AgEagle Aerial Systems Inc.

Note1 – Description of the Business and Basis of Presentation**

Description of Business–* *AgEagle™ Aerial Systems Inc. and its wholly-owned subsidiaries (“AgEagle” or the “Company”, “we”, “our”), is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for its customers in a wide range of industry verticals, including energy/utilities, infrastructure, agriculture and government.

Founded in2010, AgEagle was originally formed to pioneer proprietary, professional-grade, fixed-winged drones and aerial imagery-based data collection and analytics solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced unmanned aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include agriculture, military/defense, public safety, surveying/mapping and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (“BVLOS”) and/or Operations Over People in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of Defense.

The Company is currently headquartered in Wichita, Kansas, where we house our sensor manufacturing operations, and we operate drone distribution and coordinate global customer service operations out of Raleigh, North Carolina. In addition, the Company operates engineering and drone manufacturing operations in Lausanne, Switzerland in support of our international business activities.

On* September 11, 2025the Company rebranded to EagleNXT. The rebrand to EagleNXT underscores the Company’s commitment to advancing best-in-class drones, sensors, and software that serve both government and commercial markets. With overone million* global flights, record-setting contracts, and industry-first regulatory approvals, EagleNXT is well positioned to expand its leadership in rapidly growing markets including defense, public safety, agriculture, and environmental monitoring and research.

The Company’s mission statement-EagleNXT protects what matters most: lives, land, and the pursuit of peace– serves as the foundation of the rebrand and communicates EagleNXT’s focus on innovation, resilience, and long-term value creation.

Reverse Stock Splits - On* February 8, 2024,the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended to date, effecting a1*-for-20 reverse stock split (the* “FebruaryReverse Stock Split”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Reverse Split Amendment”). The Reverse Split Amendment was approved by the Board of the Directors of the Company (the “Board”) and became effective on February 9, 2024.On October 3, 2024,the Board approved another reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock, par value $0.001 per share, at a ratio ofone* (1) share of common stock for everyfifty (50) shares of Common Stock (the* “OctoberReverse Stock Split”). The Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effectuate the OctoberReverse Stock Split. The OctoberReverse Stock Split was effective on October 14, 2024.All share and per share amounts have been retrospectively adjusted for the effect of the Februaryand October*Reverse Stock Splits.

Basis of Presentation – The condensed consolidated financial statements of the Company are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair statement of the Company’s consolidated financial position and results of operations for the periods presented. Certain information and disclosures included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended* December 31, 2024*, included in the Company’s Annual Report on Form10-K, as filed with the SEC on* March 31, 2025.The results for thethree* andnine months ended* September 30, 2025and2024* arenot necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or periods.

The condensed consolidated financial statements include the accounts of AgEagle and its wholly-owned subsidiaries, AgEagle Aerial, Inc., Measure Global, Inc, currently inactive withno operations, and senseFly. All significant intercompany balances and transactions have been eliminated in consolidation.

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FOR THEnine months ended September 30, 2025and2024 **

Note1 – Description of the Business and Basis of Presentation–** Continued**

Liquidity and Going Concern– In pursuit of the Company’s long-term growth strategy and acquisitions, the Company has sustained continued operating losses. During thenine months ended* September 30, 2025*, the Company had net income of $3,164,500 due to non-cash warrant valuation gain of $8,511,000 and used cash in operating activities of $7,335,102. As of* September 30, 2025*, the Company has a working capital of $21,321,682, an accumulated deficit of $220,159,387, and a cash balance of approximately $16,629,000. As disclosed in Note11, we closed on a Securities Purchase Agreement for the sale and issuance of up to 100,000 shares of Series G preferred stock with a state value of $1,000 on* November 10, 2025.*At the closing, we issued a total of 12,000 shares and received net proceeds of approximately $11,500,000.

We believe our current cash balance, working capital, Securities Purchase Agreement and the initial Series G closing, help alleviate previous doubt regarding our ability to continue as a going concern. As of* September 30, 2025,our cash balance is sufficient enough to meet our financial obligations for at least the nexttwelve* months from the date these condensed consolidated financial statements are issued and we have access to sufficient capital to implement our business strategy while meeting our financial obligations via the Securities Purchase Agreement.

Note2 – Summary of Significant Accounting Policies

Risks and Uncertainties – Global economic challenges, including the impact of the war in Ukraine, rising inflation supply-chain disruptions, and adverse labor market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the UAV industry and the Company’s operational and financial performance remain uncertain and outside of the Company’s control. Specifically, because of the aforementioned continuing risks, the Company’s ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either the Company or any of itsthird parties used in our manufacturing and assembly processes continue to be adversely impacted by these matters, the Company’s supply chain* may*be disrupted, limiting its ability to manufacture and assemble products. The Company expects inflation and supply-chain disruptions and its effects to continue to have a significant negative impact on its business for an extended period of time. The company continues to monitor developments in trade policy and is evaluating alternatives to mitigate the impact of these tariffs, including supplier diversification. However, additional or sustained tariff actions could materially and adversely affect our operations, financial condition, and results of operations.

**Use of Estimates– The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the reserve for obsolete inventory, valuation of intangible assets, fair value of derivative liabilities, and deemed dividends resulting from the triggering of down round provisions and modifications to equity-linked instruments.

Accounts Receivable and Credit Policy – Trade receivables due from customers are uncollateralized customer obligations due under normal and customary trade terms. Trade receivables are stated at the amount billed to the customer. As of September 30, 2025,* December 31, 2024,and January 1, 2024,the Company had an accounts receivable balance of approximately $2.5 million, $1.4 million and $2.1 million, respectively. The Company generally doesnot* charge interest on overdue customer account balances. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

• Allowance for Credit Losses -We establish allowances for credit losses on accounts receivable, under ASC326-20-55-37. The adequacy of these allowances is assessed quarterly through consideration of factors such as customer credit ratings, age of the receivable, expected loss rates and general economic conditions. It is reasonably possible that the Company’s estimate of the allowance for credit losses will change. As of September 30, 2025,** December 31, 2024and January 1, 2024,* the Company had an allowance for credit losses balance of $0.22 million, $0.02 million and $0.16 million, respectively.

Revenue Recognition – Most of the Company’s revenues are derived primarily through the sales of drones, sensors and related accessories. The Company utilized ASC Topic606 and the related amendments,Revenue from Contracts with Customers, which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.

The Company recognizes revenue on sales to customers, dealers, and distributors upon satisfaction of performance obligations which occurs once controls transfer to customers, which is when product is shipped or delivered depending on specific shipping terms and, where applicable, a customer acceptance has been obtained. The fee isnot considered to be fixed or determinable until all material contingencies related to the sales have been resolved. The Company records revenue in the consolidated statements of operations and comprehensive loss, net of any sales, use, value added, or certain excise taxes imposed by governmental authorities on specific sales transactions and net of any discounts, allowances and returns. Therefore, revenue is recognized at a point in time.

Pursuant to ASC606, we have the following revenue recognition policies:

Additionally, customer payments or deposits received in advance of the Company completing performance obligations are recorded as contract liabilities. As of* September 30, 2025*,* December 31, 2024*, and* January 1, 2024we have $70,602, $148,054 and $226,316 of advanced customer payments presented as contract liabilities on the accompanying consolidated balance sheets, respectively. Contract liabilities are short term in nature and are expected to be recognized in the next fiscal year. During thenine* months ended* September 30, 2025*, we recognized$96,781 of revenue that was deferred as a contract liability as of* December 31, 2024*.

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Summary of Significant Accounting Policies -A description of all of the Company’s significant accounting policies and other financial information is included in the Company’s audited consolidated financial statements filed on March 31, 2025,with the SEC on Form10-K for the year ended* December 31, 2024*. These policies have been applied consistently in these unaudited condensed interim consolidated financial statements.

Income (Loss) Per Common Share and Potentially Dilutive Securities–* *Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus Common Stock, equivalents (if dilutive) related to warrants, options, and convertible instruments.

For thenine months ended* September 30, 2025*, the Company has excluded all common equivalent shares outstanding for restricted stock units (“RSUs”), warrants and options to purchase Common Stock and convertible instruments from the calculation of diluted net loss per share, because these securities are anti-dilutive for thethree month period due to the net loss incurred. As of* September 30, 2025*, the Company had 106,797 unvested RSUs,2,710,369 warrants andno options outstanding to purchase shares of Common Stock, and 2,143,977 of issuable shares upon the conversion of Series F preferred stock that have been excluded from diluted earnings per share as their inclusion would be anti-dilutive.

For thethree andnine months ended* September 30, 2024*, the Company has excluded all common equivalent shares outstanding for restricted stock units (“RSUs”), options and warrants to purchase Common Stock and convertible instruments from the calculation of diluted net loss per share, because these securities are anti-dilutive for the periods presented which consisted of 7,325 unvested RSUs,174,807 warrants,55 options, 183,259 shares issuable upon the conversion of convertible preferred stock and 242,707 shares issuable upon the conversion of convertible debt.

For thethree months ended* September 30, 2025* and thethree andnine months ended* September 30, 2024*,no adjustments were made to the numerator or denominator in our computation of diluted earnings per share due to the net loss incurred during these periods. Therefore, any such adjustments would have an anti-dilutive effect.

Net income (loss) per common share basic and dilutive is as follows for thethree andnine months ended* September 30, 2025and2024*:

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Segment Reporting– In accordance with ASC Topic280, Segment Reporting, the Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and performance assessment. The Company defines the term “chief operating decision maker” to be its chief executive officer.

The Company has determined that it operates intwo segments:

Recently Issued Accounting PronouncementsNot* Yet Adopted*– In* March 2024,the Securities and Exchange Commission (“SEC”) released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027,*for smaller reporting companies (“SRC”). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting (“ICFR”) and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.

In* December 2023,Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2023-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures (“ASU2023*-09”). The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. For entities reconciling to the U.S. statutory rate of21%, this would generally require disclosing any reconciling items that impact the rate by1.05% or more. ASU2023-09 is effective for public business entities for annual periods beginning after* December 15, 2024 (generally, calendar year2025*) and effective for all other business entitiesone year later. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. The adoption of ASU2023-09 is expected to have a financial statement disclosure impact only and isnot expected to have a material impact on the Company’s condensed consolidated financial statements.

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In* November 2024,the FASB issued ASU2024*-03, Disaggregation of Income Statement Expenses (“DISE”*)a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026,and interim reporting periods beginning after December 15, 2027,*with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard and its impact on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB didnot or arenot believed by management to have a material impact on the Company’s present and future condensed consolidated financial statements.

Note3 – Inventories, Net

Inventories, Net

As of* September 30, 2025* and* December 31, 2024*, inventories, net consist of the following:

Note4 – COVID Loans

The Company assumed the obligations fortwo COVID Loans originally made by the Small Business Administration to senseFly S.A. on* July 27, 2020 (“senseFly COVID Loans”). As of senseFly Acquisition Date, the fair value of the COVID Loan was $1,440,046 (“senseFly COVID Loans”). For thethree* andnine months ended* September 30, 2025*, senseFly S.A. made the required payments on the senseFly COVID Loans, including principal and accrued interest, aggregating approximately $92,115 and $254,885 respectively. As of* September 30, 2025*, the Company’s outstanding obligations under the senseFly COVID Loans are $309,282.

As of* September 30, 2025*, scheduled principal payments due under the senseFly COVID Loans are as follows:

Note5 – Convertible Note

The Company had a Convertible Note outstanding with Alpha Capital Anstalt (“Alpha”) which was due* January 8, 2025 (the “Note”) and was considered in default. The Note was a result of an exchange agreement executed on February 8, 2024*in which the parties agreed to exchange the then outstanding promissory note into a convertible note. The Note accrued interest at 12% per annum and would increase to the lesser of 18% or the maximum rate permitted under applicable law upon an Event of Default as defined under the Note.

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Note5 – Convertible Note–** Continued**

During thenine months ended* September 30, 2025*, the conversion price of the Note was reduced from $1.10 to$0.8294 pursuant to dilution protection provisions and due to the sale of Series F preferred stock and Series F warrants with a conversion price and exercise price of$0.8294 (see Note8). The Company recognized a loss on debt extinguishment of $125,242 for the incremental value of the conversion feature due to the reduced conversion price. The incremental value was determined using a Black-Scholes pricing model pre and post modification and the following inputs: expected term 0.50 years, risk free rate of 4.27%, volatility of 203.53%, and dividend rate of 0.00%.

During thenine months ended* September 30, 2024*, the conversion price of the Note was reduced from $62.50 to $30.00 pursuant to dilution protection provisions and due to the reduction in warrant exercise prices to $30.00 to induce exercise (see Note7). The Company recognized in interest expense the amount of $3,488,851 for the incremental value of the conversion feature due to the reduced conversion price. The incremental value was determined using a Black-Scholes pricing model pre and post modification and the following inputs: expected term 0.92 years, risk free rate of 4.83%, volatility of 89.60%, and dividend rate of 0.00%.

During thethree months ended* September 30, 2025,**$8,612* accrued interest was converted into 10,383 shares of common stock at a conversion price of*$.8294.* During thenine months ended* September 30, 2025and2024*, Alpha converted $1,425,606 and $100,000 of outstanding principal and accrued interest into 1,490,495 and 1,597 shares of Common Stock, respectively.

As of* September 30, 2025,the companyno longer had outstanding principal and accrued interest on the Note. As of September**30,2025,* and* December 31, 2024,*the outstanding principal and accrued interest were $1,333,333 and $47,123, respectively.

For thenine months ended* September 30, 2025and2024*, we recognized interest expense on the Note of $92,273 and $778,874, respectively.

Note6 – Fair Value Measurements

We closed on an offering of units consisting of Common Stock, Series A and B warrants in* October 2024 (the “October 2024Offering). In connection with the October 2024Offering, we sold units comprised of Common Stock, Series A warrants and a Series B warrants (collectively referred to as the “Warrants”) (see Note8*). The Warrants were deemed to be derivative liabilities, at issuance, due to variability in the ultimate settlement of the Warrants caused by various settlement provisions embedded within the Warrants. Liability classified warrants are reported at fair value upon issuance and subsequently at each reporting period.

On* April 2, 2025,the Company and the majority holder of the Series B warrants, executed an Amendment to the Series B Warrant to Purchase Common Stock and Exchange Agreement (the "Series B Amendment"). The Series B Amendment amended the contractual terms of the Series B warrants by removing Section3.2* of the original warrant agreement in its entirety (the "Share Combination Event"). Pursuant to the Share Combination Event, if a share split, share dividend, share combination recapitalization or other similar transaction involving common stock occurred after the issuance date of the Series B warrants, the exercise price of the Series B warrants would be adjusted to the lowest volume weighted average price during thefive days prior and after such a Share Combination Event if less than the exercise price in effect. The Company reassessed the classification of the Series B warrants after the execution of the Series B Amendment and concluded that the Series B warrants wereno longer precluded from being classified within stockholders' equity. On* April 2, 2025,we reclassified the fair value of the outstanding Series B warrants of$7,766,000 from warrant liability to additional paid-in capital. See Note8* for further disclosures regarding the Series A and B warrants.

The following tables present information about the Company’s derivative liabilities that are measured at fair value on a recurring basis as of* September 30, 2025* and* December 31, 2024* and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:

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Note6 – Fair Value Measurements–** Continued**

The fair value of the warrants was determined by using a Black-Scholes pricing model and the following assumptions:

As of* September 30, 2025* and* December 31, 2024*, the Company measured the Warrants using significant unobservable inputs that are based on little orno verifiable market data, which is Level3 in the fair value hierarchy, resulting in a fair value estimate of $123,000 and $16,400,000, respectively. Inherent in option pricing models are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility. The risk-free interest rate is based on the U.S. Treasuryzero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. As of* December 31, 2024*, the probability of a capital raise below the Warrants’ current exercise price was a significant unobservable input based on management’s estimate factoring in the Company’s capital needs and the Company’s stock price, which is volatile. As of* September 30, 2025*, this estimate wasno longer relevant as the Series A warrants include an alternate cashless exercise which allows the holder to exercise the warrant forno consideration and receivetwo shares of common stock. This settlement provision was given a100% probability in the Black-Scholes computation as it is the most economically beneficial settlement scenario to the holder.

During thenine months ended* September 30, 2025*, we recognized a gain on the change in the fair value of the warrant liabilities of $8,511,000. A reconciliation of the warrant liabilities is below:

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Note7 – Stockholders’** Equity (Deficit)**

Preferred Series F Convertible Stock

Purchase History

On* June 26, 2022,*the Company entered into a Securities Purchase Agreement (the “Series F Agreement”) with Alpha. Pursuant to the terms of the Series F Agreement, the Board of Directors of the Company (the “Board”) designated a new series of Preferred Stock, the Series F 5% Preferred Convertible Stock (“Series F”), and authorized the sale and issuance of up to 35,000 shares of Series F with a stated value of $1,000 per share. Pursuant to the Series F Agreement, sales of Series F are accompanied by warrants equal to the number of issuable shares upon conversion of the Series F to Common Stock (the “Series F Warrants”).

Additional Investment Right

The Series F Agreement provides Alpha the right to purchase up to an additional $25,000,000 stated value of Series F, after their initial 10,000 Series F purchased on* June 26, 2022,and accompanying warrants (the “Additional Investment Right” or “AIR”). Under the AIR, the Series F and Series F warrants are initially convertible and exercisable at a conversion and exercise price equal to the volume-weighted average price of the Company’s Common Stock forthree* trading days prior to the date Alpha gives notice to the Company that it will exercise its AIR. Under the terms of the AIR, conversion and exercise prices are subject to downward adjustment for any equity instrument or equity-linked instrument sold or granted at an effective price per share that is lower than the initial conversion and exercise price (“Down Round Provision”). See Note8 for warrant related disclosures.

On* February 7, 2025,Alpha and the Company executed a funding agreement in which Alpha agreed to exercise its AIR quarterly to provide financing to the Company for the nexttwelve* months, with such amounts and timing of funding to be agreed to by the parties.

