AgEagle Aerial Systems Inc.

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

Description of Business–* *AgEagle™ Aerial Systems Inc. (“AgEagle”, the “Company”, “we”, “our” or "EagleNXT”) through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for its customers.

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 autonomous uncrewed aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include military/defense, public safety, surveying/mapping, agriculture 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 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 War.

The Company is currently headquartered in Allen, Texas, where we house our sensor and drone manufacturing operations, along with the counter-drone system manufacturing of ThidrEye USA, a joint venture wit Israel's ThirdEye Systems, Inc. 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, 2025*the 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.

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.

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 the 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, 2025*, included in the Company’s Annual Report on Form10-K, as filed with the SEC on* March 31, 2026.The results for thethree* andsix months ended* June 30, 2026and2025* 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), senseFly S.A. and senseFly Inc. All significant intercompany balances and transactions have been eliminated in consolidation.

10

FOR THEsix months ended June 30, 2026and2025 **

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 thesix months ended* June 30, 2026*, the Company had a net loss of $13,966,367 due to unrealized losses incurred on short-term and long-term investments in marketable securities of $3,359,546 and used cash in operating activities of $8,372,751. As of* June 30, 2026*, the Company has a working capital of $23,720,063, an accumulated deficit of $246,589,767, and a cash balance of approximately$15,910,000. Recently, the Company has been generating capital from the sale of its Series F5% Convertible Stock ("Series F") and Series G Convertible Preferred Stock ("Series G") (see Note7). During thesix months ended* June 30, 2026,the Company generated $8,250,000 in net proceeds from the issuance of Series F and Series G. As of June**30,* 2026, 80,750 and 0 shares of Series G and Series F, respectively, with a stated value of $1,000 per share remain available for issuance. While the Company has historically been successful in raising capital to meet its working capital needs, the ability to continue raising such capital isnot guaranteed. There is substantial doubt about the Company’s ability to continue as a going concern, as the Company will require additional liquidity to continue its operations and meet its financial obligations for12 months from the date these condensed consolidated financial statements are issued. The Company is evaluating strategies to obtain the additional funding required to support future operations, as well as restructuring initiatives to increase revenue and reduce expenses.

If the Company is unable to generate significant sales growth in the near term and raise additional capital, there is a risk that the Company could default on additional obligations; and could be required to discontinue or significantly reduce the scope of its operations ifno other means of financing operations are available. The condensed consolidated financial statements donot include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern.

Note2 – Summary of Significant Accounting Policies

Risks and Uncertainties – Global economic challenges, including the impact of the war in Ukraine and Iran, 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 Unmanned Aerial Vehicle (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 and fair value of deemed dividends resulting from the triggering of down round provisions embedded in our 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 June 30, 2026 ,* December 31, 2025,and January 1, 2025,the Company had an accounts receivable balance of approximately $1.3 million, $3.4 million and $1.4 million, respectively. The Company generally doesnot* charge interest on overdue customer a ccount 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 Accounting Standards Codification ("ASC")326-20-55-37. 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 June 30, 2026, December 31, 2025and* January 1, 2025,*the Company had an allowance for credit losses balance of $0.02 million, $0.04 million and $0.02 million, respectively.

Investments in Short-Term Equity Securities, at Fair Value - During thesix months ended* June 30, 2026*, the Company acquired an investment in a marketable equity security with a readily determinable fair value. We have applied the provisions of ASC321, Investments - Equity Securities as our interest is less than atwenty percent and we donot have the ability to exercise significant influence over operating and financial policies of the investee. Equity investments within the scope of ASC321 are carried at fair value with unrealized gains or losses recorded as net unrealized gain (loss) on equity investments, a component of other income, in the accompanying condensed consolidated statements of operations. Realized gains and losses are determined on a specific identification basis, which is recorded in earnings or loss as a net realized gain (loss) on equity investments in the condensed consolidated statements of operations. The investment is classified within current assets on the condensed consolidated balance sheets based on management's ability to hold or dispose of portions or all of the marketable security within the nexttwelve months. Fair value is determined based on the quoted market price of the security on the principal exchange on which it trades as of the balance sheet date and is classified as Level1 within the fair value hierarchy established by ASC820, Fair Value Measurement ("ASC820"), as the valuation is based on unadjusted quoted prices in active markets for identical assets. The Company reviews investments in equity securities, at fair value, for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts* may**not* be recovered.

