Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements. Please see the explanatory note concerning "Forward-Looking Statements" in Part I of the Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not materially affected by inflation.

Overview

AgEagle™ Aerial Systems Inc. ("AgEagle", the "Company", "we", "our", "us" or "EagleNXT"), through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for our customers. In 2010, AgEagle began by pioneering professional-grade fixed-wing drones and aerial imagery-based data collection and analytics imagery solutions for agriculture. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced autonomous uncrewed aerial systems ("UAS") which drive revenue at the intersection of flight hardware, sensors, and software for the commercial, public safety, and defense markets. AgEagle also recently established ThirdEye USA, a joint venture dedicated to counter-UAS systems that provide detection, identification, and tracking capabilities for defense and critical infrastructure customers. The Company has achieved multiple regulatory milestones, including approvals for Beyond Visual Line of Sight and/or Operations Over People in the United States, Canada, Brazil, and the European Union, and inclusion on the Blue UAS the Defense Innovation Unit of the U.S. Department of War ("DoW").

AgEagle's shift and expansion from solely manufacturing fixed-wing farm drones in 2018, to offering what the Company believes is one of the industry's best fixed-wing, full-stack drone solutions, culminated in 2021 when the Company acquired three market-leading companies engaged in producing UAS airframes, sensors and software for commercial and government use. In addition to a robust portfolio of proprietary, connected hardware and software products; an established global network of over 165 UAS resellers; and enterprise customers worldwide; these acquisitions also brought AgEagle a highly valuable workforce comprised largely of experienced engineers and technologists with deep expertise in the fields of robotics, automation, manufacturing and data science. In 2022, the Company succeeded in integrating all three acquired companies with AgEagle to form one global company focused on taking autonomous flight performance to a higher level. The company is implementing a strategy of expansion into closely related markets of VTOL drones, precision guided loitering munitions, and counter-drone systems through select investments and international joint ventures.

Our core technological capabilities include robotics and robotics systems autonomy; advanced thermal and multispectral sensor design and development; embedded software and firmware; secure wireless digital communications and networks; lightweight airframes; UAS design, integration and operations; power electronics and propulsion systems; controls and systems integration; fixed wing flight; flight management software; data capture and analytics; human-machine interface development and integrated mission solutions.

The Company is currently headquartered in Allen, Texas where we house our sensor and drone manufacturing operations. We also design and manufacture drones in Lausanne, Switzerland. We operate a distribution and service center for certain drone products in Raleigh, North Carolina.

We intend to grow our business and preserve our leadership position by developing new drones, sensors and software and capturing a significant share of the global drone market. In addition, we expect to accelerate our growth and expansion through strategic acquisitions of companies offering distinct technological and competitive advantages and have defensible intellectual property protection in place, if applicable.

Key Growth Strategies

We intend to materially grow our business by leveraging our proprietary, best-in-class, full-stack drone solutions, industry influence and deep pool of talent with specialized expertise in robotics, automation, custom manufacturing and data science to achieve greater penetration of the global UAS industry - with near-term emphasis on capturing larger market share of the agriculture, energy/utilities, infrastructure and government/military verticals. We expect to accomplish this goal by first bringing three core values to life in our day-to-day operations and aligning them with our efforts to earn the trust and continued business of our customers and industry partners:

	●	Innovation - Committed to driving forward with positive change, our team is committed to innovate in technology, strategies, and cross-department initiatives.
	●	Passion - This fuels our obsession with excellence, our desire to try the difficult things and tackle big problems, and our commitment to meet our customers' needs - and then surpass them.
	●	Integrity - This is not optional or situational at AgEagle - it is the foundation for everything we do, even when no one is watching.
		Key components of our growth strategy include the following:
	●	Establish centers of excellence with respective expertise in UAS software, multi-spectral and counter-drone sensors, and airframes. These centers of excellence cross pollinate ideas, industry insights and skill sets to yield intelligent autonomous solutions that fully leverage AgEagle's experienced team's specialized knowledge and know-how in robotics, automation, custom manufacturing and data science.
	●	Deliver new and innovative solutions. AgEagle's research and development efforts are critical building blocks of the Company, and we intend to continue investing in our own innovations, pioneering new and enhanced products and solutions that enable us to satisfy our customers - both in response to and in anticipation of their needs. AgEagle believes that by investing in research and development, the Company can be a leader in delivering innovative autonomous robotics systems and solutions that address market needs beyond our current target markets, enabling us to create new opportunities for growth.
	●	Foster our entrepreneurial culture and continue to attract, develop and retain highly skilled personnel. AgEagle's company culture encourages innovation and entrepreneurialism, which helps attract and retain highly skilled professionals. We believe this culture is key to nurture the design and development of the innovative, highly technical system solutions that give us our competitive advantage.
	●	Growth through acquisition. Through successful execution of our growth-through-acquisition strategies, we intend to acquire technologically advanced UAS companies and intellectual property that complement and strengthen our value proposition to the market. We believe that by investing in complementary acquisitions, we can accelerate our revenue growth and deliver a broader array of innovative autonomous flight systems and solutions that address specialized market needs.

Competitive Strengths

		AgEagle believes the following attributes and capabilities provide us with long-term competitive advantages:
	●	Proprietary technologies, in-house capabilities and industry experience - We believe our decade of experience in commercial UAS design and engineering; in-house manufacturing, assembly and testing capabilities; and advanced technology development skillset serve to differentiate AgEagle in the marketplace. In fact, approximately 70% of our Company's global workforce is comprised of engineers and data scientists with deep experience and expertise in robotics, automation, custom manufacturing, and data analytics. In addition, AgEagle is committed to meeting and exceeding quality and safety standards for manufacturing, assembly, design and engineering and testing of drones, drone subcomponents and related drone equipment in our U.S. and Swiss-based manufacturing operations. As a result, our Switzerland-based operations have earned ISO:9001 international certification for our Quality Management System.

	●	In December 2022, we unveiled our new eBee™ VISION, a small, fixed-wing UAS designed to provide real-time, enhanced situational awareness for critical intelligence, surveillance and reconnaissance missions; to produce and deliver eBee™ VISION fixed-wing drones and customized command and control software that proves compatible and is in full compliance with the DoW Robotic and Autonomous System-Air Interoperability Profile . In addition, three branches of European military forces accepted delivery of eBee VISION drones in 2023. In support of its sales and pre-order efforts, AgEagle's team has been engaged in numerous live demonstrations and intensive training sessions with officials from government and military agencies across the world seeking to leverage the power of eBee VISION in their respective drone operations. In July 2023 alone, we completed a comprehensive training session with our first European military customers, who were confirmed as eBee VISION operators and qualified trainers of new users. These new customers confirmed with AgEagle's technical teams that all operational capabilities of the eBee VISION continue to meet and exceed performance benchmarks in scouting, surveillance, usability, fast deployment and flight time, among other use case criteria specified by the international military community. We have also been working in close collaboration with our network of valued added reselling partners in France, United Kingdom, Poland, Italy and Spain, among other countries, to conduct live demonstrations and technical exchanges with prospective new customers, with emphasis on showcasing use of eBee VISION UAS for public safety and first responder missions, border patrol and a wide range of commercial applications.
	●	In May 2023, we released the new RedEdge-P™ dual high resolution and RGB composite drone sensor, representing yet another AgEagle technological advancement in aerial imaging cameras, seamlessly integrating the power and performance of the RedEdge-P and the new RedEdge-P blue cameras in a single solution. The RedEdge-P dual doubles analytical capabilities with the benefit of a single camera workflow. Its coastal blue band - the first of its kind in the market - was specifically designed for vegetation analysis of water bodies; environmental monitoring; water management; habitat monitoring, protection and restoration; and vegetation species and weeds identification, including differentiating and counting plants, trees, invasive species and weeds. In August 2025, the RedEdge-P green camera was released, providing additional data bands for improved crop monitoring and analytics. The RedEdge-P triple was brought to market in October 2025, bringing 15-band superspectral imaging capability to the AgEagle product family.

	●	We offer market-tested drones, sensors and software solutions that have earned the longstanding trust and fidelity of customers worldwide - Through successful execution of our acquisition integration strategy in 2021, AgEagle is now delivering a unified line of industry trusted drones, sensors and software that have been vigorously tested and consistently proven across multiple industry verticals and use cases. For instance, our line of eBee fixed wing drones have flown more than one million flights over the past decade serving customers across, among others, the surveying and mapping; engineering and construction; military/defense; mining, quarries and aggregates; agriculture humanitarian aid and environmental monitoring, industries. Featured in over 100 research publications globally, advanced sensor innovations developed and commercialized by AgEagle have served to forge new industry standards for high performance, high resolution, thermal and multispectral imaging for commercial drone applications in agriculture, plant research, land management and forestry. In addition, we have championed the development of end-to-end software solutions which power autonomous flight and deliver actionable, contextual data and analytics for numerous Fortune 500 companies, government agencies and a wide range of businesses in agriculture, energy and utilities, construction and other industry sectors.

	●	Our eBee TAC™ UAS has been approved by the Defense Innovation Unit for procurement by the Department of War- We believe that the eBee TAC is ideally positioned to become an in-demand, mission critical tool for the U.S. military, government and civil agencies and our allies worldwide; and expect that this will prove to be a major growth catalyst for our Company and positively impact our financial performance in the years ahead. eBee TAC is available for purchase by U.S. government agencies and all branches of the military on GSA Schedule Contract #47QTCA18D003G, supplied by Hexagon US Federal and partner Tough Stump Technologies as a standalone solution or as part of the Aerial Reconnaissance Tactical Edge Mapping Imagery System. Tough Stump Technologies is actively engaged in training military ground forces based in the U.S. and in Central Europe on the use of eBee TAC for mid-range tactical mapping and reconnaissance missions.
	●	Our eBee™ X series of fixed wing UAS, including the eBee X, eBee Geo and eBee TAC, are the first and only drones on the market to comply with Category 3 of the sUAS Over People rules published by the Federal Aviation Administration. It is another important testament of our commitment to providing best-in-class solutions to our commercial customers, and we believe it will serve as a key driver in the growth of eBee utilization in the United States.
	●	Our eBee X series of drones are the world's first UAS in its class to receive design verification for BVLOS and OOP from European Union Aviation Safety Agency ("EASA"). The EASA design verification report ("DVR") demonstrates that the eBee X meets the highest possible quality and ground risk safety standards and, thanks to its lightweight design, effects of ground impact are reduced. As such, drone operators conducting advanced drone operations in 27 European Member States, Iceland, Liechtenstein, Norway, and Switzerland can obtain the HIGH or MEDIUM robustness levels of the M2 mitigation without additional verification from EASA.Regulatory constraints relating to limitations of BVLOS and OOP have continued to be a gating factor to widespread adoption of commercial drone technologies across a wide range of industry sectors worldwide. Being the first company to receive this DVR from EASA for M2 mitigation is a milestone for AgEagle and our industry in the European Union and will be key to fueling growth of our international customer base.

	●	In August 2022, we announced that the eBee X, eBee GEO and eBee AG were the first commercial drones to be designated with the C2 class identification label in accordance with EASA regulations. As of August 22, 2022, drone operators flying C2 labeled eBees are able to conduct missions in the "Open Category" with all the advantages that this entails. The C2 certification allows the eBee X series, with correct labelling, to fly at a horizontal distance of 30 meters from uninvolved people. By contrast, heavy drones like VTOLs or quadcopters must maintain a distance of 150 meters from people and any residential, commercial, industrial and recreational areas, limiting their operational capabilities to remote zones.
	●	In early October 2023, the eBee X series of drones were designated with the C6 class identification label in accordance with European Union regulations. As of January 1, 2024, drone operators of C6-labeled eBees are able to conduct BVLOS operations with airspace observers over a controlled ground area in a sparsely populated environment throughout Europe. Operators simply need to submit a required declaration with their applicable National Aviation Authority indicating whether they intend to fly missions in accordance with the European Standard Scenario- ("STS-") 01 or STS-02. The inclusion of the C6 marking alongside our C2-labeled eBee drones will significantly enhance the market advantages for our European customers. It grants access to areas and operational modes restricted to drones weighing over 4 kilograms, all without the requirement for formal permissions or regulatory waivers.

	●	In August 2025, EagleNXT launched the MicaSense RedEdge-P™ Green multispectral sensor resulting in steady sales activity that we believe demonstrates growing interest from both research and commercial customers. The RedEdge-P Green sensor expands EagleNXT's multispectral sensor portfolio by adding an enhanced green band sensor to the Company's other spectral bands. This complimentary approach is designed to support early detection of vegetative stress and subtle crop health changes during key growth stages. Customer use cases have focused on improving data quality and resolution to assist with decision-making in precision agriculture workflows. Customers have deployed the sensor in both standalone and multi-sensor configurations, including dual- and triple-sensor setups, to enable higher-band imaging for more advanced analysis. The sensor's compatibility with a broad range of leading drone platforms has supported adoption across a diverse set of applications and regions.
	●	Our March 2026 investment in Aerodrome Group Ltd. (TASE: ARDM) ("ARDM"), along with its inherent Joint Venture right reflects our initial move into the precision loitering munition space.
	●	On April 2026 investment into ThirdEye Systems Ltd. (TASE: THES) ("ThirdEye Systems") and subsequent launch of the ThirdEye USA Joint Venture, reflects a bold move into the high demand counter-drone systems space, with a specific focus on the rapid growing U.S. and Canadian market.
	●	In May 2026 our eBee VISION unmanned aircraft system (UAS) was selected for listing for purchase by the U.S. Army on their newly launched UAS Marketplace. The UAS Marketplace, launched on March 24, 2026, is a digital platform developed in partnership with Amazon Web Services and the Army Enterprise Cloud Management Agency. It serves as an "Amazon-like" storefront that enables U.S. Army units, government agencies, the Pentagon and other U.S. military branches, and allied nations to easily compare vetted drone systems, submit feedback, and place orders directly. The initiative aims to accelerate procurement, foster competition and innovation, lower barriers for industry partners, and deliver advanced capabilities to soldiers at greater speed and scale. The inclusion of the eBee VISION on the UAS Marketplace allows authorized buyers to review detailed specifications, compare capabilities with other systems, and leverage soldier feedback to inform future acquisitions, supporting the U.S. Army's goals of agility, competition, and rapid technology insertion.
	●	In Jun 2026 EagleNXT's counter-UAS Joint Venture, ThirdEye USA, was selected out of multiple entries to participate in Experimentation: Transforming in Contact (EXTiC) 26-2 ("EXTiC 26-2"), a key U.S. Central Command ("CENTCOM") technology experimentation initiative. CENTCOM's event, in collaboration with the Defense Innovation Unit, provided operationally relevant scenarios to help participants rapidly test, validate, and integrate innovative solutions. ThirdEye USA successfully showcased the MeduzaX system. MeduzaX is an advanced, AI-powered Counter-Unmanned Aerial System designed to detect, track, and classify hostile drones using passive electro-optical technology. These solutions deliver secure, real-time intelligence, surveillance, and reconnaissance, portable deployment, and advanced sensor integration, making them ideal for dynamic, contested environments.
	●	In July 2026, EagleNXT announced the reintroduction of the MicaSense RedEdge-MX multispectral sensor to the marketplace. This return brings back a trusted and popular sensors, enhanced with modern technology interfacing, greater durability and updated performance features which meet the evolving needs of precision agriculture, environmental monitoring, and research professionals. Production of the RedEdge-MX will take place in our Allen, Texas facility on a newly installed, dedicated assembly and test cell to ensure quality and the capacity to meet the needs of our customers. The RedEdge-MX has long been a benchmark for reliable multispectral data capture. Its reintroduction underscores EagleNXT's commitment to delivering proven, customer-favorite tools alongside its current lineup, including the advanced RedEdge series.
	●	Our global reseller network currently has more than 200 drone solutions providers in over 75+ countries - By leveraging our relationships with the specialty retailers that comprise our global reseller network, AgEagle benefits from enhanced brand-building, lower customer acquisition costs and increased reach, revenues and geographic and vertical market penetration. With the integration of our 2021 strategic acquisitions, we can now leverage our collective reseller network to accelerate our revenue growth by educating and encouraging our partners to market AgEagle's full suite of airframes, sensors and software as bundled solutions in lieu of marketing only previously siloed products or product lines to end users.
	●	In late 2022, we partnered with government contractor Darley to expand the market reach of AgEagle's high performance fixed wing drones and sensors to the U.S. first responder and tactical defense markets. Distinguished as one of the nation's longest standing government contracting organizations, Darley is expected to become a key contributor to AgEagle's success in delivering best-in-class UAS solutions to a wide range of state and federal agencies. Providing our best-in-class autonomous flight solutions for public safety applications through trusted resellers like Darley represents an entirely new market opportunity for AgEagle and one we intend to vigorously pursue in the coming year.

Impact of the Risks and Uncertainties On Our Business Operations

Global economic challenges, including the impact of wars, pandemics, rising inflation and supply-chain disruptions, regulatory investigations, and adverse labor and capital market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the UAV industry and our operational and financial performance remain uncertain and outside of our control. Specifically, because of the aforementioned continuing risks, our ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either we or any of our third parties in the supply chain for materials used in our manufacturing and assembly processes continue to be adversely impacted, our supply chain may be further disrupted, limiting our ability to manufacture and assemble products.