As consideration for Alpha’s commitment to additionally fund, the Company agreed to (i) extend the period in which Alpha can exercise its AIR by extending the termination date of* December 31, 2025to June 1, 2026and (ii) granting Alpha certain registration rights related to the Series F Alpha currently holds and will receive upon further exercises of its AIR. The Company filed the required registration statement to register 6,500,000 shares of Common Stock which became effective by the Securities and Exchange Commission on April 25, 2025.*

During thenine months ended* September 30, 2025*, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

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During thenine months ended* September 30, 2024*, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

● On* March 6, 2024,*we issued 1,000 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $950,000 of net proceeds after deducting equity issuance costs for legal fees of $50,000. The Series F were initially convertible into 16,588 shares of Common Stock at an initial conversion price of $60.29 and warrants to purchase up to 16,588 shares of Common Stock at an initial exercise price of $60.29 and exercisable immediately for a period ofthree years.

● On* April 12, 2024,*we issued 1,050 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $1,050,000 of net proceeds. The Series F were initially convertible into 28,378 shares of Common Stock at an initial conversion price of $37.00 and warrants to purchase up to 28,378 shares of Common Stock at an initial exercise price of $37.00 and exercisable immediately for a period ofthree years.

● On* May 31, 2024,*we issued 1,050 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $1,050,000 of net proceeds. The Series F were initially convertible into 32,659 shares of Common Stock at an initial conversion price of $32.15 and warrants to purchase up to 32,659 shares of Common Stock at an initial exercise price of $32.15 and exercisable immediately for a period ofthree years.

● On* July**25,* 2024, we issued 500 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $500,000 of net proceeds. The Series F were initially convertible into 21,598 shares of Common Stock at an initial conversion price of $23.15 and warrants to purchase up to 21,598 shares of Common Stock at an initial exercise price of $23.15 and exercisable immediately for a period ofthree years.

● On* August**26,* 2024, we issued 500 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $500,000 of net proceeds. The Series F were initially convertible into 24,765 shares of Common Stock at an initial conversion price of $20.19 and warrants to purchase up to 24,765 shares of Common Stock at an initial exercise price of $20.19 and exercisable immediately for a period ofthree years.

As of* December 31, 2024,the conversion and exercise prices on the above issuances were reduced to $1.10 in connection with the October 2024Offering. The May 2025*Down Round Trigger further reduced the conversion and exercise price on all outstanding Series F and Series F warrants from the issuances above from $1.10 to $0.8294.

Since the execution of the Series F Agreement, the Company has sold and issued Series F and Series F Warrants to Alpha or investors that Alpha has assigned the AIR for cash proceeds through the exercise of the AIR.

A summary of the Series F activity for thenine months ended* September 30, 2025*, is as follows:

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A summary of the Series F activity for thenine months ended* September 30, 2024*, is as follows:

During thethree months ended* September 30, 2025and2024*, the dividends accrued for the Series F were $36,111 and $47,879, respectively. During thenine months ended* September 30, 2025and2024,* the dividends accrued for series F were $155,800 and $158,862. As of* September 30, 2025* and* December 31, 2024*, accrued dividends on the Series F total $902,466 and $746,666 which are included in accrued expenses on the unaudited consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the purchase date.

Common Stock Issuances

Conversions

During thethree months ended* September 30, 2025and2024*, a total of 10,383 and 0 shares of Common Stock were issued for the conversion of $8,612 and $0 of outstanding accrued interest on a convertible note at an average conversion rate of $0.8294 and $0, respectively. During thenine months ended* September 30, 2025and2024*, a total of 1,490,495 and 1,597 shares of Common Stock were issued for the conversion of $1,425,606 and $100,000 of outstanding principal and accrued interest on a convertible note at an average conversion rate of$0.9573 and $62.6235, respectively (see Note5).

During thethree months ended* September 30, 2025and2024*, a total of 4,278 and 1,595 Series F were converted into a total of 3,228,799 and 69,635 shares of Common Stock, respectively. During thenine months ended* September 30, 2025and2024*, a total of 12,038 and 6,475 Series F were converted into a total of 11,501,461 and 187,009 shares of Common Stock, respectively.

Warrant Exercises

During thethree months ended* September**30,* 2025, we issued 7,868,924 shares of Common Stock for the exercise of Series B warrants with an exercise price of$0.8294 and received aggregate cash proceeds of $6,526,485 During thenine months ended* September 30, 2025*, we issued 10,089,612 shares of Common Stock for the exercise of Series B warrants with exercise prices ranging from $0.8294 to $1.10 and received aggregate cash proceeds of $8,317,002. In connection withone of the Series B exercises, the Company agreed to credit $350,000 of the aggregate exercise price pursuant to a settlement reached with the Series B warrant holder over a dispute.