• Investments in Long-Term Equity Securities, at Fair Value* - During thesix months ended* June 30, 2026*, the Company acquired an investment in a marketable equity security with a readily determinable fair value. The investment is classified within long-term assets on the condensed consolidated balance sheets based on management's agreement with ThirdEye related to the Joint Venture. While our interest is less thantwenty percent, we do have the ability to exercise significant influence over operating and financial policies of the investee, which would typically be accounted for under the provisions of ASC323, Investments - Equity Method and Joint Ventures. However, at initial recognition, the Company irrevocably elected the fair value option under ASC825-10* Financial Instruments* ("ASC825-10") for this investment. Accordingly, the investment is measured at fair value, with changes in fair value recognized in earnings each period, and the Company doesnot apply the equity method, which requires an investor to reflect its proportionate share of the investee's earnings or losses, and separately assess the investment for impairment. Fair value is determined in accordance with ASC820 based on Level1 inputs and the carrying amount and changes in fair value are presented in the accompanying condensed consolidated balance sheet, as a long-term asset, with changes in fair value being recorded as net unrealized gain (loss) on long-term equity securities, a component of other income (expense), on the accompanying condensed consolidated statements of operations.

Fair Value of Financial Instruments - The Company measures the fair value of financial instruments in accordance with U.S. GAAP, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP describesthree levels of inputs that* may*be used to measure fair value:

Level1 - quoted prices in active markets for identical assets or liabilities.

Level2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.

Level3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

See Note6 for details of assets and liabilities recorded at fair value on a recurring basis.

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 control transfers 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* June 30, 2026*,* December 31, 2025*, and* January 1, 2025we have $61,958, $127,874 and $148,054 of advanced customer payments presented as contract liabilities on the accompanying condensed consolidated balance sheets, respectively. Contract liabilities are short term in nature and are expected to be recognized in the next fiscal year. During thesix* months ended* June 30, 2026*, we recognized $127,874 of revenue that was deferred as a contract liability as of* December 31, 2025*.

11

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, 2026,with the SEC on Form10-K for the year ended* December 31, 2025*. 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 (as defined below), equivalents (if dilutive) related to unvested restricted stock units ("RSUs"), warrants, and convertible instruments. When the Company reports a net loss, the calculation of diluted net loss per share excludes potential common shares as their effect would be anti-dilutive.

The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income (loss) per share of common stock attributable to common stockholders for thethree andsix months ended* June 30, 2026and2025*:

12

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 impact of the improvements to our disclosure.

13

In* November 2024,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2024-03, 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

As of* June 30, 2026* and* December 31, 2025*, inventories, net consist of the following:

