AIRO Group Holdings Inc(AIRO) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents AIRO Group Holdings, Inc.'s unaudited condensed consolidated financial statements for periods ending June 30, 2025 and 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2025 ($) | December 31, 2024 ($) | | :--- | :--- | :--- | | Assets | | | | Cash | $40.3M | $20.7M | | Total Current Assets | $79.2M | $42.6M | | Goodwill | $572.0M | $557.5M | | Total Assets | $747.8M | $701.0M | | Liabilities & Equity | | | | Total Current Liabilities | $66.5M | $96.6M | | Total Liabilities | $68.3M | $152.3M | | Total Stockholders' Equity | $679.6M | $548.7M | - Total assets increased to $747.8 million from $701.0 million at year-end 2024, driven by a significant rise in cash following the IPO[11] - Total liabilities saw a substantial decrease to $68.3 million from $152.3 million, primarily due to the settlement of contingent consideration and other borrowings post-IPO[12] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 ($) | Three Months Ended June 30, 2024 ($) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $24.6M | $9.8M | +151.0% | | Gross Profit | $15.0M | $5.8M | +160.3% | | Loss from Operations | ($19.7M) | ($2.7M) | +631.1% | | Net Income (Loss) | $5.9M | ($5.6M) | Turnaround | | Basic EPS | $0.32 | ($0.34) | Turnaround | - The company achieved net income of $5.9 million in Q2 2025, a significant Turnaround from a net loss of ($5.6 million) in Q2 2024, primarily driven by a $15.6 million gain on debt extinguishment and $20.1 million in other income, offsetting a higher loss from operations[16] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (Unaudited, Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | ($30.8M) | ($7.8M) | | Net cash used in investing activities | ($1.1M) | ($0.5M) | | Net cash provided by financing activities | $49.6M | $0.7M | | Net increase (decrease) in cash | $19.6M | ($7.8M) | - Net cash provided by financing activities was $49.6 million for the first six months of 2025, primarily due to $61.5 million in net proceeds from the sale of common stock in the IPO[27] Notes to Condensed Consolidated Financial Statements - The company completed its Initial Public Offering (IPO) on June 16, 2025, raising net proceeds of $61.5 million, which management believes are sufficient to meet obligations and fund operations for at least the next twelve months, alleviating previous substantial doubt about its ability to continue as a going concern[33][38][39] - As a result of the IPO, contingencies on certain liabilities were resolved, leading to $17.5 million in recorded income, with the settlement involving issuing 1.4 million shares and paying $3.3 million in cash during the quarter[61] - In September 2024, the company recorded goodwill impairment charges of $17.0 million for the Electric Air Mobility segment and $21.0 million for the Training segment, triggered by the termination of a planned Business Combination Agreement and delays in securing financing[164][165] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, IPO impact, and liquidity for periods ending June 30, 2025 and 2024 Overview - AIRO Group operates as a technologically differentiated aerospace, autonomy, and air mobility platform organized into four segments: Drones, Avionics, Training, and Electric Air Mobility[251][252] - The company completed its IPO on June 16, 2025, raising net proceeds of $61.5 million, which is expected to fund future operations and growth[259] Results of Operations Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 ($) | Q2 2024 ($) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $24.6M | $9.8M | +151.0% | | Gross Profit | $15.0M | $5.8M | +160.3% | | General & Administrative Expense | $28.9M | $3.9M | +640.5% | | Net Income (Loss) | $5.9M | ($5.6M) | Turnaround | - The 151% YoY revenue growth in Q2 2025 was primarily driven by a $15.0 million increase in the Drones segment, attributed to successful market entry strategies targeting NATO member countries[296] - General and administrative expenses increased by $25.0 million, largely due to $13.3 million in corporate costs contingent upon the IPO, including equity compensation, bonuses, and legal settlement accruals[301] Liquidity and Capital Resources - As of June 30, 2025, the company had cash and restricted cash of $40.5 million and working capital of $12.6 million[309] - Management believes that the proceeds from the IPO and existing cash are sufficient to fund operations for at least the next 12 months[309] - For the six months ended June 30, 2025, net cash provided by financing activities was $49.6 million, mainly from the IPO proceeds, while net cash used in operating activities was $30.8 million[314][315][317] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is foreign currency exchange rate exposure from international operations and sales, subject to global political and economic factors - The company's primary market risk is foreign currency exchange rate risk, as a majority of its sales are to international customers and it has operations in Canada and Denmark[361] - International sales are subject to numerous political and economic factors, including changes in foreign government budgets, global economic conditions, trade sanctions, and regulatory requirements[361] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, due to identified material weaknesses in internal financial reporting controls - The CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025[363] - The ineffectiveness is attributed to material weaknesses in internal control over financial reporting[363] PART II. OTHER INFORMATION Item 1. Legal Proceedings Details several legal actions, including settlements with Robert Perrin and First Citizens Community Bank, and an accrued $0.8 million for litigation as of June 30, 2025 - In March 2025, the company agreed to settle a lawsuit with stockholder Robert Perrin for $0.8 million, to be paid over six quarters starting in Q3 2025[368] - A legal action from First Citizens Community Bank (FCCB) was settled, and all payment obligations of approximately $0.2 million were fulfilled as of April 30, 2025[367] - As of June 30, 2025, the company had accrued $0.8 million related to litigation[369] Item 1A. Risk Factors Outlines key investment risks including limited operating history, recurring losses, supplier dependency, regulatory hurdles for eVTOL, government contract reliance, and internal control weaknesses - The company has a limited operating history, a history of losses, and expects to incur significant expenses and continuing losses for the foreseeable future[371][375][377] - Material weaknesses in internal control over financial reporting have been identified, which could affect the ability to accurately and timely report financial results[373][493] - The business is highly dependent on sales to the U.S. government, particularly the Department of Defense, making it vulnerable to budget cuts, funding changes, or contract terminations[373][457] - The market for eVTOL aircraft is still emerging and unproven, and the company's eVTOL aircraft is still in development and has not yet obtained FAA certification[373][428][429] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - None reported for the period[539] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period - None reported for the period[540] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[541] Item 5. Other Information Discloses new employment agreements for key executives and a five-year lease agreement in Phoenix, Arizona, for drone innovation expansion - On August 11, 2025, the company entered into new employment agreements with CEO Joseph Burns ($700k base salary, $350k IPO bonus), President John Uczekaj ($500k base salary), and Executive Chairman Chirinjeev Kathuria ($400k base salary, $100k IPO bonus)[543][544] - On August 12, 2025, the company entered into a five-year lease in Phoenix, Arizona, to expand its U.S. drone innovation footprint, with total expected rent payments of approximately $2.3 million[545][546] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including corporate governance documents, equity incentive plans, and new agreements - The report includes several exhibits, such as the Amended and Restated Certificate of Incorporation, the 2025 Equity Incentive Plan, and new employment agreements for key executives[547]