During thethree andnine months ended* September 30, 2025,we issued 3,622,918 shares of common stock for the exercise of Series F warrants with exercise prices ranging from $0.8294 to $1.4000 and received aggregate cash proceeds of $3,804,318. Further, during thethree* andnine months ended* September 30, 2025*we issued 60,000 shares of common stock for the cashless exercise of 142,857 Series F warrants with an exercise price of $0.8294.

During thethree andnine months ended* September 30, 2025,*we issued 63,017 shares of common stock for the alternate cashless exercise of Series A warrants with an exercise price of$1.9445.

During thethree andnine months ended* September 30, 2024,*we issued 16,590 shares of common stock for the exercise of Series F warrants with an exercise price of $30.00 and received cash proceeds of $497,701.

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Warrant Exchange

On* April 2, 2025,the Company and the majority holder of the Series B warrants executed an Amendment to the Series B Warrant to Purchase Common Stock and Exchange Agreement (the "Series B Amendment"). The Series B Amendment amended the contractual terms of the Series B warrants as disclosed in Note6.* As consideration for the holder amending the contractual terms of the Series B warrants, we issued to the holder 88,908 shares of Common Stock forno consideration in exchange for 125,362 Series F warrants with a weighted average exercise price of $1.10 (see Note8). We have included the fair value of these shares issued of $108,468, based on the market price of our stock on the date of the exchange, within stockholders' equity as a deemed dividend.

Restricted Common Stock

During thethree months ended* September 30, 2025and2024*, we issued 78,000 and 0 shares of fully vested restricted Common Stock to certain employees and service providers. During thenine months ended* September 30, 2025and2024*, we issued 156,615 and 687 shares of fully vested restricted Common Stock to certain employees and service providers, respectively.

Down Round Triggers and Deemed Dividends

Below is a summary of the deemed dividends resulting from the* March 2025,** May 2025,** July 2025and August 2025Down Round Triggers that reduced the conversion and exercise price of outstanding Series F Preferred Stock, Series F Warrants and Series B Warrants during thenine* months ended* September 30, 2025:*

Below is a summary of the deemed dividends resulting from the* Marchand August 2024Down Round Trigger that reduced the conversion and exercise price of outstanding Series F Preferred Stock and Series F Warrants during thenine* months ended* September 30, 2024:*

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Deemed dividends are reflected as an increase to additional paid in capital and an increase to accumulated deficit and as an increase to total net loss or decrease to total net income attributable to Common Stockholders in computing earnings per share on the condensed consolidated statements of operations and comprehensive income (loss).

Stock-based Compensation

The Company determines the fair value of awards granted under the2017 Omnibus Equity Incentive Plan (the “Equity Plan”) based on the fair value of its Common Stock on the date of grant. Stock-based compensation expenses related to grants under the Equity Plan are included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss).

Restricted Stock Units (“RSUs”)

For thenine months ended* September 30, 2025*, a summary of RSU activity is as follows:

For thenine months ended* September 30, 2025*, the aggregate fair value of RSU awards at the time of grant was $362,945 based on the market price of our Common Stock on the date of grant.

For thethree andnine months ended* September 30, 2025*, the Company recognized $149,979 and $311,690 of stock-based compensation expense and had approximately $87,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximatelytwelve months. As of* September 30, 2025*,210 fully vested restricted Common Stock shares havenot been issued and released.

For thenine months ended* September 30, 2024*, a summary of RSU activity is as follows:

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For thenine months ended* September 30, 2024*, the aggregate fair value of RSU awards at the time of vesting was $131,504.

For thethree andnine months ended* September 30, 2024,the Company recognized $16,675 and $47,749 of stock compensation expense, respectively, and had approximately $104,809 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximatelytwenty-one* months.

Stock Options

For thenine months ended* September 30, 2025* a summary of the options activity is as follows:

As of* September 30, 2025*, the Company hadno unrecognized compensation cost related to stock options.

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or as of* September 30, 2025* (for outstanding options), less the applicable exercise price.

For thethree andnine months ended* September 30, 2025*, there wasno stock compensation expense related to the stock options.

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For thenine months ended* September 30, 2024*, a summary of the options activity is as follows:

For thethree andnine months ended* September 30, 2024,*the Company recognized $0 and $16,042, respectively, of stock compensation expense.

