UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2025

 

OR

 

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ______________to _______________.

 

Commission File Number 001-42261

 

SAFE PRO GROUP INC.

(Exact name of registrant as specified in its charter)

 

Delaware		87-4227079
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
18305 Biscayne Blvd. Suite 222 Aventura, Florida		33160
(Address of principal executive offices)		(Zip Code)

 

(786) 409-4030

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001		SPAI		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐	Accelerated filer ☐
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 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

 

As of November 14, 2025, the registrant had outstanding 20,973,270 shares of common stock.

 

 

 

FORM 10-Q

 

INDEX

 

	Page
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)	1
CONDENSED CONSOLIDATED BALANCE SHEETS	1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY	3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	5
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	35
ITEM 4. CONTROLS AND PROCEDURES	35
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	36
ITEM 1A. RISK FACTORS	37
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	37
ITEM 3 DEFAULTS UPON SENIOR SECURITIES	37
ITEM 4. MINE SAFETY DISCLOSURES	37
ITEM 5. OTHER INFORMATION	37
ITEM 6. EXHIBITS	37
SIGNATURES	38

 

 

PART I: FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

SAFE PRO GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		September 30, 2025				December 31, 2024
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash		$	7,597,009			$	1,970,719
Accounts receivable and other receivables, net			40,394				123,686
Inventory			493,547				342,061
Prepaid expenses and other current assets			291,340				313,663
Total current assets			8,422,290				2,750,129
OTHER ASSETS:
Property and equipment, net			281,650				314,881
Right of use assets, net			77,952				101,621
Intangible assets, net			903,695				1,088,645
Goodwill			-				684,867
Security deposits			9,800				9,800
Total other assets			1,273,097				2,199,814
TOTAL ASSETS		$	9,695,387			$	4,949,943
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	261,113			$	119,812
Accrued expenses			260,474				90,264
Accrued compensation			7,566				115,344
Due to related parties			432,731				421,623
Contract liabilities			73,007				83,768
Lease liabilities, current portion			73,417				63,115
Total current liabilities			1,108,308				893,926
LONG-TERM LIABILITIES
Note payable			146,000				146,000
Lease liabilities, net of current portion			1,743				35,592
Total long-term liabilities			147,743				181,592
Total liabilities			1,256,051				1,075,518
SHAREHOLDERS’ EQUITY
Preferred stock: $0.0001 par value, 10,000,000 shares authorized;
Series A preferred stock; 3,000,000 shares designated, 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively			-				-
Series B preferred stock; 3,275,000 shares designated, 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively			-				-
Series C preferred stock; 2,000 shares designated, and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively			-				-
Preferred stock, value			-				-
Common stock; $0.0001 par value, 200,000,000 shares authorized, 18,846,881 and 14,534,685 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively			1,885				1,453
Additional paid-in capital			33,578,136				18,123,723
Accumulated deficit			(25,140,685	)			(14,250,751	)
Total shareholders’ equity			8,439,336				3,874,425
Total liabilities and shareholders’ equity		$	9,695,387			$	4,949,943

 

See the accompanying notes to the unaudited condensed consolidated financial statements.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

		2025				2024				2025				2024
		Three Months Ended								Nine Months Ended
		September 30,				September 30,				September 30,				September 30,
		2025				2024				2025				2024
Revenues:
Product sales		$	81,142			$	98,636			$	270,490			$	907,260
Services			20,280				232,120				108,487				374,139
Total Revenues			101,422				330,756				378,977				1,281,399
Cost of Revenues:
Product sales			42,229				55,815				141,720				604,000
Services			8,003				122,851				54,737				185,302
Depreciation expense			17,596				17,857				55,803				49,796
Total Cost of Revenues			67,828				196,523				252,260				839,098
Gross Profit			33,594				134,233				126,717				442,301
Operating Expenses:
Salaries, wages and payroll taxes			1,285,814				2,745,525				3,744,827				3,571,310
Research and development			109,763				-				127,638				85,937
Professional services			2,168,082				430,698				4,811,591				1,508,908
Selling, general and administrative expenses			602,715				418,366				1,329,374				853,077
Depreciation and amortization			74,855				81,718				249,957				172,834
Total Operating Expenses			4,241,229				3,676,307				10,263,387				6,192,066
Loss from Operations			(4,207,634	)			(3,542,074	)			(10,136,670	)			(5,749,765	)
Other Income (Expense):
Other income			31,398				-				33,890				-
Interest income			-				10,082				51,905				10,082
Interest expense			(3,253	)			(153,464	)			(8,190	)			(304,556	)
Impairment of goodwill			(684,867	)			-				(684,867	)			-
Impairment of other intangibles			(146,001	)			-				(146,001	)			-
Total Other Income (Expense), net			(802,723	)			(143,382	)			(753,264	)			(294,474	)
Net loss		$	(5,010,358	)		$	(3,685,456	)		$	(10,889,934	)		$	(6,044,239	)
Basic and diluted loss per share of common stock		$	(0.29	)		$	(0.34	)		$	(0.69	)		$	(0.64	)
Basic and diluted weighted average number of shares of common stock outstanding			17,086,544				10,778,140				15,690,595				9,484,897

 

See accompanying notes to the unaudited condensed consolidated financial statements

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

 

For the Nine Months Ended September 30, 2024

 

		# of Shares				Amount				# of Shares				Amount					# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
		Series A Preferred Stock								Series B Preferred Stock									Common Stock								Additional								Total
		# of Shares				Amount				# of Shares				Amount					# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
Balance, December 31, 2023			3,000,000			$	300				3,275,000			$	328		-			8,734,770			$	873			$	8,597,147			$	(6,822,290	)		$	1,776,358
Issuance of common shares for stock-based compensation			-				-				-				-					480,000				48				2,199,952				-				2,200,000
Issuance of common shares for services			-				-				-				-					230,000				23				747,977				-				748,000
Issuance of common shares and warrants for cash			-				-				-				-					152,813				16				488,987				-				489,003
Issuance of common shares for preferred Series A			(3,000,000	)			(300	)			-				-					1,500,000				150				150								-
Issuance of common shares for preferred Series B			-				-				(3,275,000	)			(328	)				1,310,000				131				197								-
Issuance of common shares for cash			-				-				-				-					1,020,000				102				4,179,398								4,179,500
Relative fair value of warrants issued with convertible debt			-				-				-				-													76,802								76,802
Issuance common shares from conversion of debt																				252,666				25				808,507				-				808,532
Net loss			-				-				-				-		-			-				-				-				(6,044,239	)			(6,044,239	)
Balance, September 30, 2024			-			$	-				-			$	-		-			13,680,249			$	1,368				17,099,117			$	(12,866,529	)		$	4,233,956

 

For the Nine Months Ended September 30, 2025

 

		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
		Series A Preferred Stock								Series C Preferred Stock								Common Stock								Additional								Total
		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
Balance, December 31, 2024			-			$	-				-			$	-				14,534,685			$	1,453			$	18,123,723			$	(14,250,751	)		$	3,874,425
Issuance of common shares for stock-based compensation			-				-				-				-				1,325,000				133				6,048,277				-				6,048,410
Issuance of preferred Series C for warrants and cash			-				-				1,050				-				-				-				1,050,000				-				1,050,000
Issuance of common shares for preferred Series C			-				-				(1,050	)			-				513,334				51				(51	)			-				-
Issuance of common for exercise of warrants			-				-				-				-				466,789				47				1,511,523								1,511,570
Issuance of common stock and warrants for cash			-				-				-				-				2,000,000				200				6,767,300								6,767,500
Contributed capital			-				-				-				-				-				-				64,615								64,615
Issuance of common for exercise of options			-				-				-				-				7,073				1				12,749								12,750
Net loss			-				-				-				-				-				-				-				(10,889,934	)			(10,889,934	)
Balance, September 30, 2025			-			$	-				-			$	-				18,846,881			$	1,885				33,578,136			$	(25,140,685	)		$	8,439,336

 

 

For the Three Months Ended September 30, 2024

 

 

		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
		Series A Preferred Stock								Series B Preferred Stock								Common Stock								Additional								Total
		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
Balance, June 30, 2024			3,000,000			$	300				3,275,000			$	328				9,117,583			$	912			$	9,710,913			$	(9,181,073	)		$	531,380
Issuance of common shares for stock-based compensation			-				-				-				-				400,000				40				1,999,960				-				2,000,000
Issuance of common shares for services																			80,000				8				399,992								400,000
Issuance of common shares and warrants for cash			-				-				-				-				-				-				-				-				-
Issuance of common shares for preferred Series A			(3,000,000	)			(300	)			-				-				1,500,000				150				150				-				-
Issuance of common shares for preferred Series B			-				-				(3,275,000	)			(328	)			1,310,000				131				197				-				-
Issuance of common shares for cash			-				-				-				-				1,020,000				102				4,179,398				-				4,179,500
Issuance common shares for conversion of debt																			252,666				25				808,507								808,532
Net loss			-				-				-				-				-				-				-				(3,685,456	)			(3,685,456	)
Balance, September 30, 2024			-			$	-				-			$	-				13,680,249			$	1,368			$	17,099,117			$	(12,866,529	)		$	4,233,956

 

For the Three Months Ended September 30, 2025

 

		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
		Series A Preferred Stock								Series C Preferred Stock								Common Stock								Additional								Total
		# of Shares				Amount				# of Shares				Amount				# of Shares				Amount				Paid-in Capital				Accumulated Deficit				Shareholders’ Equity
Balance, June 30, 2025			-			$	-				1,050			$	-				15,374,685			$	1,537			$	22,696,018			$	(20,130,327	)		$	2,567,228
Balance			-			$	-				1,050			$	-				15,374,685			$	1,537			$	22,696,018			$	(20,130,327	)		$	2,567,228
Issuance of common shares for stock-based compensation			-				-				-				-				485,000				49				2,590,597				-				2,590,646
Issuance of common shares for preferred Series C			-				-				(1,050	)			-				513,334				51				(51	)			-				-
Issuance of common for exercise of warrants			-				-				-				-				466,789				47				1,511,523				-				1,511,570
Issuance of common stock and warrants for cash			-				-				-				-				2,000,000				200				6,767,300				-				6,767,500
Issuance of common for exercise of options			-				-				-				-				7,073				1				12,749				-				12,750
Net loss			-				-				-				-				-				-				-				(5,010,358	)			(5,010,358	)
Balance, September 30, 2025			-			$	-				-			$	-				18,846,881			$	1,885				33,578,136			$	(25,140,685	)		$	8,439,336
Balance			-			$	-				-			$	-				18,846,881			$	1,885				33,578,136			$	(25,140,685	)		$	8,439,336

 

See accompanying unaudited notes to the condensed consolidated financial statements.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		2025				2024
		For the Nine Months Ended
		September 30,
		2025				2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(10,889,934	)		$	(6,044,239	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense			305,760				222,630
Stock-based compensation and professional fees			6,048,410				2,948,000
Amortization of debt discount			-				208,006
Impairment of goodwill			684,867				-
Impairment of other intangibles			146,001				-
Change in operating assets and liabilities:
Accounts receivable			83,292				(58,141	)
Inventory			(151,486	)			(16,115	)
Prepaid expenses and other assets			22,323				(370,124	)
Accounts payable			141,301				64,661
Accrued expenses			170,210				161,652
Contract liabilities			(10,761	)			(14,382	)
Lease liabilities			122				(9,110	)
Accrued compensation			(99,702	)			(157,945	)
NET CASH USED IN OPERATING ACTIVITIES			(3,549,597	)			(3,065,107	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(26,035	)			(53,801	)
Investment in internal-use software			(207,545	)			(172,596	)
NET CASH USED IN INVESTING ACTIVITIES			(233,580	)			(226,397	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible notes payable			-				275,002
Proceeds from notes payable			-				236,500
Proceeds from sale of common stock and warrants			-				(236,500	)
Proceeds from sale of common stock in offering			6,767,500				4,179,500
Proceeds from sale of Preferred Series C shares and warrants			1,050,000				489,003
Proceeds from warrant exercises			1,511,570				-
Proceeds from option exercise			12,750				-
Proceeds from related party advances			129,051				-
Repayments of due to related party			(61,404	)			(20,654	)
NET CASH PROVIDED BY FINANCING ACTIVITIES			9,409,467				4,922,851
NET INCREASE IN CASH			5,626,290				1,631,347
CASH, beginning of period			1,970,719				703,368
CASH, end of period		$	7,597,009			$	2,334,715
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest		$	8,190			$	97,804
Income taxes		$	-			$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Contributed services		$	64,615			$	-
Issuance of common shares and equity for convertible debt		$	-			$	750,002
Issuance of common shares for accrued interest payable		$	-			$	58,530
Increase in additional paid in capital for conversion of preferred shares to common shares		$	-			$	347
Increase in debt discount and additional paid-in capital		$	-			$	76,802

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

NOTE 1 - NATURE OF ORGANIZATION, LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Safe Pro Group. Inc. (the “Company”) is a Delaware corporation organized on December 15, 2021, under the name of Cybernate Corp and started doing business on January 1, 2022. On July 13, 2022, the Company changed its name from Cybernate Corp. to Safe Pro Group Inc. Through a layered approach to the development and integration of advanced artificial intelligence and machine learning, drone-based remote sensing technologies and services, and personal protective gear, the Company has acquired companies with unique safety and security technologies and solutions that can provide governments, enterprises and non-government organizations with innovative solutions designed to respond to evolving threats.

 

Liquidity

 

As reflected in the accompanying unaudited condensed consolidated financial statements; the Company generated a net loss of $10,889,934 and used cash in operations of $3,549,597, during the nine months ended September 30, 2025, and has an accumulated deficit of $25,140,685 on September 30, 2025. As of September 30, 2025, the Company had a cash balance of $7,597,009 and working capital of $7,313,982.

 

On October 21, 2025, the Company sold 2,000,000 shares of the Company’s common stock at a purchase price of $7.00 per share. The gross proceeds to the Company from the offering were approximately $14.0 million, before deducting the fees and expenses.

 

On August 21, 2025, the Company sold (i) 2,000,000 shares of the Company’s common stock, and (ii) three3-year warrants to purchase up to 2,000,000 shares of the Company’s common stock at an exercise price of $6.00 per share (the “August Warrants”). The combined purchase price of one share of common stock and one accompanying August Warrant was $4.00. The gross proceeds to the Company from the offering were approximately $8.0 million, before deducting the fees and expenses, and excluding the proceeds, if any, from the exercise of the August Warrants.

 

On May 9, 2025, the Company sold: (i) 1,050 shares of Series C convertible preferred stock (the “Preferred Stock”) a price of $1,000 per share of Preferred Stock for aggregate gross proceeds of $1.05 million, and (ii) three-3year warrants to purchase the number of shares of Company’s common stock equal to the number of Conversion Shares (defined below) underlying the Preferred Stock on the date of issuance at an exercise price of $2.93 per share (the “May Warrants”). Each share of Preferred Stock has a stated value (the “Stated Value”) of $1,100 per share. Each holder of Preferred Stock may convert all, or any part, of the Stated Value the outstanding Preferred Stock, at any time at such holder’s option, into shares of the Common Stock (which converted shares of Common Stock are referred to as “Conversion Shares”) at an initial fixed “Conversion Price” of $2.25, which is subject to proportional adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions.

 

On August 29, 2024, the Company completed its initial public offering (“IPO”), pursuant to which the Company sold 1,020,000 shares of common stock for gross proceeds of $5,100,000 and received net proceeds of $4,179,500, after fees and expenses of $920,500. During December 2024, the Company received cash consideration of $878,078 for the exercise of warrants.

 

The aggregate gross proceeds $22,000,000 pursuant to the August 21, 2025 and October 21, 2025 private placements of $8,000,000 and $14,000,000, respectively, serve to mitigate the conditions that historically raised substantial doubt about the Company’s ability to continue as a going concern. The Company believes that the Company has sufficient cash to meet its obligations for a minimum of twelve months from the date of this filing.

 

Basis of presentation and principles of consolidation

 

The unaudited condensed consolidated financial statements of the Company include the accounts of the Company and its wholly owned subsidiaries, Safe-Pro USA, Airborne Response, and Safe Pro AI. All intercompany accounts and transactions have been eliminated in consolidation.

 

Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

 

Certain information and note disclosure normally included in consolidated financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the six months ended June 30, 2025, the years ended December 31, 2024 and 2023 of the Company which is included in Form 10-Q and Form 10-K, as filed on August 14, 2025 and March 31, 2025, respectively.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates during the nine months ended September 30, 2025 and 2024, include estimates for allowance for credit losses on accounts receivable and other receivables, estimates for obsolete or slow-moving inventory, the useful life of property and equipment, the valuation of assets acquired in an asset acquisition, the valuation of intangible assets and goodwill to determine any impairment, the estimate of the fair value of lease liabilities and related right of use assets, assumptions used in assessing impairment of long-lived assets, estimates related to the allocation of the transaction price for revenue recognition purposes, estimates of current and deferred income taxes and deferred tax valuation allowances, and the fair value of non-cash equity transactions.

 

Risks and uncertainties

 

The Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. In August 2024, the Company entered into a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This service is a secure and convenient way to access FDIC protection on large deposits and earn a return. This service provides for deposits in excess of $250,000 to be distributed over multiple institutions, so that at any given time there are no sums in excess of FDIC insured levels. To date, the Company has not experienced any losses on its invested cash. As of September 30, 2025 and December 31, 2024, the Company had no cash in bank in excess of FDIC insured levels.

 

The Company’s results of operations could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that are outside of its control, including the impact of health and safety concerns, and war in Ukraine and the Middle East. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, including weakened demand for the Company’s products and services and its ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could strain the Company’s domestic and international customers, possibly resulting in delays in customer payments. Any of the foregoing could harm the Company’s business and it cannot anticipate all the ways in which the current economic climate and financial market conditions could adversely impact the Company’s business.

 

Revenue recognition

 

In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

Safe-Pro USA

 

The Company recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms.

 

Revenue from Safe-Pro USA customers is generally recognized at the time of shipment, which is the time that the Company satisfies its performance obligations.

 

Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed, and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.

 

Airborne Response

 

Airborne Response recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenues from services are recognized at a point in time when Airborne Response completes services pursuant to its agreements with clients and collectability is probable.

 

Safe Pro AI

 

Safe Pro AI sells subscriptions to its customers for the use of its software under a software as a service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including demining, in law enforcement and security. The Company’s SaaS offerings are sold under a prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI initially charges data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.

 

Contract liabilities

 

Advance payments received from customers, as well as unpaid amounts that customers are contractually obligated to pay, are deferred until all revenue recognition criteria are satisfied. As of September 30, 2025 and December 31, 2024, customer advanced payments amounted to $73,007 and $83,768, respectively, which are included in contract liabilities on the accompanying unaudited condensed consolidated balance sheets.

 

Advertising costs

 

All costs related to advertising of the Company’s services and products are expensed in the period incurred. For the three and nine months ended September 30, 2025, advertising costs charged to operations were $44,448 and $157,633, respectively, and for the three and nine months ended September 30, 2024 were $85,572 and $116,170, respectively, are included in general and administrative expenses on the accompanying unaudited consolidated statements of operations.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Net loss per common share

 

ASC 260 “Earnings Per Share”, requires dual presentation of basic and diluted earnings (loss) per common share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to shareholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares were excluded from the computation of diluted shares outstanding for the nine months ending September 30, 2025 and 2024, as they would have an anti-dilutive impact on the Company’s net losses and consisted of the following:

 

 SCHEDULE OF ANTI-DILUTIVE IMPACT ON NET LOSSES

		2025				2024
		September 30,
		2025				2024
Stock warrants			2,135,688				849,768
Stock options			963,752				-
Common shares issuable upon conversion of convertible notes			-				-
Common shares issuable upon conversion of Preferred Series A			-				-
Common shares issuable upon conversion of Preferred Series B			-				-
Common shares issuable upon conversion of Preferred Series C			-				-
Total			3,099,440				849,768

 

The Company has 3,000,000 Series A Preferred, 3,275,000 Series B Preferred shares and 2,000 Series C Preferred shares authorized. On August 28, 2024, 3,000,000 Series A Preferred and 3,275,000 Series B Preferred shares were converted into 1,500,000 and 1,310,000 common shares respectively. On July 22, 2025, July 23, 2025 and September 11, 2025 Series C Preferred of 875, 145, and 30, respectively, were converted into 427,778, 70,889, and 14,667 common shares, respectively. During the nine months ended September 30, 2025 and 2024, the Company had 0 Series A Preferred shares, 0 of Series B Preferred shares and 0 of Series C Preferred shares issued and outstanding. (See Note 8).

 

Segment reporting

 

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. During the three and nine months ended September 30, 2025 and 2024, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

 

Recent accounting pronouncements

 

In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement. ASU 2024-03 is effective for annual periods beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted, and application may be applied prospectively or retrospectively. We are currently evaluating the potential effect that ASU 2024-03 will have on our consolidated financial statements.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

In November 2024, the FASB issued ASU 2024-04, “Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments,” which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt. The new guidance is effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. The Company is currently evaluating the impact of the standard on its consolidated financial statements and related disclosures.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.

 

NOTE 2 – ACCOUNTS RECEIVABLE AND OTHER RECEIVABLES

 

Accounts receivable

 

On September 30, 2025 and December 31, 2024, accounts receivable consisted of the following:

 SCHEDULE OF ACCOUNTS RECEIVABLE

		September 30, 2025				December 31, 2024
Accounts receivable		$	40,394			$	123,686
Less: allowance for doubtful accounts			-				-
Accounts receivable, net		$	40,394			$	123,686

 

For the three and nine months ended September 30, 2025 and 2024, the Company did not record any bad debt expense related to accounts receivable.

 

Performance bond receivable

 

On September 30, 2025 and December 31, 2024, other receivables consisted solely of performance bond receivables as follows:

 SCHEDULE OF OTHER RECEIVABLES

		September 30, 2025				December 31, 2024
Other receivables		$	142,526			$	142,526
Less: allowance for doubtful other receivables			(142,526	)			(142,526	)
Other receivables, net		$	-			$	-

 

Safe-Pro USA was required to obtain a Performance Guarantee (PG) at a bank designated by a former customer. The amount of each separate Performance Guarantee is 10% of the CFR (Cost and Freight) value of the contract in US Dollars. The Performance Guarantee was required to be submitted prior to the Contract being executed. In case of the supplier’s failure to fulfill the contractual obligations as per the terms of the contract, the Performance Guarantee may be forfeited. Upon certain conditions being met, the Company would be entitled to reimbursement from the Performance Guarantee being held. The Company has yet to receive any receipts from their performance bonds being held at the designated bank. As of September 30, 2025 and December 31, 2024, there were no performance bonds receivable and outstanding.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

NOTE 3 – INVENTORY

 

On September 30, 2025 and December 31, 2024, inventories consisted of the following:

 SCHEDULE OF INVENTORIES

		September 30, 2025				December 31, 2024
Raw materials		$	281,659			$	259,658
Work in process			193,618				60,229
Finished goods			18,270				22,174
Less reserve for obsolete inventory			-				-
Total		$	493,547			$	342,061

 

NOTE 4 – PROPERTY AND EQUIPMENT

 

On September 30, 2025 and December 31, 2024, property and equipment consisted of the following:

 SCHEDULE OF PROPERTY AND EQUIPMENT

		September 30, 2025				December 31, 2024
Manufacturing equipment		$	340,009			$	340,009
Drones and related equipment			129,536				115,423
Software library			10,000				10,000
Furniture, fixtures and office equipment			19,250				7,329
Property and equipment, gross			19,250				7,329
Less accumulated depreciation			(217,145	)			(157,880	)
Total		$	281,650			$	314,881

 

For the three and nine months ended September 30, 2025, depreciation expense amounted to $20,284 and $59,266, respectively. For the three and nine months ended September 30, 2024 depreciation expense amounted to $18,224 and $50,896, respectively.

 

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

 

Impairments

 

During the quarter ended September 30, 2025, the Company conducted an interim impairment test of its goodwill and other intangibles due to a decline in operating performance and a sustained decline in its stock price. As part of the analysis, the Company updated the forecasted future cash flows and revenues in the impairment assessment to reflect current conditions. Based on the results of the impairment test performed, the Company recognized a full goodwill impairment charge of $684,867 and an other intangibles impairment charge of $146,001 during the three and nine months ended September 30, 2025. No impairment charges were recognized during the three and nine months ended September 30, 2024.

