Core Insights - The U.S. Army has selected Safe Pro Group Inc. for two components of its 2026 Concept Focused Warfighter Experiment, highlighting the company's advanced AI threat detection capabilities [1][2][3] - The Senate Committee on Appropriations has advanced a proposed $617 million funding increase for Small Unmanned Aircraft Systems, which presents significant opportunities for Safe Pro's technology [5] Group 1: Company Developments - Safe Pro Group's patented AI-driven computer vision technology is recognized for its ability to analyze drone imagery and detect battlefield threats in real time [2] - The company plans to demonstrate its SPOTD AI-powered drone-based imagery analysis platform, capable of detecting over 150 types of landmines and unexploded ordnance in a fraction of a second [3] - Safe Pro's technology has been validated through over 1.66 million drone images analyzed and 28,000+ threats identified in real-world operations conducted in Ukraine [3] Group 2: Industry Context - The U.S. Army's Futures Command aims to ensure soldiers remain at the forefront of technological innovation through collaborative experimentation at events like the CFWE [2] - The proposed funding increase for drone and AI technologies aligns with the Pentagon's strategy to enhance force protection and mission planning capabilities [5] - The integration of Safe Pro's technology into the U.S. Army's ATAK platform allows for rapid sharing of threat detections across a wide range of soldier-carried and vehicle-mounted devices [4]

Core Insights - Safe Pro Group Inc. has been selected by the U.S. Army to participate in the Army Futures Command's Concept Focused Warfighting Experiment Maneuver (CFWE-M) 2026 event, which will take place at Fort Benning, Georgia from March to April 2026 [1][2] Group 1: Company Overview - Safe Pro Group Inc. is a leader in AI-powered defense and security solutions, focusing on enhancing modern force protection through advanced technologies [1][4] - The company specializes in drone imagery processing and machine learning, providing rapid identification of explosive threats, which offers a safer alternative to traditional human-based analysis methods [7] Group 2: Technology and Capabilities - Safe Pro plans to demonstrate its patented AI-powered computer vision technologies, including the SpotlightAI™ platform, which can detect and identify over 150 types of landmines and unexploded ordnance in a fraction of a second per image [3] - The company has analyzed over 1.66 million drone images and identified more than 28,000 threats across 6,705 hectares, utilizing real-world datasets from operations in Ukraine [3] Group 3: Collaboration and Integration - Safe Pro is integrating its technology into the U.S. Army's ATAK (Android Tactical Assault Kit) platform, allowing for real-time detection of small explosive threats and rapid sharing of intelligence across connected devices used by the U.S. Armed Forces [5] - The CFWE-M event serves as a primary venue for collaboration between the Army, industry, and technology developers, focusing on small unit modernization [2]

Core Viewpoint - SPARC AI INC. has successfully closed a non-brokered private placement offering, raising $200,000 in gross proceeds to support its operations and growth initiatives [1][2]. Group 1: Private Placement Details - The company issued 1,333,334 units at a price of $0.15 per unit, resulting in net proceeds of $192,000 after expenses [1]. - Each unit consists of one common share and one warrant, allowing the purchase of an additional common share at the same price for a period of twelve months [2]. - The closing date for the issuance of the securities is set for August 1, 2025, with a statutory hold period expiring on December 2, 2025 [3]. Group 2: Use of Proceeds - The net proceeds from the offering will be allocated towards funding sales and marketing activities as well as general working capital [2]. Group 3: CEO Investment and Oversubscription - CEO Anoosh Manzoori personally invested $100,000 by subscribing to 666,667 shares, indicating strong insider confidence [1]. - Due to oversubscription, the company will not require a previously planned loan of $225,000 from the CEO [4]. Group 4: Company Overview - SPARC AI specializes in developing high-tech solutions for environments where GPS is unavailable, focusing on enhancing perception and awareness [5]. - The company has created an innovative Target Acquisition System and Autonomous Flight solution for drones that do not rely on GPS or other complex technologies [5].

