AIRO Group Holdings, Inc.

Previous wording

The following is management’s discussion and analysis of the major factors that influenced our financial condition and results of operations as of and for the three months ended March 31, 2026. This analysis should be read in conjunction with the audited consolidated financial statements as of December 31, 2025 and 2024 and for each of the two years then ended, together with the related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”) and with the unaudited condensed consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Note Regarding Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All references to “we”, “us”, “our”, and the “Company” refer to AIRO Group Holdings, Inc.

Current wording

The following is management’s discussion and analysis of the major factors that influenced our financial condition and results of operations as of and for the three and six months ended June 30, 2026 and 2025. This analysis should be read in conjunction with the audited consolidated financial statements as of December 31, 2025 and 2024 and for each of the two years then ended, together with the related notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “Form 10-K”) and with the unaudited condensed consolidated financial statements and notes thereto set forth in this Quarterly Report on Form 10-Q, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Some of the information contained in this discussion and analysis includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Note Regarding Forward-Looking Statements” and “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. All references to “we”, “us”, “our”, and the “Company” refer to AIRO Group Holdings, Inc.

Previous wording

Our business is organized into four operating segments, each of which represents a critical growth vector in the aerospace and defense market: Drones, Avionics, Training, and Electric Air Mobility. These four segments collectively target a combined total addressable market estimated to be over $315.4 billion by 2030.

Current wording

Our business is organized into four operating segments, each of which represents a critical growth vector in the aerospace and defense market: Avionics, Drones, Electric Air Mobility, and Training. These four segments collectively target an estimated total addressable market of over $315 billion by 2030.

Previous wording

Avionics. The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy military aircraft and general aviation platforms. We sell our avionics products through our Aspen Avionics brand, which is well-recognized in the general aviation aftermarket sector with over 20 years of operating history and long-term customer loyalty for our value proposition. We also serve as an avionics supplier for OEMs, including Robinson Helicopters, Pilatus, Honeywell, and Joby Aviation. We believe our avionics solutions have a considerable market opportunity as general aviation fleets continue to age, with owners and operators seeking to upgrade the avionics technology on their aircraft.

Current wording

Avionics. The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy military aircraft and general aviation platforms. We sell our avionics products through our Aspen Avionics brand, which is well-recognized in the general aviation aftermarket sector with over 20 years of operating history and long-term customer loyalty for our value proposition. We also serve as an avionics supplier for OEMs, including Robinson Helicopters, Pilatus, Honeywell, and Joby Aviation. We believe our avionics solutions have a considerable market opportunity as general aviation fleets continue to age, with owners and operators seeking to upgrade the avionics technology on their aircraft. During the second quarter of 2026, our consolidated Phoenix manufacturing facility achieved AS9100D certification, reinforcing our manufacturing quality and supporting future growth across general aviation and advanced aerospace markets.

Previous wording

Drones. The Drones segment develops, manufactures, and sells drones and will provide drone services, such as DaaS, for military and commercial end users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. A critical point of differentiation lies in our drones’ ability to perform in a GPS-denied environment, which is a technology application relevant for both military and commercial end markets. The segment’s portfolio includes the RQ-35 platform and the recently introduced next-generation RQ-70 ISR platform, which is designed to support expanded operational capabilities, including longer flight range, higher payload capacity, upgraded sensor options, and enhanced autonomous mission operations.

Current wording

Drones. The Drones segment develops, manufactures, and sells drones and will provide drone services, such as DaaS, for military and commercial end users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. A critical point of differentiation lies in our drones’ ability to perform in a GPS-denied environment, which is a technology application relevant for both military and commercial end markets. The segment’s portfolio includes the battle-proven RQ-35 platform and the recently introduced next-generation RQ-70 platform, which is designed to support expanded operational capabilities, including longer flight range, greater endurance, higher payload capacity, upgraded sensor options, and enhanced autonomous mission operations. During the second quarter of 2026, we completed significant customer deliveries of our RQ-35 platform, including the first operational deployment featuring our proprietary Zentra camera suite, and announced that the RQ-35 had been added to the U.S. Department of War (“DoW”) Blue UAS list, expanding its eligibility for U.S. government procurement.

Previous wording

*Training.*The Training segment currently provides military pilot training. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our Coastal Defense brand. These offerings include adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, and Joint Terminal Attack Controller training, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and United States Air Force Air Combat Command, and are a mandated recipient on a $5.7 billion DoW Indefinite Delivery Indefinite Quantity (“IDIQ”) Contract and a $1.9 million IDIQ Contract. Our personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to bid on mandates. The Company is evaluating the strategic fit and long-term role of its Training segment. The Training segment remains a valuable asset with significant long-term opportunity, but the segment is capital-intensive and often requires meaningful ongoing investment.

Current wording

*Training.*The Training segment currently provides military pilot training. We offer professional training and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our Coastal Defense brand. These offerings include adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, and Joint Terminal Attack Controller training, as well as full joint theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and United States Air Force Air Combat Command, and are a mandated recipient on a $5.7 billion DoW Indefinite Delivery Indefinite Quantity (“IDIQ”) Contract and a $1.9 million IDIQ Contract. Our personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to bid on mandates. The Company is evaluating the strategic fit and long-term role of its Training segment. The Training segment remains a valuable asset with significant long-term opportunity, although the segment is capital-intensive and often requires meaningful ongoing investment.

Previous wording

We are dependent on a global supply chain and, in recent years, have experienced supply chain disruptions that resulted in delays and increased costs which adversely affected our performance. These disruptions impacted our ability to procure raw materials, microelectronics, and certain commodities on a timely basis and/or at expected prices, and have been driven by supply chain constraints and macroeconomic conditions, including inflation and labor market shortages. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictions, continue to contribute to these issues. Furthermore, our suppliers and subcontractors have been affected by these same factors. We also experience periodic shortages of electronic and mechanical parts. Management continues to proactively manage the supply and transportation of parts during regular sales inventory and operations meetings. This proactive planning is an integral part of our normal operations and has allowed us to anticipate potential shortages and introduce redundancy along our supply chain. These mitigation efforts have not introduced new material risks related to product quality, reliability or regulatory approval of products. We continue to monitor the condition of our supply chain and evaluate our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations. We have implemented actions and programs designed to mitigate the impacts of supply chain disruptions, but anticipate that we and others in our industry will continue to face such challenges for the foreseeable future. The supply chain disruptions discussed above did not materially impact our outlook, business goals, results of operations or capital resources during 2025 or the first three months of 2026.

Current wording

We are dependent on a global supply chain and, in recent years, have experienced disruptions that resulted in delays and increased costs which adversely affected our performance. These disruptions impacted our ability to procure raw materials, microelectronics, and certain commodities on a timely basis and/or at expected prices and have been driven by supply chain constraints and macroeconomic conditions, including inflation and labor market shortages. Current geopolitical conditions, including conflicts and other causes of strained intercountry relations, as well as sanctions and other trade restrictions, continue to contribute to these issues. Furthermore, our suppliers and subcontractors have been affected by these same factors. We also experience periodic shortages of electronic and mechanical parts. Management continues to proactively manage the supply and transportation of parts during regular sales inventory and operations meetings. This proactive planning is an integral part of our normal operations and has allowed us to anticipate potential shortages and introduce redundancy alongside our supply chain. These mitigation efforts have not introduced new material risks related to product quality, reliability or regulatory approval of products. We continue to monitor the condition of our supply chain and evaluate our procurement strategy to reduce any negative impact on our business, financial condition, and results of operations. We have implemented actions and programs designed to mitigate the impacts of supply chain disruptions but anticipate that we and others in our industry will continue to face such challenges for the foreseeable future. The supply chain disruptions discussed above did not materially impact our outlook, business goals, results of operations or capital resources during 2025 or the first six months of 2026.

Previous wording

Our business and financial performance is also affected by elevated levels of inflation and interest rates. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. Due to the nature of our government and commercial aerospace businesses, and their respective customer and supplier contracts, we are not always able to offset cost increases by increasing our contract value or pricing, in particular on our fixed-price contracts. Increasing material, component, and labor prices could subject us to losses in our fixed price contracts in the event of cost overruns. In addition, higher interest rates have increased the cost of borrowing and tightened the availability of capital. Among other things, these effects can affect our ability to acquire equipment and constrain our customers’ purchasing power and decrease orders for our products and services and impact the ability of our customers to make payments and of our suppliers to perform. Moreover, volatility in interest rates and financial markets can lead to economic uncertainty, an economic downturn or recession and impact the demand for our products and services as well as our supply chain.

Current wording

Our business and financial performance is also affected by elevated levels of inflation and interest rates. Certain costs, including rising labor rates and supplier costs, have increased as a result of inflation, and have adversely affected our margins on certain programs. Due to the nature of our government and commercial aerospace businesses, and their respective customer and supplier contracts, we are not always able to offset cost increases by increasing our contract value or pricing. This can affect our ability to acquire equipment and constrain our customers’ purchasing power, decrease orders for our products and services, and impact the ability of our customers to make payments and of our suppliers to perform. Moreover, volatility in interest rates and financial markets can lead to economic uncertainty, an economic downturn or recession and create an impact on the demand for our products and services as well as our supply chain.

Previous wording

Revenue consists primarily of product sales, fees for consulting services, licensing revenue, warranty sales, and after sale services. A majority of our revenue is derived from the Drones segment. To date, our Electric Air Mobility segment has not generated material revenue.

Current wording

Revenue consists primarily of product sales, fees for consulting services, licensing revenue, warranty sales, and after-sales services. A majority of our revenue is derived from the Drones segment. To date, our Electric Air Mobility segment has not generated material revenue.

Previous wording

Interest expense, net consists primarily of the interest expense from borrowings relating to third-party and related party notes, net of interest income earned on cash deposits.

Current wording

Interest income (expense), net consists primarily of the interest expense from borrowings, net of interest income earned on cash deposits.

Previous wording

Income tax benefit (expense) primarily consists of income taxes in certain foreign jurisdictions in which we conduct business.

Current wording

Income tax expense primarily consists of income taxes in certain foreign jurisdictions in which we conduct business.

Previous wording

We define (1) EBITDA as net loss before interest (income) expense, income tax (benefit) expense, and depreciation and amortization, (2) Adjusted EBITDA as net loss before interest (income) expense, income tax (benefit) expense, depreciation and amortization, stock-based compensation, and contingent consideration fair value adjustments, and (3) Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. The above items are excluded from our Adjusted EBITDA measure because these items are either non-cash in nature, or because the amount and timing of these items is unpredictable, or because they are not driven by core results of operations, thereby rendering comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as provides a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Current wording

We define (1) EBITDA as net (loss) income before interest (income) expense, income tax expense, and depreciation and amortization, (2) Adjusted EBITDA as net (loss) income before interest (income) expense, income tax expense, depreciation and amortization, gain on extinguishment of debt, stock-based compensation, strategic workforce transition costs, contingent consideration fair value adjustments, warrant fair value adjustment, and IPO contingencies, and (3) Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. The above items are excluded from our Adjusted EBITDA measure because these items are either non-cash in nature, or because the amount and timing of these items is unpredictable, or because they are not driven by core results of operations, thereby rendering comparisons with prior periods and competitors less meaningful. We believe Adjusted EBITDA provides useful information to investors and others in understanding and evaluating our results of operations, as well as providing a useful measure for period-to-period comparisons of our business performance. Moreover, we have included Adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measurement used by our management internally to make operating decisions, including those related to analyzing operating expenses, evaluating performance, and performing strategic planning and annual budgeting.

Previous wording

Because of these limitations, we consider, and you should consider, the non-GAAP financial measures alongside other financial performance measures, including net income (loss) and our other GAAP results. A reconciliation of EBITDA and Adjusted EBITDA to net income (loss), and Adjusted EBITDA Margin to net income (loss) margin, the most directly comparable financial measures stated in accordance with GAAP, is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measure to their most directly comparable GAAP financial measure.