 

Intangible assets

 

As a result of the acquisition of Safe Pro AI on March 9, 2023, there was a $545,625 increase in the gross intangible assets made up of $545,625 of finite lived intangible assets, consisting of a single software asset, SpotlightAI™. Spotlight AI detects threats from drone imagery, relaying precise GPS location and actionable reporting information to decision makers and ground personnel. The Company intends to utilize its AI, ML and computer vision technology to create and analyze large datasets. The Company’s technology is being used in the field by the Ukrainian government, as well as several humanitarian aid organizations.

 

During the three and nine months ended September 30, 2025, the Company capitalized $2,702 and $207,545, respectively of its direct costs. As of September 30, 2025 and September 30, 2024, the Company had $903,695 and $1,088,645, respectively, of finite lived intangible assets, net.

 

As of September 30, 2025, intangible assets subject to amortization consisted of the following:

 

SCHEDULE OF INTANGIBLE ASSETS SUBJECT TO AMORTIZATION

		September 30, 2025
		Amortization period (years)		Gross Amount				Accumulated Amortization				Net finite intangible assets
Customer relationships		5		$	388,000			$	(388,000	)		$	-
Contractual employment agreements		3			310,000				(310,000	)			-
Acquired capitalized internal-use software development costs		3			1,125,758				(222,063	)			903,695
Amortization of intangible assets				$	1,823,758			$	(920,063	)		$	903,695

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

For the three and nine months ended September 30, 2025, amortization of intangible assets amounted to $72,167 and $246,493, respectively. For the three and nine months ended September 30, 2024, amortization of intangible assets amounted to $81,352 and $171,735, respectively. For the three and nine months ended September 30, 2025, impairment of intangible assets amounted to $146,001. There were no impairment charges during the three and nine months ended September 30, 2024.

 

As of December 31, 2024, intangible assets subject to amortization consisted of the following:

 

For the year ended December 31, 2024 amortization of intangible assets amounted to $271,235.

 

Amortization of intangible assets with finite lives attributable to future periods is as follows:

 

SCHEDULE OF AMORTIZATION OF INTANGIBLE ASSETS

Year ending December 31:		Amount
2025 (three months ended December 31, 2025)		$	65,656
2026			225,971
2027			225,971
2028			225,971
2029			160,126
Total		$	903,695

 

Goodwill

 

On September 30, 2025 and December 31, 2024, goodwill consisted of the following:

 

SCHEDULE OF GOODWILL

		September 30, 2025				December 31, 2024
Safe-Pro USA		$	-			$	518,255
Airborne Response			-				166,612
Total goodwill		$	-			$	684,867

 

For the three and nine months ended September 30, 2025, impairment of goodwill amounted to $684,867.

 

NOTE 6 – NOTE PAYABLE

 

On September 30, 2020, Safe-Pro USA entered into a Loan and Authorization Agreement (the “SBA COVID-19 EIDL Loan”) with respect to a loan of $146,000 from the U.S. Small Business Administration (the “SBA”). The SBA deferred the first payment due from 12 months from the date of the promissory note to 30 months from the date of the Note, with a term of 30 years or July 1, 2050. Interest shall accrue at the rate of 3.75% per annum. The SBA Loan is secured by a continuing security interest in and to any and all Safe Pro USA’s tangible and intangible personal property, including, but not limited to inventory, equipment, accounts receivable, and deposit accounts. As of September 30, 2025 and December 31, 2024, accrued interest related to this note amounted to $2,914 and $5,227, respectively, and is included in accrued expenses on the accompanying unaudited condensed consolidated balance sheets.

 

On September 30, 2025 and December 31, 2024, notes payable consisted of the following:

 

SCHEDULE OF NOTES PAYABLE

		September 30, 2025				December 31, 2024
Notes payable		$	146,000			$	146,000
Total notes payable			146,000				146,000
Less: current portion of notes payable			-				-
Notes payable – long-term		$	146,000			$	146,000

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

The following schedule provides minimum future note payable principal payments required during future periods:

 

SCHEDULE OF MINIMUM FUTURE NOTE PAYABLE PRINCIPAL PAYMENTS

Year ending December 31:		Amount
2025		$	-
2026			2,535
2027			3,219
2028			3,342
2029			3,469
2030			3,602
Thereafter			129,833
Total note payable		$	146,000

 

NOTE 7 – CONVERTIBLE NOTES PAYABLE

 

On December 27, 2023, the Company received net proceeds of $475,000 in relation to a convertible debt agreement with an investor in the principal amount of $475,000, which matured on December 27, 2024, at an interest rate of 15% per annum and a default interest rate of 18% per annum. The convertible debt agreement provided warrants to purchase up to 148,438 shares of the Company’s common stock at an exercise price of $1.00, with a term of three years. The investor may convert any outstanding and unpaid principal portion and accrued and unpaid interest of the convertible note into shares of the Company’s common stock at the conversion price of $3.20 per share, subject to price protection and 4.9% beneficial conversion limitation. The warrants were valued at $184,063, or $1.24, and using the relative fair value method, the Company recorded as a debt discount of $132,658 to be amortized over the life of the convertible note. The warrants were valued on the grant date using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 2.91%, expected dividend yield of 0%, expected option term of three years, and expected volatility of 70.0% based on the calculated volatility of comparable companies.

 

During March 2024, the Company received net proceeds of $275,002 in relation to a convertible debt agreement with an investor in the principal amount of $475,000, which mature in March of 2025 at an interest rate of 15% per annum and a default interest rate of 18% per annum. The convertible debt agreement provided warrants to purchase up to 85,938 shares of the Company’s common stock at an exercise price of $1.00, with a term of three years. The investor may convert any outstanding and unpaid principal portion and accrued and unpaid interest of the convertible note into shares of the Company’s common stock at the conversion price of $3.20 per share, subject to price protection and 4.9% beneficial conversion limitation. The warrants were valued on the grant date at $106,563, or $1.24, using the relative fair value method. Warrants were valued on the grant date using a Black-Scholes option pricing model with the following assumptions: risk-free interest rate of 2.91%, expected dividend yield of 0%, expected option term of three years, and expected volatility of 70.0% based on the calculated volatility of comparable companies.

 

On August 27, 2024, the December 2023 Convertible Note and March 2024 Convertible Notes with principal balances of $750,002 and accrued interest payable of $58,530, were converted into 252,666 common shares of the Company, pursuant to contractual conversion terms.

 

During the three and nine months ended September 30, 2025 and the year ended December 31, 2024, the Company did not record any amortization of debt discount.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

NOTE 8 – STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

Series A Preferred Stock

 

On June 7, 2022, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate 3,000,000 shares of the Series A Preferred, par value $0.0001. The Certificate of Designation became effective in the state of Delaware on January 20, 2023. Each share of Series A Preferred had an initial stated value of $10.00 per share. On August 28, 2023, the Company amended its Series A Preferred Certificate of Designation, to amend the Series A Stated Value to $2.50 per share.

 

Each share of Series A Preferred was convertible into the number of common shares equal to the Series A Stated Value ($2.50) divided by the Fair Market Value of the common stock. The Fair Market Value is equal to the average of the closing price for the Company’s common stock on a National Market Exchange, for the 20 trading days prior to conversion or in the case of an initial public offering the initial listing price, subject to price protection. Series A Preferred has voting rights equal to the number of common shares into which it may convert. The conversion rights of Preferred Series A were contingent upon the Company’s completion of the initial public offering and/or listing on a National Market Exchange. The holders of the Series A Preferred shall be entitled to a dividend that is payable to the holders of the Company’s common stock as well as certain liquidation rights.

 

The Series A Preferred were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of the Series A Preferred Certificate of Designation, Series A Preferred is not redeemable for cash. As such, the Series A Preferred is classified as permanent equity. The Company concluded that the conversion rights under the Series A Preferred were clearly and closely related to the equity host instrument. Accordingly, the conversion rights feature on the Series A Preferred were not considered an embedded derivative that required bifurcation.

 

On June 7, 2022, in connection with the acquisition of 100% of the Safe-Pro USA, the Company issued 3,000,000 share of Series A preferred stock. On August 28, 2024, in conjunction with the Company’s initial public offering, the Series A Preferred shares were converted into 1,500,000 shares of common stock.

 

Series B Preferred Stock

 

On August 29, 2022, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate 3,275,000 shares of the Series B Preferred, par value $0.0001. The Certificate of Designation became effective in the state of Delaware on January 20, 2023. Each share of Series B Preferred had a stated value of $2.00 per share.

 

Each share of Series B Preferred was convertible into the number of common shares equal to the Series B Stated Value ($2.00) divided by the Fair Market Value of the common stock. The Fair Market Value is equal to the average of the closing price for the Company’s common stock on a National Market Exchange, for the 20 trading days prior to conversion or in the case of an initial public offering the initial listing price, subject to price protection. Series B Preferred has voting rights equal to the number of common shares into which it may convert. The conversion rights of Preferred Series B were contingent upon the Company’s completion of the initial public offering and/or listing on a National Market Exchange. The holders of the Series B Preferred shall be entitled to a dividend that is payable to the holders of the Company’s common stock as well as certain liquidation rights.

 

On August 29, 2022, in connection with the acquisition of 100% of Airborne Response, the Company issued 3,275,000 shares of Series B preferred stock. On August 27, 2024, in conjunction with the Company’s initial public offering, the Series B Preferred shares were converted into 1,310,000 shares of common stock.

 

Series C Preferred Stock

 

On May 7, 2025, the Company’s board of directors approved an Amendment to its Articles of Incorporation, to designate 2,000 shares of the Series C Preferred, par value $0.0001. On May 8, 2025, the Company’s Certificate of Designation for Series C Preferred Stock became effective, authorizing 2,000 shares with a stated value of $1,100 per share. The Series C Preferred Stock was non-voting, entitled to dividends on an as-converted basis, and convertible into common stock at a fixed price of $2.25 per share. The Company had the option to redeem the shares at stated value, and holders were entitled to liquidation preference equal to the stated value.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

On July 22, 2025, the Company issued 427,778 common shares pursuant to the conversion of 875 shares of Preferred Series C at a conversion ratio of $2.25 per share.

 

On July 23, 2025, the Company issued 70,889 common shares pursuant to the conversion of 145 shares of Preferred Series C at a conversion ratio of $2.25 per share.

 

On September 11, 2025, the Company issued 14,667 common shares pursuant to the conversion of 30 shares of Preferred Series C at a conversion ratio of $2.25 per share.

 

As of September 30, 2025, all Series C Preferred Stock had been converted into common shares, resulting in no outstanding balance.

 

Common stock issued for compensation and services

 

2025

 

On February 27, 2025, the Company issued 100,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.90, representing the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount of $390,000 are recorded to Professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

On February 28, 2025, the Company issued 400,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.88, representing the market close on date of issuance. The award was issued to Mr. Erdberg, the Company’s CEO, as pursuant to his contractual agreement with the Company. Stock-based compensation in the amount of $1,552,500 is recorded and is represented in Salary, wages and payroll taxes on the Company’s unaudited condensed consolidated statement of operations.

 

Also on February 28, 2025, the Company issued 100,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.88, representing the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount of $380,000 are recorded to Professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

On March 11, 2025, the Company issued 25,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.06, representing the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount of $76,500 are recorded to Professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

On March 20, 2025, the Company issued 12,500 common shares, outside of its 2022 Equity Plan, at a fair market value of $2.93, representing the market close on date of issuance. The award was issued to individuals for services. Stock-based professional fees in the amount of $36,625 are recorded to Professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

On June 13, 2025, the Company issued 37,500 common shares, pursuant to 2022 Equity Plan, at a fair market value of $3.01, representing the market close on date of issuance. The award was issued to an individual for services. Stock-based professional fees in the amount of $112,875 are recorded as professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

Also on June 13, 2025, the Company issued 165,000 restricted shares at a fair market value of $3.01, representing the market close on date of issuance. Stock-based professional fees in the amount of $496,650 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations. The foregoing securities were issued pursuant to Section 4(a)(2) of the Securities Act. The awards were issued to individuals for services relating to certain equity transactions and have not been registered pursuant to the Securities Act of 1933.

 

On July 22, 2025, the Company issued 265,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.85, representing the market close on date of issuance. The awards were issued to individuals in connection with services performed or pursuant to contractual employment agreements. Stock-based compensation fees totaling $1,020,250 are recorded, including $442,750 to Professional fees and $577,500 to Salary, wages and payroll taxes on the Company’s unaudited condensed consolidated statement of operations.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Also on July 22, 2025, the Company issued 30,000 restricted shares at a fair market value of $3.85, representing the market close on date of issuance. Stock based professional fees in the amount of $115,500 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations. The foregoing securities were issued pursuant to Section 4(a)(2) of the Securities Act. The award was issued to an individual for services performed and has not been registered pursuant to the Securities Act of 1933.

