FJET Starfighters Space, Inc. - 10-K

ITEM 1A. RISK FACTORS

In addition to the information contained in this Annual Report on Form 10-K, we have identified the following material risks and uncertainties which reflect our outlook and conditions known to us as of the date of this Annual Report. These material risks and uncertainties should be carefully reviewed by our stockholders and any potential investors in evaluating the Company, our business and the market value of our common stock. Furthermore, any one of these material risks and uncertainties has the potential to cause actual results, performance, achievements or events to be materially different from any future results, performance, achievements or events implied, suggested or expressed by any forward-looking statements made by us or by persons acting on our behalf. Refer to "Cautionary Note Regarding Forward-looking Statements".

There is no assurance that we will be successful in preventing the material adverse effects that any one or more of the following material risks and uncertainties may cause on our business, prospects, financial condition and operating results, which may result in a significant decrease in the market price of our common stock. Furthermore, there is no assurance that these material risks and uncertainties represent a complete list of the material risks and uncertainties facing us. There may be additional risks and uncertainties of a material nature that, as of the date of this Annual Report, we are unaware of or that we consider immaterial that may become material in the future, any one or more of which may result in a material adverse effect on us. You could lose all or a significant portion of your investment due to any one of these material risks and uncertainties.

Risks Related to our Business and Industry

We are operating in an evolving industry, which makes it difficult to forecast our revenue, plan our expenses and evaluate our business and future prospects.

We are operating in a rapidly evolving industry that may not develop in a manner favorable to our business. While our business has grown rapidly, and much of that growth has occurred in recent periods, the markets for launch services, space systems, spacecraft components and space data applications may not continue to develop in a manner that we expect or that otherwise would be favorable to our business. As a result of uncertainty in the new and evolving industry in which we operate, our ability to forecast our future results of operations and plan for and model future growth is limited and subject to a number of uncertainties. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors, and our results of operations in future reporting periods may be below the expectations of investors or analysts. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors or analysts, causing our business to suffer.

A significant portion of our business model is dependent upon the ongoing development of certain key technologies, which will require increased investment and operating expenses in the future, which may in turn impact our ability to reach and maintain revenue and profitability milestones.

The success of the Company's business plan relies significantly on its ability to complete its development and launch, first to suborbital space and then to low earth orbit, payload delivery platform. Historically, the Company has generated revenue from other lines of business which, while related, will require extensive additional investment to get to market. While the Company's business and mission has evolved, it has historically generated less than $1,000,000 revenue and other income annually, operating at break even or loss. We incurred a net loss of $16,543,616 for the fiscal year ended December 31, 2025, a net loss of $7,908,777 for the fiscal year ended December 31, 2024, and a net loss of $4,681,583 for the fiscal year ended December 31, 2023. We expect to continue to incur increased net losses for the next several years and we may not achieve or maintain profitability in the future. We believe there is a significant market opportunity for our business, and we intend to invest aggressively to capitalize on this opportunity. Due to the evolving nature of the markets in which the Company operates, it is difficult for us to predict our future results of operations or the limits of our market opportunity. We expect our operating expenses to significantly increase as we make significant investments in research and development, equipment, infrastructure, and personnel that we believe will be necessary to develop our capabilities, expand and support our operations and infrastructure, further develop our rocket and delivery platforms and otherwise compete effectively in our chosen markets. Furthermore, these efforts could be more costly than we expect and therefore negatively impact our financial and business performance. In addition, as we grow we will incur additional significant legal, accounting, and other expenses that we did not incur as a smaller company. If our revenue does not increase to offset these expected increases in our operating expenses, we will not be profitable in future periods. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow on a consistent basis. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations, and financial condition could be adversely affected. There is no assurance that we will ever achieve or sustain profitability and may continue to incur significant losses going forward. Any failure by us to achieve or sustain profitability on a consistent basis could cause the value of our Common Stock to decline.

We will require significant capital investment in order to meet our objectives, and lack of that investment or the success of the execution of our plan may impact our ability to continue as a going concern.

Since inception, the Company has generated revenues and other income of less than $1,000,000 annually from its "non-payload launch" business, operating as a smaller, privately held concern with no outside investment. The execution of the Company's vision and mission to utilize its current assets and experience to build its space payload launch platform will require significant investment, resulting in net losses for the Company's fiscal year ended December 31, 2025, primarily as a result of increased expenses related to the Company's operations and go-forward business model. There can be no assurances that we will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain financing through private placements, public offerings and/or bank financing necessary to support our working capital requirements. To the extent that funds generated from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on acceptable terms. These conditions raise substantial doubt about our ability to continue as a going concern. If adequate working capital is not available, we may be forced to discontinue operations, which would cause investors to lose their entire investment. Our auditors have indicated that these conditions raise substantial doubt about the Company's ability to continue as a going concern.

Our ability to execute on our business plan to become a provider of low earth orbit satellite launch services is dependent us obtaining and maintaining licenses, waivers, certifications, permits and authorizations, including the requisite launch licenses from the Federal Aviation Administration (the "FAA") Office of Commercial Space Transportation (the "AST").

Our ability to execute our business plan depends on achieving certain certifications and licenses from the FAA AST as well as potentially other agencies and operators. Obtaining these certifications or licenses will require the Company to successfully execute certain tests or achieve certain technical, business and performance milestones, some of which may require the testing of certain components of our platform that are currently operational, proposed, or in development. In furtherance of obtaining licensing, we are currently (i) preparing the requisite documentation to submit to the FAA's Office of Commercial Space Transportation, and (ii) scheduling the required wind tunnel and drop testing. There is no guarantee that we will successfully meet these requirements or milestones in a timely manner, the failure to of which could materially impact the Company's ability to operate our business.

Our business relationships with various governmental and private entities are subject to the policies, priorities, regulations, mandates and funding levels of such entities and may be negatively or positively impacted by any change thereto.

Historically, a portion of our revenues have been derived from government contracts or related agreements from contracts with the U.S. government and its agencies or from subcontracts with other U.S. government contractors. While we expect these revenues to continue to grow as we expand our service, there are many contingencies that might adversely affect our existing agreements or our ability to qualify for new agreements. We expect these revenues to continue to grow as we expand our services. Our contracts with the U.S. government may be fixed-price contracts. Under firm fixed-price contracts, work performed and products shipped are priced at a fixed amount without adjustment for actual costs incurred in connection with the contract. Therefore, we bear the risk of loss if costs increase.

