Safe Pro Group Inc.

Previous wording

During the three months ended March 31, 2026, the Company purchased approximately 79.4% of its inventory from two suppliers (Supplier A 67.9%, and Supplier B 11.5%.) During the three months ended March 31, 2025, the Company purchased approximately 88.9% of its inventory from four suppliers (Supplier C 10.0%, Supplier B 42.0%, Supplier D 15.3% and Supplier E 21.7%).

Current wording

During the three months ended June 30, 2025, the Company purchased approximately 77.2% of its inventory from two suppliers (Supplier D, 45.9% and Supplier E, 31.2%). During the six months ended June 30, 2025, the Company purchased approximately 93.8% of its inventory from four suppliers (Supplier G, 40.8%, Supplier D, 28.3%, Supplier E, 13.5%, and Supplier F, 11.2%,).

Previous wording

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. During the three months ended March 31, 2026 and 2025, the Company operated in three reportable business segments which consisted of (1) the business of Safe-Pro USA, (2) the business of Airborne Response, and (3) the business of Safe Pro AI. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

Current wording

The Company uses “the management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker is the chief executive officer of the Company, who reviews operating results to make decisions about allocating resources and assessing performance of the Company’s reportable segments. The Company operates in three reportable business segments consisting of (1) Safe-Pro USA, (2) Airborne Response, and (3) Safe Pro AI. The Company’s reportable segments offer distinct products and services and are managed separately based on the nature of their operations.

Previous wording

*Cost of Revenue.*During the three months ended March 31, 2026 and 2025, cost of revenues increased to $389,700 compared to $123,236, an increase of $266,464, or 216.2%. Gross profit margins were 68.1% and 33.3%, respectively. The increase in cost of revenue is attributable to significantly higher sales that occurred during the first quarter of 2026 compared to the first quarter of 2025. For the three months ended March 31, 2026 and 2025, gross profit margins for Safe-Pro USA were 50.2% and 25.9%, respectively. Gross profit margins for Airborne Response were 43.6% and (76.0)%, respectively. Gross profit margins for Safe Pro AI were 72.1% and 70.9%, respectively. The increase in margin was attributable to improved absorption of fixed costs, and a favorable mix of higher-margin product and AI-driven revenue during the current period.

Current wording

The change in cost of revenue is attributable to higher revenue levels, improved absorption of fixed costs, and a favorable mix of higher-margin product and AI-driven revenue.

Previous wording

*Operating Expenses.*Total operating expenses for the three months ended March 31, 2026 and 2025 were $3,747,818 and $4,067,256, a decrease of $319,438 or 7.9%. Factors resulting in the decrease are described more fully below.

Current wording

*Operating Expenses.*Total operating expenses for the three months ended June 30, 2026 and 2025 were $4,124,383 and $1,954,903, an increase of $2,169,480 or 111.0%. Total operating expenses for the six months ended June 30, 2026 and 2025 were $7,872,201 and $6,022,159, an increase of $1,850,042 or 30.7%. Factors resulting in the increase are described more fully below.

Previous wording

Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended March 31, 2026 and 2025 were $1,650,663 and $2,024,543, a decrease of $373,880 or 18.5%. The decreases were primarily attributable to a decrease in non-cash stock based compensation of $637,966, partially offset by increased cash compensation associated with personnel additions and operational growth.

Current wording

Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended June 30, 2026 and 2025 were $2,222,179 and $434,470, an increase of $1,787,709 or 411.5%. Total salaries, wages and payroll taxes for the six months ended June 30, 2026 and 2025 were $3,872,842 and $2,459,013, an increase of $1,413,829 or 57.5%. The increases for six months ended June 30, 2026 as compared to the same period in 2025 were primarily attributable to increased salaries, wages and payroll taxes of $1,206,222 associated with personnel additions and operational growth, as well as an increase in non-cash stock-based compensation of $207,607.

Previous wording

Research and Development expenses were $360,397 and $0, for the three months ended March 31, 2026 and 2025, respectively, an increase of $360,397 or 100.0%. The increase is primarily attributable to expanded development efforts and the engagement of external contractors to support enhancements to the artificial intelligence business.

Current wording

*Research and Development.*Total research and development expenses for the three months ended June 30, 2026 and 2025 were $192,435 and $17,875, respectively, an increase of $174,560 or 976.6%. Total research and development expenses for the six months ended June 30, 2026 and 2025 were $552,832 and $17,875, respectively, an increase of $534,957 or 2992.8%. The increases for six months ended June 30, 2026 as compared to the same period in 2025 is primarily attributable to expanded development efforts and the engagement of external contractors to support enhancements to the artificial intelligence business.