Current wording

Because of these limitations, we consider, and you should consider, the non-GAAP financial measures alongside other financial performance measures, including net (loss) income and our other GAAP results. A reconciliation of EBITDA and Adjusted EBITDA to net (loss) income, and Adjusted EBITDA Margin to net (loss) income margin, the most directly comparable financial measures stated in accordance with GAAP, is provided below. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measure to their most directly comparable GAAP financial measure.

Previous wording

The following table shows our consolidated financial results for the three months ended March 31, 2026 and 2025:

Current wording

The following table shows our consolidated financial results for the three and six months ended June 30, 2026 and 2025:

Previous wording

Three Months Ended March 31, 2026 and 2025

Current wording

For the three months ended June 30, 2026 compared to the same period in 2025, revenue increased by $18.6 million, driven by a $19.0 million increase in the Drones segment, partially offset by a $0.3 million decrease in the Training segment and a $0.1 million decrease in the Avionics segment.

Previous wording

For the three months ended March 31, 2026 compared to the same period in 2025, cost of revenue increased by $1.7 million, primarily due to an increase of $1.9 million and $0.1 million within the Drones and Avionics segments, respectively, partially offset by a $0.4 million decrease in the Training segment. Gross margin was 26.6% during the three months ended March 31, 2026 compared to 58.8% during the same period in 2025. The decline in gross margin was primarily driven by a 39.2% decrease in the Drones segment, reflecting lower order volume, production timing, and an atypical sales mix during the quarter, with fewer new drone system sales and a higher concentration of lower-margin upgrades, modifications, and support-related orders. Gross margin in the Avionics segment decreased by 21.5% due to a temporary disruption from a facility relocation and lower sales volume. The Training segment margin also decreased by 4.2% due to lower sales.

Current wording

For the three months ended June 30, 2026 compared to the same period in 2025, cost of revenue increased by $6.0 million, primarily due to an increase of $6.0 million within the Drones segment driven by higher drone sales. Gross margin was 64.1% during the three months ended June 30, 2026 compared to 61.2% during the same period in 2025 commensurate with higher sales volume. For the six months ended June 30, 2026 compared to the same period in 2025, cost of revenue increased by $7.7 million, primarily due to an increase of $7.9 million and $0.1 million within the Drones and Avionics segments, respectively, partially offset by a $0.4 million decrease in the Training segment commensurate with higher sales volume.

Previous wording

For the three months ended March 31, 2026 compared to the same period in 2025, R&D expense increased by $3.0 million primarily due to a $2.3 million increase in the Drones segment, a $0.5 million increase in the Avionics segment, and a $0.3 million increase in the Electric Air Mobility segment. The increase in the Drones segment was primarily driven by higher personnel and consulting costs related to ongoing strategic and development initiatives. The increase in the Avionics segment reflects targeted investments within the platform, while the increase in the Electric Air Mobility segment was primarily due to higher personnel costs supporting development programs.

Current wording

For both comparative periods, the increase in the Drones segment was primarily driven by higher personnel and consulting costs related to ongoing strategic and development initiatives. The increase in the Electric Air Mobility segment was primarily due to higher personnel costs supporting development programs, while the increase in the Avionics segment reflects targeted investments within the platform.

Previous wording

For the three months ended March 31, 2026 compared to the same period in 2025, sales and marketing expense increased by $0.5 million, primarily due to higher personnel costs within the Drones segment.

Current wording

For the three months ended June 30, 2026 compared to the same period in 2025, sales and marketing expense increased by $0.6 million, primarily due to higher personnel costs, higher facility costs driven by repair and maintenance activities, and increased marketing and tradeshow expenses. For the six months ended June 30, 2026 compared to the same period in 2025, sales and marketing expense increased by $1.1 million, primarily due to higher personnel costs, higher facility costs driven by repair and maintenance activities, and increased marketing and tradeshow expenses.

Previous wording

For the three months ended March 31, 2026 compared to the same period in 2025, general and administrative expense increased by $5.9 million, primarily driven by a $3.4 million increase in corporate expenses, including a $2.3 million increase in compensation expense, a $0.3 million increase in insurance, a $0.4 million increase in professional fees, a $0.2 million increase in lease expense, and a $0.2 million increase in other corporate overhead. The remaining increase reflects higher expenses across our operating segments, including a $1.8 million increase in the Drones segment, a $0.3 million increase in the Avionics segment, a $0.2 million increase in the Training segment, and a $0.1 million increase in the Electric Air Mobility segment. The increase in the Drones segment was primarily due to higher equity-based compensation, personnel, and operating costs, while the increases in the Avionics, Training, and Electric Air Mobility segments were primarily attributable to higher personnel and operating costs.

Current wording

For the six months ended June 30, 2026 compared to the same period in 2025, general and administrative expense decreased by $6.8 million, primarily reflects lower expenses across our operating segments, including a $9.2 million decrease in the Training segment and a $1.4 million decrease in the Avionics segment, partially offset by a $4.4 million increase in the Drones segment, and a $0.5 million increase in the Electric Air Mobility segment. The decreases in the Training and Avionics segments were primarily attributable to lower stock-based compensation that vested with the IPO, while the increase in the Drones and Electric Air Mobility segments were primarily due to higher stock-based compensation for drones, and higher personnel and operating costs for both. The remaining change is primarily driven by a $1.1 million decrease in corporate expenses, including decreases of $5.6 million in stock-based compensation, $2.7 million in IPO-related expenses and $1.3 million in professional fees, partially offset by increases in compensation expense of $6.5 million and $2.0 million in other expenses.

Previous wording

As of March 31, 2026, we had cash and restricted cash of $54.4 million, of which $0.2 million was either restricted or was designated exclusively for Sky-Watch operations, and working capital of $62.5 million.

Current wording

As of June 30, 2026, we had cash and restricted cash of $26.0 million, of which $0.2 million was either restricted or was designated exclusively for Sky-Watch operations. Working capital was $61.5 million. In July 2026, we collected $43.2 million from the outstanding receivables as of June 30, 2026 strengthening our liquidity position.

Previous wording

Edvard Per Erik Svehag, a member of our Board of Directors, is a director of Dangroup ApS (“Dangroup”) and indirectly beneficially owns approximately 60% of Dangroup. In June 2024, we entered into an Incentive Agreement with Dangroup (the “Dangroup Incentive Agreement”), whereby we agreed to pay Dangroup 20% of Sky-Watch’s EBITDA as an incentive bonus for its continued involvement in Sky-Watch’s governance, management and/or other operations, commencing on January 1, 2025 for an initial term of five years, which shall renew upon mutual agreement of the parties. In December 2024, we amended the Dangroup Incentive Agreement, in addition to the incentive bonus described above, whereby we agreed to transfer to Dangroup shares of our common stock immediately prior to the completion of the IPO such that Dangroup’s ownership was increased to 5% of our capital stock on a fully diluted basis. During the year ended December 31, 2025, we issued 0.5 million shares of our common stock to Dangroup in satisfaction of this agreement. During the three months ended March 31, 2026 and 2025, the Company recorded $0.5 million of expense within general and administrative expense related to the agreement.

Current wording

Edvard Per Erik Svehag, a member of our Board of Directors, is a director of Dangroup ApS (“Dangroup”) and indirectly beneficially owns approximately 60% of Dangroup. In June 2024, we entered into an Incentive Agreement with Dangroup (the “Dangroup Incentive Agreement”), whereby we agreed to pay Dangroup 20% of Sky-Watch’s EBITDA as an incentive bonus for its continued involvement in Sky-Watch’s governance, management and/or other operations, commencing on January 1, 2025 for an initial term of five years, which shall renew upon mutual agreement of the parties. In December 2024, we amended the Dangroup Incentive Agreement, in addition to the incentive bonus described above, whereby we agreed to transfer to Dangroup shares of our common stock immediately prior to the completion of the IPO such that Dangroup’s ownership was increased to 5% of our capital stock on a fully diluted basis. During the year ended December 31, 2025, we issued 0.5 million shares of our common stock to Dangroup in satisfaction of this agreement. In June 2026, the Dangroup Incentive Agreement was further amended. In connection with the June 2026 amendment, the Company also agreed to pay Dangroup DKK 1.3 million, or $0.2 million with a foreign exchange rate as of June 30, 2026, on or before December 15, 2026. The incentive bonus related to fiscal year 2025 of $6.1 million was paid on June 10, 2026. During the three months ended June 30, 2026 and 2025, the Company recorded $2.6 million and $1.8 million, respectively, and $3.1 million and $2.3 million for the six months ended June 30, 2026 and 2025, respectively, of expenses within general and administrative expense related to the agreement.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2026 was $17.4 million, primarily due to a $15.5 million net loss and a $11.1 million increase in inventory. These uses were partially offset by non-cash expenses, including $3.1 million of depreciation and amortization and $1.5 million of stock-based compensation, as well as working capital changes, including a $4.1 million decrease in accounts receivable and a $5.1 million increase in accounts payable, accrued expenses and other long-term liabilities, partially offset by a $2.1 million increase in prepaid expenses and other assets and a $2.1 million decrease in related party payables.

