrical and Electronic Equipment and Directive 2011/65/EU on the Restriction of the use of certain Hazardous Substances in Electrical and Electronic Equipment, as amended. Other jurisdictions have adopted similar legislation. Such requirements typically are not applicable to most equipment produced by Aspen Avionics. Aspen Avionics believes that it has complied with such rules and regulations, where applicable, with respect to its existing products sold into such jurisdictions. Aspen Avionics intends to comply with such rules and regulations with respect to its future products.

Wireless Communications Regulations. Wireless communications, whether radio, satellite or telecommunications, are also subject to governmental regulation. Equipment produced in Aspen Avionics’ Communication Systems and Space and Airborne Systems segments, in particular, is subject to domestic and international requirements to avoid interference among users of radio and television frequencies and to permit interconnection of telecommunications equipment. Aspen Avionics is also required to comply with technical operating and licensing requirements that pertain to its wireless licenses and operations. Aspen Avionics believes that it has complied with such rules and regulations and licenses with respect to its existing products and services, and it intends to comply with such rules and regulations and licenses with respect to its future products and services. Governmental reallocation of the frequency spectrum could impact Aspen Avionics’ business, financial condition, and results of operations.

127

Environmental Regulation

Operations in all of our segments are subject to extensive, and frequently changing, federal, state and local environmental laws and substantial related regulation by government agencies, including the Environmental Protection Agency. Among other matters, these regulatory authorities impose requirements that regulate the operation, handling, transportation and disposal of hazardous materials; protect the health and safety of workers; and require us to obtain and maintain licenses and permits in connection with our operations. This extensive regulatory framework imposes significant compliance burdens and risks on us. Notwithstanding these burdens, we believe that we are in material compliance with all federal, state and local environmental laws and regulations governing our operations. To date, there have been no material adverse effect to our consolidated financial statements nor competitive positions as a result of these environmental regulations.

Other Regulation

We are also subject to a variety of other regulations including work-related and community safety laws. The Occupational Safety and Health Act of 1970 mandates general requirements for safe workplaces for all employees and established the Occupational Safety and Health Administration (“OSHA”) in the Department of Labor. In particular, OSHA provides special procedures and measures for the handling of certain hazardous and toxic substances. In addition, specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste. Requirements under state law, in some circumstances, may mandate additional measures for facilities handling materials specified as extremely dangerous. We believe that our operations are in material compliance with OSHA’s health and safety requirements.

Legal Proceedings

A civil action was filed against Old AGI, Inc. in the Circuit Court of Cook County, State of Illinois in February 2022. The claimant alleges that an agreement for certain services entered into in March 2020 was breached and resulted in damages to claimant. This case was dismissed on July 5, 2022. However, the court allowed the claimant to amend its complaint. On August 5, 2022, the claimant filed its amended complaint, and we filed our response on October 12, 2022. The parties have engaged in discovery and mandatory arbitration. The arbitration resulted in an award in our favor, which was contested by the claimant. On December 19, 2024, the Circuit Court denied our motion for summary judgment. At this time, it is not possible to estimate the amount of loss or probable losses, if any, that might result from an adverse resolution of this matter. WeThis ~~intend~~matter towas ~~continue~~set tofor ~~vigorously~~trial ~~defend~~in ~~against~~June ~~the~~of ~~complaint~~2025, but was voluntarily dismissed without prejudice on June 4, 2025.

Civil actions were filed against CDI and individual guarantors in the Tioga County Court, State of Pennsylvania, in July 2023. The claimant, FCCB, alleges that payment under certain promissory notes is due, and the claimant is seeking recovery of the outstanding amounts. The claimant obtained judgments against all named defendants. We are in negotiations with the claimant and, in the meantime, has negotiated forbearance agreements to prevent the claimant from enforcing the judgments.99