Previous wording

Professional fees were $922,257 and $1,602,148 for the three months ended March 31, 2026 and 2025, respectively, a decrease of $679,891 or 42.4%. The decreases are related to a decrease in non-cash expenses for share-based compensation of $805,851, partially offset by increases in director fees, accounting fees, investor relations and public company expense of $125,960.

Current wording

Professional fees were $929,083 and $1,041,362 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $112,279 or 10.8%. Professional fees were $1,851,340 and $2,643,510 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $792,170 or 30.0%. The decreases for six months ended June 30, 2026 as compared to the same period in 2025 are related to a decrease in non-cash expenses for share-based compensation of $1,119,147, partially offset by increases in director fees, accounting fees, investor relations and public company expense of $326,977.

Previous wording

Selling, general and administrative expenses were $758,610 and $355,863 for the three months ended March 31, 2026 and 2025, respectively, an increase of $402,747 or 113.2%. The increases are attributable to increases in D&O insurance expense, travel and contractor fees.

Current wording

Selling, general and administrative expenses were $716,516 and $370,796 for the three months ended June 30, 2026 and 2025, respectively, an increase of $345,720 or 93.2%. Selling, general and administrative expenses were $1,475,126 and $726,660 for the six months ended June 30, 2026 and 2025, respectively, an increase of $748,466 or 103.0%. The increases for six months ended June, 2026 as compared to the same period in 2025 are attributable to increases in D&O insurance expense, travel and contractor fees.

Previous wording

Depreciation and amortization expenses were $55,891 and $84,702 for the three months ended March 31, 2026 and 2025, respectively, a decrease of $28,811, or 34.0%. The decrease was related to amortization of certain finite lived intangible asset technologies, which were fully impaired prior to the beginning of the current period, offset by amortization of newly capitalized technologies.

Current wording

Depreciation and amortization expenses were $64,170 and $90,400 for the three months ended June 30, 2026 and 2025, respectively, a decrease of $26,230, or 29.0%. Depreciation and amortization expenses were $120,061 and $175,101 for the six months ended June 30, 2026 and 2025, respectively, a decrease of $55,040, or 31.4%. The decrease was related to amortization of certain finite lived intangible asset technologies, which were fully amortized prior to the beginning of the current period, offset by amortization of newly capitalized technologies.

Previous wording

Total Other Income Our total other income was $123,904 compared to $40,673, during the three months ended March 31, 2026 and 2025 respectively, an increase of $83,231 or 204.6%. The increase was primarily attributable to higher interest income earned on increased cash balances during the period.

Current wording

Total Other Income, Net. Our total other income, net was $102,709 compared to $8,787, during the three months ended June 30, 2026 and 2025 respectively, an increase of $93,922 or 1068.9%. Our total other income was $226,613 compared to $49,460, during the six months ended June 30, 2026 and 2025 respectively, an increase of $177,153 or 358.2%. The increase was primarily attributable to higher interest income earned on increased cash balances during the period.

Previous wording

Net Loss. We recorded a net loss of $2,793,485 for the three months ended March 31, 2026 as compared to a net loss of $3,965,017, for the three months ended March 31, 2025. The decrease is a result of the factors as described above.

Current wording

Net Loss. We recorded a net loss of $3,168,862 for the three months ended June 30, 2026 as compared to a net loss of $1,914,559, for the three months ended June 30, 2025. We recorded a net loss of $5,962,347 for the six months ended June 30, 2026 as compared to a net loss of $5,879,576 for the six months ended June 30, 2025. The increase is a result of the factors as described above.

Previous wording

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At March 31, 2026, we had a cash balance of $14,802,060 and working capital of $14,394,175.

Current wording

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At June 30, 2026, we had a cash balance of $10,230,514 and working capital of $10,965,737. The Company has the funds to support its planned operations, for a minimum of the next twelve months.

Previous wording

Our current assets at March 31, 2026 decreased by $2,361,640, or 13.2%, to $15,566,806 from $17,928,446, from December 31, 2025. The decreases included cash of $1,991,028, accounts receivable of $38,305, inventory of $161,209 and prepaid expenses and other current assets of $171,098.

Current wording

Our current assets at June 30, 2026 decreased by $5,550,022, or 31.0%, to $12,378,424 from $17,928,446, from December 31, 2025. The decreases included cash of $6,562,574, and prepaid expenses and other current assets of $280,138, partially offset by increases to accounts receivable of $1,150,262, and inventory of $142,428.