Changes in government policies, priorities, regulations, government agency mandates, funding levels through agency budget reductions, the imposition of budgetary constraints, or a decline in government support or deferment of funding for programs in which we or our customers participate could result in contract terminations, delays in contract awards, reduction in contract scope, performance penalties or breaches of our contracts, the failure to exercise contract options, the cancellation of planned procurements, and fewer new business opportunities, all of which could negatively impact our business, financial condition, results of operations and cash flows.

We are subject to the procurement policies and procedures set forth in the Federal Acquisition Regulation (" FAR "). The FAR governs aspects of U.S. government contracting, including contractor qualifications and acquisition procedures. The FAR provisions in U.S. government contracts must be complied with in order for the contract to be awarded and provides for audits and reviews of contract procurement, performance, and administration. Failure to comply with the provisions of the FAR could result in contract termination.

In addition, contracts with any government, including the U.S. government, may be terminated or suspended by the government at any time and could result in significant liability obligations for us. Remedies for termination may fall short of the financial benefit associated with full completion and operation of a contract. In addition, we may not be able to procure new contracts to offset the revenue or backlog lost as a result of any termination of government contracts. The loss of one or more large contracts could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Our ability to pursue many of our business activities is regulated by various agencies and departments of the U.S. government and, in certain circumstances, the governments of other countries. Commercial space launches require licenses from the U.S. Department of Transportation (" DoT ") and the FAA AST. The Federal Communications Commission also requires licenses for radio communications during our rocket launches. Our classified programs require that we and certain of our employees maintain appropriate security clearances. We also require export licenses from the U.S. Department of State (" DoS "), the U.S. Department of Commerce (" DoC ") and, occasionally, the governments of other countries with respect to transactions we have with foreign customers or foreign subcontractors.

The Company has also worked with foreign governments or entities in the pursuit of its business initiatives. Our ability to operate may be negatively impacted by a change in the relationship status between the U.S. government or government agencies and any other country where we might engage in business in the future.

Our future revenue and operating results are dependent on our ability to generate a sustainable order rate for our products and services and develop new technologies to meet the needs of our customers or potential new customers.

Our financial performance is dependent on our ability to generate a sustainable order rate for our products and services. This can be challenging and may fluctuate on an annual basis as the number of contracts awarded varies. If we are unable to win new awards or execute existing contracts as expected, our business, results of operations, and financial position could be further adversely affected.

The rocket launch services, mission services, satellite, and satellite component industries are each characterized by development of technologies to meet changing customer demand for complex and reliable products and services. Our products and services embody complex technology and may not always be compatible with current and evolving technical standards and systems developed by others. Failure or delays to meet the requisite and evolving industry or user standards could have a material adverse effect on our business, results of operations, and financial condition.

Our business critically depends upon our ability to develop, produce, test and successfully deploy our platform, which requires continued development in order to be proven to deliver our solution and stay relevant as the market demands change and mature.

The Company is still in the early stage of development of several of our core systems, including the development, testing, certifying and licensing our rocket family (referred to as " StarLaunch "), a core component of our delivery platform. We have previously experienced, and may experience in the future, delays or other complications in the design, manufacture and commercialization of our platform and services. If we fail to develop and successfully commercialize new technologies, if we fail to develop such technologies before our competitors, or if such technologies fail to perform as expected, or are inferior to those of our competitors, our business, financial condition and results of operations could be materially and adversely impacted.

We expect to derive a substantial amount of our revenues from only a core group of major customers. Our inability to attract new customers, a loss of, or default by, one or more of our customers, or a material adverse change in any such customer's business or financial condition, could materially reduce our future revenues.

Currently, while the overall market opportunity is significant and growing, there is a small group of potential customers for the Company. The failure to attract customers, or to perform for one customer could negatively influence our ability to attract business from others. Furthermore, many of our customers are involved in initiatives that could be impacted by a range of risk factors. Should one of more of our customers experience a downturn in their business or find themselves in financial difficulties, this could result in their ceasing or reducing their use of our services or becoming unable to pay for services they had contracted to buy. In addition, some of our customers' industries are undergoing significant consolidation, and our customers may be acquired by each other or other companies, including by our competitors. Such acquisitions could adversely affect our ability to sell services to such customers and to any end-users whom they may serve. Some customers have in the past defaulted, and our customers may in the future default, on their obligations to us due to bankruptcy, lack of liquidity, operational failure, or other reasons. Such defaults could adversely affect our revenues, operating margins and cash flows.

Disruptions in U.S. government operations and funding could have a material adverse effect on our revenues, earnings and cash flows, and otherwise adversely affect our financial condition.

Any disruptions in federal government operations could have a material adverse effect on our revenues, earnings, and cash flows. A prolonged failure to maintain significant U.S. government operations, particularly those pertaining to our business, could have a material adverse effect on our revenues, earnings, and cash flows. Continued uncertainty related to recent and future government shutdowns, the budget and/or the failure of the government to enact annual appropriations, such as long-term funding under a continuing resolution, could have a material adverse effect on our revenues, earnings and cash flows. Additionally, disruptions in government operations may negatively impact regulatory approvals and guidance that are important to our operations.

We may not be successful in developing new technology, and the technology we are successful in developing may not meet the needs of our customers or potential new customers.

The markets in which we operate are characterized by changing technology and evolving industry standards, and we may not be successful in identifying, developing and marketing products and services that respond to rapid technological change, evolving technical standards and systems developed by others. Our competitors may develop technology that better meets the needs of our customers. If we do not continue to develop, manufacture, and market innovative technologies or applications that meet customers' requirements, sales may suffer and our business may not continue to grow in line with historical rates or at all. If we are unable to achieve sustained growth, we may be unable to execute our business strategy, expand our business, or fund other liquidity needs, and our business prospects, financial condition and results of operations could be materially and adversely affected.

We operate in highly competitive industries and in various jurisdictions across the world which may cause us to have to reduce our prices.

We operate in an industry where many of our competitors are larger and have substantially greater resources than we have. We may also face competition in the future from emerging low-cost competitors. Competition in the suborbital and low earth orbit payload launch and related launch services business is becoming increasingly diverse, and while our current competitors offer different products and services, there can often be competition for contracts.

In addition, some of our foreign competitors currently benefit from, and others may benefit in the future from, protective measures by their home countries where governments are providing financial support, including significant investments in the development of new technologies. Government support of this nature greatly reduces the commercial risks associated with rocket launch, satellite and satellite component development activities for these competitors. This market environment may result in increased pressures on our pricing and other competitive factors.