Core Insights - SPARC AI INC. is expanding into the commercial drone sector with an AI-powered product currently in stealth mode, leveraging its expertise in drone software technology [1][3] - The new product will enable users to design, build, optimize, budget, and launch drones efficiently, integrating various engineering tools and SPARC AI's Target Acquisition System [2][3] - The global drone industry is valued at $63 billion, and SPARC AI aims to capture market share in high-growth sectors such as agriculture, logistics, and environmental monitoring [3] Company Developments - SPARC AI is conducting a non-brokered private placement offering of 1,000,000 units at $0.15 per unit, aiming to raise $150,000 to fund product development and market launch [4] - The CEO, Anoosh Manzoori, plans to subscribe to the placement shares, indicating strong confidence in the company's strategic direction [4] - A $225,000 loan agreement has been secured with the CEO to support ongoing operations and product development, with favorable terms including no interest and no fees [5]

Core Insights - SPARC AI INC. has been shortlisted for the 2025 Australian Association for Uncrewed Systems (AAUS) Innovation Award, recognizing its contributions to uncrewed systems and advanced air mobility (AAM) sectors in Australia [1][2] - The AAUS Innovation Award honors organizations that exhibit creativity and technical excellence in uncrewed systems across various domains [2] - SPARC AI is preparing for an investor roadshow in Canada in June 2025, including a presentation at the Investor Clubhouse event in Toronto, aimed at showcasing its AI solutions to 80 VIP investors [3] Company Overview - SPARC AI has developed a Target Acquisition System that determines geolocation coordinates of distant objects without relying on traditional technologies such as radar, lidar, GPS, sensors, satellites, or image recognition software [5]

PART I: FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201%2E%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Presents unaudited financial statements for Q1 2025, showing a net loss and detailing a subsequent capital raise [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to $3.69 million, driven by a reduction in cash, leading to a decline in shareholders' equity Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $912,219 | $1,970,719 | | Total current assets | $1,485,653 | $2,750,129 | | Total Assets | $3,686,590 | $4,949,943 | | **Liabilities & Equity** | | | | Total current liabilities | $872,025 | $893,926 | | Total liabilities | $1,043,230 | $1,075,518 | | Accumulated deficit | $(18,215,768) | $(14,250,751) | | Total shareholders' equity | $2,643,360 | $3,874,425 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Q1 2025 revenue fell 39.9% year-over-year while operating expenses surged, resulting in a significantly wider net loss Statement of Operations Summary (Unaudited) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total Revenues | $184,802 | $307,653 | | Gross Profit | $61,566 | $127,215 | | Total Operating Expenses | $4,067,256 | $1,212,101 | | Loss from Operations | $(4,005,690) | $(1,084,886) | | Net Loss | $(3,965,017) | $(1,143,860) | | Net Loss Per Share (Basic & Diluted) | $(0.27) | $(0.13) | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) Shareholders' equity declined by $1.23 million, as the quarterly net loss outpaced non-cash compensation and capital additions - For the three months ended March 31, 2025, total shareholders' equity decreased by **$1,231,065**, mainly due to a net loss of **$3,965,017**, offset by stock-based compensation of **$2,435,625** and other capital additions[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The company experienced increased cash burn from operations, leading to a total cash decrease of $1.06 million in Q1 2025 Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(941,751) | $(568,016) | | Net Cash Used in Investing Activities | $(123,359) | $0 | | Net Cash Provided by Financing Activities | $6,610 | $264,255 | | **Net Decrease in Cash** | **$(1,058,500)** | **$(303,761)** | | **Cash, end of period** | **$912,219** | **$399,607** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes highlight substantial going concern uncertainty, segment details, significant customer concentration, and a subsequent equity offering - The company has a history of net losses (**$3.97M in Q1 2025**) and negative operating cash flow (**$941,751 in Q1 2025**), with an accumulated deficit of **$18.2M**, raising **substantial doubt about its ability to continue as a going concern**[19](index=19&type=chunk)[21](index=21&type=chunk) - On May 9, 2025, after the quarter ended, the company closed a private offering of Series C convertible preferred stock, raising aggregate gross proceeds of **$1.05 million** to mitigate liquidity concerns[23](index=23&type=chunk)[129](index=129&type=chunk) - The company operates in three segments: Safe-Pro USA (protective gear), Airborne Response (drone services), and Safe Pro AI (AI/ML software), with Q1 2025 revenues of **$140,600**, **$4,204**, and **$39,998** respectively[46](index=46&type=chunk)[126](index=126&type=chunk) - For Q1 2025, three customers accounted for **94.4% of total sales**, indicating significant customer concentration risk[104](index=104&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=ITEM%202%2E%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes a 39.9% revenue decline to funding cuts and a 235.6% expense increase to non-cash stock compensation [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 2025 revenue fell 39.9% while operating expenses rose 235.6%, driven by stock-based compensation, widening the net loss Comparison of Operations for the Three Months Ended March 31 | Item | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $184,802 | $307,653 | $(122,851) | (39.9)% | | Gross Profit | $61,566 | $127,215 | $(65,649) | (51.6)% | | Total Operating Expenses | $4,067,256 | $1,212,101 | $2,855,155 | 235.6% | | Net Loss | $(3,965,017) | $(1,143,860) | $(2,821,157) | 246.6% | - The increase in operating expenses was primarily due to non-cash stock-based compensation, including **$1,579,285** related to salaries and **$992,052** related to professional fees[166](index=166&type=chunk)[168](index=168&type=chunk) - The decrease in revenue was attributed to security services budgetary cuts in Federal Funding and the timing of a training contract with Florida Power and Light[163](index=163&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity weakened, with cash falling to $0.91 million and working capital decreasing to $0.61 million Key Liquidity Metrics | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash | $912,219 | $1,970,719 | | Working Capital | $613,628 | $1,856,203 | - Net cash used in operating activities for Q1 2025 was **$941,751**, primarily due to a net loss of **$3.97 million**, partially offset by non-cash expenses like stock-based compensation of **$2.44 million**[178](index=178&type=chunk) - Net cash used in investing activities was **$123,359** in Q1 2025 for the purchase of property, equipment, and intangible technologies[180](index=180&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies include segment-specific revenue recognition, goodwill impairment testing, and stock-based compensation valuation - Revenue recognition policies are tailored to each business segment: Safe-Pro USA (goods shipped), Airborne Response (services completed), and Safe Pro AI (SaaS model based on usage)[187](index=187&type=chunk)[188](index=188&type=chunk)[190](index=190&type=chunk) - Goodwill is not amortized but is tested for impairment at least annually, while intangible assets with finite lives are amortized[192](index=192&type=chunk)[193](index=193&type=chunk) - Stock-based compensation is accounted for under ASC 718, requiring measurement at the grant-date fair value and recognition over the service period[195](index=195&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=ITEM%203%2E%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Safe Pro Group Inc. is not required to provide the information for this item - The company is exempt from this disclosure requirement as it qualifies as a smaller reporting company[198](index=198&type=chunk) [Controls and Procedures](index=38&type=section&id=ITEM%204%2E%20CONTROLS%20AND%20PROCEDURES) Disclosure controls were deemed ineffective due to a material weakness in internal controls related to limited resources - Management concluded that **disclosure controls and procedures were ineffective** as of March 31, 2025[200](index=200&type=chunk) - A **material weakness was identified** in internal control over financial reporting due to a lack of segregation of duties and issues with inventory management, attributed to limited resources[202](index=202&type=chunk) - The company plans to remediate the material weakness by engaging a third party to conduct a full assessment of controls and procedures once resources become available[204](index=204&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=39&type=section&id=ITEM%201%2E%20LEGAL%20PROCEEDINGS) The company is not currently a party to any legal proceedings that would materially impact its business or financial condition - The company is not currently involved in any material pending legal proceedings[207](index=207&type=chunk) [Risk Factors](index=40&type=section&id=ITEM%201A%2E%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - There have been no material changes to the company's risk factors from those set forth in its Annual Report on Form 10-K filed on March 31, 2025[209](index=209&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=ITEM%202%2E%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) In March 2025, the company issued 12,500 restricted shares for professional fees under a Securities Act exemption - On March 20, 2025, the Company issued **12,500 restricted shares valued at $36,625** for professional fees, outside of its 2022 Equity Plan, pursuant to Section 4(a)(2) of the Securities Act[210](index=210&type=chunk) [Defaults Upon Senior Securities](index=40&type=section&id=ITEM%203%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon its senior securities during the period - None[211](index=211&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=ITEM%204%2E%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - Not applicable[212](index=212&type=chunk) [Other Information](index=40&type=section&id=ITEM%205%2E%20OTHER%20INFORMATION) No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[213](index=213&type=chunk) [Exhibits](index=40&type=section&id=ITEM%206%2E%20EXHIBITS) Lists all filed exhibits, including documents for the May 2025 private offering and Sarbanes-Oxley certifications - The report includes several exhibits, notably documents related to the **May 9, 2025, private offering** (Series C Preferred Stock, Warrants, Purchase Agreement) and Sarbanes-Oxley certifications[214](index=214&type=chunk) [Signatures](index=41&type=section&id=SIGNATURES) The report was duly authorized and signed on May 15, 2025, by the CEO and CFO - The report was signed on May 15, 2025, by Daniyel Erdberg (CEO) and Theresa Carlise (CFO)[217](index=217&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 | | --- | --- ...

PART I: FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Safe Pro Group Inc.'s unaudited financial statements as of September 30, 2024, reflect asset growth and a widened net loss, primarily due to its August 2024 IPO [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of September 30, 2024, total assets increased to **$5.48 million** and stockholders' equity to **$4.23 million** due to the IPO and preferred share conversion Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2024 | Dec 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash | $2,334,715 | $703,368 | +231.9% | | Total Current Assets | $3,349,635 | $1,273,908 | +162.9% | | Total Assets | $5,476,549 | $3,430,199 | +59.7% | | **Liabilities & Equity** | | | | | Total Current Liabilities | $1,049,187 | $1,416,729 | -25.9% | | Convertible notes payable, net | $0 | $343,796 | -100.0% | | Total Liabilities | $1,242,593 | $1,653,841 | -24.9% | | Total Stockholders' Equity | $4,233,956 | $1,776,358 | +138.4% | - All **Series A and Series B preferred stock** was converted into **common stock** as of September 30, 2024, eliminating preferred stock from the balance sheet[13](index=13&type=chunk)[72](index=72&type=chunk) [Consolidated Statements of Operations](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) For the nine months ended September 30, 2024, revenues doubled to **$1.28 million**, but net loss widened to **$6.04 million** due to increased operating expenses Statement of Operations Summary (Unaudited) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenues | $1,281,399 | $640,062 | +100.2% | | Gross Profit | $442,301 | $233,166 | +89.7% | | Total Operating Expenses | $6,192,066 | $2,123,844 | +191.5% | | Loss from Operations | ($5,749,765) | ($1,890,678) | +204.1% | | Net Loss | ($6,044,239) | ($1,894,258) | +219.1% | | Basic and diluted loss per share | ($0.64) | ($0.25) | +156.0% | - Salaries, wages, and payroll taxes for the nine months ended Sep 30, 2024, surged to **$3.57 million** from **$0.91 million** YoY, primarily due to increased stock-based compensation[15](index=15&type=chunk) - Professional services expenses for the nine months ended Sep 30, 2024, increased to **$1.51 million** from **$0.54 million** YoY, also driven by higher stock-based compensation and costs associated with the IPO[15](index=15&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) For the nine months ended September 30, 2024, stockholders' equity increased to **$4.23 million**, primarily due to preferred stock and debt conversions, IPO proceeds, and stock-based compensation - On August 28, 2024, all outstanding Series A and Series B preferred stock was converted into **1,500,000** and **1,310,000** shares of common stock, respectively[16](index=16&type=chunk)[112](index=112&type=chunk)[122](index=122&type=chunk) - The company issued **1,020,000** common shares for cash, raising **$4,179,500** in net proceeds from its IPO[16](index=16&type=chunk)[30](index=30&type=chunk) - Stock-based compensation for services and employees added **$2.95 million** to additional paid-in capital during the first nine months of 2024[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the nine months ended September 30, 2024, net cash used in operations increased to **$3.1 million**, while financing activities provided **$4.9 million**, primarily from IPO proceeds Cash Flow Summary (Unaudited) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($3,065,107) | ($1,752,025) | | Net Cash Used in Investing Activities | ($226,397) | ($28,749) | | Net Cash Provided by Financing Activities | $4,922,851 | $668,571 | | **Net Increase (Decrease) in Cash** | **$1,631,347** | **($1,112,203)** | - Financing activities were dominated by **$4.18 million** in net proceeds from the IPO common stock offering and **$0.49 million** from other common stock sales[20](index=20&type=chunk)[193](index=193&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes detail the company's three segments, **$4.18 million** IPO proceeds, preferred stock and convertible note conversions, and significant customer concentration - The company operates through three wholly-owned subsidiaries: **Safe-Pro USA** (ballistic solutions), **Airborne Response** (drone services), and **Safe Pro AI** (AI/ML software)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Following its IPO, which raised net proceeds of **$4.18 million**, management believes it has sufficient cash to mitigate going concern risks for at least the next 12 months[30](index=30&type=chunk)[31](index=31&type=chunk) - For the nine months ended Sep 30, 2024, four customers accounted for **95.2%** of total sales, indicating significant customer concentration[166](index=166&type=chunk) - On August 27, 2024, convertible notes with a principal of **$750,001** and accrued interest of **$58,531** were converted into **252,666** common shares[102](index=102&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=44&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes **100.2%** revenue growth to increased sales, while a widened net loss is due to higher operating expenses, with liquidity significantly improved post-IPO [Results of Operations](index=47&type=section&id=Results%20of%20Operations) For the nine months ended September 30, 2024, total revenues increased by **100.2%** to **$1.28 million**, but operating expenses surged **191.5%** to **$6.19 million**, leading to a **$6.04 million** net loss Revenue by Segment - Nine Months Ended Sep 30 | Segment | 2024 Revenue | 2023 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Safe-Pro USA | $751,031 | $519,728 | +44.5% | | Airborne Response | $525,992 | $120,334 | +337.1% | | Safe Pro AI | $4,375 | $0 | N/A | | **Total** | **$1,281,399** | **$640,062** | **+100.2%** | - The increase in operating expenses for the nine months ended Sep 30, 2024 was primarily driven by stock-based compensation of **$2.95 million** and increased audit, legal, and consulting fees related to the IPO[211](index=211&type=chunk)[213](index=213&type=chunk) - Gross profit margin for the nine months ended Sep 30, 2024, decreased to **34.5%** from **36.4%** in the prior year, attributed to a higher sales mix of non-manufactured products with lower margins[209](index=209&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2024, liquidity significantly improved with cash at **$2.33 million** and positive working capital, driven by **$4.9 million** in net financing cash flows from the IPO Key Liquidity Metrics | Metric | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash | $2,334,715 | $703,368 | | Working Capital | $2,300,448 | ($142,821) | - Net cash provided by financing activities for the nine months ended Sep 30, 2024, was **$4.92 million**, primarily from the IPO and other equity/debt issuances[228](index=228&type=chunk)[229](index=229&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is not required to provide this information as it qualifies as a smaller reporting company - As a **smaller reporting company**, Safe Pro Group Inc. is exempt from providing quantitative and qualitative disclosures about market risk[250](index=250&type=chunk) [Controls and Procedures](index=56&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) As of September 30, 2024, management concluded that disclosure controls were not effective due to material weaknesses in inventory control and segregation of duties, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were **not effective** as of September 30, 2024[252](index=252&type=chunk) - Material weaknesses were identified in (i) **inventory control management** and (ii) a lack of **segregation of duties** within accounting functions[252](index=252&type=chunk) - Remediation efforts include engaging an inventory control consultant and implementing new policies for revenue recognition[255](index=255&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=57&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any pending legal proceedings that are expected to have a material adverse effect on its business, financial condition, or operating results - As of the filing date, the Company is not a party to any **material legal proceedings**[256](index=256&type=chunk) [Risk Factors](index=57&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the company's risk factors from those disclosed in its Prospectus dated August 28, 2024 - The company states there have been no **material changes** to its risk factors from those set forth in its Prospectus[257](index=257&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During Q3 2024 and thereafter, the company conducted several unregistered sales of securities, including shares issued for convertible debt and preferred stock conversions, and compensation - In August 2024, the company issued **252,666** shares to convert **$750,002** in debt and **$58,531** in accrued interest[259](index=259&type=chunk) - In August 2024, a total of **2,810,000** common shares were issued upon the conversion of all outstanding Series A and Series B preferred stock[259](index=259&type=chunk) - In August 2024, **480,000** fully vested shares of common stock were issued for compensation, valued at **$2,400,000**[261](index=261&type=chunk) [Defaults Upon Senior Securities](index=58&type=section&id=ITEM%203%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reports no defaults upon its senior securities - None[262](index=262&type=chunk) [Mine Safety Disclosures](index=58&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[262](index=262&type=chunk) [Other Information](index=58&type=section&id=ITEM%205.%20OTHER%20INFORMATION) During the quarter, none of the company's directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or executive officer has adopted or terminated a **Rule 10b5-1 trading arrangement** during the reporting period[263](index=263&type=chunk) [Exhibits](index=59&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the quarterly report, including the Underwriting Agreement, various promissory notes and warrants, and officer certifications required by the Sarbanes-Oxley Act

[Form 8-K Current Report (November 14, 2024)](index=1&type=section&id=Form%208-K%20Current%20Report) This report details Safe Pro Group Inc.'s third-quarter 2024 financial results and associated exhibits, filed on November 14, 2024 [Results of Operations and Financial Condition](index=1&type=section&id=Item%202.02.%20Results%20of%20Operations%20and%20Financial%20Condition.) Safe Pro Group Inc. announced its Q3 2024 financial and operational results via a press release, furnished but not filed under Section 18 of the Exchange Act - Safe Pro Group Inc. reported its third-quarter 2024 financial and operating results via a press release on November 14, 2024[2](index=2&type=chunk) - The earnings release, Exhibit 99.1, is incorporated by reference into the Form 8-K[2](index=2&type=chunk) - Information furnished in this item is not considered "filed" under Section 18 of the Exchange Act, limiting liability for misleading statements[3](index=3&type=chunk) [Financial Statements and Exhibits](index=2&type=section&id=Item%209.01.%20Financial%20Statements%20and%20Exhibits.) This section details the exhibits accompanying the Form 8-K filing, primarily the Q3 2024 earnings release Exhibit List | Exhibit Number | Exhibit Description | | :--- | :--- | | 99.1 | Earnings Release issued by Safe Pro Group Inc., dated November 14, 2024 | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | [Signatures](index=3&type=section&id=SIGNATURES) The report is officially signed by Daniyel Erdberg, Chief Executive Officer of Safe Pro Group Inc., on November 14, 2024 - The Form 8-K was duly authorized and signed by Daniyel Erdberg, Chief Executive Officer, on November 14, 2024[4](index=4&type=chunk)

[PART I: FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) Unaudited financial statements for Safe Pro Group Inc. as of June 30, 2024, show increased liabilities, decreased equity, and widened net losses despite revenue growth [Consolidated Balance Sheets](index=7&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2024, total assets decreased to $3.02 million, total liabilities increased to $2.49 million, and stockholders' equity fell to $0.53 million Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | **Total Current Assets** | $776,402 | $1,273,908 | | Cash | $175,953 | $703,368 | | **Total Assets** | **$3,018,419** | **$3,430,199** | | **Total Current Liabilities** | $2,279,352 | $1,416,729 | | Convertible notes payable, net | $631,001 | $343,796 | | **Total Liabilities** | **$2,487,040** | **$1,653,841** | | **Total Stockholders' Equity** | **$531,379** | **$1,776,358** | [Consolidated Statements of Operations](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Revenues for the three and six months ended June 30, 2024, grew significantly, but net loss also widened substantially to $1.21 