DYNAMIC AEROSPACE SYSTEMS Corp

Previous wording

For the twelve months ended March 31, 2026, our financial condition reflects a growth-oriented company with significant investments in technology and infrastructure. The transition to operating as Dynamic Aerospace Systems has positioned us to capitalize on the growing demand for autonomous UAV solutions. However, we have identified potential risks, including material weaknesses in internal controls over financial reporting, which we are actively working to remediate. Our balance sheet is primarily composed of intangible assets related to UAV technology, and physical assets from acquisitions.

Current wording

For the six months ended June 30, 2026, our financial condition reflects a growth-oriented company with significant investments in technology and infrastructure. The transition to operating as Dynamic Aerospace Systems has positioned us to capitalize on the growing demand for autonomous UAV solutions. However, we have identified potential risks, including material weaknesses in internal controls over financial reporting, which we are actively working to remediate. Our balance sheet is primarily composed of intangible assets related to UAV technology, and physical assets from acquisitions.

Previous wording

Professional fees were $286,190 in the three months ended March 31, 2026, an increase of $13,222, or 5%, compared to $272,968 in the three months ended March 31, 2025, resulting from professional fees paid related to the implementation of our Dynamic Aerospace Systems assets acquired in April 2025.

Current wording

Professional fees were $369,999 in the three months ended June 30, 2026, an increase of $136,594, or 59%, compared to $233,405 in the three months ended June 30, 2025, resulting from professional fees paid related to the implementation of our Dynamic Aerospace Systems assets acquired in April 2025.

Previous wording

Salaries were $429,251 in the three months ended March 31, 2026, an increase of $429,251, or 100%, compared to $-0- in the three months ended March 31, 2025 due to the hiring of certain Vayu employees following the acquisition of the Vayu Assets.

Current wording

Salaries were $518,139 in the three months ended June 30, 2026, an increase of $518,139, or 100%, compared to $-0- in the three months ended June 30, 2025 due to the hiring of certain Vayu employees following the acquisition of the Vayu Assets.

Previous wording

Stock compensation expense was $399,266 in the three months ended March 31, 2026, an increase of $399,266, or 100%, compared to $-0- in the three months ended March 31, 2025. Stock compensation expense arises primarily from RSU incentive grants made to employees under our Executive and Non-Executive RSU Plans.

Current wording

Stock compensation expense was $558,897 in the three months ended June 30, 2026, an increase of $488,846, or 698%, compared to $70,051 in the three months ended June 30, 2025. Stock compensation expense arises primarily from RSU incentive grants made to employees under our Executive and Non-Executive RSU Plans following the acquisition of the Vayu Assets in April 2025.

Previous wording

Other general and administrative costs were $63,278 in the three months ended March 31, 2026, an increase of $7,929, or 14%, compared to $55,349 in the three months ended March 31, 2025 due primarily to higher overhead costs related with the administration of our newly acquired assets in 2025.

Current wording

Other general and administrative costs were $206,396 in the three months ended June 30, 2026, an increase of $126,200, or 157%, compared to $80,196 in the three months ended June 30, 2025 due primarily to higher overhead costs related with the administration of our newly acquired assets in 2025.

Previous wording

We recognized financing cost of $10,634 in the three months ended March 31, 2026, reflecting the excess of the allocated components of certain debt instruments at inception over the net proceeds from such instruments. There was no corresponding charge in the year ended three months ended March 31, 2025.

Current wording

We recognized financing cost of $297,602 in the three months ended June 30, 2026, reflecting the excess of the allocated components of certain debt instruments at inception over the net proceeds from such instruments. There was no corresponding charge in the three months ended June 30, 2025.

Previous wording

During the three months ended March 31, 2026, we recognized a gain from the change in fair value of derivative financial instruments of $437,257 to record the change in fair value of certain floating-rate convertible features embedded in our debt instruments that were treated as derivative financial instruments. There was no corresponding gain or loss in the three months ended March 31, 2025.