 

On August 4, 2025, the Company granted 30,000 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $3.36, representing the market close on date of issuance. The award was granted to an individual in connection with services performed. The shares vest in equal monthly installments of 2,500 shares over a 12-month period beginning September 1, 2025, subject to continued service. As of September 30, 2025, the Company issued 2,500 shares. Stock-based professional fees in the amount of $8,400 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

On August 22, 2025, the Company issued 187,500 common shares, pursuant to its 2022 Equity Plan, at a fair market value of $5.69, representing the market close on date of issuance. The awards were issued to individuals in connection with services performed or pursuant to contractual employment agreements. Stock based professional fees in the amount of $1,066,875 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

2024

 

On January 9, 2024, the Company issued 50,000 vested restricted common shares to a director for services rendered pursuant to a board of directors’ agreement (See Note 11). The Company valued these common shares at the fair value of $98,000, or $1.96 per share based on sales of common stock units in recent private placements.

 

On June 24, 2024, the Company issued 180,000 fully vested restricted common shares to consultants for services rendered. The Company valued these common shares at $450,000 or $2.50 per share based on sales of common stock units in recent private placements.

 

On August 29, 2024, the Company issued 80,000 restricted common shares to consultants for services rendered. The Company valued these common shares at $400,000 or $5.00 per share based on the initial listing price for its public offering.

 

Additionally, on August 29, 2024, the Company issued 270,000 restricted common shares to Daniyel Erdberg, 80,000 restricted common shares to Theresa Carlise and 50,000 restricted common shares to an Employee. The Company valued these common shares at $2,000,000 or $5.00 per share based on the initial listing price for its public offering.

 

In connection with these shares, the Company recorded stock-based professional fees of $400,000 and $948,000, respectively, for the three and nine months ended September 30, 2024.

 

Common stock and warrants issued for cash

 

2025

 

During the three months ended September 30, 2025, the Company completed a private placement of 2,000,000 Units for aggregate gross proceeds of $8,000,000, or $4.00 per Unit. Each Unit consisted of one share of common stock and one common stock purchase warrant. Each warrant entitles the holder to acquire one share of common stock at an exercise price of $6.00 per share, exercisable immediately and expiring three years from the date of issuance. The Company incurred direct equity issuance costs of $1,232,500, which were recorded as a reduction to additional paid-in capital.

 

2024

 

For the three months ending September 30, 2024, the Company issued 0 common shares for cash. During the nine months ended September 30, 2024, the Company completed a private placement of (i) 51,249 Units for aggregate proceeds of $163,997, or $3.20 per Unit. Each Unit consisted of one share of common stock and one common stock purchase warrant of the Company. Each warrant entitles the holder thereof to acquire one share of common stock of the Company for a price of $1.00 for a period of 3 years from the date of issuance and (ii) 101,564 Units for aggregate proceeds of $325,004, or $3.20 per Unit. Each Unit consisted of one share of common stock and one common stock purchase warrant of the Company. Each warrant entitles the holder thereof to acquire one share of common stock of the Company for a price of $3.20, for a period of 3 years from the date of issuance.

 

Contributed capital

 

On March 31, 2025, Mr. Borkar, President of Safe-Pro USA and an employee, which is his spouse, agreed to forgive aggregate accrued salary of $64,615, which has been recorded as contributed capital as presented on the condensed consolidated statement of shareholders’ equity. See Note 11.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Warrants

 

A summary of the status of the Company’s total outstanding warrants and changes during the nine months ended September 30, 2025 and 2024, respectively are as follows:

 SCHEDULE OF OUTSTANDING WARRANTS AND CHANGES 

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value (1)
Balance Outstanding on December 31, 2024			125,531			$	4.09				3.26			$	90,952
Issued			2,525,835				5.37				2.84				-
Exercised			(515,678	)			-				-				-
Balance Outstanding on September 30, 2025			2,135,688			$	5.88				2.88			$	2,435,901
Exercisable, September 30, 2025			2,123,188			$	5.89				2.87			$	2,399,026

 

(1)	The aggregate intrinsic value on September 30, 2025, was calculated based on Nasdaq’s market close on September 30, 2025 of $7.02 and the exercise price of the underlying warrants.

 

		Number of Warrants				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value (1)
Balance Outstanding on December 31, 2023			611,017			$	1.00				2.5			$	574,356
Issued			289,751				2.70				3.0				-
Balance Outstanding on September 30, 2024			900,768			$	1.55				2.1			$	1,211,261
Exercisable, September 30, 2024			849,768			$	1.64				2.3			$	1,382,621

 

(1)

The aggregate intrinsic value on September 30, 2024, was calculated based on Nasdaq’s market close on September 30, 2024 of $2.89 and the exercise price of the underlying warrants. The aggregate intrinsic value on December 31, 2023 was calculated based on the difference between the calculated fair value on December 31, 2023 of $1.94 and the exercise price of the underlying warrants.

 

For the nine months ending September 30, 2025 and 2024, the Company recorded $14,069 and $0, respectively, for stock-based compensation expense related to 12,500 warrants as issued for services. As of September 30, 2025, unamortized stock-based compensation for warrants was $ 1,378 to be recognized through December 31, 2025.

 

The above warrants granted during the nine months ended September 30, 2025 were valued using the Black-Scholes option pricing model using the following weighted average assumptions:

 SCHEDULE OF BLACK-SCHOLES OPTION PRICING MODEL TO WARRANTS GRANTED ASSUMPTION

		September 30, 2025
Expected term, in years			5
Expected volatility			54.41	%
Risk-free interest rate			4.01	%
Dividend yield			-

 

Representative warrants

 

On August 29, 2024, in connection with the IPO, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Dawson James Securities, Inc. (the “Underwriter”), Pursuant to the Underwriting Agreement, the Company issued a common stock purchase warrant to the Underwriter for the purchase of 51,000 shares of common stock at an exercise price of $6.25, subject to adjustments (the “Underwriter Warrant”). The Underwriter Warrant is exercisable at any time and from time to time, in whole or in part, during the period commencing on March 1, 2025, and ending on August 28, 2029 and may be exercised on a cashless basis under certain circumstances. The Underwriter Warrant provides for registration rights (including piggyback rights) and customary anti-dilution provisions (for share dividends and splits and recapitalizations) and anti-dilution protection (adjustment in the price of the Underwriter Warrant and the number of shares underlying the Underwriter Warrant) resulting from corporate events (which would include dividends, reorganization, mergers and similar events). The Underwriter Warrant and the common stock underlying the Underwriter Warrant were registered as a part of the IPO Registration Statement.

 

Warrants issued for Convertible Preferred Series C Stock

 

On May 8, 2025, the Company entered into convertible Series C Preferred agreements with investors pursuant to which the Company issued and sold to the Investors for an aggregate price of $1,050,000 to (i) 1,050 Series C Preferred shares, stated value $1,100 which are convertible into 513,335 shares of the Company’s common stock at a conversion rate of $2.25 per share and (ii) warrants to purchase 513,335 shares of common stock at an initial exercise price of $2.93 per share, subject to adjustment.

 

During the three months ended September 30, 2025, 513,334 warrants were exercised at an exercise price of $2.93 per share, resulting in aggregate proceeds of approximately $1.5 million to the Company.

 

Warrants issued for Convertible Debt

 

During March 2024, the Company entered into convertible note agreements with investors pursuant to which the Company issued and sold to the Investors (i) the March 2024 Convertible Notes in the principal amount of $275,001 and (ii) the March 2024 Warrants to purchase up to 85,938 shares of the Company’s common stock at an initial exercise price of $1.00, subject to adjustment.

 

Warrants issued in connection with private placement

 

During the three months ended September 30, 2025, the Company completed a private placement of 2,000,000 Units for aggregate gross proceeds of $8,000,000, or $4.00 per Unit. Each Unit consisted of one share of common stock and one common stock purchase warrant. Each warrant entitles the holder to acquire one share of common stock at an exercise price of $6.00 per share, exercisable immediately and expiring three years from the date of issuance.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

The Company determined that the warrants do not meet the definition of liability under FASB ASC Topic 480 and therefore classified the warrants as equity instruments.

 

Options

 

A summary of the Company’s stock option activity is as follows:

 SCHEDULE OF STOCK OPTION ACTIVITY

		Shares Underlying Options				Weighted Average Exercise Price				Weighted Average Contractual Life (Years)				Intrinsic Value
Outstanding at December 31, 2024			322,500			$	3.40				4.97			$	138,675
Granted			650,000				7.42				4.66				-
Forfeited			-				-				-				-
Exercised			(8,748	)			3.40				-				-
Outstanding at September 30, 2025			963,752			$	6.11				4.52			$	1,363,782
Exercisable at September 30, 2025			432,188			$	4.06				4.20			$	1,217,851

 

For the nine months ending September 30, 2025 and 2024, the Company recorded $548,342 and $0, respectively, for stock-based compensation expense related to stock options. As of September 30, 2025, unamortized stock-based compensation for stock options was $1,101,752 to be recognized through March 31, 2030.

 

The options granted during the nine months ended September 30, 2025 were valued using the Black-Scholes option pricing model using the following weighted average assumptions:

 SCHEDULE OF WEIGHTED AVERAGE ASSUMPTIONS OF OPTIONS

		September 30, 2025
Expected term, in years			4.59
Expected volatility			51.36	%
Risk-free interest rate			3.84	%
Dividend yield			-

 

2022 Equity Incentive Plan

 

On July 1, 2022, the Company’s Board of Directors authorized and adopted the 2022 Equity Incentive Plan (the “2022 Plan”) and reserved 5,000,000 shares of common stock for issuance thereunder. The 2022 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. The 2022 Plan provides for the issuance of incentive stock options, non-statutory stock options, restricted stock, restricted stock units (“RSUs”), and other stock-based awards. During the year ended December 31, 2024 and 2023, 1,082,500 and 595,000 of the Company’s common shares issued for services, as described above, were issued pursuant to the 2022 Plan, respectively. During the nine months ended September 30, 2025, 1,885,000 of the Company’s common shares and options issued for services and compensation, as described above, were issued pursuant to the 2022 Plan. As of September 30, 2025, the Company had 667,500 shares available for issuance under the 2022 Plan.

 

2025 Equity Incentive Plan

 

In April 2025, the Compensation Committee of the Board of Directors approved the 2025 Stock Plan, pending stockholders’ approval, which was subsequently received on June 26, 2025. The 2025 Plan is a stock-based compensation plan that provides discretionary grants of stock options, stock awards, stock unit awards and stock appreciation rights to key employees, non-employee directors and consultants. The share reserve is subject to an annual automatic increase of up to 5% of the Company’s outstanding common stock through January 1, 2035, unless otherwise determined by the Board. The plan includes provisions related to award limits, changes in control, and restrictions on repricing. No shares, stock options, or other awards have been issued under the 2025 Plan as of September 30, 2025.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

Legal matters

 

From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of September 30, 2025, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.

 

Product liability insurance

 

The Company’s subsidiary, Safe-Pro USA, carries a product liability policy that covers up to $2,000,000 of claims retroactive to June 26, 2020.

 

Contingent amounts due to related parties

 

As discussed in Note 11 – Related Party Transactions, the Company agreed to assume liability to the former members of Safe-Pro USA of $1,622,540 as of the Safe-Pro USA acquisition date. The amount due to the former members Safe-Pro USA was originally agreed to be $2,193,901, which was reduced to $1,622,540 to account for certain revenues not recognized since the performance obligation was not completed and other holdbacks. On April 11, 2024, pursuant to the Fifth Amendment to Exchange Agreement, should the Company collect the 20% performance obligation in the future that the former members would be reimbursed this difference up to $571,361. In addition, pursuant to Amendment No. 5, all further payments due under this contingent obligation of $571,361, are to be paid from the proceeds of contracts and performance bonds, offset by certain costs associated with the contracts, from the customer the Bangladesh Ministry of Defense. On March 19, 2025 and July 25, 2025, the Company received $37,615 and $56,325, respectively, in regard to this contingent obligation net of commissions payable. As of September 30, 2025, the remaining balance of $435,656 is only payable from proceeds related to contracts with the Bangladesh Ministry of Defense customer.

 

NOTE 10 – CONCENTRATIONS

 

Concentrations of credit risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade accounts receivable and cash deposits.