Previous wording

Our current liabilities at March 31, 2026 decreased to $1,172,631 from $1,250,844 or a decrease of $78,213, or 6.3% from December 31, 2025. The decrease is comprised of decreases in accrued expenses of $71,009, due to related parties of $272, and current portion of lease liabilities of $18,606, partially offset by increases in accounts payable of $2,341, and contract liabilities of $9,333.

Current wording

Our current liabilities at June 30, 2026 increased to $1,412,687 from $1,250,844 or an increase of $161,843, or 12.9% from December 31, 2025. The increase is comprised of decreases in accrued expenses of $48,178, due to related parties of $4,830, and current portion of lease liabilities of $38,679, partially offset by increases in accounts payable of $68,658, and contract liabilities of $184,872.

Previous wording

Net cash flows used in operating activities for the three months ended March 31, 2026 amounted to $1,177,977 and were primarily attributable to our net loss of $2,793,485, offset by depreciation and amortization expense of $78,822 and stock-based compensation and professional fees of $1,225,520. Changes in operating assets and liabilities were reflected by decreases in; accounts receivable of $38,305, inventory of $161,209, and prepaid and other current assets of $171,098, as well as increases in accounts payable of $2,341 and contract liabilities of $9,333; and partially offset by decreases in lease liabilities $111, and accrued expenses of $71,009.

Current wording

Net cash flows used in operating activities for the six months ended June 30, 2026 amounted to $4,055,774 and were primarily attributable to our net loss of $5,962,347, offset by depreciation and amortization expense of $167,768 and stock-based compensation and professional fees of $2,546,226. Changes in operating assets and liabilities included increases in accounts receivable and other receivables of $1,150,262 and inventory of $142,428, and decreases in accrued expenses of $48,178 and lease liabilities of $221. These uses of cash were partially offset by increases in accounts payable of $68,658 and contract liabilities of $184,872, and a decrease in prepaid expenses and other current assets of $280,138.

Previous wording

Net cash flows used in operating activities for the three months ended March 31, 2025 amounted to $941,751 and were primarily attributable to our net loss of $3,965,017, offset by depreciation and amortization expense of $103,366 and stock-based compensation and professional fees of $2,669,337. Changes in operating assets and liabilities were reflected by increases in; inventory of $28,344, prepaid and other current assets of $69,731, accounts payable of $106,247, accounts receivable of $107,901; and offset by decreases in accrued expenses of $4,601, lease liabilities $33 and contract liabilities of $57,026.

Current wording

Net cash flows used in operating activities for the six months ended June 30, 2025 amounted to $1,984,809 and were primarily attributable to our net loss of $5,879,576, offset by depreciation and amortization expense of $213,309 and stock-based compensation and professional fees of $3,457,764. Changes in operating assets and liabilities included increases in accounts payable of $48,881 and accrued expenses of $71,357, partially offset by decreases in accounts receivable of $85,127, inventory of $35,773, prepaid expenses and other current assets of $132,269, decreases in accrued compensation of $111,279, decreases in contract liabilities of $38,367, and decreases in lease liabilities of $67.

Previous wording

Net cash flows used in investing activities were $81,700 and $123,359, for the three months ended March 31, 2026 and 2025, respectively. During the three months ended March 31, 2026, we purchased property and equipment of $48,200 and investment in intangible technologies of $33,500. During the three months ended March 31, 2025, we purchased property and equipment of $18,247 and investment in intangible technologies of $105,112.

Current wording

Net cash flows used in investing activities were $171,836 and $225,877 for the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, we purchased property and equipment of $108,336 and investment in intangible technologies of $63,500. During the six months ended June 30, 2025, we purchased property and equipment of $21,034 and investment in intangible technologies of $204,843.

Previous wording

During the three months ended March 31, 2025, we had related party advances of $15,816 partially offset by related party repayments of $9,206.

Current wording

During the six months ended June 30, 2026, we had purchases of Treasury Stock of $2,330,134 and repayments to a related party of $14,390, partially offset by related party advances of $9,560.

Previous wording

Intangibles assets, net consists of contractual employment agreements, customer relationships and acquired capitalized internal-use software. All intangible assets determined to have finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. The Company periodically evaluates both finite and indefinite lived intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.

Current wording

Intangible assets, net consists of contractual employment agreements, customer relationships and acquired capitalized internal-use software. All intangible assets determined to have finite lives are amortized over their estimated useful lives. The useful life of an intangible asset is the period over which the asset is expected to contribute directly or indirectly to future cash flows. The Company periodically evaluates both finite and indefinite lived intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable.