Safe Pro Group Inc.
For the period ended Mar 31, 2025. Filed May 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
SPAI$3.09+12.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001493152-24-045955
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001641172-25-010842
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 90 current paragraphs.
49 unchanged; 27 reworded; 14 added; 17 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Current report
This Form 10-Q includes forward-looking statements. These statements involve risks known to us, significant uncertainties, and other factors which may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements.
Current report
Some of the statements used in this report constitute “forward-looking statements” that represent our beliefs, projections and predictions about future events. Forward-looking statements are all statements other than statements of historical fact, including statements that refer to plans, intentions, objectives, goals, targets, strategies, hopes, beliefs, projections, prospects, expectations or other characterizations of future events or performance, and assumptions underlying the foregoing. The words “may,” “could,” “should,” “would,” “will,” “project,” “intend,” “continue,” “believe,” “anticipate,” “estimate,” “forecast,” “expect,” “plan,” “potential,” “opportunity,” “scheduled,” “goal,” “target,” and “future,” variations of such words, and other comparable terminology and similar expressions and references to future periods are often, but not always, used to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements about the following:
Current report
These statements are necessarily subjective, are based upon our current plans, intentions, objectives, goals, strategies, beliefs, projections and expectations, and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements described in or implied by such statements. Actual results may differ materially from expected results described in our forward-looking statements, including with respect to correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of the publicly available information with respect to the factors upon which our business strategy is based, or the success of our business. Furthermore, industry forecasts are likely to be inaccurate, especially over long periods of time.
Current report
Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that may cause actual results, our performance or achievements, or industry results to differ materially from those contemplated by such forward-looking statements include, without limitation, those discussed under the caption “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.
Current report
Supplier concentration
Current report
During the three months ended March 31, 2025, the Company purchased approximately 88.9% of its inventory from four suppliers (American Protection Works 10.0%, Avient Protective Materials 42.0%, Lincoln Fabrics 15.3% and Chatsuboo.net 21.7%. During the three months ended March 31, 2024, the Company purchased approximately 72.2% of its inventory from two suppliers, (Minelab Electronics 40.1% and Hextronics 42.1%.)
Current report
The loss of these suppliers may have a material adverse effect on the Company’s results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.
Current report
*Net Revenue.*For the three months ended March 31, 2025 and 2024, revenues generated were $184,802 and $307,653, a decrease of $122,851 or 39.9%. Comparable sales for Safe-Pro USA were $140,600 for the three months ended March 31, 2025 as compared to $222,356 for the same period in 2024, a decrease of $81,756 or 36.8%. Comparable sales for Airborne Response were $4,204 for the three months ended March 31, 2025 as compared to $85,297 for the same period in 2024, a decrease of $81,093 or 95.1%. For the three months ended March 31,2025 and 2024, sales for Safe Pro AI were $39,998 and $0. The decrease in revenue was attributable to security services budgetary cuts made in Federal Funding in January 2025. We expect this reduction to be temporary until such time a new budget is approved. We are also outsourcing our efforts in finding new customers which specialize in security services for the private sector in US and internationally. The company’s contractual obligation with a customer, Florida Power and Light, required certain training, which occurred in the first quarter of 2025. We expect revenue to resume to normal levels in the second quarter of 2025.
Current report
Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended March 31, 2025 and 2024 were $2,024,543 and $434,578, an increase of $1,589,965 or 365.9%. The increases were primarily attributable to stack based compensation of $1,579,285, pursuant to certain contractual obligations relating to an employment agreement.
Current report
Research and Development expenses were $0 and $85,777, for the three months ended March 31, 2025 and 2024, respectively, a decrease of $85,777 or 100.0%. The decrease is primarily attributable to the Company’s a reduction of development costs to its trademarked product, Spotlight AITM, which was put into service on July 1, 2024.
Current report
Selling, general and administrative expenses were $355,863 and $185,372 for the three months ended March 31, 2025 and 2024, respectively, an increase of $170,491 or 92.0%. The increases are attributable to increases in D&O insurance expense, advertising and contractor fees.
Current report
Depreciation and amortization expenses were $84,702 and $45,601 for the three months ended March 31, 2025 and 2024, respectively, an increase of $39,101, or 85.7%. The increase was related to amortization of finite lived intangible asset technologies.
Current report
During the three months ended March 31, 2025, we had related party advances of $15,816 and related party repayments of $9,206.
Removed paragraphs (17)
Previous report
Recent Developments
Previous report
On August 29, 2024, we consummated our initial public offering (“IPO”), pursuant to which we sold 1,020,000 shares of common stock at an offering price of $5.00 per share. In connection with the IPO, we entered into an underwriting agreement (the “Underwriting Agreement”) with Dawson James Securities, Inc., as representative of the underwriters listed on Schedule I thereto (the “Underwriters”). Pursuant to the Underwriting Agreement, we issued a common stock purchase warrant to the Underwriter for the purchase of 51,000 shares of common stock at an exercise price of $6.25, subject to adjustments (the “Warrant”). The Warrant will be exercisable at any time and from time to time, in whole or in part, during the period commencing on March 1, 2025 and ending on August 28, 2029 and may be exercised on a cashless basis under certain circumstances. In connection with the IPO, (i) our outstanding Series A preferred stock and Series B preferred stock were converted into an aggregate of 2,810,000 shares of common stock; (ii) 480,000 shares of common stock was issued to certain executives pursuant to their respective employment agreements, and (iii) 252,666 shares of common stock was issued upon conversion of convertible notes and accrued interest.
Previous report
In connection with the IPO, we sold 1,020,000 shares of common for gross proceeds of $5,100,000 and received net proceeds of $4,179,500, after fees and expenses of $920,500. The Underwriters did not exercise the option to purchase up to an additional 153,000 shares of common stock from the Company.
Previous report
For the Nine months Ended September 30, 2024 and 2023:
Previous report
*Net Revenue.*For the three months ended September 30, 2024 and 2023, revenues generated were $330,756 and $163,547, an increase of $167,209 or 102.2%. Comparable sales for Safe-Pro USA were $98,637 for the three months ended September 30, 2024 as compared to $58,590 for the same period in 2023, an increase of $40,047 or 68.4%. Comparable sales for Airborne Response were $227,745 for the three months ended September 30, 2024 as compared to $104,957 for the same period in 2023, an increase of $122,788 or 117.0%. Safe Pro AI had sales of $4,375, for the three months ended September 30, 2024, which related to the launch of Spotlight AI on July 1, 2024. The increase in revenue was attributable to an increase in recurring revenue from existing customers.
Previous report
For the nine months ended September 30, 2024 and 2023, revenues generated were $1,281,399 and $640,062, an increase of $641,337 or 100.2%. Comparable sales for Safe-Pro USA were $751,031 for the nine months ended September 30, 2024 as compared to $519,728 for the same period in 2023, an increase of $231,303 or 44.5%. Comparable sales for Airborne Response were $525,992 for the nine months ended September 30, 2024 as compared to $120,334 for the same period in 2023, an increase of $405,658 or 337.1%. Safe Pro AI had sales of $4,375, for the nine months ended September 30, 2024, which related to the launch of Spotlight AI on July 1, 2024. The increase in revenue was attributable to two additional customers, which represented 44.7% of the total sales and an increase in recurring revenue from existing customers for the nine months ended September 30, 2024.
Previous report
Salaries, wages and payroll taxes. Total salaries, wages and payroll taxes for the three months ended September 30, 2024 and 2023 were $2,745,525 and $339,210, an increase of $2,406,315 or 709.4%. Total salaries, wages and payroll taxes for the nine months ended September 30, 2024 and 2023 were $3,571,310 and $911,537, an increase of $2,659,773 or 291.8%. The increases were primarily attributable stock-based compensation of $2,200,000 and $464,199, pursuant to new employment agreements, in preparation for the Company’s initial public offering.
Previous report
Research and Development expenses were $0 and $91,537, for the three months ended September 30, 2024 and 2023, respectively, a decrease of $91,537 or 100.0%. Research and Development expenses were $85,937 and $243,972, for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $158,035 or -64.8%. The decrease is primarily attributable to the second quarter capitalization of development costs of $172,596 for the Company’s advanced artificial intelligence (“AI”) -powered object detection and data analysis and reporting tools for hyper-scalable, cloud-based processing of drone imagery, which was put in service on July 1, 2024.
Previous report
Selling, general and administrative expenses were $418,366 and $89,142 for the three months ended September 30, 2024 and 2023, respectively, an increase of $329,224 or 369.3%. Selling, general and administrative expenses were $853,077 and $290,014 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $563,063 or 194.2%. The increases for the three months ended September 30, 2024 and 2023, are indicative of the increase for the nine months ended September 30, 2024 and 2023, of $563,063 which is primarily attributable to increases in: advertising of $107,592, related to social media branding, employee benefits of $51,366, related to amended employment agreements, franchise taxes of $24,654, other selling, general and administrative costs of $22,866, variable costs which fluctuates to an increase in sales of $212,628 and D&O insurance of $17,708, offset by product costs incurred in the prior year of $30,531.
Previous report
Depreciation and amortization expenses were $81,718 and $45,529 for the three months ended September 30, 2024 and 2023, respectively, an increase of $36,189, or 79.5%. For the nine months ended September 30, 2024 and 2023, depreciation and amortization costs were $172,834 and $136,586 respectively, an increase of $36,248, or 26.5%. The increase relates to the implementation of Spotlight AI on July 1, 2024, which resulted in its amortization with a useful life of five years of $36,000 at September 30, 2024.
Previous report
During the nine months ended September 30, 2024, we had proceeds from the sale of convertible notes payable of $275,002, proceeds from the sale of common stock and warrants of $489,003, proceeds from our initial public offering of $4,179,500, proceeds from notes payable of $236,500, which were offset by repayments due to related party for $20,564 and repayments of notes payable of $236,500.
Previous report
For a Bangladesh customer for which Safe-Pro USA historically derived a significant portion of its revenue the Company has identified two performance obligations:
Previous report
The Company estimated the allocation of the transaction price to each of the above performance obligations since it does not have evidence of standalone selling process, which is summarized as follows:
Previous report
● Performance Obligation 1 - Historically, the Company has received 80% of the contract price upon shipment and presentation of required documents.
Previous report
● Performance Obligation 2 - The remaining 20% of the contract price shall be authorized and received after 1) post-shipment inspection is performed, functionality testing is performed, and approval of the testing is granted. The 20% is triggered after testing and training. Local training with the contracted items consists of 1) use and care training, 2) engineering, repair, & maintenance, and 3) inventory management. Historically, the remaining 20% has not been collected. Although the Company believes this 20% will ultimately be collected, due to the historical non-payment of this 20%, the Company will not record such revenue until such time as collection is probable and all training and inspections are completed.
Previous report
In connection with the revenue associated with the significant customer discussed above, the Company shall pay a commission of approximately 10% of amounts collected to local agents that assist with the facilitation of training, shipment, and documentation.
Previous report
Revenue from other Safe-Pro USA customers is generally recognized at the time of shipment, which is the time that the Company satisfies its performance obligations.
Reworded paragraphs (27)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. See the section titled “Risk Factors” in our prospectus dated August 28, 2024 (“Prospectus”) filed with the Securities and Exchange Commission (the “SEC”) on August 29, 2024 pursuant to Rule 4245(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”), which is available on the SEC’s EDGAR website at www.sec.gov, for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-Q.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes thereto included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. See the section titled “Risk Factors” in our Form 10-K dated March 31, 2025 as filed with the Securities and Exchange Commission (the “SEC”), pursuant to Rule 4245(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”), which is available on the SEC’s EDGAR website at www.sec.gov, for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere in this Form 10-Q.
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 nine months ending September 30, 2024 and 2023, 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 for the entire Company. During the three months ended March 31, 2025 and 2024, 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.
Previous wording
***Cost of Goods Sold and Gross Profit.***Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and the evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer and supply chain. Gross margin will vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing, labor costs for services and depreciation for our drone related fixed assets, our production costs, which includes depreciation related costs for manufacturing equipment, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.
Current wording
***Cost of Goods Sold and Gross Profit.***Gross profit has been and will continue to be affected by various factors, including changes in our supply chain and the evolving product mix. The margin profile of our current products and future products will vary depending on operating performance, features, materials, manufacturer and supply chain. Gross margin will vary as a function of changes in pricing due to competitive pressure, our third-party manufacturing, labor costs for services and depreciation for our drone related fixed assets and our production costs, which includes depreciation related costs for manufacturing equipment, costs of shipping and logistics, provision for excess and obsolete inventory and other factors. We expect our gross margins will fluctuate from period to period depending on the interplay of these various factors.
Previous wording
***Salary, Wages and Payroll Taxes.***Salaries are representative of officer and stock-based compensation and administrative personnel costs. Wages consist primarily of manufacturing wages. The salary and wages associated payroll tax is reflected here as well.
Current wording
***Salary, Wages and Payroll Taxes.***Salaries are representative of officer and stock-based compensation and administrative personnel costs. The salary and wages associated payroll tax is reflected here as well.
Previous wording
Research and Developmentexpenses consist of costs associated with personnel and contractor fees associated with the design and development of our products, product certification, travel, recruiting and information technology. We generally recognize research and development expenses as incurred. Development costs incurred prior to establishment of technological feasibility are expensed as incurred. We expect our research and development costs to continue to increase as we develop new products and modify existing products to meet the changes within our markets.
Current wording
Research and Developmentexpenses consist of costs associated with personnel and contractor fees associated with the design and development of our products, product certification, travel, recruiting and information technology. Development costs incurred prior to establishment of technological feasibility were expensed as incurred. Software development costs related to design enhancement of the product are capitalized. We expect our research and development costs to continue to increase as we develop new products and modify existing products to meet the changes within our markets.
Previous wording
Professional Fees primarily represent certain costs for legal, audit, accounting, public company expense, investor relations, consulting fees and share-based compensation.
Current wording
Professional Fees primarily represent certain costs for legal, audit, accounting, public company expense, investor relations, consulting fees and share-based compensation for services.
Previous wording
Selling, General and Administrativeexpenses consist of expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, commissions payable, national and local regulatory approvals of our products, travel, entertainment, recruiting, operating supplies such as, computer equipment, drones, EOD testing supplies; and facilities and other supporting overhead costs. For the year ending December 31, 2024, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a Responder (DaaR).
Current wording
Selling, General and Administrativeexpenses consist of expenses associated with our training programs, trade shows, marketing programs, promotional materials, demonstration equipment, commissions payable, national and local regulatory approvals of our products, travel, entertainment, recruiting, operating supplies such as, computer equipment, drones, EOD testing supplies; and facilities and other supporting overhead costs. For the year ending December 31, 2025, we expect selling, general and administrative expenses to increase, as we ramp up our sales and marketing expansion efforts to correspond with our increased production efforts, relating to our personal protective gear, the availability of additional AI-powered image processing solutions and new drone-based services such as Drone as a First Responder (DFR).
Previous wording
Comparison of the Three and Nine months Ended September 30, 2024 and 2023
Current wording
Comparison of the Three Months Ended March 31, 2025 and 2024
Previous wording
*Cost of Revenue.*During the three months ended September 30, 2024 and 2023, cost of revenues increased to $196,523 compared to $101,011, an increase of $95,422, or 94.4%. Gross profit margins were 40.6% and 38.2%, respectively. The increase in gross profit margins for the three months ended September 30, 2024 and 2023 were due to increased sales of manufactured product which has a higher gross profit. For the nine months ended September 30, 2024 and 2023, cost of revenue increased to $839,098, as compared to $406,896, for the same period in the prior year, an increase of $432,202 or 106.2%. Gross profit margins were 34.5% and 36.4%, respectively. The decrease in margin was attributable to an increase in sales for two new customers that represented 44.7% of our total sales for the nine months ended September 30, 2024, which was for non-manufactured product which has a lower gross profit margin. We expect our cost of revenues to continue to increase during fiscal 2024 and beyond, as we expand our operations and begin generating additional revenues under our current business. However, we are unable at this time to estimate the amount of the expected increases.
Current wording
*Cost of Revenue.*During the three months ended March 31, 2025 and 2024, cost of revenues decreased to $123,236 compared to $180,438, a decrease of $57,202, or 31.7%. Gross profit margins were 33.3% and 41.4%, respectively. The decrease in cost of revenue is attributable to the decrease in revenue of services at a higher gross profit margin. The decrease in margin was attributable to a decrease in sales for services which have a higher gross profit margin. We expect our cost of revenues to continue to increase during fiscal 2025 and beyond, as we expand our operations and begin generating additional revenues under our current business. However, we are unable at this time to estimate the amount of the expected increases.
Previous wording
*Operating Expenses.*Total operating expenses for the three months ended September 30, 2024 and 2023 were $3,676,307 and $740,664, an increase of $2,935,643 or 396.4%. Total operating expenses for the nine months ended September 30, 2024 and 2023 of $6,192,066 and $2,123,845, an increase of $4,068,221 or 191.5%. Factors resulting in the increase are described more fully below.
Current wording
*Operating Expenses.*Total operating expenses for the three months ended March 31, 2025 and 2024 were $4,067,256 and $1,212,101, an increase of $2,855,155 or 235.6%. Factors resulting in the increase are described more fully below.
Previous wording
Professional fees were $430,698 and $175,246 for the three months ended September 30, 2024 and 2023, respectively, an increase of $255,452 or 145.8%. The increase for the quarter is due to stock based compensation of $200,000. Professional fees were $1,508,908 and $541,736 for the nine months ended September 30, 2024 and 2023, respectively, an increase of $967,172 or 178.5%. The increase for the nine months ended September 30, 2024 and 2023, was attributable to; an increase in non-cash expenses for share-based compensation of $603,000, audit related expenses of $251,675, investor relations of $53,372, public company expense of $27,125, director fees $12,789, other professional fees of $29,889, associated with the preparation of the Company’s initial public offering, offset by a decrease of legal fees of $10,678.
Current wording
Professional fees were $1,062,148 and $460,773 for the three months ended March 31, 2025 and 2024, respectively, an increase of $1,141,375 or 247.7%. The increases for the three months ended March 31, 2025 and 2024, are related to an increase in non-cash expenses for share-based compensation of $992,052 and an increase in accounting, legal fees, public company expense and director fees of $200,036, offset by a decrease of other professional fees of $50,712.
Previous wording
Total Other (Income) Expense. Our total other expenses were $143,382 compared to $1,566, during the three months ended September 30, 2024 and 2023 respectively, an increase of $141,816 or 9055.9%. Our total other expenses were $294,474 compared to $3,580, during the nine months ended September 30, 2024 and 2023 respectively, an increase of $290,894 or 8125.5%. For the nine months ended September 30, 2024, the increase is primarily attributed to an increase in interest expense related to convertible debt of $300,470, offset by an increase in interest income of $9,576 and an increase in interest expense of, from the three months ended September 30, 2023 of $151,898, which was further offset by an increase in interest income of $10,082.
Current wording
Total Other (Income) Expense, Our total other expenses were $(40,673) compared to $58,974, during the three months ended March 31, 2025 and 2024 respectively, an increase of other income of $42,318 or 100.0% and a decrease in interest expense of $57,329. The increase is primarily attributed to a decrease in interest expense related to convertible debt which was offset by an increase of interest income of $12,703 and other income $29,615.
Previous wording
Net Loss. We recorded a net loss of $3,685,456 for the three months ended September 30, 2024 as compared to a net loss of $679,784, for the three months ended September 30, 2023. We recorded a net loss of $6,044,239 for the nine months ended September 30, 2024 as compared to a net loss of $1,894,259, for the nine months ended September 30, 2023. The increase is a result of the factors as described above.
Current wording
Net Loss. We recorded a net loss of $3,965,017 for the three months ended March 31, 2025 as compared to a net loss of $1,143,860, for the three months ended March 31, 2024. 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 September 30, 2024, we had a cash balance of $2,334,715 and working capital of $2,300,448.
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 March 31, 2025, we had a cash balance of $912,219 and working capital of $613,628.
Previous wording
Our current assets at September 30, 2024 increased by $2,075,727, or 162.9%, to $3,349,635 from $1,273,908, from December 31, 2023. The increases included cash of $1,631,347, accounts receivable of $58,141, inventory of $16,115 and prepaid expenses and other current assets of $370,124.
Current wording
Our current assets at March 31, 2025 decreased by $1,264,476, or 46.0%, to $1,485,653 from $2,750,129, from December 31, 2024. The decreases included cash of $1,058,500, accounts receivable of $107,901, inventory of $28,344 and prepaid expenses and other current assets of $69,731.
Previous wording
Our current liabilities at September 30, 2024 decreased to $1,049,187 from $1,416,729 or a decrease of $367,542, or 25.9% from December 31, 2023. The decrease is comprised of decreases in: convertible note payable, net of discount of $343,796, accrued compensation and benefits of $157,945, amounts due to related parties of $20,654, contract liabilities of $14,382, and was offset by increases in accounts payable of $64,661, accrued expenses of $103,122 and lease liabilities of $1,452.
Current wording
Our current liabilities at March 31, 2025 decreased to $872,025 from $893,926 or an increase of $21,901, or 2.4% from December 31, 2024. The decrease is comprised of increases in; accounts payable of $106,247, accrued expenses $33,316, due to related parties of $6,610 and offset by decreases in; accrued compensation of $102,532, current portion of lease liabilities of $8,516, and contract liabilities of $57,026.
Previous wording
Net cash flows used in operating activities for nine months ended September 30, 2023 amounted to $1,752,025 and were primarily attributable to our net loss of $1,894,258 offset by depreciation and amortization expense of $178,323, stock-based compensation of $113,200 and lease costs of $1,882. Changes in operating assets and liabilities were reflected by increases in; accounts receivable of $318,236, inventory of $314, prepaid and other current assets of $20,193, contract liabilities of $34,855, accrued compensation of $55,971, accounts payable of $117,248, and offset by decreases in accrued expenses of $60,889.
Current 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 $2,435,625 and fair value of options and warrants of $233,712. 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, accrued expenses of $97,931, accrued compensation of $102,532; and offset by decreases in accounts receivable of $107,901, lease liabilities $33 and contract liabilities of $57,026.
Previous wording
Net cash flows used in operating activities for the nine months ended September 30, 2024 amounted to $3,065,107 and were primarily attributable to our net loss of $6,044,239, offset by depreciation and amortization expense of $222,630, stock-based compensation of $2,948,000 and amortization of debt discount of $208,006. Changes in operating assets and liabilities were reflected by increases in: inventory of $16,115, accounts receivable of $58,141, prepaid and other current assets of $370,124, accounts payable of $64,661, accrued expenses of $161,652, and was offset by decreases in: accrued compensation and benefits of $157,945, lease liabilities of $9,110 and contract liabilities of $14,382.
Current wording
Net cash flows used in operating activities for the three months ended March 31, 2024 amounted to $568,016 and were primarily attributable to our net loss of $1,143,860 and lease costs of $6, offset by depreciation and amortization expense of $60,677, stock-based compensation and professional fees of $98,000 and amortization of debt discount of $36,785. Changes in operating assets and liabilities were reflected by increases in; inventory of $ 43,480, prepaid and other current assets of $163,113, contract liabilities of $343,517, accrued compensation of $187,559; and offset by decreases in accounts receivable of $90,491, accounts payable $14,083 and accrued expenses of $20,503.
Previous wording
Net cash flows used in investing activities were $226,397 and $28,749, for the nine months ended September 30, 2024 and 2023, respectively. During the nine months ended September 30, 2024, we purchased property and equipment of $53,801 and investment in intangible technologies of $172,596. For the nine months ended September 30, 2023, we purchased property and equipment of $28,749.
Current wording
Net cash flows used in investing activities were $123,359 and $0, for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025, we purchased property and equipment of $18,247 and investment in intangible technologies of $105,112.
Previous wording
Net cash flows provided by financing activities were $4,922,851 and $668,971 for the nine months ended September 30, 2024 and 2023, respectively.
Current wording
Net cash flows provided by financing activities were $6,610 and $264,255 for the three months ended March 31, 2025 and 2024, respectively.
Previous wording
During the nine months ended September 30, 2023, we had proceeds from the sale of convertible notes payable of $989,250 offset by repayments due to related party for $320,679.
Current wording
Net cash flows provided by (used in) financing activities were $264,255, for the three months ended March 31, 2024. During the three months ended March 31, 2024, we had proceeds from the sale of convertible notes payable of $275,001, offset by repayments due to related party for $10,746.
Previous wording
Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.
Current wording
Safe-Pro USA recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms. Revenue from product sales is recognized when the related goods are shipped whereas revenue from training and inspection activities is recognized when the services are completed, and payment is probable. Discounts in multiple elements sold as a single arrangement are allocated proportionately to the individual elements based on the fair value charged when the element is sold separately.
Previous wording
Safe Pro AI will sell subscriptions to its customers for the use of its software under a software as a service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including demining, in law enforcement and security. The Company’s SaaS offerings shall be sold under a prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers will utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI will initially charge data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.
Current wording
Safe Pro AI sells subscriptions and licenses to its customers for the use of its software under a software-as-a-service subscription model (“SaaS”), which will allow for the rapid, automated processing of aerial and ground-based imagery uploaded by customers, making it an ideal solution for a number of applications including defense, demining, in law enforcement and border security. Safe Pro AI’s, SaaS offerings are sold under a license or prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers will utilize declining prices as the volume grows. Under this model, customers are charged an upfront fee based upon the number of gigapixels of aerial images uploaded into the system for processing. For customer convenience, Safe Pro AI will initially charges data processing fees on a per hectare basis (1 hectare = 1,000 square meters). Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct.
Previous wording
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business acquisitions. Goodwill is not subject to amortization but is subject to impairment tests at least annually. The Company reviews the carrying amounts of goodwill by reporting unit at least annually, or when indicators of impairment are present, to determine if goodwill may be impaired. To test goodwill impairment, the Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. The Company would not be required to quantitatively determine the fair value of goodwill unless it determines, based on the qualitative assessment there are indicators of impairment. Under the quantitative test of goodwill, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value exceeds the fair value, then the goodwill is impaired by the excess amount. The Company performs its annual testing for goodwill during the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit.
Current wording
Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in business acquisitions. Goodwill is not subject to amortization but is subject to impairment tests at least annually. The Company reviews the carrying amounts of goodwill by reporting unit at least annually, or when indicators of impairment are present, to determine if goodwill may be impaired. To test goodwill impairment, the Company may first assess qualitative factors to determine whether it is more likely thannot that the fair value of goodwill is less than its carrying value. The Company would not be required to quantitatively determine the fair value of goodwill unless it determines, based on the qualitative assessment there are indicators of impairment. Under the quantitative test of goodwill, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. If the carrying value exceeds the fair value, then the goodwill is impaired by the excess amount. The Company performs its annual testing for goodwill during the fourth quarter of each fiscal year or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit.
Previous wording
Stock-based compensation is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the consolidated financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
Current wording
Stock-based compensation is accounted for based on the requirements of ASC 718 –“Compensation –Stock Compensation”, which requires recognition in the consolidated financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under the FASB’s Accounting Standards Update (“ASU”) 2016-09Improvements to Employee Share-Based Payment.
Previous wording
The Company accounts for business acquisitions using the acquisition method of accounting where the assets acquired and liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company’s consolidated financial statements as of the date of the acquisition.
Current wording
The Company accounts for business acquisitions using the acquisition method of accounting where the assets acquired, and the liabilities assumed are recognized based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use of significant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenue, expenses, and cash flows, weighted average cost of capital, discount rates, and estimates of terminal values. Business acquisitions are included in the Company’s consolidated financial statements as of the date of the acquisition.
Previous wording
The Company evaluates acquisitions pursuant to ASC 805, “Business Combinations,” to determine whether the acquisition should be classified as either an asset acquisition or a business combination. Acquisitions for which substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets are accounted for as an asset acquisition. For asset acquisitions, the Company allocates the purchase price of these acquired assets on a relative fair value basis and capitalizes direct acquisition related costs as part of the purchase price. Acquisition costs that do not meet the criteria to be capitalized are expensed as incurred and presented in general and administrative costs in the consolidated statements of operations, if any.
Current wording
The Company evaluates acquisitions pursuant to ASC 805, “Business Combinations,” to determine whether the acquisition should be classified as either an asset acquisition or a business combination. Acquisitions for which substantially all of the fair value of the gross assets acquired are concentrated in a single identifiable asset or a group of similar identifiable assets are accounted for as an asset acquisition. For acquisitions of an asset or a group of assets that does not constitute a business, the Company applies ASC 805-50 which provides guidance on acquisitions of assets rather than a business. Acquisitions of assets are accounted for using the cost accumulation and allocation model. For asset acquisitions, the Company allocates the purchase price of these acquired assets on a relative fair value basis and capitalizes direct acquisition related costs as part of the purchase price. Acquisition costs that do not meet the criteria to be capitalized are expensed as incurred and presented in general and administrative costs in the consolidated statements of operations, if any.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
The Company recognizes revenue when, or as, the performance obligation is satisfied. Performance obligations are determined through a review of customer contracts and may differ between customers depending upon contract terms.