Note8 – Warrants

Equity Classified Warrants

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Note8 – Warrants–** Continued**

During thenine months ended* September 30, 2025*, we issued the following Series F Warrants in connection with the issuance of Series F Preferred Stock (see Note7) pursuant to the exercise of the AIR by Alpha:

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A summary of activity related to warrants, classified within stockholders’ equity (deficit) for the periods presented is as follows:

In connection with the execution of the Series B Amendment (see Note6), the total Series B common stock warrants outstanding as of* September 30, 2025,*of 12,960 with an exercise price of $0.8294, are reflected as equity-classified warrants.

During thethree andnine months ended* September 30, 2025,3,622,918 Series F warrants were exercised, and the Company issued 3,622,918 shares of common stock and received cash proceeds of $3,804,318. During thethree* months ended* September 30, 2025,7,868,924 Series B warrants were exercised and the Company issued 7,868,924 shares of common stock and received cash proceeds of $6,526,485. During thenine* months ended* September 30, 2025,10,089,612 Series B warrants were exercised and the Company issued 10,089,612 shares of common stock and received cash proceeds of$8,317,002. During thenine* months ended* September 30, 2025,*the Company agreed to credit $350,000 of the aggregate exercise price, at the time of exercise, associated with 267,849 Series B warrants, pursuant to a settlement reached with the Series B warrant holder over a dispute.

As of* September 30, 2025*, the intrinsic value of the warrants was $1,365,692 based on the market price of our stock and the warrant exercise price.

Liability Classified Warrants

The Series A and B warrants issued in* October 2024,*pursuant to an offering, have the following contractual terms.

Each Series A Warrant and B Warrant was immediately exercisable on the date of issuance and expires five years from the closing date of the offering.

Under the alternate cashless exercise option of the Series A Warrants, a holder of the Series A Warrant, has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise of the Series A Warrant and (y)2.0. In addition, the Series A Warrants and Series B Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) the lowest volume weighted average price for thefive trading days immediately preceding and immediately following the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants so that the aggregate exercise price remains constant in such an event (the “Share Combination Event”). The Share Combination Event was eliminated from the contractual terms of the Series B Warrants with the execution of the Series B Amendment (see Note6). Finally, with certain exceptions, the Series B Warrants provide for a down round adjustment to the exercise price and number of shares underlying the Series B Warrants upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the exercise price of the Series B Warrant. The exercise price was adjusted down to $1.20 and further adjusted down to$0.8294 with the* March 2025Down Round Trigger and May 2025Down Round Triggers, respectively, and an additional 2,582,234 and 3,057,622, respectively warrants were issued in connection with the reduction so that the aggregate exercise price remains unchanged. During thenine* months ended* September 30, 2025*, we recognized a deemed dividend of $4,942,669 which has been included on the statement of stockholders' equity as a reduction of accumulated deficit and as additional paid-in capital for the incremental value due to the* May,** July,and August 2025Down Round Triggers. The March 2025Down Round Trigger was included in the change in fair value of warrant liabilities as the Series B Warrants were liability classified until April 2, 2025 (see Note6*).

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Note8 – Warrants–** Continued**

A summary of activity related to the Series A and B warrants, initially classified as liabilities, for thenine months ended* September 30, 2025* is as follows:

The outstanding and exercisable Series A Warrants provide for an alternative cashless exercise which allows the holder to exercise the Series A Warrant forno consideration and receivetwo shares of common stock for each warrant exercised.

Note9 – Commitments and Contingencies

Legal Matters

We note that in the ordinary course of business that we* maybe the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damage may**not* be estimable. We donot believe any legal action would have a significant impact on the financials. However, there is inherent uncertainty regarding such matters.

Purchase Commitments

The Company routinely places orders for manufacturing services and materials. As of* September 30, 2025*, the Company had purchase commitments of $1,875,361.

Note10 – Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented by operating segment in making operating decisions, allocating resources, and evaluating financial performance.

During thenine months ended* September 30, 2025*, the Company conducted the business throughtwo primary operating segments: Drones and Sensors. During the year ended* December 31, 2024*, our SaaS segment ceased operations and didnot renew any of its software subscriptions. Transactions in this segment during2025 will consist of run off related expenses until this segment is fully shut down. During thenine months ended* September 30, 2025*, we sold the Measure domain name and received approximately $250,000 in cash proceeds which has been reflected within other income on the unaudited condensed consolidated statements of operations as the domain name had a net book value of $0.

The accounting policies of the operating segments are the same as those described in Note2. Non-allocated administrative and other expenses are reflected in Corporate. Corporate assets include cash, prepaid expenses, right-of-use asset and other assets.