Current wording

Net cash used in operating activities for the six months ended June 30, 2026 was $48.7 million, primarily due to a $17.4 million net loss, a $34.9 million increase in accounts receivable, a $6.5 million decrease in related party payables, and a $3.3 million increase in inventory. These uses were partially offset by non-cash expenses, including $6.8 million of depreciation and amortization and $2.6 million of stock-based compensation, as well as working capital changes, including a $2.9 million increase in deferred revenue and a $0.7 million decrease in prepaid expenses and other assets.

Previous wording

Cash of $2.1 million and $0.3 million was used in investing activities during the three months ended March 31, 2026 and 2025, respectively, to purchase property and equipment and intangible assets.

Current wording

Cash of $4.5 million and $1.1 million was used in investing activities during the six months ended June 30, 2026 and 2025, respectively, to purchase property and equipment and intangible assets.

Previous wording

Net Cash (Used in) Provided by Financing Activities

Current wording

Net Cash Provided by Financing Activities

Previous wording

Net cash used in financing activities during the three months ended March 31, 2026 was $0.6 million due to repayments on third party borrowings and related party borrowings. Net cash provided by financing activities during the three months ended March 31, 2025 was $1.8 million primarily due to $3.5 million of proceeds from the Libertas loans and $0.2 million of related party borrowings proceeds that were partially offset by $1.7 million of debt repayments including $1.1 million to Libertas, $0.4 million to WebBank and $0.2 million to First Citizens Community Bank.

Current wording

Net cash provided by financing activities during the six months ended June 30, 2026 was $4.0 million, primarily due to a $5.5 million increase in lines of credit related to Sky-Watch’s overdraft credit facility, partially offset by $1.3 million of repayments on third-party borrowings and $0.2 million of repayments on related party borrowings. Net cash provided by financing activities during the six months ended June 30, 2025 was $49.6 million primarily due to $61.5 million of proceeds from the IPO net of issuance costs, $8.5 million of proceeds from the Libertas and WebBank loans that were partially offset by $14.8 million of debt repayments on borrowings and related borrowings, $3.3 million of contingent consideration payments, and $2.2 million in payments due to seller.

Previous wording

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These policies relate to revenue recognition, goodwill impairment, inventory, income taxes, impairment of indefinite-lived and long-lived assets, and stock-based compensation. We have other important accounting policies and practices; however, once adopted, these other policies either generally do not require us to make significant estimates or assumptions or otherwise only require implementation of the adopted policy and not a judgment as to the policy itself. Management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Despite our intention to establish accurate estimates and assumptions, actual results may differ from these estimates under different assumptions or conditions. During the three months ended March 31, 2026, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

Our condensed consolidated financial statements have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. These policies relate to revenue recognition, goodwill impairment, inventory, income taxes, impairment of indefinite-lived and long-lived assets, and stock-based compensation. We have other important accounting policies and practices; however, once adopted, these other policies either generally do not require us to make significant estimates or assumptions or otherwise only require implementation of the adopted policy and not a judgment as to the policy itself. Management bases its estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Despite our intention to establish accurate estimates and assumptions, actual results may differ from these estimates under different assumptions or conditions. During the six months ended June 30, 2026, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2025.