Critical Accounting Estimates

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include the reserve for obsolete inventory, stock options and consideration, valuation of intangible assets, fair value of derivative liabilities, and deemed dividends resulting from the triggering of down round provisions and modifications to equity-linked instruments.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting estimates affect the more significant judgments and estimates used in preparing our condensed consolidated financial statements. Please see Note 2 to our condensed consolidated financial statements, which are included in this Quarterly Report on Form 10-Q. There have been no material changes made to the critical accounting estimates during the periods presented in the condensed consolidated financial statements.

Three and Six Months Ended June 30, 2026 as Compared to Three and Six Months Ended June 30, 2025

Revenues

For the three months ended June 30, 2026, revenues were $2,685,971 as compared to $4,197,561 for the three months ended June 30, 2025, a decrease of $1,511,590, or 36.0%. The decrease of $1,511,590 was attributable to a decrease of $1,663,105 in revenues from our drone products related to the timing of national contracts and additional time each contract takes to close. The federal government shutdown in the United States, along with delayed approved defense funding bills, also contributed to the decrease in drone revenue. An increase of $151,515 in sensor revenues was due to sales mix, product repricing, and international growing seasons.

For the six months ended June 30, 2026, revenues were $4,087,177 as compared to $7,846,970 for the six months ended June 30, 2025, a decrease of $3,759,793, or 47.9%. The decrease of $3,759,793 was attributable to a decrease of $3,254,988 in revenues from our drone products related to the timing of national contracts and additional time each contract takes to close, reduced sales in Europe related to the sentiment of US defense company's and shifting the market to local producers. The federal government shutdown in the United States, along with delayed approved defense funding bills, also contributed to the decrease in drone revenue. A decrease in the sensor revenues was due to sales mix, product repricing, and international growing seasons.

Cost of Sales and Gross Profit

For the three months ended June 30, 2026, cost of sales was $1,326,018 as compared to $1,857,682 for the three months ended June 30, 2025, a decrease of $531,664 or 28.6%. For the three months ended June 30, 2026, gross profit was $1,359,953 as compared to $2,339,879 for the three months ended June 30, 2025, a decrease of $979,926, or 41.9%. The primary factors contributing to the decrease in our cost of sales and gross profit margin were reduced revenue resulitng in less cost of sales, offset by fixed costs, salaries and rent that were not offset by revenue.

For the six months ended June 30, 2026, cost of sales was $2,142,297as compared to $3,373,275 for the six months ended June 30, 2025, a decrease of $1,230,978 or 36.5%. For the six months ended June 30, 2026, gross profit was $1,944,880 as compared to $4,473,695 for the six months ended June 30, 2025, a decrease of $2,528,815, or 56.5%. The primary factors contributing to the decrease in our cost of sales and gross profit margin were reduced revenue and higher fixed costs, salaries and rent that were not offset by revenue.

General and Administrative Expenses

For the three months ended June 30, 2026, general and administrative expenses were $3,899,548 as compared to $2,534,170 for the three months ended June 30, 2025, representing an increase of $1,365,378, or 53.9%. The increase was primarily attributable to higher compensation expenses related to the hiring of additional employees, relocation costs, and increased professional fees, including legal and consulting expenses. These increases were partially offset by lower amortization expense in 2026, primarily due to impairment charges recorded during the year ended December 31, 2025.

For the six months ended June 30, 2026, general and administrative expenses were $6,653,575 as compared to $4,506,980for the six months ended June 30, 2025, representing an increase of $2,146,595, or 47.6%. The increase was primarily attributable to higher compensation expenses related to the hiring of additional employees, relocation costs, and increased professional fees, including legal and consulting expenses. These increases were partially offset by lower amortization expense in 2026, primarily due to impairment charges recorded during the year ended December 31, 2025.

Research and Development

For the three months ended June 30, 2026, research and development expenses were $1,983,084 as compared to $810,990 for the three months ended June 30, 2025, an increase of $1,172,094, or 144.5%. The increase was primarily attributable to the engagement of consultants to improve our sensors and release new products. The Company also hired additional employees for its engineering team for the further development of its drone products, resulting in higher salary expenses.

For the six months ended June 30, 2026, research and development expenses were $3,746,226 as compared to $1,547,401 for the six months ended June 30, 2025, an increase of $2,198,825, or 142.1%. The increase was primarily attributable to the engagement of consultants to improve our sensors and release new products. The Company also hired additional employees for its engineering team for the further development of its drone products, resulting in higher salary expenses.

Sales and Marketing

For the three months ended June 30, 2026, sales and marketing expenses were $1,082,952 as compared to $1,062,345 for the three months ended June 30, 2025, an increase of $20,607, or 1.9%. The increase was primarily attributable to higher department headcount, increased public relations expenses, and greater travel activity by our sales and marketing team.

For the six months ended June 30, 2026, sales and marketing expenses were $2,248,781 as compared to $1,489,486 for the six months ended June 30, 2025, an increase of $759,295, or 51.0%. The increase was primarily attributable to higher department headcount, increased public relations expenses, and greater travel activity by our sales and marketing team.

Other Income (Expense), net

For the three months ended June 30, 2026, other expense was $9,781,098 as compared to the other income of $787,250 for the three months ended June 30, 2025, a decrease of $10,568,348. The decrease was primarily attributable to the recognition of a 726,000 gain from changes in the fair value of outstanding warrant liabilities, which were recorded during the three months ended June 30, 2025. These items were offset by an unrealized loss on the fair value of the short and long term investments in equity securities of $9,837,228 recognized during the three months ended June 30, 2026.

For the six months ended June 30, 2026, other loss was $3,262,665 as compared to the other income of $8,849,835 for the six months ended June 30, 2025, a decrease of $ 12,112,500.The decrease was primarily attributable to the recognition of an 8,506,000 gain from changes in the fair value of outstanding warrant liabilities, $250,000 from the sale of the Measure domain name, and approximately $236,251 from an employee retention tax credit refund, all of which were recorded during the six months ended June 30, 2025. Additionally, an unrealized loss on the fair value of the short and long terms investments in equity securities of $3,359,546 offset by $234,941of the interest from our cash investment was recognized during the six months ended June 30, 2026.

Net Income

For the three months ended June 30, 2026, we generated a net loss of $15,386,729 as compared to a net loss of $1,280,376 for the three months ended June 30, 2025, a decrease of $14,106,353 or 1101.7%. The increase in our net loss is primarily attributable to the above-mentioned changes in our cost of sales, general and administrative, research and development, sales and marketing, and other net income (expense).

For the six months ended June 30, 2026, we generated a net loss of $13,966,367 as compared to a net income of $5,779,663 for the six months ended June 30, 2025, increase of $19,746,030 or 341.6%. The increase in our net loss is primarily attributable to the above-mentioned changes in our cost of sales, general and administrative, research and development, sales and marketing, and other net income (expense).

Cash Flow

Six Months Ended June 30, 2026 as Compared to the Six Months Ended June 30, 2025

As of June 30, 2026, cash on hand was $15,910,228, as compared to $ 29,858,655 as of December 31, 2025, a decrease of $13,948,427 or 46.7%.

For the six months ended June 30, 2026, cash used in operations was $8,372,751, an increase of $4,333,066 or 107.3%, as compared to cash used of $4,039,685 for the six months ended June 30, 2025. The increase in cash used in operating activities was principally driven by the reduction in our net income, after adjusting for non-cash operating activities, due to increases in operating expenses related to consulting, salary expense and the opening of the Texas facility, partially offset by an increase in operating cash flows from changes in operating assets and liabilities, primarily the reduction of outstanding accounts payable. All of which resulted in an increase in cash used in operating activities.

For the six months ended June 30, 2026, cash used in investing activities was $13,612,909, an increase of $13,589,027, or 56900.7%, as compared to cash used of $23,882 for the six months ended June 30, 2025. The increase is related to $555,076 purchases of property and equipment and $13,000,000used in the purchase of the short and long term investment in equity securities.

For the six months ended June 30, 2026, cash provided by financing activities was $7,937,202, an increase of $1,991,456 or 33.5%, as compared to cash provided of $5,945,746 for the six months ended June 30, 2025. The increase in cash provided by our financing activities was due to an increase in net proceeds from the exercise of Series F Warrants, issuance of Series F and Series F Warrants, sales of Series G offset by dividend payments.

Liquidity, Capital Resources and Going Concern

As of June 30, 2026, we had a working capital of $23,720,063 and cash on hand of $15,910,228. For the six months ended June 30, 2026, we incurred a loss from operations of $10,703,702, an increase of $ 7,633,530, or 248.6%, as compared to $3,070,172 for the six months ended June 30, 2025. During the six months ended June 30, 2026, we used cash in our operating activities of $8,372,751. As of June 30, 2026, we do not have sufficient cash on hand to meet our financial obligations for the next twelve months.

Off-Balance Sheet Arrangements

On June 30, 2026, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.