 

The Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. To date, the Company has not experienced any losses on its invested cash. As of September 30, 2025 and December 31, 2024, the Company recorded no cash in bank in excess of FDIC insured levels. In August 2024, the Company entered into a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This service is a secure, and convenient way to access FDIC protection on large deposits, earn a return, and enjoy flexibility. This reduces the Company’s risk as it relates to uninsured FDIC amounts in excess of $250,000.

 

Geographic concentrations of sales

 

For the three months ended September 30, 2025, 64.6% of total sales were to customers in the United State and 35.4% were to a customer in Asia. During the nine months ended September 30, 2025, 74.1% of total sales were to a customer in the United States, 9.5% total sales were to a customer in Asia and 16.4% of total sales were to a customer in Canada.

 

For the three months ended September 30, 2024, 98.7% of total sales were to customers in the United States and 1.3% of total sales were to a customer in Europe. During the nine months ended September 30, 2024, 67.3% of total sales were to customers in the United States and 32.7% of total sales were to customers in Europe.

 

Customer concentration

 

For the three months ended September 30, 2025, four customers accounted for approximately 84.7% of total sales (Golden West Humanitarian Foundation 35.4%, Florida Power & Light 19.2%, Classic Custom 18.6%, and Security Pro USA 11.6%, respectively). For the nine months ended September 30, 2025, three customers accounted for approximately 69.9% of total sales (Classic Custom, 35.2%, JD Advanced Forensics 18.3% and Mriya Aid 16.4%, respectively).

 

For the three months ended September 30, 2024, two customers accounted for approximately 92.7% of total sales, (Classic Custom 29.5% and Florida Power & Light 63.2%, respectively). For the nine months ended September 30, 2024, four customers accounted for approximately 95.2% of total sales (Classic Custom 23.8%, Mriya Aid 32.5%, Hialeah Gardens PD 12.2% and Florida Power & Light 26.7%, respectively).

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

A reduction in sales from or the loss of such customers would have a material adverse effect on the Company’s results of operations and financial condition. On September 30, 2025, three customers accounted for 95.1% of the total accounts receivable balance (Florida Power & Light 28.6%, JD Advanced Forensics 55.5% and U.S. Department of Veteran Affairs 11.0%).

 

On September 30, 2024, one customer accounted for 94.4% of the total accounts receivable balance. On December 31, 2024, one customer accounted for 89.5% of the total accounts receivable balance (Florida Power & Light). Sales of Airborne Response are seasonal based on weather conditions or patterns.

 

Supplier concentration

 

During the three months ended September 30, 2025, the Company purchased approximately 78.5% of its inventory from three suppliers. During the nine months ended September 30, 2025, the Company purchased approximately 56.8% of its inventory from two suppliers.

 

During the three months ended September 30, 2024, the Company purchased approximately 37.9% of its inventory from two suppliers. During the nine months ended September 30, 2024, the Company purchased approximately 50.1% of its inventory from two suppliers.

 

The loss of these suppliers may have a material adverse effect on the Company’s results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.

 

NOTE 11 – RELATED PARTY TRANSACTIONS

 

Due to related parties

 

In connection with the Acquisition of Safe-Pro USA, the Company agreed to assume a liability due to the former member of Safe-Pro USA, who is a current director of the Company, of $1,622,540. The Safe-Pro USA preacquisition members advanced funds to Safe-Pro USA for working capital purposes prior to the acquisition and during the 2024, 2023 and 2022 periods. Additionally, during 2024, 2023 and 2022, a company owned by the preacquisition members paid certain expenses and wages on behalf of the Company and was reimbursed for these expenses. These advances are non-interest bearing and are payable on demand but only from proceeds received from contracts the Bangladesh Ministry of Defense customer. During the nine months ended September 30, 2025, the Company primarily advanced funds received from the Bangladesh receivables of $93,940 and made payments of $40,800. During year ended December 31, 2024, the Company repaid $20,654 of these advances and assumed liabilities. During the year ended December 31, 2023, the Company was advanced funds of $298,361 and repaid $793,458 of these advances and assumed liabilities. During the period from June 8, 2022 to December 31, 2022, the Company had advanced funds of $93,003 and repaid $814,892 of these advances and assumed liabilities. On September 30, 2025 and December 31, 2024, amounts due to the former member amounted to $435,656 and $382,516, respectively, which is included in due to related parties on the accompanying unaudited consolidated balance sheets. See Note 9 –Contingent amounts due to related parties.

 

On March 31, 2025, Mr. Borkar waived accrued salary in aggregate of $56,538, as due under his Employment Agreement and subsequent 4th Amendment to the Share Exchange Agreement. For the year ended December 31, 2024, approximately $32,308 was waived and was recorded as contributed capital as of March 31, 2025. For the nine months ended September 30, 2025, approximately $24,231 was waived and recorded as an offset to wages on the Company’s unaudited condensed consolidated statement of operations. See Note 8. As of September 30, 2025 and year ended December 31, 2024, the accrued wages balance for Mr. Borkar was $5,934 and $39,107.

 

On March 31, 2025, a spouse of Mr. Borkar waived the accrued salary in aggregate of $56,538, as due under her Employment Agreement and subsequent 4th Amendment to the Share Exchange Agreement. For the year ended December 31, 2024, approximately $32,308 was waived and was recorded as contributed capital as of March 31, 2025, see Note 8. For the three months ended March 31, 2025, approximately $24,231 was waived and recorded as an offset to salary wages and payroll taxes on the Company’s unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2025, the accrued wages balance for the spouse of Mr. Borkar was $5,934.

 

For the nine months ended September 30, 2025 and 2024, the Company recorded gross wages of $86,827 and $ 0, respectively, for the spouse of Mr. Borkar.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Related party purchases

 

During the nine months ended September 30, 2025 and 2024, the Company purchased inventory and services from a company owned by the spouse of Mr. Borkar, in the amount of $6,139 and $0, respectively, which is included in cost of sales on the accompanying unaudited consolidated statements of operations.

 

NOTE 12 – OPERATING LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES

 

On July 13, 2022, and effective August 1, 2022, the Company entered into a 36-month lease agreement for the lease of office space under a non-cancelable operating lease through July 31, 2025. During the term of lease, the Company shall pay base rent of $2,704 from August 1, 2022 to July 1, 2023, with escalation of the base rent of 4% per year thereafter on the anniversary date of the lease. The Company is to pay the base rental rate plus common area assessments and sales tax for the lease payments.

 

On June 20, 2025, the Company renewed the above operating lease through July 31, 2026. During the term of lease, the Company shall pay base rent of $2,935 from August 1, 2025 to July 31, 2026, with option for an additional 12 months to July 31, 2027, at a base rent of $3,053. The Company is to pay the base rental rate plus common area assessments and sales tax for the lease payments. In connection with this lease, on August 1, 2022, the Company incurred right of use assets and lease liabilities of $92,509. On June 20, 2025 the Company incurred an additional right of use asset and lease liabilities of $33,084 for the renewal period.

 

In July 2021, Safe-Pro USA entered into a 62-month lease agreement for the lease of office, manufacturing and warehouse space under a non-cancelable operating lease through September 30, 2026. During the term of lease, the Company shall pay base rent of $3,043 from August 1, 2021 to September 30, 2022, with escalation of the base rent of 4% per year thereafter on the anniversary date of the lease. The Company is to pay the base rental rate plus common area assessments and sales tax for the lease payments. Common area assessments and sales tax for the lease payments are expensed monthly as incurred. In connection with the Company’s acquisition of Safe-Pro USA, on June 7, 2022, the Company acquired right of use assets and assumed lease liabilities of $156,963 and at June 30, 2022 $154,265, respectively.

 

In April 2024, Airborne Response entered into a 39-month lease agreement for the lease of a vehicle under a non-cancelable operating lease through July 2027. During the term of lease, the Company shall pay base rent of $296 from April 2024 to July 2027. In connection with the signing of the vehicle lease, the Company recorded a right of use assets and lease liabilities of $19,583 and $9,539, respectively.

 

In adopting ASC Topic 842, Leases (Topic 842) on January 1, 2022 the Company had elected the ‘package of practical expedients, which permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. Upon signing new leases for property and equipment, the Company analyzed the new leases and determined it is required to record a lease liability and a right of use asset on its consolidated balance sheets, at fair value.

 

During the three and nine months ended September 30, 2025, in connection with its operating property leases, the Company recorded rent expense of $19,121 and $67,236, respectively. During the three and nine months ended September 30, 2024, in connection with its property operating leases, the Company recorded rent expense of $22,395 and $69,100, respectively, which is expensed during the period and included in general and administrative expenses on the accompanying unaudited consolidated statements of operations.

 

The significant assumption used to determine the present value of the lease liabilities on August 1, 2022 and June 7, 2022, and April 2024 was a discount rate ranging from 3.75%, 6.0% and 7.5%, which was based on the Safe-Pro USA’s, the Company’s and Airborne Response estimated average incremental borrowing rate, respectively.

 

On September 30, 2025 and December 31, 2024, right-of-use asset (“ROU”) is summarized as follows:

 SCHEDULE OF RIGHT OF USE ASSET

		September 30, 2025				December 31, 2024
Office lease right of use assets		$	310,598			$	277,514
Auto lease right of use asset			19,583				19,583
Less: accumulated amortization			(252,229	)			(195,476	)
Balance of ROU assets		$	77,952			$	101,621

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

Other information:		September 30, 2025				December 31, 2024
Weighted average remaining lease term – operating leases			0.99 years				1.57 years
Weighted average discount rate – operating leases			4.60	%			4.60	%

 

On September 30, 2025 and December 31, 2024, operating lease liabilities related to the ROU assets are summarized as follows:

 SCHEDULE OF OPERATING LEASE LIABILITY TO ROU ASSET

		September 30, 2025				December 31, 2024
Lease liabilities related to office lease right of use assets		$	69,867			$	91,113
Lease liabilities related to auto lease right of use asset			5,293				7,595
Less: current portion of lease liabilities			(73,417	)			(63,115	)
Lease liabilities – long-term		$	1,743			$	35,592

 

On September 30, 2025, future minimum base lease payments due under non-cancelable operating leases are as follows:

 SCHEDULE OF LEASE PAYMENTS DUE UNDER NON-CANCELABLE OPERATING LEASES

Twelve months ended December 31,		Amount
2025		$	20,727
2026			56,964
2027			1,183
Total minimum non-cancellable operating lease payments			78,874
Less: discount to fair value			(3,714	)
Total lease liabilities on September 30, 2025		$	75,160

 

NOTE 13 – SEGMENT REPORTING

 

During the three and nine months ended September 30, 2025 and 2024, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
(unaudited)

 

Information with respect to these reportable business segments for the three and nine months ending September 30, 2025 and 2024 was as follows:

 SCHEDULE OF  BUSINESS SEGMENT REPORTING

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2025				2024				2025				2024
Revenues:
Safe-Pro USA		$	81,142			$	98,637			$	270,490			$	751,031
Airborne Response			20,280				227,745				39,157				525,992
Safe Pro AI			-				4,375				69,330				4,375
Revenues			101,422				330,756				378,977				1,281,399
Depreciation and amortization:
Safe-Pro USA			14,555				27,577				65,412				82,125
Airborne Response			25,089				35,001				83,449				102,705
Safe Pro AI			52,382				36,631				155,698				36,701
Other (a)			425				366				1,201				1,099
Depreciation and amortization			92,451				99,576				305,760				222,630
Interest expense:
Safe-Pro USA			1,644				1,647				4,461				5,154
Airborne Response			531				587				755				587
Safe Pro AI			-				-				-				-
Other (b)			1,078				151,231				2,975				298,816
Interest expense			3,253				153,464				8,190				304,556
Net (loss) income:
Safe-Pro USA			(612,967	)			(104,938	)			(778,959	)			(175,109	)
Airborne Response			(414,679	)			(73,504	)			(688,507	)			(358,488	)
Safe Pro AI			(3,528,573	)			(226,893	)			(773,089	)			(313,420	)
Other			(454,139	)			(3,280,122	)			(8,649,379	)			(5,197,222	)
Net (loss) income		$	(5,010,358	)		$	(3,685,456	)		$	(10,889,934	)		$	(6,044,239	)

 

(a)	Depreciation is recorded in Safe-Pro USA, Airborne Response and Safe Pro AI in cost of sales on the Company’s condensed consolidated unaudited statement of operations in cost of sales and has been described above, separately.
(b)	The Company does not allocate financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level. See interest expense other (b) in the above table.

 

		September 30, 2025				December 31, 2024
Identifiable long-lived tangible assets, net by segment:
Safe-Pro USA		$	181,126			$	217,134
Airborne Response			62,623				71,444
Safe Pro AI			30,129				22,143
Other (a)			7,772				4,160
Long lived tangible assets		$	281,650			$	314,881

 

 

SAFE PRO GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024

(unaudited)

 

NOTE 14 – SUBSEQUENT EVENTS

 

Stock-based compensation issued for wages and services

 

On October 1, 2025, the Company issued 2,500 shares of common stock to an individual service provider as the second installment of a 30,000-share award under the 2022 Equity Incentive Plan. The shares were valued at $3.36 per share, based on the market close on the grant date. The award vests in equal monthly installments of 2,500 shares over 12 months, beginning September 1, 2025, subject to continued service. The stock-based compensation of $8,400 was recorded on the Company’s statement of operations to Professional fees.

 

On October 2, 2025, the Company issued 48,889 shares of common stock pursuant to a warrant exercise. As of September 30, 2025, the Company had received proceeds of $143,245 and recognized the amount as additional paid-in capital in the unaudited condensed consolidated balance sheet. Upon issuance of the shares on October 2, 2025, the Company reclassified the par value of the shares from additional paid-in capital to common stock to reflect the shares outstanding.

 

On October 17, 2025, the Company issued 50,000 shares of its common stock pursuant to its 2022 Equity Incentive Plan. The shares were granted at a fair market value of $3.90 per share, based on the closing price on the grant date. This issuance was made in accordance with a contractual employment agreement dated February 27, 2025, which provided for the issuance of 50,000 shares effective six months from the agreement date. As of September 30, 2025, the Company recognized stock-based compensation expense totaling $195,000, which was recorded as Professional Fees in the unaudited condensed consolidated statement of operations. Upon issuance of the shares on October 17, 2025, the Company reclassified the par value of the shares from additional paid-in capital to common stock to reflect the shares outstanding.

 

On October 17, 2025, the Company issued 25,000 shares of its common stock pursuant to its 2022 Equity Incentive Plan. The shares were granted at a fair market value of $3.06 per share, based on the closing price on the grant date. This issuance was made in accordance with a contractual employment agreement dated March 11, 2025, which provided for the issuance of 25,000 shares effective six months from the agreement date. As of September 30, 2025, the Company recognized stock-based compensation expense totaling $76,500, which was recorded as Professional Fees in the unaudited condensed consolidated statement of operations. Upon issuance of the shares on October 17, 2025, the Company reclassified the par value of the shares from additional paid-in capital to common stock to reflect the shares outstanding.

 

On October 31, 2025, the Compensation Committee approved the accelerated vesting and issuance of 25,000 shares of common stock under the 2022 Equity Incentive Plan. In accordance with ASC 718, the fair value of the award was measured at $6.30 per share, the closing price on the acceleration date, as this constituted a modification of the original grant. As a result, the stock-based compensation of $157,500 was recorded on the Company’s statement of operations to Professional fees.

 

Shelf Registration Statement

 

On October 10, 2025, the Company filed a shelf registration statement on Form S-3 with the SEC, allowing for the potential offering of up to $100 million of common stock, preferred stock, debt securities, warrants, purchase contracts, or units. Securities may be offered from time to time in one or more offerings, as described in future prospectus supplements.

 

Private Placement of Common Stock

 

On October 17, 2025, the Company closed on a private placement of 2,000,000 shares of common stock at a purchase price of $7.00 per share, resulting in aggregate gross proceeds of $14,000,000. The shares were issued to accredited investors pursuant to Securities Purchase Agreements, relying on exemptions from registration under Section 4(a)(2) of the Securities Act of 1933 and Rule 506 of Regulation D. The shares are fully paid, non-assessable, and restricted securities.

 

The Company agreed to use its best efforts to file a registration statement to register the resale of the shares within fifteen business days of closing. Additionally, the Company agreed not to enter into any transaction for the sale of equity securities or securities convertible into equity securities for a period of 90 days following the closing, except that after the registration statement has been effective for at least 30 days, the Company may enter into such transactions if the price per share is at least $6.00.

 

On October 22, 2025, the Board of Directors approved payments totaling $1,400,000 to advisory service providers and employees in connection with their roles in the Company’s private placement transaction. These payments represent direct equity issuance costs and were recorded as a reduction to additional paid-in capital.

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. See the section titled “Risk Factors” in our Form 10-K dated March 31, 2025 as filed with the Securities and Exchange Commission (the “SEC”), which is available on the SEC’s EDGAR website at www.sec.gov, for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-Q.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Form 10-Q includes forward-looking statements. These statements involve risks known to us, significant uncertainties, and other factors which may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements.

 

Some of the statements used in this report constitute “forward-looking statements” that represent our beliefs, projections and predictions about future events. Forward-looking statements are all statements other than statements of historical fact, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements about the following:

 

	●	our prospects, including our future business, revenues, expenses, net income, earnings per share, gross margins, profitability, cash flows, cash position, liquidity, financial condition and results of operations, backlog of orders and revenue, our targeted growth rate, our goals for future revenues and earnings, and our expectations about realizing the revenues in our backlog and in our sales pipeline;
	●	the effects on our business, financial condition, and results of operations of current and future economic, business, market and regulatory conditions, including the current economic and market conditions and their effects on our customers and their capital spending and ability to finance purchases of our products, services, technologies and systems;
	●	the effects of fluctuations in sales on our business, revenues, expenses, net income, earnings per share, margins, profitability, cash flows, capital expenditures, liquidity, financial condition, and results of operations;
	●	our products, services, technologies, and systems, including their quality and performance in absolute terms and as compared to competitive alternatives, their benefits to our customers and their ability to meet our customers’ requirements, and our ability to successfully develop and market new products, services, technologies and systems;
	●	our markets, including our market position and our market share;

 

 

	●	our ability to successfully develop, operate, grow and diversify our operations and businesses;
	●	our business plans, strategies, goals and objectives, and our ability to successfully achieve them;
	●	the sufficiency of our capital resources, including our cash and cash equivalents, funds generated from operations, availability of borrowings under our credit and financing arrangements and other capital resources, to meet our future working capital, capital expenditure, lease and debt service and business growth needs;
	●	the value of our assets and businesses, including the revenues, profits and cash flows they are capable of delivering in the future;
	●	the effects on our business operations, financial results, and prospects of business acquisitions, combinations, sales, alliances, ventures and other similar business transactions and relationships;
	●	industry trends and customer preferences and the demand for our products, services, technologies and systems; and
	●	the nature and intensity of our competition, and our ability to successfully compete in our markets.

 

These statements are necessarily subjective, are based upon our current plans, intentions, objectives, goals, strategies, beliefs, projections and expectations, and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based, or the success of our business. Furthermore, industry forecasts are likely to be inaccurate, especially over long periods of time.

 

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that may cause actual results, our performance or achievements, or industry results to differ materially from those contemplated by such forward-looking statements include, without limitation, those discussed under the caption “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC.

 

Business Overview

 

We were incorporated in the State of Delaware on December 15, 2021. Safe Pro Group Inc. is the parent company of Airborne Response Corp. and Safe-Pro USA, LLC, which were both incorporated in Florida, in 2016 and 2008, respectively. On March 9, 2023, Safe Pro Group Inc. acquired Safe Pro AI LLC (formerly known as Demining Development LLC), a privately held developer of Artificial Intelligence (“AI”) and Machine Learning (“ML”) software technology for processing of drone-based imagery and data. We are a company focused on innovative security and protection solutions, specifically, advanced artificial intelligence / machine learning (AI/ML) software technology for the creation of robust datasets sourced from the analysis of aerial imagery, bullet and blast resistant personal protection equipment and providing mission-critical aerial managed services.

 

 

Through a layered approach to the development and integration of advanced technologies in artificial intelligence, drone-based remote sensing technologies, services, and personal protective gear, Safe Pro Group seeks to provide government, NGOs and enterprises with innovative solutions designed to respond to evolving threats.

 

Currently, the Company’s revenue is primarily generated by its subsidiaries Airborne Response and Safe-Pro USA. We expect to begin realizing revenue from Safe Pro AI for its Safe Pro Object Threat Detection (SPOTD) technology ecosystem - Spotlight AI™, SpotlightAI™ OnSight and SPOTD NODE (Navigation, Observation and Detection Engine)- as a result of multiple completed demonstrations and evaluations in Ukraine, the Philippines and the United States during 2025, as well as planned demonstrations including events hosted by the U.S. Army in early 2026. As of November 1, 2025, SpotlightAI™, has analyzed more than 2,130,777 drone images from Ukraine, identifying more than 38,195 landmines and unexploded remnants of war across 10,966 hectares (27,086 acres) of Ukrainian territory.

 

Furthermore, the Company expects to generate revenue through a number of strategic relationships formed during August and September of 2025 with select drone industry vendors introduced through its most recent investors, such as Ondas Holdings Inc. and Unusual Machines Inc.

 

Principle of Consolidation

 

Our consolidated financial statements included in this report include our accounts and those of our subsidiaries: Airborne Response Corp., Safe-Pro USA LLC, and Safe Pro AI LLC from their respective dates of acquisition.

 

Supplier Concentration

 

During the three months ended September 30, 2025, the Company purchased approximately 78.5% of its inventory from three suppliers (Barrday Corp 21.9%, Industries Bitossi Inc. 32.2%, and Lincoln Fabrics 24.4%). During the nine months ended September 30, 2025, the Company purchased approximately 56.8% of its inventory from two suppliers (Avient Protective Materials 29.6% and Lincoln Fabrics 27.3%).

 

During the three months ended September 30, 2024, the Company purchased approximately 37.9% of its inventory from two suppliers (Matrix Space 10.8% and Southeast Drone Technologies 27.1%).

 

During the nine months ended September 30, 2024, the Company purchased approximately 50.1% of its inventory from two suppliers, (Minelab Electronics 36.7% and Mithix Pro 13.4%).

 

The loss of these suppliers may have a material adverse effect on the Company’s results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.

 

Segment Information

 

During the nine months ended September 30, 2025 and 2024, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

 

Significant Components of Our Results of Operations

 

Revenues. Our revenues are generated primarily from the sale of our products, which consist primarily of personal protective gear (“PPE”) and ballistic protective equipment including Explosive Ordnance Disposal (“EOD”) and blast and fragmentation resistant vests and body armor, as well as aerial managed services (drones) for the inspection of customer’s critical infrastructure including radio towers and power grids. At contract inception, we assess the goods and services promised in the contract with customers and identify a performance obligation for each. To determine the performance obligation, we consider all products and services promised in the contract regardless of whether they are explicitly stated or implied by customary business practices. The timing of satisfaction of the performance obligation is not subject to significant judgment. We measure revenue as the amount of consideration expected to be received in exchange for transferring goods and services. We generally recognize product revenues at the time of shipment, provided that all other revenue recognition criteria have been met.

 

Cost of Goods Sold and Gross Profit. Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and the evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer and supply chain. Gross margin will vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing, labor costs for services and depreciation for our drone-related fixed assets and our production costs, which includes depreciation related costs for manufacturing equipment, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.

 

 

Operating Expenses. We classify our operating expenses as salary, wages and payroll taxes, research and development, professional fees, selling, general, administrative, non-production and services related depreciation and amortization. Additionally, we separate depreciation and amortization expense into its own category.

 

Salary, Wages and Payroll Taxes. Salaries are representative of officer and stock-based compensation and administrative personnel costs. The salary and wages associated payroll tax is reflected here as well.

 

Research and Development expenses consist of costs associated with personnel and contractor fees associated with the design and development of our products, product certification, travel, recruiting and information technology. Development costs incurred prior to establishment of technological feasibility were expensed as incurred. Software development costs related to design enhancement of the product are capitalized. We expect our research and development costs to continue to increase as we develop new products and modify existing products to meet the changes within our markets.

 

Professional Fees primarily represent certain costs for legal, audit, accounting, public company expense, investor relations, consulting fees and share-based compensation for services.

 

Selling, General and Administrative expenses consist of expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, commissions payable, national and local regulatory approvals of our products, travel, entertainment, recruiting, operating supplies such as, computer equipment, drones, EOD testing supplies; and facilities and other supporting overhead costs. For the year ending December 31, 2025, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a First Responder (DFR).

 

Depreciation and Amortization expense consists of depreciation related to computer and related office equipment, as well as amortization related to finite-lived intangibles.

 

Interest Expense is comprised of interest expense associated with our secured notes payable and convertible notes. The amortization of debt discounts is also recorded as part of interest expense.

 

Provision for Income Taxes. Current and deferred income tax expense or benefit in any given period will depend upon a number of events and circumstances, one of which is the income tax net income or loss from operations for the period which is usually different from the U.S. GAAP net income or loss, for the period due to differences in tax laws and timing differences. Management assesses our deferred tax assets in each reporting period, and if it is determined that it is not more likely than not to be realized, we will record a change in our valuation allowance in that period.

 

 

Results of Operations

 

Comparison of the Three months Ended September 30, 2025 and 2024

 

For the Three months Ended September 30, 2025 and 2024:

 

		September 30,				September 30,
		2025				2024				Change				%
REVENUES:
Product Sales		$	81,142			$	98,636			$	(17,495	)			(17.7	)%
Services			20,280				232,120				(211,840	)			(91.3	)%
Total Revenues			101,422				330,756				(229,334	)			(69.3	)%
COST OF REVENUES:
Product sales			42,229				55,815				(13,586	)			(24.3	)%
Services			8,003				122,851				(114,848	)			(93.5	)%
Cost of depreciation			17,596				17,857				(261	)			(1.5	)%
Total Cost of Revenues			67,828				196,523				(128,695	)			(65.5	)%
Gross profit			33,594				134,233				(100,639	)			(75.0	)%
Operating expenses:
Salary, wages and payroll taxes:
Salary, wages and payroll taxes			454,429				545,525				(91,096	)			(16.7	)%
Stock-based compensation			831,385				2,200,000				(1,368,615	)			(62.2	)%
Total salary wages and payroll taxes			1,285,814				2,745,525				(1,459,711	)			(53.2	)%
Research and development			109,763				-				109,763				-
Professional fees:
Professional fees - other			408,821				230,698				178,123				(77.2	)%
Stock-based compensation – professional fees			1,759,261				200,000				1,559,261				(779.6	)%
Total Professional fees			2,168,082				430,698				1,737,384				403.4	%
Selling, general and administrative expenses			602,715				418,366				184,349				44.1	%
Depreciation and amortization			74,855				81,718				(6,863	)			(8.4	)%
Total operating expenses			4,241,229				3,676,307				564,922				15.4	%
Loss from operations			(4,207,635	)			(3,542,074	)			(665,561	)			18.8	%
Other income (expense):
Other income			31,398				-				31,398				-
Interest income			-				10,082				(10,082	)			-
Interest expense			(3,253	)			(153,464	)			150,211				(97.9	)%
Impairment of goodwill			(684,867	)			-				(684,867	)			-
Impairment of other intangibles			(146,001	)			-				(146,001	)			-
Total other income (expense)			(802,723	)			(143,382	)			(659,341	)			(459.8	)%
Net loss		$	(5,010,358	)		$	(3,685,456	)		$	(1,324,902	)			36.0	%

 

 

Comparison of the Nine Months Ended September 30, 2025 and 2024

 

For the Nine Months Ended September 30, 2025 and 2024:

 

		September 30,				September 30,
		2025				2024				Change				%
REVENUES:
Product Sales		$	270,490			$	907,260			$	(636,770	)			(70.2	)%
Services			108,487				374,139				(265,652	)			(71.0	)%
Total Revenues			378,977				1,281,399				(902,422	)			(70.4	)%
COST OF REVENUES:
Product sales			141,720				604,000				(462,280	)			(76.5	)%
Services			54,737				185,302				(130,565	)			(70.5	)%
Cost of depreciation			55,803				49,796				6,007				12.1	%
Total Cost of Revenues			252,260				839,098				(586,838	)			(69.9	)%
Gross profit			126,717				442,301				(315,584	)			(71.4	)%
Operating expenses:
Salary, wages and payroll taxes:
Salary, wages and payroll taxes			1,689,872				1,371,310				318,562				23.2	%
Stock-based compensation			2,054,955				2,200,000				(145,045	)			(6.6	)%
Total salary wages and payroll taxes			3,744,827				3,571,310				173,517				4.9	%
Research and development			127,638				85,937				41,701				48.5	%
Professional fees:
Professional fees - other			1,200,636				760,908				439,728				57.8	%
Stock-based compensation – professional fees			3,610,955				748,000				2,862,955				382.7	%
Total Professional fees			4,811,591				1,508,908				3,302,683				218.9	%
Selling, general and administrative expenses			1,329,374				853,077				476,297				55.8	%
Depreciation and amortization			249,957				172,834				77,123				44.6	%
Total operating expenses			10,263,387				6,192,066				4,071,321				65.8	%
Loss from operations			(10,136,670	)			(5,749,765	)			(4,386,905	)			76.3	%
Other income (expense):
Other income			33,890				-				33,890				-
Interest income			51,905				10,082				41,823				414.8	%
Interest expense			(8,190	)			(304,556	)			296,366				(97.3	)%
Impairment of goodwill			(684,867	)			-				(684,867	)			-
Impairment of other intangibles			(146,001	)			-				(146,001	)			-
Total other income (expense)			(753,264	)			(294,474	)			(458,790	)			155.8	%
Net loss		$	(10,889,934	)		$	(6,044,239	)		$	(4,845,695	)			80.2	%

 

Net Revenue. For the three months ended September 30, 2025 and 2024, revenues generated were $101,422 and $330,756, a decrease of $229,334 or 69.3%. Comparable sales for Safe-Pro USA were $81,141 for the three months ended September 30, 2025 as compared to $98,637 for the same period in 2024, a decrease of $17,496 or 17.7%. Comparable sales for Airborne Response were $20,280 for the three months ended September 30, 2025 as compared to $227,745 for the same period in 2024, a decrease of $207,465 or 91.1%. Comparable sales for Safe Pro AI were $0 for the three months ended September 30, 2025 as compared to $4,375 for the same period in 2024.

 

For the nine months ended September 30, 2025 and 2024, revenues generated were $378,977 and $1,281,399, a decrease of $902,422 or 70.4%. Comparable sales for Safe-Pro USA were $270,489 for the nine months ended September 30, 2025 as compared to $751,031 for the same period in 2024, a decrease of $480,542 or 64.0%. Comparable sales for Airborne Response were $39,157 for the nine months ended September 30, 2025 as compared to $525,992 for the same period in 2024, a decrease of $486,835 or 92.6%. Comparable sales for Safe Pro AI were $69,330 for the nine months ended September 30, 2025 as compared to $4,375 for the same period in 2024.

 

 

A substantial portion of revenue for Airborne Response, is with one customer, Florida Power & Light, (“FPL”). If there is positive weather patterns, the electrical power grid remains in stable condition requiring less maintenance and repair work which results in fewer work orders for Airborne Response. For the three and nine months ended September 30, 2025 and 2024, the decrease in revenue for Airborne Response was primarily attributable the lack of disruptions to the FPL electrical power grid, due to positive weather patterns, which included no active hurricanes. Airborne Response is currently in the process of completing a training program for a new revenue stream, providing nested flight services with FPL/NextEra.

 

For the three and nine months ended September 30, 2025 and 2024, Safe-Pro USA’s decrease in revenue is attributable to the effects of U.S. Tariffs on Chinese products. The Company imports Security Guards’ uniforms from China As the result of the high tariffs of goods imported from China, a our business model is being reevaluated and recalibrated at this time, with the consequence that business is at its lowest level. Safe-Pro USA is in the process of sourcing additional customers along with obtaining government certifications to become a supplier for the U.S. government.

 

We expect to begin realizing revenue from Safe Pro AI for its Safe Pro Object Threat Detection (SPOTD) technology ecosystem - Spotlight AI™, SpotlightAI™ OnSight and SPOTD NODE (Navigation, Observation and Detection Engine)- as a result of multiple completed demonstrations and evaluations in Ukraine, the Philippines and the United States during 2025, as well as planned demonstrations including events hosted by the U.S. Army in early 2026. As the Company begins to bring on SaaS and subscription customers related to its AI offerings, it is expected that revenue growth will have a more predictable trajectory, and decrease the volatility from one-time contracts.

 

Cost of Revenue During the three months ended September 30, 2025 and 2024, cost of revenues decreased to $67,828 compared to $196,523, a decrease of $128,695, or 65.5%. Gross profit margins were 33.1% and 40.7%, respectively. The decrease in cost of revenue is directly attributable to a decrease in revenue. For the nine months ended September 30, 2025 and 2024, gross profit margins were 33.4% and 34.5%, respectively. The decrease in margin was attributable to an increase in sales for products which have a lower gross profit margin.

 

Operating Expenses. Total operating expenses for the three months ended September 30, 2025 and 2024 were $4,241,228 and $3,676,307, an increase of $564,922 or 15.4%. Total operating expenses for the nine months ended September 30, 2025 and 2024 were $10,263,387 and $6,192,066, an increase of $4,071,321 or 65.8%. Factors resulting in the increase are described more fully below. For the year ending December 31, 2025, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a First Responder (DFR).

 

Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended September 30, 2025 and 2024 were $1,285,814 and $2,745,525, a decrease of $1,459,711 or 53.2%. The decrease was primarily driven by higher stock-based compensation expense of $2,200,000 recorded during the three months ended September 30, 2024, compared to $831,385 in the current period. The prior year expense was associated with new employment agreements executed in preparation for the Company’s initial public offering.

 

Total salaries, wages and payroll taxes for the nine months ended September 30, 2025 and 2024 were $3,744,827 and $3,571,310, an increase of $173,517 or 4.9%. The increases were primarily attributable to additional compensation expense related to employment agreements and incentive bonuses associated with current-year equity issuances, partially offset by a reduction in officer wages incurred pursuant to the terms of employment agreements with the Chief Executive Officer.

 

Research and Development expenses were $109,763 and $0, for the three months ended September 30, 2025 and 2024, respectively, an increase of $109,763. Research and Development expenses were $127,638 and $85,937, for the nine months ended September 30, 2025 and 2024, respectively, an increase of $41,701 or 48.5%. The increase is primarily attributable to expanded development efforts and the engagement of external contractors to support enhancements to the artificial intelligence business.

 

Professional fees were $2,168,082 and $430,698 for the three months ended September 30, 2025 and 2024, respectively, an increase of $1,737,384 or 403.4%. Professional fees were $4,811,591 and $1,508,908 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $3,302,683 or 218.9%. The increases for nine months ended September 30, 2025 as compared to the same period in 2024, were attributable to non-cash expenses for share-based professional fees of $2,862,955 recognized pursuant to contractual agreements, additional public company expenses of $344,518 including legal and investor relations fees, and additional director fees of $95,210. The increase is partially offset by the reduction of reclassification of contractor expenses from professional fees to selling, general and administrative expenses in 2025.

 

Selling, general and administrative expenses were $602,715 and $418,366 for the three months ended September 30, 2025 and 2024, respectively, an increase of $184,349 or 44.1%. Selling, general and administrative expenses were $1,329,374 and $853,077 for the nine months ended September 30, 2025 and 2024, respectively, an increase of $476,297 or 55.8%. The increases for the nine months ended September 30, 2025 as compared to the same period in 2024, are primarily attributable to increases in advertising and D&O insurance premiums and the reclassification of contractor fees from professional fees to selling, general and administrative expenses.

 

Depreciation and amortization expenses were $74,855 and $81,718 for the three months ended September 30, 2025 and 2024, respectively, a decrease of $6,863, or 8.4%. For the nine months ended September 30, 2025 and 2024, depreciation and amortization costs were $249,957 and $172,834 respectively, an increase of $77,123, or 44.6%.

 

We expect our expenses in each of these areas to continue to increase during fiscal 2025 and beyond as we expand our operations and begin generating additional revenues for our current business. However, we are unable at this time to estimate the amount of the expected increases.

 

Total Other Income (Expense). Our total other expenses were $802,723 compared to $143,382 during the three months ended September 30, 2025 and 2024 respectively, an increase of $659,341, or 459.8%. Our total other expenses were $753,264 compared to $294,474, during the nine months ended September 30, 2025 and 2024 respectively, an increase of $458,790, or 155.8%. The increase is primarily attributable to the goodwill and intangible asset impairment charges recognized during the three months ended September 30, 2025.

 

Net Loss. We recorded a net loss of $5,010,358 for the three months ended September 30, 2025 as compared to a net loss of $3,685,456 an increase of $1,324,902, or 36.0%, for the three months ended September 30, 2024. We recorded a net loss of $10,889,934 for the nine months ended September 30, 2025 as compared to a net loss of $6,044,239 for the nine months ended September 30, 2024, an increase of $4,845,695, or 80.2%. The increase is a result of the factors as described above.

 

 

Consolidated Balance Sheet Data:

 

		September 30,				December 31,
		2025				2024				Change				%
		(Unaudited)
Cash		$	7,597,009			$	1,970,719			$	5,626,290				285.5	%
Property and equipment, net			281,650				314,881				(33,231	)			(10.6	)%
Current assets			8,422,290				2,750,129				5,672,161				206.3	%
Total assets			9,695,387				4,949,943				4,745,444				95.9	%
Current liabilities			1,108,308				893,926				214,382				24.0	%
Working capital			7,313,982				1,856,203				5,457,779				294.0	%
Total liabilities			1,256,051				1,075,518				180,533				16.8	%
Additional paid in capital			33,578,136				18,123,723				15,454,413				85.3	%
Accumulated deficit			(25,140,685	)			(14,250,751	)			(10,889,934	)			76.4	%
Total stockholders’ equity		$	8,439,336			$	3,874,425			$	4,564,911				117.8	%

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At September 30, 2025, we had a cash balance of $7,597,009 and working capital of $7,313,982.

 

Our current assets at September 30, 2025 increased by $5,672,161, or 206.3%, to $8,422,290 from $2,750,129, from December 31, 2024. The increases included cash of $5,626,290 and inventory of $151,486, and are partially offset by decreases in accounts receivable of $83,292 and prepaid expenses and other current assets of $22,323, which is primarily a result of the proceeds from the private placement and the exercise of warrants during the three months ended September 30, 2025.

 

Our current liabilities at September 30, 2025 increased to $1,108,308 from $893,926 or an increase of $214,382, or 24.0% from December 31, 2024. The increase is comprised of increases in accounts payable of $141,301, accrued expenses of $170,210, due to related parties of $11,108, current portion of lease liabilities of $10,302 and are partially offset by decreases in accrued compensation of $107,778 and contract liabilities of $10,761.

 

Operating Activities

 

Net cash flows used in operating activities for the nine months ended September 30, 2025 amounted to $3,549,597 and were primarily attributable to our net loss of $10,889,934, offset by depreciation and amortization expense of $305,760, impairment of goodwill of $684,687, impairment of other intangibles of $146,001, and stock-based compensation and professional fees of $6,048,410. Changes in operating assets and liabilities were reflected by increases in accounts receivable of $83,292, prepaid and other current assets of $22,323, accounts payable of $141,301, accrued expenses of $170,210 and lease liability of $122 which were offset by decreases in inventory of $151,486, contract liabilities of $10,761 and accrued compensation of $99,702.

 

Net cash flows used in operating activities for the nine months ended September 30, 2024 amounted to $3,065,107 and were primarily attributable to our net loss of $6,044,239, offset by depreciation and amortization expense of $222,630, stock-based compensation and professional fees of $2,948,000, and amortization of debt discount of $208,006. Changes in operating assets and liabilities were reflected by increases in accounts payable of $64,661 and accrued expenses of $161,652 offset by decreases in accounts receivable of $58,141, inventory of $16,115, prepaid and other current assets of $370,124, contract liabilities of $14,382, lease liability of $9,110 and accrued compensation of $157,945.

 

Investing Activities

 

Net cash flows used in investing activities were $233,580 and $266,397, for the nine months ended September 30, 2025 and 2024, respectively. During the nine months ended September 30, 2025, we purchased property and equipment of $26,035 and investment in intangible technologies of $207,545.

 

Financing Activities

 

Net cash flows provided by financing activities were $9,409,467 and $4,922,851 for the nine months ended September 30, 2025 and 2024, respectively.

 

During the nine months ended September 30, 2025, we had proceeds from the sale of common stock in private placement offering of $6,767,500, proceeds from exercise of warrants of $1,511,570, proceeds from sale of Preferred Series C shares and warrants of $1,050,000, proceeds from exercise of options of $12,750, and proceeds from related party advances of $129,051 and partially offset by related party repayments of $61,404.

 

During the nine months ended September 30, 2024, we had proceeds from the sale of convertible notes payable of $275,002, proceeds from the sale of common stock and warrants of $489,003, proceeds from our initial public offering of $4,179,500, proceeds from notes payable of $236,500, which were offset by repayments due to related party for $20,564 and repayments of notes payable of $236,500.

 

 

Critical Accounting Policies and Estimates

 

The following is not intended to be a comprehensive list of our accounting policies or estimates. Our significant accounting policies are more fully described in Note 2 — Summary of Significant Accounting Policies in the Notes. In preparing our consolidated financial statements and accounting for the underlying transactions and balances, we apply our accounting policies and estimates as disclosed in the Notes. We consider the policies and estimates discussed below as critical to an understanding of our consolidated financial statements because their application places the most significant demands on our judgment, with financial reporting results dependent on estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Specific risks for these critical accounting estimates are described in the following paragraphs. Preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

 

Besides estimates that meet the “critical” accounting estimate criteria, we make many other accounting estimates in preparing our consolidated financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenue and expenses as well as disclosures of contingent assets and liabilities. Estimates are based on experience and other information available prior to the issuance of the financial statements. Materially different results can occur as circumstances change and additional information becomes known, including for estimates that we do not deem “critical.”

 

Accounts receivable and other receivables

 

The Company adopted ASC 326 “Financial Instruments – Credit Losses” on January 1, 2023. The Company recognizes an allowance for losses on accounts receivable and other receivables in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts or other accounts considered at risk or uncollectible. The bad debt expense associated with the allowance for doubtful accounts related to accounts receivable and other receivables is recognized in selling, general and administrative expenses.

 

Revenue recognition

 

In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:

 

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

 

The Company offers a warranty on its manufactured products. The Company considered the need to make an accrual for warranty expenses that may be incurred. Historically, the Company has incurred no warranty expense and accordingly, the Company believes that no warranty expense accrual is deemed necessary.

 

Safe-Pro USA

 

Safe-Pro USA recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed, and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.

 

Airborne Response

 

Airborne Response recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenues from services are recognized at a point in time when Airborne Response completes services pursuant to its agreements with clients and collectability is probable.

 

 

Safe Pro AI

 

Safe Pro AI sells subscriptions and licenses to its customers for the use of its software under a software-as-a-service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including defense, demining, in law enforcement and border security. Safe Pro AI’s, SaaS offerings are sold under a license or prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers will utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI will initially charge data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.

 

Goodwill and intangible assets

 

The Company’s business acquisitions typically result in the recording of goodwill and other intangible assets, which affect the amount of amortization expense and possibly impairment write-downs that the Company may incur in future periods.

 

Intangible assets are carried at cost less accumulated amortization for finite-lived assets, computed using the straight-line method over the estimated useful life, less any impairment charges.

 

Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business acquisitions. Goodwill is not subject to amortization but is subject to impairment tests at least annually. The Company reviews the carrying amounts of goodwill by reporting unit at least annually, or when indicators of impairment are present, to determine if goodwill may be impaired. To test goodwill impairment, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. The Company would not be required to quantitatively determine the fair value of goodwill unless it determines, based on the qualitative assessment there are indicators of impairment. Under the quantitative test of goodwill, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value exceeds the fair value, then the goodwill is impaired by the excess amount. The Company performs its annual testing for goodwill during the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit.

 

Intangibles assets, net consists of contractual employment agreements, customer relationships and acquired capitalized internal-use software. All intangible assets determined to have finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. The Company periodically evaluates both finite and indefinite lived intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.

 

Impairment of long-lived assets

 

In accordance with ASC Topic 360, the Company reviews long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

 

 

Stock-based compensation

 

Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the consolidated financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.

 

Business acquisitions

 

The Company accounts for business acquisitions using the acquisition method of accounting where the assets are acquired, and the liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company’s consolidated financial statements as of the date of the acquisition.

 

Asset Acquisitions

 

The Company evaluates acquisitions pursuant to ASC 805, “Business Combinations,” to determine whether the acquisition should be classified as either an asset acquisition or a business combination. Acquisitions for which substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets are accounted for as an asset acquisition. For acquisitions of an asset or a group of assets that does not constitute a business, the Company applies ASC 805-50 which provides guidance on acquisitions of assets rather than a business. Acquisitions of assets are accounted for using the cost accumulation and allocation model. For asset acquisitions, the Company allocates the purchase price of these acquired assets on a relative fair value basis and capitalizes direct acquisition related costs as part of the purchase price. Acquisition costs that do not meet the criteria to be capitalized are expensed as incurred and presented in general and administrative costs in the consolidated statements of operations, if any.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Management, with the participation of our Chief Executive Officer, who is our principal executive officer, and Chief Financial Officer, who is our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that we file or submit under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

Based on the evaluation of our disclosure controls and procedures as of September 30, 2025, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were ineffective due to the material weakness in internal control over financial reporting discussed below.

 

 

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

	●	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions;
	●	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and directors; and

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis.

 

In its assessment of the effectiveness of internal control over financial reporting as of September 30, 2025, management identified a material weakness related to segregation of duties. Specifically, due to limited resources and headcount we did not have multiple people in the accounting function for a full segregation of duties and were reliant on outside consultants for external reporting. During the first quarter of 2025, the Company has remedied the material weakness related to inventory management by its implementation of a new system.

 

Based on this assessment, management concluded that we did not maintain effective internal control over financial reporting as of September 30, 2025, based on the criteria in Internal Control – Integrated Framework (2013).

 

Plan for Remediation of Material Weakness

 

We are in the process of; (i) engaging a third party to conduct a full assessment of our controls and procedures and (ii) adding an accounting professional to facilitate segregation of duties. Management’s current expectation is to have completed its assessment of its controls and procedures for the filing of its Form 10-K for the year ended December 31, 2025.

 

Changes in Internal Control over Financial Reporting

 

Except as disclosed above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II: OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. The Company is not currently involved in any pending legal proceeding or litigation, and to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results.

 

 

Item 1A. Risk Factors.

 

In addition to the other information set forth in this report, you should carefully consider the factors discussed in the section entitled “Risk Factors” in the Form 10-K for the year ended December 31, 2024, as filed on March 31, 2025. The risks described in the Form 10-Q are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes to our risk factors from those set forth in our Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

On July 22, 2025, the Company issued 30,000 restricted shares of common stock at a fair market value of $3.85 per share, representing the market close on date of issuance. Stock-based professional fees in the amount of $115,500 are recorded to professional fees, on the Company’s unaudited condensed consolidated statement of operations.

 

The securities were issued pursuant to Section 4(a)(2) of the Securities Act. The awards were issued to an individual for services relating to certain equity transactions. These securities have not been registered pursuant to the Securities Act of 1933, as amended (the “Securities Act”).

 

On August 19, 2025, the Company sold an aggregate of: (i) 2,000,000 shares of common stock, and (ii) three-year warrants to purchase up to 2,000,000 shares of common stock at an exercise price of $6.00 per share. The combined purchase price of one share of common stock and one accompanying warrant was $4.00. The common stock and warrants issued in the offering and the shares issuable upon exercise of the warrants were offered and sold to “accredited investors” in a private placement under Section 4(a)(2) of the Securities Act, and Regulation D promulgated thereunder and have not been registered under the Securities Act or applicable state securities laws.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

During the fiscal quarter ended September 30, 2025, none of the Company’s officers and directors adopted, modified or terminated a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K of the Exchange Act):

  

ITEM 6. EXHIBITS

 

Exhibit No.		Index to Exhibits
4.1		Form of Warrant (incorporated by reference to Exhibit 4.1 of the Form 8-K filed August 21, 2025)
10.1		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Form 8-K filed August 21, 2025)
10.2		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Form 8-K filed October 21, 2025
31.1		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.ins		Inline XBRL Instance Document
101.sch		Inline XBRL Taxonomy Schema Document
101.cal		Inline XBRL Taxonomy Calculation Document
101.def		Inline XBRL Taxonomy Linkbase Document
101.lab		Inline XBRL Taxonomy Label Linkbase Document
101.pre		Inline XBRL Taxonomy Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: November 14, 2025	SAFE PRO GROUP INC.
	By:	/s/ Daniyel Erdberg
		Daniyel Erdberg
		Chairman and Chief Executive Officer
		(principal executive officer)
		/s/ Theresa Carlise
		Theresa Carlise
		Chief Financial Officer, Treasurer & Assistant Secretary
		(principal financial and accounting officer)