Core Viewpoint - Safe Pro Group Inc. has announced a $14 million strategic investment led by Ondas Holdings Inc., focusing on enhancing its AI-powered defense and security solutions [1]. Investment Details - The investment involves a private placement consisting of the sale of two million shares of Safe Pro common stock [1]. - The proceeds from this investment are expected to support the company's growth and development initiatives [1].

Core Insights - SPARC AI Inc. has appointed a leading North American defense and government advisory firm to enhance its expansion into the U.S. and Canadian defense markets, marking a significant milestone in its growth strategy [1][2] - The advisory firm will assist in business development, government defense relations, and strategic introductions, ensuring compliance with the Lobbying Act of Canada [2] - SPARC AI's CEO stated that the company has reached a level of technological maturity suitable for deployment, with systems tested in demanding conditions [3] Company Developments - The newly appointed advisory firm will guide SPARC AI in strengthening partnerships within North America's defense ecosystem [2] - SPARC AI has expanded its drone demonstration fleet, acquiring custom-built drones to showcase its advanced technologies, including the Target Acquisition System and Autonomous Flight Engine [3] - The company's technology enables drones to operate without GPS, radar, laser, or lidar, which is crucial for operations in contested environments [3] Technology Overview - SPARC AI develops next-generation, GPS-free target acquisition and intelligence software for drones and edge devices, focusing on real-time detection and tracking without heavy sensors [4] - The flagship platform aims to provide unmatched situational awareness for defense, rescue, and commercial operators [4] - The company is committed to building a scalable software platform that will define the future of drone intelligence globally [4]

Group 1 - Fastenal Co. is expected to report quarterly earnings of 30 cents per share with revenue projected at $2.13 billion [2] - Safe Pro Group Inc. filed for a mixed shelf offering of up to $100 million, resulting in a 0.7% decline in its shares to $6.75 [2] - enCore Energy Corp. filed for a mixed shelf offering of up to $350 million, with shares falling 2.1% to $3.30 [2] - Vince Holding Corp. announced its transfer from NYSE to Nasdaq, with shares slipping 0.4% to $2.85 [2] - Rocky Mountain Chocolate Factory Inc. is set to release its third-quarter earnings after the market closes, with shares down 0.6% to $1.61 [2]

Core Insights - Safe Pro Group Inc. has successfully detected over 36,000 landmines and explosive objects using its AI models and algorithms [1] - The analysis was conducted on more than 2,000,000 drone images, covering an area of 22,500 acres in the battlefields of Ukraine [1] Company Overview - Safe Pro Group Inc. is recognized as a leader in AI-powered security and situational awareness solutions [1] - The company's AI technology is trained and refined using imagery obtained from a variety of approved sources [1]

Group 1 - Red Cat Holdings Inc. announced a collaboration with Safe Pro Group Inc. to integrate AI-powered image analysis into the Black Widow drone platform [1][3] - The partnership aims to enable real-time identification and location of over 150 types of explosive threats, enhancing military operational capabilities [1][2] - The integration will utilize Safe Pro's Object Threat Detection system to process real-time 4k video onboard the drone, delivering live threat data to military situational awareness platforms [2][3] Group 2 - The Black Widow drone will also incorporate Safe Pro's SPOTD Navigation, Observation and Detection Engine, which processes and shares mission-critical information [3] - This technology allows users to collect visual data, receive threat alerts, and create interactive maps, improving situational awareness in environments with limited connectivity [3][4] - Red Cat Holdings provides solutions for the drone industry, focusing on military, government, and commercial operations [4]

Core Insights - Red Cat Holdings, Inc. has announced a strategic collaboration with Safe Pro Group Inc. to enhance its drone capabilities for defense and national security applications [1][2] Company Overview - Red Cat Holdings, Inc. is a U.S.-based provider of advanced all-domain drone and robotic solutions, focusing on military, government, and public safety operations [8] - Safe Pro Group Inc. specializes in AI-enabled security and defense solutions, particularly in drone imagery processing for rapid identification of explosive threats [9] Collaboration Details - The collaboration will integrate Safe Pro's AI-powered image analysis technology into Red Cat's Black Widow drones, enabling real-time identification of over 150 types of explosive threats [2][3] - Safe Pro's Object Threat Detection (SPOTD) system will process real-time 4k video onboard the Black Widow, delivering live threat data to military situational awareness platforms [3] Technological Advancements - The integration includes Safe Pro's SPOTD Navigation, Observation and Detection Engine (NODE), which processes and shares mission-critical information collected by drones [4] - The SPOTD technology is powered by a large dataset of over 1.88 million drone images and 34,200+ identified threats across 8,119 hectares in Ukraine [5] Market Positioning - The Black Widow drone is positioned as a leading small unmanned aircraft system (sUAS) for defense and security, meeting the evolving needs of the U.S. Army and its allies [6][7] - The collaboration aims to provide enhanced real-time situational awareness for modern warfare, addressing the critical needs of today's warfighters [7]

Core Viewpoint - Safe Pro Group Inc. has secured a private placement with strategic investors to enhance its AI-powered defense solutions, particularly in the drone market, which is projected to grow significantly due to increased government funding and new legislation [1][4]. Company Summary - Safe Pro Group Inc. is a leader in AI-enabled defense and security solutions, focusing on drone imagery processing and advanced situational awareness tools for various sectors including defense and humanitarian applications [8][9]. - The company has developed patented technologies such as the Safe Pro Object Threat Detection (SPOTD) and the Navigation Observation Detection Engine (NODE), which are designed to improve operational efficiency in military and commercial markets [3][5]. Investment Details - The private placement involves the sale of 2,000,000 shares at $4.00 per share, along with warrants for an additional 2,000,000 shares at an exercise price of $6.00, potentially raising up to $20 million [3]. - This investment is expected to strengthen Safe Pro's financial position and facilitate the commercialization of its AI technologies [3]. Market Context - The U.S. Senate Appropriations Committee has proposed a $617 million increase in funding for small unmanned aircraft systems (SUAS), alongside the One Big Beautiful Bill Act (OBBBA) which allocates up to $30 billion for new drone and AI spending [4]. - The global drone accessories market is currently valued at $17.5 billion and is projected to exceed $115 billion by 2032, indicating a robust growth trajectory for the industry [11]. Strategic Partnerships - Safe Pro has partnered with Ondas Holdings Inc. and Unusual Machines Inc., both leaders in the drone industry, to enhance its technological capabilities and market reach [1][6]. - These partnerships aim to accelerate the development and deployment of advanced AI solutions in the unmanned systems sector, contributing to the removal of landmines and enhancing U.S. leadership in the global drone market [6].

PART I: FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Presents unaudited condensed consolidated financial statements, including balance sheets, operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity | ASSETS (Unaudited) | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Cash | $805,596 | $1,970,719 | | Total current assets | $1,331,838 | $2,750,129 | | Total other assets | $2,207,493 | $2,199,814 | | TOTAL ASSETS | $3,539,331 | $4,949,943 | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Total current liabilities | $809,911 | $893,926 | | Total long-term liabilities | $162,192 | $181,592 | | Total liabilities | $972,103 | $1,075,518 | | Total shareholders' equity | $2,567,228 | $3,874,425 | | Total liabilities and shareholders' equity | $3,539,331 | $4,949,943 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Details the company's revenues, costs, and net loss for the three and six months ended June 30, 2025, and 2024 | (Unaudited) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $92,753 | $642,989 | $277,555 | $950,642 | | Total Cost of Revenues | $61,196 | $458,374 | $184,432 | $638,812 | | Gross Profit | $31,557 | $184,615 | $93,123 | $311,830 | | Total Operating Expenses | $1,954,903 | $1,307,421 | $6,022,159 | $2,519,521 | | Loss from Operations | $(1,923,346) | $(1,122,806) | $(5,929,036) | $(2,207,691) | | Total Other Income (Expense), net | $8,787 | $(92,117) | $49,460 | $(151,092) | | Net loss | $(1,914,559) | $(1,214,923) | $(5,879,576) | $(2,358,783) | | Basic and diluted loss per share | $(0.13) | $(0.14) | $(0.39) | $(0.27) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) Outlines changes in common stock, additional paid-in capital, and accumulated deficit for the periods presented | (Unaudited) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Common Stock ( of Shares) | 15,374,685 | 14,534,685 | | Common Stock (Amount) | $1,537 | $1,453 | | Additional Paid-in Capital | $22,696,018 | $18,123,723 | | Accumulated Deficit | $(20,130,327) | $(14,250,751) | | Total Shareholders' Equity | $2,567,228 | $3,874,425 | - For the six months ended June 30, 2025, the company issued **840,000 common shares** for stock-based compensation, contributing **$3,457,681** to additional paid-in capital. Additionally, **1,050 Series C preferred shares** were issued for cash, adding **$1,050,000** to additional paid-in capital[14](index=14&type=chunk) - The net loss for the six months ended June 30, 2025, was **$(5,879,576)**, significantly increasing the accumulated deficit[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months | CASH FLOWS (Unaudited) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(1,952,501) | $(1,159,475) | | Net cash used in investing activities | $(225,877) | $(223,509) | | Net cash provided by financing activities | $1,045,563 | $855,569 | | NET DECREASE IN CASH | $(1,132,815) | $(527,415) | | CASH, beginning of period | $1,970,719 | $703,368 | | CASH, end of period | $805,596 | $175,953 | - Cash used in operating activities increased by **68.4%** from **$(1,159,475)** in H1 2024 to **$(1,952,501)** in H1 2025, primarily due to a larger net loss[18](index=18&type=chunk) - Financing activities provided **$1,045,563** in H1 2025, mainly from the sale of Series C preferred shares and warrants (**$1,050,000**), an increase from **$855,569** in H1 2024[18](index=18&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Provides detailed explanations of accounting policies, financial instruments, and segment information [NOTE 1 - Nature of Organization, Liquidity and Summary of Significant Accounting Policies](index=11&type=section&id=NOTE%201%20-%20Nature%20of%20Organization%2C%20Liquidity%20and%20Summary%20of%20Significant%20Accounting%20Policies) Outlines business, liquidity challenges, going concern issues, and key accounting policies including revenue recognition - Safe Pro Group Inc. focuses on innovative security and protection solutions, integrating advanced AI/ML, drone-based remote sensing, and personal protective gear through its subsidiaries Safe-Pro USA, Airborne Response, and Safe Pro AI[20](index=20&type=chunk) - The company has incurred a net loss of **$5,879,576** and used **$1,952,501** in cash from operations for the six months ended June 30, 2025, resulting in an accumulated deficit of **$20,130,327** and raising substantial doubt about its ability to continue as a going concern[21](index=21&type=chunk)[23](index=23&type=chunk) - Management plans to address going concern risk by submitting bids for new customer business and seeking additional equity financing, while also investing in R&D and 'SpotlightAI' for future revenue growth[23](index=23&type=chunk) - On May 9, 2025, the Company closed a private offering, selling **1,050 shares of Series C convertible preferred stock** for **$1.05 million** and three-year warrants to purchase common stock[24](index=24&type=chunk) [NOTE 2 – Accounts Receivable and Other Receivables](index=16&type=section&id=NOTE%202%20%E2%80%93%20Accounts%20Receivable%20and%20Other%20Receivables) Details composition of accounts and other receivables, noting no allowance for doubtful accounts | Accounts Receivable | June 30, 2025 | December 31, 2024 | | :------------------ | :------------ | :---------------- | | Accounts receivable | $38,559 | $123,686 | | Less: allowance for doubtful accounts | - | - | | Accounts receivable, net | $38,559 | $123,686 | | Other Receivables | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Other receivables | $142,526 | $142,526 | | Less: allowance for doubtful other receivables | $(142,526) | $(142,526) | | Other receivables, net | $- | $- | - The company had no performance bonds receivable and outstanding as of June 30, 2025, and December 31, 2024, as the full amount was offset by an allowance for doubtful receivables[51](index=51&type=chunk) [NOTE 3 – Inventory](index=17&type=section&id=NOTE%203%20%E2%80%93%20Inventory) Breaks down inventory into raw materials, work in process, and finished goods, showing a slight decrease | Inventory | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Raw materials | $273,530 | $259,658 | | Work in process | $10,548 | $60,229 | | Finished goods | $22,210 | $22,174 | | Less reserve for obsolete inventory | - | - | | Total | $306,288 | $342,061 | [NOTE 4 – Property and Equipment](index=17&type=section&id=NOTE%204%20%E2%80%93%20Property%20and%20Equipment) Details property and equipment, net of depreciation, showing a decrease in total net assets | Property and Equipment | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Manufacturing equipment | $340,009 | $340,009 | | Drones and related equipment | $129,537 | $115,423 | | Software library | $10,000 | $10,000 | | Furniture, fixtures and office equipment | $14,249 | $7,329 | | Less accumulated depreciation | $(196,863) | $(157,880) | | Total | $296,932 | $314,881 | - Depreciation expense for the three months ended June 30, 2025, was **$19,957**, and for the six months ended June 30, 2025, was **$24,649**[54](index=54&type=chunk) [NOTE 5 – Intangible Assets and Goodwill](index=17&type=section&id=NOTE%205%20%E2%80%93%20Intangible%20Assets%20and%20Goodwill) Provides details on intangible assets, primarily SpotlightAI™ software, and goodwill, including amortization - The acquisition of Safe Pro AI on March 9, 2023, resulted in a **$545,625** increase in finite-lived intangible assets, primarily the SpotlightAI™ software, used by the Ukrainian government and humanitarian aid organizations[55](index=55&type=chunk) | Intangible Assets (June 30, 2025) | Amortization period (years) | Gross Amount | Accumulated Amortization | Net finite intangible assets | | :---------------------------------- | :-------------------------- | :----------- | :----------------------- | :--------------------------- | | Customer relationships | 5 | $388,000 | $(222,300) | $165,700 | | Contractual employment agreements | 3 | $310,000 | $(307,652) | $2,348 | | Acquired capitalized internal-use software development costs | 3 | $1,123,056 | $(171,943) | $951,113 | | Total | | $1,721,325 | $(701,895) | $1,119,161 | - Amortization of intangible assets for the six months ended June 30, 2025, was **$174,327**, an increase from **$90,383** in the prior year period[59](index=59&type=chunk) | Goodwill | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Safe-Pro USA | $518,255 | $518,255 | | Airborne Response | $166,612 | $166,612 | | Total goodwill | $684,867 | $684,867 | [NOTE 6 – Note Payable](index=18&type=section&id=NOTE%206%20%E2%80%93%20Note%20Payable) Details the company's long-term SBA COVID-19 EIDL Loan, secured by company assets - The company has a **$146,000 SBA COVID-19 EIDL Loan**, accruing interest at **3.75%** per annum, with payments deferred until 30 months from the note date and a term of 30 years[61](index=61&type=chunk) | Notes Payable | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Notes payable | $146,000 | $146,000 | | Less: current portion of notes payable | - | - | | Notes payable – long-term | $146,000 | $146,000 | | Future Note Payable Principal Payments | 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](index=19&type=section&id=NOTE%207%20%E2%80%93%20Convertible%20Notes%20Payable) Details convertible debt agreements from 2023 and 2024, which were converted into common shares - In December 2023, the Company received **$475,000** from a convertible debt agreement with a **15% interest rate**, maturing December 2024, and warrants to purchase **148,438 common shares** at **$1.00**[64](index=64&type=chunk) - In March 2024, an additional **$275,001** was received from a similar convertible debt agreement, maturing March 2025, with warrants for **85,938 common shares** at **$1.00**[65](index=65&type=chunk) - Both convertible notes, totaling **$750,001** in principal and **$58,531** in accrued interest, were converted into **252,666 common shares** on August 27, 2024[66](index=66&type=chunk) [NOTE 8 – Stockholders' Equity](index=20&type=section&id=NOTE%208%20%E2%80%93%20Stockholders'%20Equity) Provides comprehensive details on preferred and common stock issuances, warrants, and stock options - Series A and B Preferred shares were converted into common stock in August 2024, while Series C Preferred Stock was designated in May 2025, with a stated value of **$1,100 per share** and a conversion price of **$2.25**[71](index=71&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - For the six months ended June 30, 2025, the company issued **840,000 common shares** for stock-based compensation and services, totaling **$3,457,765** in value[14](index=14&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - As of June 30, 2025, **651,366 warrants** were outstanding with a weighted average exercise price of **$3.18**, and **672,500 stock options** were outstanding with a weighted average exercise price of **$5.46**[93](index=93&type=chunk)[102](index=102&type=chunk) - The 2025 Equity Incentive Plan, approved by stockholders in June 2025, reserves **5,000,000 shares of common stock** for issuance and includes an evergreen increase of **5%** of outstanding common stock annually[105](index=105&type=chunk)[106](index=106&type=chunk) [NOTE 9 – Commitments and Contingencies](index=29&type=section&id=NOTE%209%20%E2%80%93%20Commitments%20and%20Contingencies) Addresses legal matters, product liability insurance, and a contingent liability to former Safe-Pro USA members - The company is not currently involved in any pending or threatened legal proceedings that are expected to have a material adverse effect on its financial condition[117](index=117&type=chunk)[229](index=229&type=chunk) - Safe-Pro USA carries a product liability policy covering up to **$2,000,000** in claims retroactive to June 26, 2020[118](index=118&type=chunk) - A contingent liability of **$381,581** is due to former Safe-Pro USA members, payable only from proceeds related to contracts with the Bangladesh Ministry of Defense customer[119](index=119&type=chunk) [NOTE 10 – Concentrations](index=29&type=section&id=NOTE%2010%20%E2%80%93%20Concentrations) Highlights concentrations of credit risk, geographic sales, customer base, and suppliers - The company uses an Insured Cash Sweep Service (ICS) to distribute deposits exceeding **$250,000** across multiple institutions, mitigating FDIC insurance limits[121](index=121&type=chunk) - For the six months ended June 30, 2025, **77.6%** of total sales were to a customer in the United States and **22.4%** to Canada. Three customers accounted for approximately **88.5%** of total sales[122](index=122&type=chunk)[123](index=123&type=chunk) - For the six months ended June 30, 2025, approximately **93.8%** of inventory was purchased from four suppliers, indicating a high supplier concentration[126](index=126&type=chunk) [NOTE 11 – Related Party Transactions](index=30&type=section&id=NOTE%2011%20%E2%80%93%20Related%20Party%20Transactions) Details transactions with related parties, including liabilities, waived salaries, and inventory purchases - As of June 30, 2025, **$381,581** is due to former Safe-Pro USA members (a current director), payable only from proceeds from Bangladesh Ministry of Defense contracts[129](index=129&type=chunk) - Mr. Borkar, CEO, and his spouse waived accrued salaries totaling **$56,538** each as of March 31, 2025, with portions recorded as contributed capital and offsets to wages[130](index=130&type=chunk)[131](index=131&type=chunk) - The company purchased **$5,299** in inventory and services from a company owned by Mr. Borkar's spouse during the six months ended June 30, 2025[134](index=134&type=chunk) [NOTE 12 – Operating Lease Right-of-Use ("ROU") Assets and Operating Lease Liabilities](index=31&type=section&id=NOTE%2012%20%E2%80%93%20Operating%20Lease%20Right-of-Use%20%28%22ROU%22%29%20Assets%20and%20Operating%20Lease%20Liabilities) Outlines operating lease agreements for office space and a vehicle, detailing ROU assets and lease liabilities - The company renewed an office lease through July 31, 2026, incurring an additional ROU asset and lease liability of **$33,084**[136](index=136&type=chunk) | ROU Assets | June 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 | $(233,448) | $(195,476) | | Balance of ROU assets | $96,733 | $101,621 | | Operating Lease Liabilities | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Lease liabilities related to office lease right of use assets | $87,678 | $91,113 | | Lease liabilities related to auto lease right of use asset | $6,075 | $7,595 | | Less: current portion of lease liabilities | $(77,561) | $(63,115) | | Lease liabilities – long-term | $16,192 | $35,592 | | Future Minimum Base Lease Payments (June 30, 2025) | Amount | | :------------------------------------------------- | :----- | | 2025 | $40,901 | | 2026 | $56,963 | | 2027 | $1,183 | | Total minimum non-cancellable operating lease payments | $99,047 | | Less: discount to fair value | $(5,295) | | Total lease liabilities on June 30, 2025 | $93,752 | [NOTE 13 – Segment Reporting](index=32&type=section&id=NOTE%2013%20%E2%80%93%20Segment%20Reporting) Presents financial information for the company's three reportable business segments: Safe-Pro USA, Airborne Response, and Safe Pro AI - The company operates in three segments: Safe-Pro USA (personal protective gear), Airborne Response (drone-based services), and Safe Pro AI (AI/ML software)[145](index=145&type=chunk) | Segment Revenues | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Safe-Pro USA | $48,748 | $430,039 | $189,348 | $652,395 | | Airborne Response | $14,673 | $212,950 | $18,877 | $298,247 | | Safe Pro AI | $29,333 | $- | $69,330 | $- | | Total Revenues | $92,753 | $642,989 | $277,555 | $950,642 | | Segment Net (Loss) Income | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Safe-Pro USA | $(100,303) | $(6,694) | $(165,993) | $(70,171) | | Airborne Response | $(127,403) | $(140,317) | $(273,828) | $(284,984) | | Safe Pro AI | $(172,019) | $(590) | $(318,949) | $(86,527) | | Other | $(1,514,834) | $(1,067,322) | $(5,120,806) | $(1,917,101) | | Total Net Loss | $(1,914,559) | $(1,214,923) | $(5,879,576) | $(2,358,783) | | Identifiable Long-Lived Tangible Assets, net by segment | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------ | :------------ | :---------------- | | Safe-Pro USA | $193,261 | $217,134 | | Airborne Response | $68,084 | $71,444 | | Safe Pro AI | $31,095 | $22,143 | | Other | $4,492 | $4,160 | | Total | $296,932 | $314,881 | [NOTE 14 – Subsequent Events](index=34&type=section&id=NOTE%2014%20%E2%80%93%20Subsequent%20Events) Discloses events after the reporting period, including preferred stock conversion and additional stock-based compensation - In July 2025, **875 shares of Preferred Series C** were converted into **427,779 common shares**, and **145 shares** were converted into **70,889 common shares**[151](index=151&type=chunk) - The Compensation Committee approved the issuance of **145,000 shares** for services (**$562,600**) and **150,000 shares** for compensation (**$582,000**) in July 2025, pursuant to the 2022 Equity Plan[152](index=152&type=chunk)[153](index=153&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Provides management's perspective on financial condition, operational results, liquidity, capital resources, and critical accounting policies [Cautionary Note Regarding Forward-Looking Statements](index=35&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Highlights that the report contains subjective forward-looking statements with inherent risks and uncertainties - This section emphasizes that the report contains forward-looking statements that are subjective and involve known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from expectations[158](index=158&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [Business Overview](index=36&type=section&id=Business%20Overview) Introduces Safe Pro Group Inc. as a parent company focusing on AI/ML software, PPE, and drone services - Safe Pro Group Inc. is a parent company of Airborne Response Corp., Safe-Pro USA, LLC, and Safe Pro AI LLC, focusing on advanced AI/ML software, personal protective equipment, and drone-based aerial managed services[162](index=162&type=chunk) - The company expects to realize revenue from its Safe Pro AI segment and its Spotlight AI™ ecosystem, which has analyzed over **1.66 million drone images** and identified over **28,000 threats** across **6,705 hectares** in Ukraine[165](index=165&type=chunk) [Significant Components of Our Results of Operations](index=37&type=section&id=Significant%20Components%20of%20Our%20Results%20of%20Operations) Explains key drivers of revenues, gross profit, and operating expenses, including anticipated increases in R&D and S,G&A - Revenues are primarily generated from product sales (PPE, ballistic protective equipment) and aerial managed services (drones), recognized at shipment or service completion[171](index=171&type=chunk) - Gross profit is influenced by supply chain changes, product mix, operating performance, and production costs, with expected fluctuations[172](index=172&type=chunk) - Operating expenses are categorized into salaries, wages and payroll taxes, research and development, professional fees, selling, general and administrative expenses, and depreciation and amortization[173](index=173&type=chunk) - The company anticipates increases in R&D, selling, general and administrative expenses as it expands operations, sales, and marketing efforts for new products and services[175](index=175&type=chunk)[177](index=177&type=chunk)[191](index=191&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, detailing changes in revenues, costs, and net loss for the periods presented [Comparison of the Three months Ended June 30, 2025 and 2024](index=39&type=section&id=Comparison%20of%20the%20Three%20months%20Ended%20June%2030%2C%202025%20and%202024) Compares financial performance for the three months, highlighting significant decreases in revenue and increases in net loss | Financial Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :------------ | :--------- | :--------- | | Total Revenues | $92,753 | $642,989 | $(550,236) | (85.6)% | | Total Cost of Revenues | $61,196 | $458,374 | $(397,178) | (86.6)% | | Gross profit | $31,557 | $184,615 | $(153,058) | (82.9)% | | Total operating expenses | $1,954,903 | $1,307,421 | $647,482 | 49.5% | | Loss from operations | $(1,923,346) | $(1,122,806) | $(800,540) | 71.3% | | Total other income (expense) | $8,787 | $(92,117) | $100,904 | (109.5)% | | Net loss | $(1,914,559) | $(1,214,923) | $(699,636) | 57.6% | - Total revenues decreased by **85.6%** due to a one-time contract for EOD gear completed in the prior period, with Safe-Pro USA sales down **88.7%** and Airborne Response sales down **93.1%**. Safe Pro AI generated **$29,333** in revenue from **$0** in the prior year[182](index=182&type=chunk)[184](index=184&type=chunk) - Operating expenses increased by **49.5%**, driven by a **10.0%** increase in salaries, wages, and payroll taxes, a significant increase in professional fees (**68.7%**), and a **98.3%** increase in depreciation and amortization[181](index=181&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk)[190](index=190&type=chunk) [Comparison of the Six months Ended June 30, 2025 and 2024](index=40&type=section&id=Comparison%20of%20the%20Six%20months%20Ended%20June%2030%2C%202025%20and%202024) Compares financial performance for the six months, showing substantial declines in revenue and a significant increase in net loss | Financial Metric | June 30, 2025 | June 30, 2024 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :------------ | :--------- | :--------- | | Total Revenues | $277,555 | $950,642 | $(673,087) | (70.8)% | | Total Cost of Revenues | $184,432 | $638,812 | $(454,380) | (71.1)% | | Gross profit | $93,123 | $311,830 | $(218,707) | (70.1)% | | Total operating expenses | $6,022,159 | $2,519,521 | $3,502,638 | 139.0% | | Loss from operations | $(5,929,036) | $(2,207,691) | $(3,721,345) | 168.6% | | Total other income (expense) | $49,640 | $(151,092) | $200,732 | (132.7)% | | Net loss | $(5,879,576) | $(2,358,783) | $(3,520,793) | 149.3% | - Total revenues decreased by **70.8%** for the six months, with Safe-Pro USA sales down **71.1%** and Airborne Response sales down **93.7%**. Safe Pro AI generated **$69,330** in revenue[183](index=183&type=chunk) - Operating expenses surged by **139.0%**, primarily due to a **196.5%** increase in salaries, wages, and payroll taxes (driven by **$1,606,070** in non-cash stock compensation) and a **145.2%** increase in professional fees (due to **$1,753,695** in non-cash share-based professional fees)[185](index=185&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - Net loss increased by **149.3%** to **$(5,879,576)** for the six months ended June 30, 2025, compared to **$(2,358,783)** in the prior year, mainly due to increased operating expenses[193](index=193&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash position, working capital, and sources and uses of cash from operating, investing, and financing activities | Balance Sheet Data | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash | $805,596 | $1,970,719 | $(1,165,123) | (59.1)% | | Current assets | $1,331,838 | $2,750,129 | $(1,418,291) | (51.6)% | | Current liabilities | $809,911 | $893,926 | $(84,015) | (9.4)% | | Working capital | $521,927 | $1,856,203 | $(1,334,276) | (71.9)% | | Total stockholders' equity | $2,567,228 | $3,874,425 | $(1,307,197) | (33.7)% | - Cash decreased by **59.1%** to **$805,596**, and working capital decreased by **71.9%** to **$521,927** as of June 30, 2025, primarily due to funding working capital needs from decreased revenue[195](index=195&type=chunk)[196](index=196&type=chunk) - Net cash used in operating activities was **$(1,952,500)** for the six months ended June 30, 2025, mainly due to the net loss, partially offset by non-cash expenses like stock-based compensation[198](index=198&type=chunk) - Financing activities provided **$1,045,563**, primarily from the sale of Series C preferred stock and warrants (**$1,050,000**)[201](index=201&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Identifies key accounting policies and estimates, including revenue recognition, impairment, and stock-based compensation - Key accounting policies and estimates include allowances for credit losses on accounts receivable, revenue recognition (following ASU Topic 606), valuation of goodwill and intangible assets for impairment, and accounting for business and asset acquisitions[203](index=203&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[211](index=211&type=chunk)[214](index=214&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - The company recognizes stock-based compensation based on grant-date fair value over the vesting period, electing to recognize forfeitures as they occur[216](index=216&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) States that the company is exempt from providing market risk disclosures due to its smaller reporting company status - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[219](index=219&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Reports ineffective disclosure controls and a material weakness in internal control over financial reporting, with a remediation plan - Disclosure controls and procedures were deemed **ineffective** as of June 30, 2025[221](index=221&type=chunk) - A **material weakness** in internal control over financial reporting was identified, specifically concerning segregation of duties and inventory management, attributed to limited resources and reliance on outside consultants[224](index=224&type=chunk)[225](index=225&type=chunk) - The company plans to engage a third party to conduct a full assessment of its controls and procedures to remediate the material weakness[226](index=226&type=chunk) PART II. OTHER INFORMATION Provides additional information including legal proceedings, risk factors, equity sales, and other disclosures [Item 1. Legal Proceedings](index=46&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Confirms the company is not involved in any material legal proceedings or litigation - The company is not currently involved in any pending legal proceedings or litigation that would likely have a material adverse effect on its business[229](index=229&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=ITEM%201A.%20RISK%20FACTORS) Refers to the Annual Report on Form 10-K for risk factors, noting no material changes - Readers should refer to the 'Risk Factors' section in the Form 10-K for the year ended December 31, 2024, as there have been no material changes to the company's risk factors[231](index=231&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details the issuance of restricted common shares for services under Section 4(a)(2) of the Securities Act - On June 13, 2025, **165,000 restricted common shares** were issued for services at a fair market value of **$3.01 per share**, resulting in **$496,650** recorded as professional fees[232](index=232&type=chunk) - These securities were issued pursuant to Section 4(a)(2) of the Securities Act and were not registered[233](index=233&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Reports no defaults upon senior securities during the period - There were no defaults upon senior securities[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) States that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[235](index=235&type=chunk) [Item 5. Other Information](index=47&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Discloses Rule 10b5-1 trading arrangements adopted by the CEO and President of Airborne Response Corp - CEO Daniyel Erdberg adopted a Rule 10b5-1 trading plan on June 11, 2025, for the sale of up to **1,000,000 shares** of his common stock, effective until August 31, 2026[236](index=236&type=chunk) - Christopher Todd, President of Airborne Response Corp., adopted a Rule 10b5-1 trading plan on June 27, 2025, for the sale of up to **62,500 shares** of his common stock, effective until March 17, 2026[237](index=237&type=chunk) [Item 6. Exhibits](index=47&type=section&id=ITEM%206.%20EXHIBITS) Lists exhibits filed with the Form 10-Q, including certificates, warrants, agreements, and certifications - Key exhibits include the Certificate of Designations of Series C Preferred Stock, Form of Warrant, Securities Purchase Agreement, and the Safe Pro Group Inc. 2025 Stock Plan[238](index=238&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also included[238](index=238&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES) Contains the required signatures of the registrant's authorized officers, including the CEO and CFO - The report is signed by Daniyel Erdberg, Chairman and Chief Executive Officer, and Theresa Carlise, Chief Financial Officer, Treasurer & Assistant Secretary, on August 14, 2025[242](index=242&type=chunk)

Core Viewpoint - Safe Pro Group Inc. is advancing its AI-powered computer vision technology for explosive threat detection, with recent patent applications published in Australia, Israel, and Europe, enhancing its global intellectual property protection strategy [2][4]. Group 1: Technology and Innovation - The company’s AI-powered technology has analyzed over 1.78 million drone images and identified more than 31,600 explosive threats across 7,819 hectares in Ukraine, showcasing its effectiveness in real-world applications [6]. - Safe Pro's patented Safe Pro Object Threat Detection (SPOTD) technology can detect over 150 types of small explosive threats, including landmines and unexploded ordnance, addressing a significant global challenge as nearly 60 countries are affected by landmines [5][6]. Group 2: Intellectual Property and Market Position - The publication of international patent applications under the Patent Cooperation Treaty (PCT) is a strategic move to secure exclusive rights to its technology, signaling to competitors the potential for infringement liabilities [2][4]. - The company’s existing US Patent No. 12,146,729, valid until 2043, covers autonomous detection and identification of explosives using AI, indicating the innovative nature of its technology [4]. Group 3: Industry Context and Challenges - The global landmine crisis is escalating, particularly as more European nations consider withdrawing from the Ottawa Convention, which could lead to increased threats to armed forces and allies [3]. - The company is actively pursuing global protection of its intellectual property to address the growing challenges posed by landmines and other explosive threats [3].

Core Insights - The FAA's proposed rules for normalizing Beyond Visual Line of Sight (BVLOS) operations are expected to significantly enhance the deployment of drone applications across various sectors, particularly benefiting Safe Pro Group Inc. and its AI technology [1][5]. Company Overview - Safe Pro Group Inc. is a leader in AI-powered defense and security solutions, focusing on enhancing situational awareness and critical information access for customers in defense, humanitarian aid, law enforcement, and commercial markets [4][9]. - The company operates a fleet of advanced drone platforms for both routine operations and disaster response, positioning itself as a key player in climate resilience and emergency management [6]. Industry Impact - The normalization of BVLOS operations is projected to unlock transformative drone applications in sectors such as agriculture, energy, public safety, emergency response, infrastructure inspection, and logistics [3][5]. - The drone services market was valued at approximately $8.66 billion in 2025 and is anticipated to grow at a CAGR of 14.3%, reaching around $32.96 billion by 2035 [3]. Technological Advancements - Safe Pro's patented AI-powered computer vision technology is capable of rapidly analyzing drone imagery to detect small objects, with proven applications in identifying landmines and unexploded ordnance [7]. - The company’s Safe Pro Object Threat Detection (SPOTD) technology has been battle-tested in Ukraine, analyzing over 1.66 million drone images and identifying more than 28,000 threats across a significant area [7]. Future Prospects - The proposed FAA rules aim to provide greater operational flexibility for drone operators and manufacturers, which is expected to drive rapid growth in the drone services sector and support the development of new AI-powered drone services [5][6].