million and $2.36 million respectively Statement of Operations Summary (in USD) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $642,989 | $103,008 | $950,642 | $476,515 | | **Gross Profit** | $184,615 | $33,784 | $311,830 | $170,720 | | **Loss from Operations** | $(1,122,806) | $(730,337) | $(2,207,691) | $(1,212,459) | | **Net Loss** | **$(1,214,923)** | **$(731,488)** | **$(2,358,783)** | **$(1,214,474)** | | **Basic and Diluted EPS** | $(0.14) | $(0.09) | $(0.27) | $(0.16) | [Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS%27%20EQUITY) Stockholders' equity decreased from $1.78 million to $0.53 million by June 30, 2024, primarily due to a $2.36 million net loss, partially offset by capital contributions - Total stockholders' equity decreased by **$1,244,979** in the first six months of 2024, from **$1,776,358** to **$531,379**[16](index=16&type=chunk)[20](index=20&type=chunk) - The decrease was driven by a net loss of **$2,358,783**, partially offset by capital contributions from stock-based compensation, warrant issuances, and share sales totaling approximately **$1.1 million**[16](index=16&type=chunk)[17](index=17&type=chunk)[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=12&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2024, net cash used in operations was $1.16 million, investing activities used $0.22 million, and financing provided $0.86 million, resulting in a $0.53 million cash decrease Cash Flow Summary for Six Months Ended June 30 (in USD) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | $(1,159,475) | $(1,170,373) | | **Net Cash Used in Investing Activities** | $(223,509) | $0 | | **Net Cash Provided by Financing Activities** | $855,569 | $83,381 | | **Net Decrease in Cash** | $(527,415) | $(1,086,992) | | **Cash, End of Period** | $175,953 | $665,274 | [Notes to Unaudited Consolidated Financial Statements](index=14&type=section&id=NOTES%20TO%20UNAUDITED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail company formation, acquisitions, accounting policies, going concern mitigation via IPO, convertible debt, equity transactions, customer/supplier concentrations, and executive commitments - The company acquired Safe-Pro USA in 2022 (ballistics solutions), Airborne Response in 2022 (drone services), and Safe Pro AI in 2023 (AI/ML software)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - The company's IPO in August 2024, which raised net proceeds of **$4.3 million**, mitigates substantial doubt about its ability to continue as a going concern[34](index=34&type=chunk)[35](index=35&type=chunk) - For the six months ended June 30, 2024, four customers accounted for **96.1%** of total sales, and one supplier accounted for **40.0%** of inventory purchases[163](index=163&type=chunk)[165](index=165&type=chunk) - Subsequent to quarter end, the company completed its IPO on August 29, 2024, selling **1,020,000 shares** for gross proceeds of **$5.1 million**, converting all outstanding preferred stock and convertible notes into common stock[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses the company's security and protection solutions business, highlighting significant Q2 2024 revenue growth, widened net loss due to increased expenses, and improved liquidity post-IPO - The company operates through three main subsidiaries: Airborne Response Corp. (drone services), Safe-Pro USA, LLC (personal protective gear), and Safe Pro AI LLC (AI/ML software)[190](index=190&type=chunk)[199](index=199&type=chunk) - A key recent development was the consummation of its IPO on August 29, 2024, which raised gross proceeds of **$5.1 million** and resulted in the conversion of preferred stock and convertible notes[193](index=193&type=chunk)[194](index=194&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Q2 2024 revenues surged by 524.2% to $643k, but total operating expenses increased by 71.1% to $1.3 million, widening the net loss to $1.21 million Comparison of Three Months Ended June 30, 2024 and 2023 (in USD) | Metric | 2024 | 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $642,989 | $103,008 | $539,981 | 524.2% | | **Gross Profit** | $184,615 | $33,784 | $150,831 | 446.5% | | **Total Operating Expenses** | $1,307,421 | $764,121 | $543,300 | 71.1% | | **Net Loss** | $(1,214,923) | $(731,488) | $(483,435) | 66.1% | - The increase in revenue for Q2 2024 was primarily due to sales to two new customers, which represented **79.0%** of total sales for the quarter[211](index=211&type=chunk) - The increase in operating expenses was driven by higher salaries related to new employment agreements, and a significant increase in professional fees (**$441,890**) and SG&A (**$154,540**) in preparation for the IPO[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2024, the company had a cash balance of $175,953 and a $1.5 million working capital deficit, significantly improved by $4.3 million net IPO proceeds post-quarter Balance Sheet and Liquidity Comparison (in USD) | Metric | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Cash | $175,953 | $703,368 | $(527,415) | | Working Capital Deficit | $(1,502,950) | $(142,821) | $(1,360,129) | | Total Liabilities | $2,487,040 | $1,653,841 | $833,199 | - Net cash used in operating activities for the six months ended June 30, 2024, was **$1,159,475**, primarily due to the net loss of **$2,358,783**, offset by non-cash charges like stock-based compensation and depreciation[227](index=227&type=chunk) - Net cash from financing activities was **$855,569** for the first six months of 2024, from proceeds of convertible notes (**$275,001**), common stock and warrants (**$489,002**), and notes payable (**$110,000**)[231](index=231&type=chunk) [Critical Accounting Policies and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies requiring significant judgment include revenue recognition, goodwill and intangible asset impairment, long-lived asset impairment, stock-based compensation, and acquisition classification - Revenue recognition for a key Bangladesh customer involves two performance obligations, with the second (20% of contract value) recognized only upon completion of training and inspection, and historically uncollected[239](index=239&type=chunk)[241](index=241&type=chunk) - Goodwill is tested for impairment annually or when indicators are present, potentially using a qualitative assessment before a quantitative test[247](index=247&type=chunk) - Stock-based compensation is measured at grant-date fair value and recognized over the service period, with forfeitures recognized as they occur[250](index=250&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Safe Pro Group Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, Safe Pro Group Inc. is not required to provide quantitative and qualitative disclosures about market risk[254](index=254&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2024, due to material weaknesses in inventory control and segregation of duties, with remediation efforts underway - Management identified material weaknesses in internal controls over financial reporting as of June 30, 2024[256](index=256&type=chunk) - The weaknesses relate to (i) inventory control management and (ii) a lack of segregation of duties within accounting functions[256](index=256&type=chunk) - Remediation efforts include engaging a third-party inventory control management consultant and implementing new policies for revenue recognition cut-offs[259](index=259&type=chunk) [PART II. OTHER INFORMATION](index=54&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is not currently involved in any material pending legal proceedings that would adversely affect its business or financial condition - As of the report date, the Company is not involved in any material pending legal proceedings[260](index=260&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's Prospectus dated August 28, 2024 - There have been no material changes to the risk factors previously disclosed in the company's Prospectus[261](index=261&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the first six months of 2024, the company conducted several unregistered sales of securities, including convertible notes, common stock units, and shares for compensation, relying on Securities Act exemptions - In March 2024, the company sold convertible notes totaling **$275,002** with associated warrants[263](index=263&type=chunk)[264](index=264&type=chunk) - In April and June 2024, the company sold units (common stock and warrants) in private placements for gross proceeds of **$163,998**, **$225,005**, and **$100,000**, respectively[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk) - In June 2024, **180,000** fully vested shares of common stock were issued as compensation, valued at **$450,000**[268](index=268&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=ITEM%203%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the reporting period - None[269](index=269&type=chunk) [Item 4. Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - Not applicable[269](index=269&type=chunk) [Item 5. Other Information](index=56&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during the reporting period - No director or executive officer adopted or terminated a Rule 10b5-1 trading arrangement during the reporting period[270](index=270&type=chunk) [Item 6. Exhibits](index=56&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the quarterly report, including the Underwriting Agreement, promissory notes, employment agreements, and officer certifications - Key exhibits filed include the Underwriting Agreement, warrants, promissory notes, employment agreements, and Sarbanes-Oxley certifications[270](index=270&type=chunk)