PART I: FINANCIAL INFORMATION Financial Statements (Unaudited) Presents unaudited financial statements for Q1 2025, showing a net loss and detailing a subsequent capital raise Condensed Consolidated Balance Sheets 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 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 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 additions13 Condensed Consolidated Statements of Cash Flows 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 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 concern1921 - 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 concerns23129 - 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 $39,998 respectively46126 - For Q1 2025, three customers accounted for 94.4% of total sales, indicating significant customer concentration risk104 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes a 39.9% revenue decline to funding cuts and a 235.6% expense increase to non-cash stock compensation Results of Operations Q1 2025 revenue fell 39.9% while operating expenses rose 235.6%, driven by stock-based compensation, widening the net loss Comparison of Operations for the Three Months Ended March 31 | Item | 2025 | 2024 | Change ($) | 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 fees166168 - 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 Light163 Liquidity and Capital Resources 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 million178 - Net cash used in investing activities was $123,359 in Q1 2025 for the purchase of property, equipment, and intangible technologies180 Critical Accounting Policies and Estimates 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)187188190 - Goodwill is not amortized but is tested for impairment at least annually, while intangible assets with finite lives are amortized192193 - Stock-based compensation is accounted for under ASC 718, requiring measurement at the grant-date fair value and recognition over the service period195 Quantitative and Qualitative Disclosures About Market Risk 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 company198 Controls and Procedures 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, 2025200 - 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 resources202 - 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 available204 PART II. OTHER INFORMATION Legal Proceedings 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 proceedings207 Risk Factors 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, 2025209 Unregistered Sales of Equity Securities and Use of Proceeds 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 Act210 Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None211 Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable212 Other Information 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 quarter213 Exhibits 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 certifications214 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
Safe Pro Group Inc.(SPAI) - 2025 Q1 - Quarterly Report