Note4 - Investment in Equity Securities

On* March 4, 2026,the Company executed a private placement subscription form (the "Subscription") with Aerodrome Group Ltd. ("ARDM"), a company whose ordinary shares are listed for trading on the Tel Aviv Stock Exchange Ltd. ("TASE"). Pursuant to the Subscription, the Company purchased 11,523,750 ordinary shares of ARDM for $3,000,000, or $0.26 per share. The Company's ownership in ARDM is approximately 12%. The Subscription includes a non-binding strategic framework, subject to the execution of mutually definitive agreements and applicable regulatory approvals, for the establishment of a joint venture ("JV") between AgEagle and ARDM for the distribution and marketing of advanced autonomous uncrewed systems, including loitering munitions, in the United States and Canadian markets, as long as AgEagle continues to hold ARDM ordinary shares. AgEagle has the sole and exclusive right to establish the JVfor a period ofeighteen* months following the initial investment with ownership of the JV being split 51% and 49% between AgEagle and ARDM, respectively. As of* June 30, 2026*, the JV hasnot yet been established. Due to our ownership being less than20% and the JVnot yet being established, we have accounted for our interest in ARDM in accordance with ASC321 Investments in Equity Securities. We will continue to evaluate the appropriate accounting model to apply to this equity security investment at each reporting period date. The establishment of the JV could result in us having the ability to exert significant influence over ARDM, which would require our investment to be accounted for under ASC323 as an equity method investment. As of* June 30, 2026*, our equity investment in ARDM is carried at fair value with changes in fair value being recognized as unrealized gain (losses), a component of other income (expenses) on the condensed consolidated statement of operations. The activity in our investment in ARDM during thesix months ended* June 30, 2026* is presented below (see also Note6).

On* April 13, 2026,the Company entered into a private placement agreement (the "ThirdEye Agreement") with ThirdEye Systems Ltd. ("ThirdEye Systems"), a company whose ordinary shares are listed for trading on the TASE under the ticker symbol THES. Pursuant to the ThirdEye Agreement, the Company agreed to invest an aggregate amount between $10.0 million and $14.95 million in exchange for 3,268,608 ordinary shares and 1,618,227 rights to shares of ThirdEye Systems. At closing, the Company contributed $10.0 million and received the 3,268,608 ordinary shares and 1,618,227 rights to shares of ThirdEye Systems for 9.27 ILS per share or $3.06 USD per share. The rights to purchase 1,618,227 shares of ThirdEye Systems for 9.27 ILS expiredthirty* days after closing in* May 2026.Upon acquiring the investment in April 2026,*our Chief Executive Officer became a board member of the investee and we executed a separate joint venture agreement with the investee.

Pursuant to the terms of the ThirdEye Agreement, EagleNXT and ThirdEye Systems also entered into a joint venture agreement (the “JV Agreement”) on* April 13, 2026that provided for the formation of ThirdEye USA, LLC (“ThirdEye USA”) as a Delaware limited liability company. EagleNXT will own 51.0% of ThirdEye USA and has the right to appointthree* of thefive managers who will oversee the daily affairs and operations of ThridEye USA. The investee has the right o appoint the remainingtwo managers. ThirdEye USA began operations in* July 2026.ThirdEye USA was formed for the purpose of commercialization counter drone, target recognition systems and related technologies within the United States and Canada. Further, EagleNXT has committed to make a $4,000,000 capital contribution into ThirdEye USA for working capital purposes. As of the date of these condensed consolidated financial statements, these contributions havenot* yet been made to the investee. Investee will provide ThirdEye USA with an exclusive royalty bearing license, for the use of the intellectual property to the extent included for use under the covered business, as defined in the JV Agreement, and support and oversee, coordinate and act in order to facilitate Israeli authorization and regulatory requirements applicable to the Company, if such is necessary.

Due to EagleNXT's ability to exercise significant influence over ThirdEye Systems due to board representation and the JV agreement, this investment would be accounted for under the equity method. However, at initial recognition, the Company irrevocably elected the fair value option under ASC825-10 for this investment. Accordingly, the investment is measured at fair value, with changes in fair value recognized in earnings each period.

The investments in marketable equity securities acquired during thesix months ended* June 30, 2026* are presented as follows on the accompanying condensed consolidated balance sheet as of* June 30, 2026:*

Note5 – 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 June 30, 2026*, the Company’s outstanding obligations under the senseFly COVID Loans are $254,967.

As of* June 30, 2026*, scheduled principal payments due under the senseFly COVID Loans are as follows:

Note6 – Fair Value Measurements

Investments in Equity Securities

As disclosed in Note4, we acquired investments in marketable equity securities during thethree andsix months ended* June 30, 2026* that are recorded at fair value each reporting period. Since the ordinary shares we hold in ARDM and THES trade on the TASE, we have determined the fair value of these shares using quoted market prices on the TASE as of* June 30, 2026* which is a Level1 input within the fair value measurement hierarchy. As of* June 30, 2026*, ARDM's and THES's market price as reported on the TASE was 1.13 NIS or $0.38 per share and 4.81 NIS or $1.62 per share, respectively. These market prices were utilized in determining the investments fair value as of* June 30, 2026*.

Warrant Liabilities

We closed on an offering of units consisting of Common Stock, Series A warrants ("Series A Warrants") and Series B warrants (Series 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 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, so that the Series B Warrant would be accounted for as equity on the consolidated financial statements for the Company (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 to 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 Warrants and B Warrants. The Series A Warrants remained classified as liabilities.

The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of* June 30, 2026* and* December 31, 2025* and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:

14

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* June 30, 2026* and* December 31, 2025*, 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 $55,000 and $50,000, 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. 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 thesix months ended* June 30, 2026*, we recognized a loss on the change in the fair value of the warrant liabilities of $5,000. A reconciliation of the warrant liabilities is below:

15

Note7 – Stockholders’** Equity**

Preferred Series F Convertible Stock

Purchase History

On* June 26, 2022,*the Company entered into the Series F Agreement with Alpha Capital Anstalt ("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, 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 provide additional funding, the Company agreed to (i) extend the period in which Alpha can exercise its AIR by extending the termination date of* December 31, 2025* to* 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 was declared effective by the SEC on April 25, 2025.*

During thesix months ended* June 30, 2026*, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

16

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

● On* February 7, 2025,we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into 450,390 shares of Common Stock at an initial conversion price of $2.2203 and Series F Warrants to purchase up to 450,390 shares of Common Stock at an initial exercise price of $2.2203. The Series F Warrants are immediately exercisable upon issuance for a period ofthree years. As of June 30, 2026*, this issuance of Series F had been fully converted to shares of Common Stock.

● On* March 17, 2025,we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 415,420 shares of Common Stock at an initial conversion price of $1.2036 and Series F Warrants to purchase up to 415,420 shares of Common Stock at an initial exercise price of $1.2036. The Series F Warrants are immediately exercisable upon issuance and have athree-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “March 2025Down Round Trigger”), including the Series F and Series F Warrants issued on February 7, 2025.See Down Round Triggers and Deemed Dividends resulting from such triggers in Note7* below. As of* June 30, 2026*, this issuance of Series F had been fully converted to shares of Common Stock.

● On* May 5, 2025,we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 602,846 shares of Common Stock at an initial conversion price of$.8294 and Series F Warrants to purchase up to 602,846 shares of Common Stock at an initial exercise price of$.8294. The Series F Warrants are immediately exercisable upon issuance and have athree-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series B and F Warrants being triggered (the “* May 2025** Down Round Trigger”). See Down Round Triggers and Deemed Dividends in Note7 below.

● On* June 6,*2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into an aggregate of 418,831 shares of Common Stock at an initial conversion price of $1.1938 and Series F Warrants to purchase up to 418,831 shares of Common Stock at an initial exercise price of $1.1938. The Series F Warrants are immediately exercisable upon issuance and have athree-year term.

● On* June 9, 2025**,* we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 838,364 shares of Common Stock at an initial conversion price of $1.1928 and Series F Warrants to purchase up to 838,364 shares of Common Stock at an initial price of $1.1928. The Series F Warrants are immediately exercisable upon issuance and have athree-year term.

● On* June 17, 2025,we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 797,067 shares of Common Stock at an initial conversion price of $1.2546 and Series F Warrants to purchase up to 797,067 shares of Common Stock at an initial price of $1.2546. The Series F Warrants are immediately exercisable upon issuance and have athree*-year term.

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. As of* June 30, 2026*,no Series F shares remain available for issuance.

A summary of the Series F activity for thesix months ended* June 30, 2026*, is as follows:

17

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

During thethree months ended* June 30, 2026and2025*, the dividends accrued on the Series F were $26,296 and $52,038, respectively. During thesix months ended* June 30, 2026and2025*, the dividends accrued on the Series F were $57,292 and $119,688, respectively. As of* June 30, 2026* and* December 31, 2025*, accrued dividends on the Series F total $101,190 and $948,532 which are included in accrued expenses on the condensed 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. On* January 9, 2026,the Company made a cash dividend payment of $853,679, on June 1, 2026*the Company made another cash payment of $50,955.

Series G Convertible Preferred Stock

On* November 5, 2025,the Company executed a certificate of designation (the "Series G Certificate of Designation") of preferences, rights and limitations of the Series G Convertible Preferred Stock, designating 100,000 shares of Series G Convertible Preferred Stock ("Series G"), with a par value of $0.001 and a stated value of $1,000. The shares of Series G haveno* voting rights except as provided in the Series G Certificate of Designation or as otherwise required by law and only receive dividends when declared by the Board of Directors. Series G have liquidation preferences over common stockholders and are pari passu to Series F. On* November 5, 2025,the Company entered into a Securities Purchase Agreement with certain existing investors,one of which is Alpha (the "Purchasers"), pursuant to which, subject to the terms and conditions set forth therein, the Company agreed to issue and sell to the Purchasers in a registered direct offering an aggregate of up to 100,000 shares of the Series G. Subject to the terms and conditions of the Series G Certificate of Designation, the Series G were convertible immediately upon issuance, at an initial conversion price equal to $1.2300 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustments in the event of any issuances of Common Stock or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable conversion price (subject to certain exceptions) ("Down Round Provision"). The Company agreed to sell, and the Purchasers, severally andnot* jointly, agreed to purchase an aggregate of 12,000 shares of Series G on the initial closing date.

On* November 10, 2025,the Company sold 12,000 shares of Series G and received net cash proceeds of $11,507,338. After issuance of the Series G, the Company sold Series F and Series F Warrants on November 24,and December 22, 2025with conversion and exercise prices of $1.1347 and$$0.9615, respectively. This triggered the Down Round Provision embedded within the Series G and reduced the initial conversion price of $1.2300 to $1.1347 and further to $0.9615 on December 2025.During thesix* months ended* June 30, 2026*, the conversion price was further reduced from $0.9615 to $0.8526 for the 6,190 Series G outstanding upon the* January 2026*Down Round Trigger. The impacts of this trigger event are described below.

On* March 4and5,* 2026, the Company sold 250 and 2,000 shares of Series G, respectively, and received aggregate net proceeds of $2,250,000. The Series G were convertible immediately upon issuance, at an initial conversion price equal to $1.00 per share.

On* May 14and28,* 2026, the Company sold 2,000 and 3,000 shares of Series G, respectively, and received aggregate net proceeds of $5,000,000. The Series G are convertible immediately upon issuance, at an initial conversion price equal to $1.00 per share. As of* June 30, 2026*, the Company has issued a total of 19,250 Series G shares, and 80,750 Series G shares remain available for issuance.

A summary of the Series G activity for thesix months ended* June 30, 2026*, is as follows:

(i) All 2,000 shares of Series G were issued and outstanding on May 27, 2026when the sale of Series F occurred on May 27, 2026with a conversion price of $0.9746 which triggerred a down round provision and reduced the Series G conversion price from $1.00 to $0.9746.

Common Stock Issuances

Conversions

During thesix months ended* June 30, 2026and2025*, a total of 0 and 700,000 shares of Common Stock were issued for the conversion of $0 and $770,000 of principal outstanding on a convertible note at a conversion ratio of $0 and $1.10, respectively (see Note5).

During thethree months ended* June 30, 2026and2025*, a total of 478 and 5,350 Series F were converted into a total of 559,465 and 6,081,754 shares of Common Stock, respectively, at a conversion price of $0.8526 and $1.10, respectively. During thesix months ended* June 30, 2026and2025*, a total of 11,440 and 0 Series G were converted into a total of 12,562,267 and 0 shares of Common Stock, respectively. During thesix months ended* June 30, 2026* , the Series G conversion prices upon conversion were $0.8526 and $1.000.

Warrant Exercises

During thethree months ended* June 30, 2026*, we issued 608,839 shares of common stock for the cashless exercise of 1,942,118 Series F Warrants with an exercise price of $0.8296. During thesix months ended* June 30, 2026*, we issued 1,128,050 shares of Common Stock for the exercise of Series F Warrants with an exercise price of $0.8526 and received aggregate cash proceeds of $961,776. Further, during thesix months ended* June 30, 2026* we issued 967,645 shares of Common Stock for the cashless exercise of 2,613,915 Series F Warrants with an exercise price of $0.8526.

During thethree months ended* June 30, 2025,we issued 1,952,839 shares of Common Stock for the exercise of Series B warrants with an exercise price of $0.8294 and aggregate cash proceeds of $1,619,683. During thesix* months ended* June 30, 2025,*we issued 2,220,688 shares of Common Stock for the exercise of Series B warrants with an average exercise price of $0.9639 or aggregate exercise price of $2,140,516. 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 and received and aggregate cash proceeds of $1,790,516.

18

Down Round Triggers and Deemed Dividends

We have several outstanding equity classified and equity-linked instruments that include down round provisions in which the conversion or exercise price is adjusted down upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the conversion or exercise price of the equity-linked instruments. As of* March 31, 2026,*these equity-linked instruments include the Series F, Series F Warrants, Series G and Series B Warrants.

Upon a down round provision being triggered in an equity classified instrument, we compute the incremental value provided to the holder for the reduction in conversion or exercise price using a Black-Scholes model to determine the fair value of the equity-linked instruments prior to and after the down round provision trigger. The incremental value is recorded within stockholders’ equity as a deemed dividend. Specifically, deemed dividends increase additional paid in capital and increase accumulated deficit and increase 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.

During the periods ended* June 30, 2026and2025*, we used the following assumptions in the Black-Scholes model used to compute the incremental value for the conversion price reductions in the Series F and Series G and Series F Warrants and Series B Warrants:

Below is a summary of the deemed dividends resulting from the* January 2026and May**2026* Down Round Triggers that reduced the conversion and exercise price of outstanding Series F and Series G, and Series F Warrants, as applicable, during thesix months ended* June 30, 2026*.

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.

Below is a summary of the deemed dividends resulting from the* Marchand May 2025Down Round Trigger that reduced the conversion and exercise price of outstanding Series F Preferred Stock and Series F Warrants during thesix* months ended* June 30, 2025*.

19

*** 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.

Restricted Stock Units (“RSUs”)

For thesix months ended* June 30, 2026*, a summary of RSU activity is as follows:

For thesix months ended* June 30, 2026*, the aggregate fair value of RSU awards at the time of grant was $827,642 based on the market price of our Common Stock on the date of grant.

For thethree andsix months ended* June 30, 2026*, the Company recognized $138,184 and $212,791 of stock-based compensation expense, respectively and had approximately $541,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximatelythirty three months.

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

20

For thesix months ended* June 30, 2025*, the aggregate fair value of RSU awards at the time of vesting was $219,105.

For thethree andsix months ended* June 30, 2025*, the Company recognized $111,832 and $161,710 of stock-based compensation expense and had approximately $93,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximatelytwelve months.

Note8 – Warrants

*** Equity Classified Warrants***

During thesix months ended* June 30, 2026*, 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:

During thesix months ended* June 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:

21

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

The table above includes the total Series F Warrants issued with Series F Preferred Stock (see Note7) and the Series B Warrants issued in the* October 2024Offering (see Note7*) of 2,109,604 and 12,290, respectively, that are outstanding as of* June 30, 2026.*

During thethree months ended* June 30, 2026*,1,942,117 Series F Warrants were exercised on a cashless basis, and the Company issued 608,839 shares of common stock.