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Note10 – Segment Information–** Continued**

As of* September 30, 2025* and* December 31, 2024and for thethree* andnine months ended* September 30, 2025and2024*, operating information about the Company’s reportable segments consisted of the following:

Goodwill and Assets

Net Income (Loss)

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Note10 – Segment Information–** Continued**

Revenues by Geographic Area

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Note11 – Subsequent Events

Management has evaluated subsequent events through the date that the Company’s unaudited condensed consolidated financial statements were issued. Based on this evaluation, the Company has determined thatno additional subsequent events have occurred, other than those noted below, which require disclosure through the date that these unaudited condensed consolidated financial statements were issued.

On* October 3, 2025,*Alpha exercised its right under the Securities Purchase Agreement to purchase an additional 2,000 shares of Series F convertible into 967,165 shares of common stock, in the aggregate, at a conversion price of $2.0679 and warrants to purchase up to 967,165 shares of common stock at an exercise price of $2.0679 per share for an aggregate purchase price of $2,00,000.

On* October**6,* 2025, Alpha exercised its right under the Securities Purchase Agreement to purchase an additional 1,000 shares of Series F convertible into 426,857 shares of common stock, in the aggregate, at a conversion price of $2.3427 and warrants to purchase up to 426,857 shares of common stock at an exercise price of $2.3427 per share for an aggregate purchase price of $1,000,000.

On* November 5, 2025,the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (the “Series G Certificate of Designation”) with the Secretary of State of the State of Nevada in connection with the Purchase Agreement. Pursuant to the Series G Certificate of Designation, subject to the rights of holders of preferred stock of senior rank to the Series G Preferred Stock, holders of Series G Preferred Stock are entitled to receive dividends when and as declared by the board of directors of the Company. Except as otherwise required by law, the Series G Preferred Stock doesnot* have voting rights. Following its issuance, the Series G Preferred Stock with a stated value of $1,000 is immediately convertible into shares of the Company’s Common Stock at an initial conversion price equal 25% of the minimum price (as defined in section713(c) of the NYSE American LLC Company Guide) on the trading day immediately preceding the subscription date (the "Conversion Price"). The Conversion Price is subject to adjustment for additional preferred share issuances at the lesser of (i) the Conversion Price and (ii) the initial Conversion Price on the additional preferred shares. However, the Conversion Price shallnot be less than $1.00.

On* November**5*,2025, we executed a Securities Purchase Agreement (the “Purchase Agreement”) with Alpha and another investor (the “Buyers”), pursuant to which, subject to the terms and conditions set forth therein, the Company agreed to issue and sell to the Buyers an aggregate of up to 100,000 shares of the Company’s Series G Convertible Preferred Stock, $0.001 par value per share (the “Series G Preferred Stock”). Subject to the terms and conditions of the Certificate of Designation, the Series G Preferred Stock is convertible immediately upon issuance, at the Conversion Price defined above. On* November 5, 2025, (the “Initial Closing Date”), the Company agreed to sell, and the Buyers, severally andnot* jointly, agreed to purchase an aggregate of 12,000 shares of Series G Preferred Stock for gross proceeds of $12,000,000. Following the approval by the Company’s stockholders with respect to the transactions contemplated by the Purchase Agreement and the Certificate of Designation, including the issuance of all of the shares of the Company’s common stock, par value $0.001 per share, issuable upon conversion of the shares of the Series G Preferred Stock in accordance with the terms of the Purchase Agreement in excess of 19.99% of the issued and outstanding Common Stock on the Initial Closing Date, the Buyers* may,*subject to the terms and conditions of the Purchase Agreement, purchase up to a total aggregate of 88,000 shares of Series G Preferred Stock in addition to the 12,000 shares purchased on the Initial Closing Date.

On* November 10,*the Company executed the Security Purchase Agreement, receiving net cash proceeds of approximately $11,500,000 after the equity issuance cost of approximately $500,000. The company issued 12,000 shares of Series G Preferred Stock to the Buyers.

Subsequent to* September 30, 2025,*through the date of this filing, the Company has issued a total of 1,117,574 shares of Common Stock for the conversion of 2,185 shares of Series F Preferred Stock with a stated value of $1,000 per share at a conversion price of $1.23 and $2.0679, also, the Company has issued a total of 1,920,324 shares of Common Stock for the conversion of 2,362 shares of Series G Preferred Stock at a conversion price of $1.23.

Subsequent to* September 30, 2025,*through the date of this filing, the Company has issued a total of 300,000 shares of Common Stock for the conversion of warrants related to Series F Preferred Stock with an exercise price of $1.400 and received cash proceeds of $420,000.

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