ACivil ~~civil~~actions ~~action~~were ~~was~~ filed against ~~us,~~CDI ~~Old~~and ~~AGI,~~individual ~~Inc.,~~guarantors ~~AIRO~~in ~~Group~~the ~~(Illinois),~~Tioga ~~AIRO~~County ~~Drone~~Court, ~~Agile~~State ~~Defense,~~of ~~Joseph Burns~~Pennsylvania, ~~Chirinjeev Kathuria and John Uczekaj~~ in ~~Chancery~~July ~~Court in Delaware in September~~ 2023. The claimant, ~~Robert Perrin~~ FCCB, ~~one of our stockholders,~~ alleges that ~~these~~ ~~entities~~payment ~~failed to pay him for services allegedly rendered~~ under ancertain ~~Employment~~promissory ~~Agreement~~notes ~~with~~is ~~AIRO Group (Illinois)~~due, ~~that~~and the ~~individual defendants~~claimant ~~have~~is ~~breached~~seeking ~~their~~recovery ~~fiduciary duties as members~~ of ~~our~~the ~~board~~outstanding ofamounts. ~~directors,~~The claimant ~~and~~obtained ~~that~~judgments ~~defendants~~against ~~violated~~all ~~the~~named ~~Computer Fraud and Abuse Act~~defendants. On ~~November~~March 1727, ~~2023~~2025, ~~we filed a motion to dismiss. In response,~~ the ~~claimant~~Company ~~filed~~entered aninto ~~Amended~~a ~~Complaint~~settlement onagreement ~~February~~with ~~22,~~FCCB ~~2024~~providing infor ~~which~~a hefull ~~dropped~~and ~~AIRO~~unconditional ~~Group~~release ~~(Illinois)~~of asall aclaims ~~defendant,~~related ~~dropped~~to the ~~breach~~underlying ofdebt ~~contract~~upon ~~claim~~completion ~~and~~of ~~added~~payments atotaling ~~wage claim under Delaware~~approximately ~~statute~~$0.2 Onmillion. As of April 530, ~~2024~~2025, we ~~filed~~have afulfilled ~~Partial~~our ~~Answer~~payment ~~and~~obligations ~~Affirmative~~under ~~Defenses as well as a Partial Motion to Dismiss. In response,~~ the ~~claimant~~ ~~filed a Second Amended Complaint on May 16~~agreement, ~~2024~~and ~~in which he dropped~~ the ~~wage~~parties ~~claim~~have ~~under~~fully ~~Delaware statute~~ and ~~added~~unconditionally released aeach ~~civil conspiracy~~other ~~claim~~from ~~against~~and all ~~defendants. We filed an Amended Answer on November 15~~claims/liabilities, ~~2024~~or ~~and~~obligations ~~intends~~related to ~~continue to vigorously defend against all claims asserted in~~ the ~~complaint~~underlying debt.

~~Aside~~A ~~from~~civil ~~the~~action ~~above~~was ~~matters~~filed against us, weOld ~~are~~AGI, ~~not~~Inc., aAIRO ~~party~~Group to(Illinois), ~~any~~AIRO ~~material~~Drone, ~~legal~~Agile ~~proceedings~~Defense, Joseph Burns, Chirinjeev Kathuria and ~~are~~John ~~not~~Uczekaj ~~aware~~in ofChancery ~~any~~Court ~~pending~~in orDelaware ~~threatened~~in ~~claims~~September 2023. ~~From time~~The toclaimant, ~~time~~Robert Perrin, weone ~~may~~of beour ~~subject~~stockholders, alleges that these entities failed to ~~various~~pay ~~legal~~him ~~proceedings~~for ~~and~~services ~~claims~~allegedly ~~that~~rendered ~~arise~~under inan Employment Agreement with AIRO Group (Illinois), that the ~~ordinary~~individual defendants ~~course~~have breached their fiduciary duties as members of our ~~business~~board ~~activities. Legal~~of ~~contingencies~~directors, ~~are~~and ~~subject~~that todefendants ~~significant~~violated ~~uncertainties~~the Computer Fraud and Abuse Act. On November 17, ~~therefore~~2023, ~~determining~~we filed a motion to dismiss. In response, the ~~likelihood~~claimant offiled an Amended Complaint on February 22, 2024 in which he dropped AIRO Group (Illinois) as a ~~loss~~defendant, ordropped the ~~measurement~~ breach of contract claim and added a ~~loss~~wage ~~can~~claim beunder ~~complex~~Delaware statute. ToOn ~~the~~April ~~extent~~5, ~~applicable~~2024, we ~~will~~filed ~~accrue~~a ~~losses~~Partial ~~that~~Answer ~~are~~and ~~both~~Affirmative ~~probable~~Defenses ~~and~~as ~~reasonably~~well ~~estimable~~as a Partial Motion to Dismiss. AsIn ofresponse, ~~December~~the 31claimant filed a Second Amended Complaint on May 16, 2024 in which he dropped the wage claim under Delaware statute and ~~2023~~added a civil conspiracy claim against all defendants. We filed an Amended Answer on November 15, ~~there~~2024. ~~were~~In noMarch ~~accruals~~2025, ~~related~~we agreed to ~~litigation~~settle Mr. Perrin’s individual claims in the lawsuit for $0.8 million, contingent upon the closing of the IPO, which will be paid over six quarters beginning with the quarter ending September 30, 2025.

~~128~~Aside from the above matters, we are not a party to any material legal proceedings and are not aware of any pending or threatened claims. From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Legal contingencies are subject to significant uncertainties and, therefore, determining the likelihood of a loss or the measurement of a loss can be complex. To the extent applicable, we will accrue losses that are both probable and reasonably estimable. As of June 30, 2025, we had accruals of $0.8 million related to litigation.

100

MANAGEMENT

Executive Officers and Directors

The following table provides information regarding our current executive officers, ~~directors~~ and ~~director~~directors ~~nominees~~ as of ~~February 21~~July 31, 2025:

Name	Age	Position
Executive Officers
Dr. Chirinjeev Kathuria	60	Executive Chairman, Co-Founder and Director
Captain Joseph D. Burns	63	Chief Executive Officer and Director
John Uczekaj	66	President, Chief Operating Officer and Director
Dr. Mariya Pylypiv	36	Chief Financial Officer
Non-Employee Director and Director Nominees
Non-Employee Directors
John M. Belcher	83	Director
John M. Belcher(1)	84

Filing Compare · AIRO Group Holdings, Inc.