During thesix months ended* June 30, 2026*,2,613,914 Series F Warrants were exercised on the cashless basis and the Company issued 967,645 shares of common stock and 1,128,050 Series F Warrants were exercised on a cash basis and the Company issued 1,128,050 shares of Common Stock and received cash proceeds of $961,776.

As of* June 30, 2026*, the intrinsic value of the warrants was $60,833 based on the market price of our stock and the warrant exercise price.

Liability Classified Warrants

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

Each Series A 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 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 so that the aggregate exercise price remains constant in such an event (the “Share Combination Event”).

22

Note8 – Warrants–** Continued**

A summary of activity related to the Series A and B warrants, initially classified as liabilities, for thesix months ended* June 30, 2026* 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

Leases

On* January 1, 2026,a lease commenced for a 33,144 square foot space located in Allen, Texas. The lease term ends January 31, 2031,withone* optional extension ofsixty months. Monthly rental payments required over the lease term range from $36,597 to $42,813 with annual increases of 3.75% commencing on* February**1st* of each year. Thefirst month of rent was abated, and a $165,720 tenant improvement allowance was provided by the landlord. The lease required a security deposit of $162,000 and a standby letter of credit of $165,720. The lease is classified as an operating lease under ASC842. At the lease commencement, the Company recognized a right-of-use asset and operating lease liability of $2,008,598, based on present value of future lease payments over the lease term. The Company used an incremental borrowing rate of 6.43% in determining the present value of lease payments.

As a result of the senseFly acquisition, the Company assumed the operating leases for office spaces in Raleigh, North Carolina, and Lausanne, Switzerland. The operating lease in Raleigh expired in* July 2023and the operating lease in Lausanne was set to expire in April 2023.The Company was required to notify the landlord of its intention tonot* renew the lease in* March 2022.The Company neglected to provide such notification, therefore, afive* year renewal option was automatically triggered in* March 2022.The Lausanne lease is now set to expire in April**2028.* The estimated cash rent payments due through the expiration of this operating lease total approximately $1,445,806.

The Company has an operating lease in Wichita, Kansas, which served as its corporate offices. The lease commencement date was* November 1, 2023,and will expire on October 31, 2026,*unless sooner terminated or extended. The estimated cash rent payments due through the expiration of this operating lease total $26,668.

As of* June 30, 2026* and* December 31, 2025,*balance sheet information related to the Company’s operating leases is as follows:

As of* June 30, 2026*, scheduled future maturities of the Company’s lease liabilities are as follows:

As of* June 30, 2026* and* December 31, 2025,*the weighted-average lease-term and discount rate of the Company’s leases are as follows:

For thesix months ended* June 30, 2026and2025*, supplemental cash flow information related to leases is as follows:

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* June 30, 2026*, the Company had purchase commitments of $3,697,839.

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 thesix months ended* June 30, 2026*, the Company conducted the business throughtwo primary operating segments: Drones and Sensors. During the year ended* December**31,2024,* our Software-as-a-service segment ceased operations and didnot renew any of its software subscriptions. Transactions in this segment during2025 consisted primarily of run-off related expenses until this segment was fully shut down. In* February 2025,*we sold the Measure Global, Inc. domain name and received approximately $250,000 in cash proceeds which has been reflected within other incomeon 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 assets and other assets.

23

Note10 – Segment Information–** Continued**

As of* June 30, 2026* and* December 31, 2025* and for thethree andsix months ended* June 30, 2026and2025*, operating information about the Company’s reportable segments consisted of the following:

Assets

Net Income (Loss)

24

Note10 – Segment Information–** Continued**

Revenues by Geographic Area

25

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.

Subsequent to* June**30,* 2026, through the date of this filing, the Company has issued a total of 802,252 shares of Common Stock for the conversion of 684 shares of Series F with a stated value of $1,000 per share at a conversion price of $0.8526 from* August 7, 2026to August 11, 2026.*

26