Revenue and Sales Performance - The company expects to begin realizing revenue from Safe Pro AI's technology ecosystem, including Spotlight AI™, with multiple completed demonstrations in Ukraine, the Philippines, and the United States during 2025 [180]. - Total revenues for the three months ended September 30, 2025, were $101,422, a decrease of $229,334 or 69.3% compared to $330,756 in 2024 [197]. - Product sales for the nine months ended September 30, 2025, were $270,490, down $636,770 or 70.2% from $907,260 in 2024 [199]. - The company generated revenue primarily from personal protective gear and aerial managed services, with revenue recognition occurring at the time of shipment [187]. - The company expects to begin realizing revenue from Safe Pro AI's technology ecosystem in 2026, following successful demonstrations [202]. Expenses and Financial Performance - The company anticipates an increase in selling, general, and administrative expenses for the year ending December 31, 2025, to support expanded sales and marketing efforts [193]. - Selling, general and administrative expenses increased by $184,349 or 44.1% for the three months ended September 30, 2025, compared to the same period in 2024 [209]. - Total operating expenses for the three months ended September 30, 2025, increased by $564,922 or 15.4% to $4,241,229 compared to $3,676,307 in 2024 [204]. - Professional fees for the three months ended September 30, 2025, were $2,168,082, an increase of $1,737,384 or 403.4% from $430,698 in 2024 [208]. - Total other expenses rose by $659,341 or 459.8% for the three months ended September 30, 2025, primarily due to goodwill and intangible asset impairment charges [212]. - Net loss for the three months ended September 30, 2025, was $5,010,358, an increase of $1,324,902 or 36.0% from $3,685,456 in 2024 [197]. - The net loss for the three months ended September 30, 2025, was $5,010,358, an increase of $1,324,902 or 36.0% compared to the same period in 2024 [213]. Research and Development - Research and development costs are expected to continue increasing as the company develops new products and modifies existing ones to meet market changes [191]. - Research and development expenses for the three months ended September 30, 2025, were $109,763, an increase of $109,763 from $0 in 2024 [207]. Inventory and Supplier Risk - During the three months ended September 30, 2025, approximately 78.5% of the company's inventory was purchased from three suppliers, indicating a high supplier concentration risk [183]. Business Segments and Acquisitions - The company operates in three reportable business segments: Safe-Pro USA, Airborne Response, and Safe Pro AI, each managed separately based on operational differences [186]. - The company acquired Safe Pro AI LLC on March 9, 2023, enhancing its capabilities in AI and machine learning for drone-based data processing [177]. Cash Flow and Assets - Cash balance increased by $5,626,290 or 285.5% to $7,597,009 as of September 30, 2025, compared to December 31, 2024 [215]. - Current assets increased by $5,672,161 or 206.3% to $8,422,290 as of September 30, 2025, driven by cash and inventory increases [217]. - Current liabilities increased by $214,382 or 24.0% to $1,108,308 as of September 30, 2025, due to higher accounts payable and accrued expenses [218]. - Net cash flows used in operating activities for the nine months ended September 30, 2025, amounted to $3,549,597, primarily due to a net loss of $10,889,934 [219]. - Net cash flows provided by financing activities were $9,409,467 for the nine months ended September 30, 2025, compared to $4,922,851 in 2024 [222]. Equity and Valuation - Total stockholders' equity increased by $4,564,911 or 117.8% to $8,439,336 as of September 30, 2025, compared to December 31, 2024 [215]. - The Company accounts for business acquisitions using the acquisition method, recognizing assets and liabilities at their estimated fair values [238]. - Goodwill is recorded as the excess of the purchase price over the estimated fair values of net assets acquired [238]. - The Company evaluates acquisitions to determine if they should be classified as asset acquisitions or business combinations based on fair value concentration [239]. - For asset acquisitions, the purchase price is allocated on a relative fair value basis, and direct acquisition costs are capitalized [239]. - Stock-based compensation is recognized based on the grant-date fair value of the award, with forfeitures recognized as they occur [237]. Market and Strategic Focus - The company is focused on providing innovative security solutions to government, NGOs, and enterprises, responding to evolving threats through advanced technologies [179]. - The decrease in revenue for Airborne Response was primarily due to stable weather patterns affecting maintenance work orders for Florida Power & Light [200]. - Safe-Pro USA's revenue decline was attributed to U.S. tariffs on Chinese products, prompting a reevaluation of the business model [201]. - Gross margins are expected to fluctuate due to various factors, including supply chain changes and product mix [188].
Safe Pro Group Inc.(SPAI) - 2025 Q3 - Quarterly Report