Current wording

During the three months ended June 30, 2026, we recognized a gain from the change in fair value of derivative financial instruments of $104,629 to record the change in fair value of certain floating-rate convertible features embedded in our debt instruments that were recorded as derivative financial instruments. There was no corresponding gain or loss in the three months ended June 30, 2025.

Previous wording

Amortization of debt discount was $191,764 in the three months ended March 31, 2026, an increase of $27,985, or 17%, compared to $163,779 in the three months ended March 31, 2025. Such charges reflect the amortization of beneficial conversion features and original issue discounts that we recorded as discounts at inception of certain of our promissory and convertible notes issued in 2025 and 2026. The increase is due to larger discount balances in 2026 compared to 2025.

Current wording

Amortization of debt discount was $223,033 in the three months ended June 30, 2026, a decrease of $104,888, or 32%, compared to $327,921 in the three months ended June 30, 2025. Such charges reflect the amortization of beneficial conversion features and original issue discounts that we recorded as discounts at inception of certain of our promissory and convertible notes issued in 2025 and 2026. The decrease is due to larger discount balances in 2025 compared to 2026.

Previous wording

For the three months ended March 31, 2026, we recognized a net loss of $1,051,493, an increase of $557,641, or 113%, compared to net loss of $493,852 in the three months ended March 31, 2025. The increase is primarily due to higher salaries and operating expenses from scaling our operations in preparation for future growth and stock based compensation for employee RSU incentive grants, offset by a gain in 2026 from the change in fair value of derivative financial instruments.

Current wording

For the three months ended June 30, 2026, we recognized a net loss of $2,179,349, an increase of $1,373,582, or 170%, compared to net loss of $805,767 in the three months ended June 30, 2025. The increase is primarily due to higher salaries and operating expenses from scaling our operations in preparation for future growth, stock-based compensation for employee RSU incentive grants, and day-one financing costs associated with issuance of certain convertible notes.

Previous wording

Depreciation and amortization expense increased by $87,146, or 100%, from $-0- in the three months ended March 31, 2025 to $-0- in the three months ended March 31, 2026 as a result of amortization of intangible assets and depreciation of fixed assets acquired from Vayu and GAC in April 2025.

Current wording

Depreciation and amortization expense increased by $79,111, or 84%, from $94,494 in the six months ended June 30, 2025 to $173,605 in the six months ended June 30, 2026, as a result of amortization of intangible assets and depreciation of fixed assets acquired from Vayu and GAC in April 2025.

Previous wording

Interest and other expense was $21,221 in the three months ended March 31, 2026, an increase of $19,465, or 1,108%, compared to $1,756 in the three months ended March 31, 2025. The increased interest expense is attributable to higher interest-bearing debt balances in 2026.

Current wording

Interest and other expense was $44,674 in the six months ended June 30, 2026, an increase of $43,218, or 2,968%, compared to $1,456 in the six months ended June 30, 2025. The increased interest expense is attributable to higher interest-bearing debt balances in 2026.

Previous wording

Cash flows used in operating activities were $342,941 and $562,554 for the three months ended March 31, 2026 and 2025, respectively. Working capital for the three months ended March 31, 2026 provided cash of $456,999 due from cash provided by accounts payable and accrued liabilities (due primarily to unpaid executive salaries from 2025 and 2026), accrued interest, and related parties, partially offset by cash used by prepaid expenses. Working capital for the three months ended March 31, 2025 used cash of $232,481 due to cash used by accounts payable, related party repayments, and accrued interest.

Current wording

Cash flows used in operating activities were $832,030 and $771,366 for the six months ended June 30, 2026 and 2025, respectively. Working capital for the six months ended June 30, 2026, provided cash of $1,085,897 due from cash provided by accounts payable and accrued liabilities (due primarily to unpaid executive salaries from 2025 and 2026), accrued interest, and related parties, partially offset by cash used by prepaid expenses. Working capital for the six months ended June 30, 2025 used cash of $127,992 due primarily to cash used by accounts payable and accrued interest.

Previous wording

Cash flows used in investing activities were $49,004 and $-0-, for the three months ended March 31, 2026 and 2025, respectively. Additions to property, plant and equipment during the three months ended March 31, 2026 are related to investments into demo drones.

Current wording

Cash flows used in investing activities were $66,229 and $-0-, for six months ended June 30, 2026 and 2025, respectively. Additions to property, plant and equipment during the six months ended June 30, 2026, are related to investments into demo drones.

Previous wording

Cash flows provided by financing activities were $384,399 and $562,535 for the three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026, we received $210,000 from the sale of preferred shares, $66,899 from the sales of common shares under the ELOC, and $160,000 received from the issuance of notes and convertible notes, partially offset by the repayment of a promissory note in the amount of $52,500. For the three months ended March 31, 2025, net cash provided by financing activities was $562,535, comprised of $617,535 received from the issuance of notes and convertible notes, partially offset by the repayment of two promissory notes in the amount of $55,000.

Current wording

Cash flows provided by financing activities were $851,855 and $788,200 for the six months ended June 30, 2026 and 2025, respectively. For the six months ended June 30, 2026, we received $192,355 from the sale of common stock under the ELOC and in private placement transactions, $210,000 from the sale of preferred stock, and $579,500 received from the issuance of notes and convertible notes, partially offset by the repayment of a promissory note in the amount of $130,000. For the six months ended June 30, 2025, net cash provided by financing activities was $788,200, comprised of $843,200 received from the issuance of notes and convertible notes, partially offset by the repayment of two promissory notes in the amount of $55,000.

Previous wording

Although we may require additional equity or debt financing in the short term, management believes the Company is well-positioned to execute on its strategic objectives with the support of existing investors and engaged advisors. While any future financing may involve dilution or debt obligations, we are focused on securing capital on terms that preserve long-term shareholder value and support our path to profitability.

Current wording

Although we will require additional equity or debt financing in the short term, management believes the Company is well-positioned to execute on its strategic objectives with the support of existing investors and engaged advisors. While any future financing may involve dilution or debt obligations, we are focused on securing capital on terms that preserve long-term shareholder value and support our path to profitability.

Previous wording

During the three months ended March 31, 2026, we issued convertible notes payable and promissory notes with a total face value of $171,000 that resulted in net proceeds of $160,000. Additionally, a convertible note with face value of $58,000 and penalties of $5,800 was converted into shares of our preferred stock. We also repaid existing promissory notes totaling $52,500. The remaining outstanding debt as of March 31, 2026, matures at various times during 2026.

Current wording

During the six months ended June 30, 2026, we issued convertible notes payable and promissory notes with a total face value of $627,022 that resulted in net proceeds of $419,500. Additionally, a convertible note with face value of $58,000 and penalties of $5,800 was converted into shares of our preferred stock, and a second note with a face value of $495,000 was partially converted for $65,000 of face value into common stock. We also repaid existing promissory notes totaling $130,000. The remaining outstanding debt as of June 30, 2026, matures at various times during the second half of 2026 and 2027.

Previous wording

As of March 31, 2026, we had cash balances of $46,463, a working capital deficit of $3,057,323 and an accumulated deficit of $10,842,613. For the three months ended March 31, 2026, we had a net loss of $1,051,493 and used cash from operating activities of $342,941. However, the Company is actively pursuing financing opportunities and anticipates revenue growth from sales that are expected to begin offsetting operating expenses within the next twelve months.

Current wording

As of June 30, 2026, we had cash balances of $7,605, a working capital deficit of $4,283,304 and an accumulated deficit of $13,021,962. For the six months ended June 30, 2026, we had a net loss of $3,230,842 and used cash from operating activities of $832,030. However, the Company is actively pursuing financing opportunities and anticipates revenue growth from sales that are expected to begin offsetting operating expenses within the next twelve months.