To become and remain competitive, the Company will require capital for research and development, asset improvement and pilot training, sales and marketing efforts, capital expenditures, inventory purchases, investor relations, the repayment of outstanding loans and general corporate purposes. The Company may not have sufficient resources to maintain its operations on a competitive basis, which could materially and adversely affect the business, financial condition, results of operations or prospects of the Company.

We often rely on a single vendor or a limited number of vendors to provide certain key products or services and the inability of these key vendors to meet our needs could have a material adverse effect on our business.

Historically, we have contracted with a single vendor or a limited number of vendors to provide certain key products or services, such as our StarLaunch rocket development, which is a core component of our development and platform solution. As part of our business philosophy, we outsource the development of certain critical components of our products and services. While we believe that this approach gives us certain advantages, we recognize that it can also create dependencies on third parties that can negatively and critically impact our business. In addition, our manufacturing operations depend on specific technologies and companies for which there may be a limited number of vendors. If these vendors are unable to meet our needs because they fail to perform adequately, are unable to match new technological requirements or problems, or are unable to dedicate engineering and other resources necessary to provide the services contracted for, our business, financial position and results of operations may be adversely affected. While alternative sources for these products, services, and technologies may exist, we may not be able to develop these alternative sources quickly and cost-effectively, which could materially impair our ability to operate our business. Furthermore, these vendors may request changes in pricing, payment terms, or other contractual obligations, which could cause us to make substantial additional investments.

We depend on several specialized suppliers for the majority of specialized supply needs. Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.

We depend on several specialized suppliers for the majority of specialized supply needs. We obtain our replacement and spare parts, components, sub systems, and equipment from suppliers that we believe to be reliable and reputable. The majority of our requirements are consumables in nature, including liquid oxygen, fuel, and tires. The first two of these items are supplied by Kennedy Space Center space port services. Disruptions in the supply of key raw materials or components and difficulties in the supplier qualification process, as well as increases in prices of raw materials, could adversely impact us.

Many raw materials, major components, and product equipment items are procured or subcontracted on a single or sole-source basis. Although we believe that sources of supply for raw materials and components are generally adequate, it is difficult to predict what effects shortages or price increases may have in the future. Our ability to manage inventory and meet delivery requirements may be constrained by our suppliers' inability to scale production and adjust delivery of long-lead time products during times of volatile demand. Our inability to fill our supply needs would jeopardize our ability to fulfill obligations under commercial and government contracts, which could, in turn, result in reduced sales and profits, contract penalties or terminations, and damage to customer relationships, and could have a material adverse effect on our operating results, financial condition, or cash flows.

Key raw materials and components used in our operations include composite materials, electronic, electro-mechanical and mechanical components, fuel systems, maintenance components, systems and subsystems that must be successfully integrated into finished products and systems. We are impacted by increases in the prices of raw materials used in production on fixed-price business. We monitor sources of supply to attempt to assure that adequate raw materials and other components and supplies needed in manufacturing processes are available. Prolonged disruptions in the supply of any of our key raw materials or components, difficulty completing qualification of new sources of supply, implementing use of replacement materials, components or new sources of supply, or a continuing increase in the prices of raw materials, energy, or components could have a material adverse effect on our operating results, financial condition, or cash flows.

Developments related to the conflict in the Middle East and the global response, could adversely affect our business, financial condition and results of operations.

The conflict in Iran has led to the disruption of global supply chains and energy markets. This has led to increased volatility in commodity prices, and could adversely affect market conditions and have an adverse affect on our business, financial condition and results of operations.

The expansion of our operations subjects us to additional risks that can adversely affect our operating results.

We contemplate further expansion of our operations as part of our growth strategy, further research and development, geographic expansion, services expansion and other potentially critical necessities. Our current and contemplated operations subject us to a variety of risks, including:

recruiting and retaining talented and capable management, pilots, engineers and employees;

competition from other companies with significant market share in those markets and with better understanding of demand;

difficulties in enforcing contracts, collecting accounts receivables, and longer payment cycles;

regulatory, political or contractual limitations on our ability to operate in certain foreign markets, including trade barriers such as export requirements, tariffs, taxes and other restrictions and expenses;

compliance with anti-bribery laws, including without limitation the Foreign Corrupt Practices Act ;

varying security laws and regulations in the United States and other countries;

differing regulatory and legal requirements and possible enactment of additional regulations or restrictions on the use, import or export of our products and services, which could delay or prevent the sale or use of our products and services in some jurisdictions;

currency translation and transaction risk, which may negatively affect our revenue, cost of net revenue, and gross margins, and could result in exchange losses;

heightened exposure to political instability, war and terrorism;

access to launch capacity at government-controlled launch sites, such as the Kennedy Space Center and the Space Force's Launch Range Delta 45 at the Cape Canaveral Space Force Station;

the Company's ability to expand geographically;

weaker protection of intellectual property rights in some countries; and

overlapping of different tax regimes.

Any of these risks could harm our operations and reduce our sales, adversely affecting our business, operating results, financial condition and growth prospects.

Our fleet of supersonic aircraft requires continued sourcing and inventory evolution, regular maintenance and the upgrading or replacement of aging parts, and our inability to add to and upgrade our fleet, find qualified technicians or source replacement parts may result in some of our aircraft being inoperable for extended periods of time or permanently decommissioned, the occurrence of which can materially and adversely affect our operations.

A core part of our overall platform is our use of high-performance aircraft, which were originally manufactured between 1963 and 1969, and which have been decommissioned from the military and retrofitted for use as the first stage vehicle of our platform. Given the age of our existing aircraft, we have sought to acquire additional aircraft to support our mission. While we expect to be able to add to our fleet, there is no guarantee that more aircraft can be successfully added. Today, the Company's fleet consists of seven Lockheed F-104s, with 1-seat and 2-seat configurations. These aircraft have been upgraded over the years both before and after their acquisition by the Company. However, as with any aircraft, it is critical to maintain and upgrade while also assuring that there are appropriate spare parts to service. We designate the 1-seat aircraft as core launch vehicles and 2-seat aircraft as training, testing, and support vehicles. Each aircraft goes through rigorous testing and upgrades from avionics to safety systems. We maintain over 20 spare engines as well as brakes, tires and other components. While it is not necessarily unusual for a specific aircraft to have a long lifespan, these aircraft require a significant surplus of spare parts in order to maintain air worthiness. While we have sourced what we believe is a 10-year operating backlog of supplies and parts, there is no guarantee that there will be sufficient supply of parts and supplies to continue to support the functional capabilities of our aircraft. We have designed our platform to support optimized cadence (repetitive takeoff and delivery) and built our model using our current fleet. However, during any period of time in which one or more of our aircraft are not operational, we may lose most or all of the revenue that otherwise would have been derived from such aircraft. If one or more of our aircraft experiences significant damage or deterioration such that it is no longer operational and must be permanently decommissioned, it could significantly impact our business, prospects and profitability.

We are currently seeking to acquire additional newer model aircraft (" Platform II Aircraft ") to modernize our fleet and minimize risks related to our currently aging fleet. The availability of aircraft which have comparable abilities to the Lockheed F-104 aircraft which are able to be purchased by civilians is very limited, and we may be unable to secure an agreement to acquire the Platform II Aircraft on acceptable financial terms, or at all. In order to acquire the Platform II Aircraft, we may be required to raise additional capital through debt or equity financings, and there is no assurance we will be able to secure sufficient additional capital. In addition, we believe that that the Platform II Aircraft would, like the Lockheed F-104, be decommissioned military aircraft which are no longer being manufactured. 9  There is no assurance that we would be able to secure a sufficient supply of parts and supplies to continue to support the functional capabilities of the Platform II Aircraft, if acquired. Our inability to acquire the Platform II Aircraft, repair or replace damaged existing aging Aircraft, or correct any other technical problem in a timely manner could result in a significant loss of revenue.

The payloads and related solutions and systems that we may contract to deliver are subject to manufacturing and launch delays, mission and strategy shifts, damage or destruction during pre-launch operations, launch failures and incorrect orbital placement, the occurrence of which can materially and adversely affect our operations.

While we are a payload delivery service provider for third parties and do not currently plan on developing our own satellites, we are dependent on such third parties for the timely delivery of their payloads and delivery requirements. Delays in the manufacturing of satellites or other payloads, launch delays, damage or destruction during pre-launch operations, launch failures or incorrect orbital placement could have a material adverse effect on our business, financial condition and results of operations. The loss of, or damage to, a payload due to a launch failure could result in significant delays in anticipated revenue as well as impact our reputation across the industry. Any launch delay, launch failure, underperformance, delay, or perceived delay could have a material adverse effect on our results of operations, business prospects and financial condition.

Our revenue, results of operations and reputation may be negatively impacted if our platform fails to operate in the expected manner.

Our platform consists of both manned and unmanned components. Launches are technologically complex procedures and may be disrupted by any number of issues including weather, facility access and scheduling, and demand priority, which may impact our ability to deliver our service in a timely manner. Sophisticated software used in our products and services may contain defects that can unexpectedly interfere with the software's intended operation, while physical elements may be impacted by a range of performance issues. Defects or other delivery delays may also occur in components and products that we purchase from third parties. Our services require the third-party development of rockets that must function under demanding and unpredictable operating conditions and in harsh and potentially destructive environments. Our products and services may not be successfully implemented, pass required acceptance criteria, or operate or give the desired output, or we may not be able to detect and fix all defects in rockets and systems we sell and/or use. Failure to do so could result in lost revenue and damage to our reputation and may adversely affect our ability to win new contract awards.

9   F-104 Starfighter , Lockheed Martin   (Oct. 1, 2020), Lockheed Martin .

Our business involves significant risks and uncertainties that may not be covered by insurance.

A significant portion of our business relates to designing, developing and manufacturing advanced rocket technology products and services. New technologies may be untested or unproven. Failure of some of these products and services could result in extensive property damage. Accordingly, we may incur liabilities that are unique to our products and services.

The amount of insurance coverage that we maintain may not be adequate to cover all claims or liabilities. Existing coverage may be canceled while we remain exposed to the risk and it is not possible to obtain insurance to protect against all operational risks, natural hazards and liabilities.

The price and availability of insurance fluctuate significantly. Insurance market conditions or factors outside our control at the time we are in the market for the required insurance, such as failure of our aircraft and rockets, could cause premiums to be significantly higher than current estimates and could reduce amounts of available coverage. The cost of our insurance has been increasing and may continue to increase. Higher premiums on insurance policies will reduce our operating income by the amount of such increased premiums. If the terms of insurance policies become less favorable than those currently available, there may be limits on the amount of coverage that we can obtain or we may not be able to obtain insurance at all.

While we endeavor to maximise the benefits of insurance protection such as business interruption insurance, it is not always feasible to obtain certain policies. Given the evolution of the industry, any business interruption losses could exceed the coverage available or be excluded from our insurance policies. Any disruption of our ability to operate our business could result in a material decrease in our revenues or significant additional costs to replace, repair, or insure our assets, which could have a material adverse impact on our financial condition and results of operations.

Interruption or failure of our infrastructure could hurt our ability to effectively perform our daily operations and provide and produce our products and services, which could damage our reputation and harm our operating results.

We are vulnerable to natural disasters and significant disruptions including hurricanes, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, epidemics or pandemics, acts of terrorism, power shortages and blackouts, aging infrastructures and telecommunications failures. In the event of such a natural disaster or other disruption, we could experience: disruptions to our operations or the operations of suppliers, subcontractors, distributors or customers; destruction of facilities; and/or loss of life.

The availability of many of our products and services depends on the continuing operation of our information technology and communications systems. Any downtime, damage to, or failure of our systems could result in interruptions in our operations and services, which could reduce our revenue and profits. Our systems are vulnerable to damage or interruption from hurricanes, floods, fires, power loss, aging infrastructure, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm our systems. An infrastructure failure could result in the destruction of our Aircraft, rockets, and other components being manufactured or in inventory, manufacturing delays, or additional costs. The occurrence of any of the foregoing could result in lengthy interruptions in our operations and services and/or damage our reputation, which could have a material adverse effect on our financial condition and results of operations.

Any significant disruption in or unauthorized access to our computer systems or those of third parties that we utilize in our operations, including those relating to cybersecurity or arising from cyber-attacks, could result in a loss or degradation of service, unauthorized disclosure of data, or theft or tampering of intellectual property, any of which could materially adversely impact our business.

Our operations, products, services and intellectual property are inherently at risk of disruption, loss, inappropriate access, or tampering by both insider threats and external bad actors. In particular, our operations face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information, intellectual property and networks. In addition, insider threats, threats to the safety of our directors and employees, threats to the security of our facilities, infrastructure, and supply chain, and threats from terrorist acts or other acts of aggression could have a material adverse impact on our business.

Our customers and suppliers face similar threats. Customer or supplier proprietary, classified, or sensitive information stored on our networks is at risk. Assets, intellectual property and products in customer or supplier environments are also inherently at risk. We also have risk where we have access to customer and supplier networks and face risks of breach, disruption, or loss as well.

Our systems and processes can be attacked by third parties to obtain access to our data, systems and assets. The techniques used to gain unauthorized access are constantly evolving, and we may be unable to anticipate or prevent all unauthorized access, disruption, loss, or harm. Because of our highly desired intellectual property and our support of the U.S. government and other governments, we (and our customers and suppliers) may be a particularly attractive target for such attacks by hostile foreign governments. We cannot offer assurances that future attacks will not materially adversely affect our business.

A security event or other significant disruption of our operations, systems, assets, products, or services could:

disrupt the proper functioning of our networks, applications and systems and therefore our operations and/or those of certain of our customers or suppliers;

result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of, our, our customers', or our suppliers' proprietary, confidential, sensitive or otherwise valuable information, including trade secrets, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes;

destroy or degrade assets including space, ground and intellectual property assets;

manipulate or tamper with our operations, products, services or other systems delivered to our customers or suppliers;

compromise other sensitive government functions; and

damage our reputation with our customers (particularly agencies of various governments) and the public generally.

A security event that involves classified or other sensitive government information or certain controlled technical information could subject us to civil or criminal penalties and could result in loss of security clearances and other accreditations, loss of our government contracts, loss of access to classified information, loss of export privileges or debarment as a government contractor.

Our technology may violate the proprietary rights of third parties, which could have a negative impact on our operations.

If any of our technology violates proprietary rights, including copyrights and patents, third parties may assert infringement claims against us. Certain software modules and other intellectual property used by us or in rockets and systems make use of or incorporate licensed software components and other licensed technology. These components are developed by third parties over whom we have no control. Any claims brought against us may result in limitations on our ability to use the intellectual property subject to these claims. We may be required to redesign our rockets and systems or to obtain licenses from third parties to continue our offerings without substantially re-engineering such rockets or systems. Our intellectual property rights may be invalidated, circumvented, challenged, infringed or required to be licensed to others. An infringement or misappropriation could harm any competitive advantage we currently derive or may derive from our proprietary rights.

Indemnity provisions in certain agreements potentially expose us to losses.

Our agreements with certain third parties include indemnification provisions, under which we agree to indemnify them for losses suffered or incurred as a result of damages caused by us to property or persons, which, in certain instances, may include losses related to intellectual property infringement. The terms of these indemnity provisions generally survive for a certain period of time after execution of the corresponding agreement. Any dispute with a third party with respect to such obligations could have adverse effects on our relationship with that party and any potential indemnity payment could harm our business, operating results and financial condition.

We may not have adequate capital to fund our business and may need substantial additional funding to continue operations. We may not be able to raise capital when needed, if at all, which would force us to delay, reduce or eliminate our business development efforts and could cause our business to fail.

We have limited capital available to us. If our entire original capital is fully expended and additional costs cannot be funded from borrowings or capital from other sources, then our financial condition, results of operations, and business performance would be materially adversely affected. We may require additional capital for the development of our business operations. We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect. Accordingly, we will need to obtain additional funding in order to continue our operations. We may not be able to raise needed additional capital or financing due to market conditions or for regulatory or other reasons. We cannot assure that we will have adequate capital to conduct our business. If additional funding is not obtained, we may need to reduce, defer or cancel business development efforts, or overhead expenditures to the extent necessary. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition, and results of operations.

Uncertain global macro-economic and political conditions could materially adversely affect our results of operations and financial condition.

Our results of operations are materially affected by economic and political conditions in the United States and internationally, including inflation, deflation, interest rates, availability of capital, energy and commodity prices, trade laws and the effects of governmental initiatives to manage economic conditions. Current or potential customers may delay or decrease spending on our products and services as their business and/or budgets are impacted by economic conditions. The inability of current and potential customers to pay us for our products and services may adversely affect our earnings and cash flows.

If we are unable to hire, retain or motivate qualified personnel, consultants, independent contractors, and advisors, we may not be able to grow effectively.

Our performance will be largely dependent on the talents and efforts of highly skilled individuals. The loss of one or more members of our management team or other key employees or consultants could materially harm our business, financial condition, results of operations and prospects. Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization. We face competition for personnel and consultants from other companies, universities, public and private research institutions, government entities and other organizations.  If we do not succeed in attracting excellent personnel or in retaining or motivating them, we may be unable to grow effectively. In addition, our future success will depend in large part on our ability to retain key consultants and advisors. We cannot assure that any skilled individuals will agree to become an employee, consultant, or independent contractor of the Company. Our inability to retain their services could negatively impact our business and our ability to execute our business strategy.

We are highly dependent on the services of Tim Franta, our new Chief Executive Officer, and if we are unable to retain Mr. Franta, our ability to compete could be harmed.

Our success depends, in part, on our ability to retain our key personnel. We are now highly dependent on the services of Tim Franta, who has been appointed to replace Rick Svetkoff as our Chief Executive Officer. Mr. Franta has served as our Vice President of Development since October 18, 2022, and continues to serve in that capacity.  Prior to that, Mr. Franta was the deputy director of Energy Florida based in Cape Canaveral from October 2018 to September 2022, and Director of Special Projects from 2012 to October 2018. Previously, Mr. Franta has worked for the Florida Legislature and was chief of staff for the Florida Space Authority. Mr. Franta's expertise and industry connections would be very difficult to replace, and if he were to discontinue his service to us due to death, disability, retirement or any other reason, we would be significantly disadvantaged. We do not currently maintain a key person life insurance policy with respect to Mr. Franta.

We have historically been highly dependent on the services of Rick Svetkoff, our former President and Chief Executive Officer, and it remains unclear whether his recent departure will adversely affect our ability to compete.

Historically, we have been highly dependent on the services of Rick Svetkoff, our former President and Chief Executive Officer.  Mr. Svetkoff resigned as the Chief Executive Officer, President, Chairman and director of the Company on February 19, 2026.  Mr. Svetkoff has historically been the source of many, if not most, of the ideas and execution driving our Company.  Although Mr. Svetkoff's resignation has not materially affected the day-to-day operations of the Company, it remains unclear at this time whether his departure will adversely affect our ability to compete in the long term.

Failure to develop our internal controls over financial reporting as we grow could have an adverse impact on us. We have identified material weaknesses in our internal controls over financial reporting as of December 31, 2025, which we may not be able to remedy in a timely manner.

As our Company matures, we will need to continue to develop and improve our current internal control systems and procedures to manage our growth. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish appropriate controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition, or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

Our management has identified material weaknesses in our internal control over financial reporting during the year ended December 31, 2025, and concluded that, due to such material weakness, our disclosure controls and procedures were not effective as of December 31, 2025. To address our material weaknesses, we are in the process of planning to implement measures designed to improve our internal control over financial reporting and remediate the control deficiencies that led to the material weaknesses. Such changes may not, however, be effective in establishing the adequacy of our internal control over financial reporting. If the material weaknesses are not adequately remediated, or if we identify further material weaknesses in our internal controls, our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our business, financial condition, results of operations and the price of our Common Stock.

Failure to comply with United States federal and state laws relating to employment could subject us to penalties and other adverse consequences.

We are subject to various employment-related laws in the jurisdictions in which our employees are based. We face risks if we fail to comply with applicable United States federal or state wage laws and wage laws of the international jurisdictions where we currently operate or may operate in the future. Any violation of applicable wage laws or other labor- or employment-related laws could result in complaints by current or former employees, adverse media coverage, investigations and damages or penalties which could have a materially adverse effect on our reputation, business, financial condition and results of operations. In addition, responding to any such proceedings may result in a significant diversion of management's attention and resources, significant defense costs and the incurrence of other professional fees.

Changes to applicable United States tax laws and regulations or exposure to additional income tax liabilities could affect our business and future profitability.

Since all of our operations are located in the United States, we are subject to various United States federal, state and local taxes. New laws and policy relating to taxes may have an adverse effect on our business and future profitability. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

We may be subject to litigation and other legal proceedings that could adversely affect our business, financial condition, and results of operations, and the outcome of pending litigation is inherently uncertain.

From time to time, we may become a party to litigation, claims, regulatory inquiries, governmental investigations and other legal proceedings arising in the ordinary course of business or otherwise. Any such legal proceedings, regardless of their merit or outcome, can be time-consuming, costly, and distracting to management, and may result in materially adverse monetary damages, injunctive relief or reputational harm.

Specifically, on April 9, 2026, Richard “Rick” Svetkoff, our former CEO, President, Executive Chairman and Director, filed a complaint in the 18 th Judicial Circuit in Brevard County, Florida against the Company, our current directors and CEO, and Flagship Bank as trustee for funds held in the name of our wholly-owned subsidiary, Starfighters International, Inc. See Item 3. “Legal Proceedings” for a more complete description of this litigation.

The results of legal proceedings are inherently uncertain, and adverse judgments or settlements in any such disputes may result in materially adverse monetary damages or injunctive relief against us. Even if we are ultimately successful in defending against any such claims, we may incur significant legal fees, management time and other costs that could adversely affect our financial performance. Any claims or litigation could damage our reputation and impair our ability to attract and retain customers, partners and employees. The outcome of the pending litigation cannot be predicted, and an adverse result could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, negative publicity arising from litigation can cause harm to our reputation independent of the ultimate legal outcome. Adverse media coverage or public attention surrounding any litigation matters may negatively affect investor sentiment, customer relationships and business partner confidence. There is no guarantee that any actions we take to defend our reputation will be effective or will mitigate the impact of such negative publicity.

Misconduct by our officers, directors or employees could expose us to financial losses, legal liability, reputational harm and negative publicity, any of which could have a material adverse effect on our business.

We are exposed to the risk of fraud, misconduct or other improper activities by our current or former officers, directors or employees. Such misconduct could include, without limitation, unauthorized financial transactions, misappropriation or conversion of corporate assets, breach of fiduciary duty, self-dealing, noncompliance with applicable laws and regulations, failure to disclose material information accurately, improper use of confidential or proprietary information, violations of securities laws (including insider trading), or other conduct that is inconsistent with our policies, legal obligations or ethical standards.

As described in greater detail under Item 3. “Legal Proceedings,” our ongoing internal investigation has identified alleged misconduct by our former CEO, Mr. Svetkoff, both prior to and following his resignation on February 19, 2026, including alleged unauthorized transfers of Company funds without approval of our Board of Directors or audit committee.

Although we have adopted a code of business conduct and ethics and internal control procedures, it is not always possible to identify and deter misconduct, and the precautions we take may not be effective in preventing all improper activities or protecting us from resulting financial losses or legal liability. Any actual or alleged misconduct by our current or former officers, directors or employees can generate negative publicity, damage our reputation and harm our relationships with customers, investors, business partners and other stakeholders. The costs of internal investigations, legal defense and remediation, together with any reputational harm, could have a material adverse effect on our business, financial condition and results of operations.

We are unable to predict the extent to which epidemics, pandemics, and similar outbreaks, including the global COVID-19 pandemic, may adversely impact our business operations, financial performance, results of operations and stock price.

The Company's business could be significantly adversely affected by the outbreak of epidemics, pandemics, or similar outbreaks, including any outbreak of additional strains of COVID-19. Global reactions to the spread of COVID‐19 led to, among other things, significant restrictions in many jurisdictions on travel and gatherings of individuals, quarantines, temporary business closures and a general reduction in consumer activity. Such epidemics, pandemics or similar outbreaks could materially and adversely impact the Company's business, including without limitation, employee health, workforce availability and productivity, limitations on travel, supply chain disruptions, increased insurance premiums, and increased costs and reduced efficiencies. More broadly, such an outbreak could disrupt economic activity, resulting in reduced commercial and consumer confidence and spending, volatility in the global economy, and instability in the credit and financial markets, all of which could have an adverse impact on the Company's business, results of operations and financial condition.

Risks Related to Our Common Stock

Conflicts of Interest.

The Company may be subject to various potential conflicts of interest because of the fact that some of its officers and directors may be engaged in a range of business activities. In addition, the Company's executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some cases, the Company's executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to the Company's business and affairs and that could adversely affect the Company's operations. These business interests could require significant time and attention of the Company's executive officers and directors.

If we issue additional Common Stock, stockholders may experience dilution in their ownership of the Company.

We have the right to raise additional capital or incur borrowings from third parties to finance our business. Our Board has the authority, without the consent of any of our Stockholders, to cause us to issue more Common Stock. Consequently, stockholders may experience more dilution in their ownership of us in the future. Our Board and majority stockholders have the power to amend our certificate of incorporation in order to effect forward and reverse stock splits, recapitalizations, and similar transactions without the consent of our other stockholders. The issuance of additional Common Stock would dilute stockholders' ownership in the Company.

We do not intend to pay dividends and there will thus be fewer ways in which you are able to make a gain on your investment.

We have never paid any cash or stock dividends and we do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may prohibit the payment of any dividends. Because we do not intend to declare dividends, any gain on your investment will need to result from an appreciation in the price of our Common Stock. There will therefore be fewer ways in which you are able to make a gain on your investment.

We may be at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If the price of our Common Stock decreases and we were sued, it could result in substantial costs and a diversion of management's attention and resources, which could harm our business.

Our former President and Chief Executive Officer, Rick Svetkoff, exercises significant control over the Company.

Our former President and Chief Executive Officer, Mr. Svetkoff, controls approximately 32.1% of the Common Stock. The concentrated voting control held by Mr. Svetkoff will limit the ability of the Company's stockholders to influence corporate matters for the foreseeable future, including the election of directors as well as with respect to decisions regarding amendments of our share capital, creating and issuing additional classes of shares, making significant acquisitions, selling significant assets or parts of our business, merging with other companies and undertaking other significant transactions. As a result, Mr. Svetkoff will have the ability to influence many matters affecting the Company and actions may be taken that the Company's stockholders may not view as beneficial. The market price of our Common Stock could be adversely affected due to the significant influence and voting power of Mr. Svetkoff. Additionally, the significant influence and voting interest of Mr. Svetkoff may discourage transactions involving a change of control, including transactions in which an investor, as a stockholder of the Company, might otherwise receive a premium for those shares over the then-current market price, or discourage competing proposals if a going private transaction is proposed by Mr. Svetkoff.

Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which would limit such stockholders ability to choose the judicial forum for disputes with us or our directors, officers or other employees.

Our Certificate of Incorporation provides that unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee or agent of the Company to the Company or the Company's stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation or the bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, in each case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. However, the exclusive forum provision would not apply to suits brought to enforce any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have received notice of and consented to the foregoing provisions. Although we believe this choice of forum provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against us and our directors and officers. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation or similar governing documents has been challenged in legal proceedings and it is possible that in connection with any action a court could find the choice of forum provisions contained in our Certificate of Incorporation to be inapplicable or unenforceable in such action. If a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of the Company's financial condition and results of operations contain forward-looking statements that involve risks, uncertainties and assumptions including, among others, statements regarding our capital needs, business plans and expectations. In evaluating these statements, you should consider various factors, including the risks, uncertainties and assumptions set forth in reports and other documents we have filed with or furnished to the SEC and, including, without limitation, this Annual Report on Form 10-K filing for the fiscal year ended December 31, 2025, including the consolidated financial statements and related notes contained herein. These factors, or any one of them, may cause our actual results or actions in the future to differ materially from any forward-looking statement made in this document. Refer to "Cautionary Note Regarding Forward-looking Statements" and Item 1A. Risk Factors.

Company Overview

The Company was founded and incorporated under the laws of the State of Delaware on September 6, 2022. On December 17, 2025, the Company successfully closed their initial public offering and on December 18, 2025, our common shares were listed for trading on the NYSE American under the trading symbol "FJET". Our goal is to make space accessible to entrepreneurs, researchers, industry participants, and the government at a high cadence and the right cost.

Our principal operating facility, head office and mailing address is located at 505 Odyssey Way, Suite 203, Kennedy Space Center, Florida, 32953 and our phone number is 321-261-0900. Our registered and records office is located at 850 New Burton Road, Suite 201, Dover, Delaware 19904. Our website address is https://starfightersspace.com/ .

We operate the world's only commercial fleet of flight-ready F-104 supersonic aircraft. Recent increases in government expenditures and commercial investment are driving growth in the space economy. This increase has created a demand for services such as the NASA owned F-104s used to provide. To our knowledge, there is currently no other commercially available aircraft to the public with the capabilities of the Lockheed F-104 in terms of speed and climbing performance. We plan to fulfill these needs through a fleet of seven (7) F-104 aircraft. Based at NASA's Kennedy Space Center, the aircraft provide the following four groups of services:

Launch Services and Access to Space;

Research and Development (R&D) and Test and Evaluation (T&E) Test Bed;

Defense, Civil, Academic and Commercial Services; and

Pilot and Astronaut Training.

Recent Developments

Commencement of trading on the NYSE American

On December 17, 2025, we completed our initial public offering through the closing of the final round of our offering under Regulation A of Section 3(b) of the Securities Act for Tier 2 offerings, pursuant to which we sold 6,145,364 shares of common stock at a price of $3.59 per share, for gross proceeds of $22,061,857. Our shares commenced trading on the NYSE American under the trading symbol "FJET" on December 18, 2025.

On December 18, 2025, we also issued 3,834,857 shares of common stock at a conversion price of $2.154, being a 40% discount of the initial public offering price, pursuant to the automatic conversion of our outstanding convertible debentures, and 404,312 shares in satisfaction of a note payable by SFI to Space Florida. The fair value of these shares was $13,767,137.

Successful completion of wind tunnel testing for STARLAUNCH 1

On January 21, 2026, we announced the successful completion of wind tunnel testing of STARLAUNCH 1, a key technical milestone in our air-launched rocket development efforts.

The completed test campaign evaluated separation of the STARLAUNCH 1 vehicle from the Starfighters' aircraft platform across both subsonic and supersonic conditions. Using a combination of computational fluid dynamics (CFD) analysis and experimental wind tunnel testing, we assessed separation behavior at Mach 0.85 and Mach 1.3. Across all test conditions, clean separation was demonstrated with no adverse aerodynamic interactions observed.

The wind tunnel campaign consisted of ten successful runs, conducted at both subsonic and supersonic speeds. Experimental results showed strong agreement between CFD predictions and measured forces and moments, confirming the accuracy of Starfighters' aerodynamic models and separation simulations.

Testing was conducted at the FAMU/FSU Joint College of Engineering Polysonic Wind Tunnel. The correlation between simulation and experimental data represents an important risk-reduction step as the program transitions from analytical validation toward physical test articles.

Based on the completed testing, we have initiated the next procedural step in the program by moving forward with the procurement of instrumented drop test articles. These articles are intended to support further evaluation of separation dynamics under flight conditions and will incorporate onboard sensors and telemetry systems.

STARLAUNCH 1 is being developed as a sub-orbital vehicle designed to support short-duration microgravity missions and serves as a pathfinder for future air-launched concepts. In parallel, the validated separation work also supports our broader aerospace testing services, including programs where clean separation is required for advanced and hypersonic vehicle testing.

Current Status of Aerovision Aircraft Acquisition Agreement

Our wholly owned subsidiary, Starfighters International, is party to an aircraft acquisition agreement dated October 31, 2024, and amended on January 28, 2025 (as amended, the " Aircraft Agreement "), with Aerovision LLC, a Florida limited liability company (" Aerovision "), pursuant to which Starfighters International agreed to purchase from Aerovision various used aircraft and associated spare equipment in phases. The subject aircraft for acquisition pursuant to the Aircraft Agreement originally included twelve F-4 Phantom II aircraft that had been decommissioned by the Republic of Korea Air Force.

The Aircraft Agreement required an initial deposit advance in the amount of $5,000,000, payable in two instalments of $2,500,000.00 each, with the first payment to be made on or before January 31, 2025 and the second payment to be made within 10 days of Aerovision executing a binding agreement to acquire a minimum of eight F-4 Phantom II aircraft from one or more alternative suppliers when it became uncertain whether the F-4 Phantom II aircraft originally identified for acquisition by Starfighters International were, in fact, available.

Starfighters International paid the two instalments of the initial deposit advance to Aerovision, totaling $5,000,000, on January 24, 2025, and March 3, 2025. However, Aerovision has not provided any information as to the availability of any of the F-4 Phantom II aircraft contemplated to be purchased by Starfighters International, and all recent attempts by our Company to contact Aerovision have been unsuccessful. We, acting through Starfighters International, are reviewing what remedies might be available under the Aircraft Agreement.

Resignations of Rick Svetkoff and Brenda Svetkoff

On February 19, 2026, our Board of Directors received by email a resignation letter pursuant to which Rick Svetkoff resigned as the Chief Executive Officer, President, Chairman and director of the Company. In his resignation letter, Mr. Svetkoff indicated that his disagreement with the Board and the Company related to the operations, policies and practices of the Company acting through the Board led to his decision to resign from all officer positions and as a director of the Company. Although Mr. Svetkoff's resignation has not materially affected our day-to-day operations, it remains unclear at this time whether his departure will adversely affect our ability to compete in the long term.

Also, on February 19, 2026, the Board received by email a resignation letter from Brenda Svetkoff, the spouse of Mr. Svetkoff, pursuant to which Mrs. Svetkoff resigned as the Secretary of the Company.  In her resignation letter, Mrs. Svetkoff indicates that her disagreement with the Board and the Company related to the operations, policies and practices of the Company acting through the Board led to her decision to resign from acting as the Secretary of the Company.

Copies of the resignation letters received from Mr. and Mrs. Svetkoff were included as Exhibits 17.1 and 17.2, respectively, to the Company's current report on Form 8-K, as filed with the SEC on February 25, 2026.

The Company respectfully disagrees with the substance of and the assertions and characterizations that are contained in the resignation letters of Mr. Svetkoff and Mrs. Svetkoff.

Appointment of Tim Franta as Chief Executive Officer

On February 22, 2026, following the resignation of Mr. Svetkoff as the Chief Executive Officer, President and Chairman, the Board of Directors at a meeting appointed Tim Franta, then a current director and the VP Development, as the Chief Executive Officer of the Company.  In addition to assuming his new duties as Chief Executive Officer, Mr. Franta continues to serve the Company as a director and VP Development.

Results of Operations - Year Ended December 31, 2025 Compared to Year Ended December 31, 2024

Operating expenses

Advertising and promotion

Bank and interest charges

Business development

Consulting fees

Contract labor and fuel

Depreciation

Directors' fees

Franchise tax

Insurance

Licenses

Listing fees

Management fees

Office and administrative

Professional fees

Relocation costs

Rent expense

Repairs and maintenance

Research and development

Travel and entertainment

Vehicle

Total operating expenses

Other income (expense)

Amortization of debt discount

Change in fair value of derivative liability

Other income

Grant income

Interest expense

Interest income

Write-off of other receivable

Exchange loss

Total other income (expense)

Net loss

During the year ended December 31, 2025, we incurred a net loss of $16,543,616 compared to net loss of $7,908,777 for the year ended December 31, 2024. An analysis of the increase in net loss of $8,634,839 including the major components our results for the periods, is below.

Advertising and promotion

During the year ended December 31, 2025, we incurred advertising and promotion expenses of $1,436,875 compared to $183,790 for the year ended December 31, 2024, an increase of $1,253,085 year over year. During the year ended December 31, 2025 the Company embarked on a public relations campaign to raise awareness about its brand and business in light of the Company's efforts to complete its final closing of its Regulation A financing in connection with its plan to list on the NYSE American, whereas the Company incurred lower ongoing public relations expenses during the year ended December 31, 2024. Furthermore, in 2025, advertising and promotion expenses also include $18,321 in stock-based compensation related to RSUs issued to a marketing consultant.

Business development

During the year ended December 31, 2025, we incurred business development expenses of $1,841,982 compared to $360,000 for the year ended December 31, 2024, an increase of $1,481,982 year over year. Such expenses are incurred for corporate advisory and investor outreach activities associated with the Company's financing and listing efforts, with higher amount of time spent by the Company's advisors on these activities during efforts to complete its final closing of its Regulation A financing in connection with its plan to list on the NYSE American. Furthermore, in 2025, business development expenses also include $256,496 in stock -based compensation related to RSUs issued to a business development advisor of the Company.

Consulting fees

During the year ended December 31, 2025, we incurred consulting fees of $4,263,195 compared to $998,364 for the year ended December 31, 2024, an increase of $3,264,831 year over year. In 2025, consulting fees include $3,051,279 in stock -based compensation related to options and RSUs issued. The year-over-year increase relates to additional corporate advisory and consulting expenses incurred to facilitate the Company’s efforts to go public.

Contract labor and fuel

During the year ended December 31, 2025, we incurred contract labor and fuel expenses of $1,387,747 compared to $403,800 for the year ended December 31, 2024, an increase of $983,947 year-over-year. The increase is due to a higher level of flight activities undertaken in the current year. Furthermore, in 2025, contract labor costs also include $735,209 in stock -based compensation related to options issued to members of the operations team based at Kennedy Space Center.

Directors' fees

During the year ended December 31, 2025, we incurred directors' fees of $168,000 compared to $164,000 for the year ended December 31, 2024, an increase of $4,000 year over year, which is relatively consistent year over year.

Insurance

During the year ended December 31, 2025, we incurred insurance expense of $197,107 compared to $87,372 for the year ended December 31, 2024, an increase of $109,735. Insurance expenses of the Company included coverages for its operations of F-104 aircrafts, as well as directors' and officers' ("D&O") coverages. The increase is mainly due to increased D&O coverages connected to the Company's listing on the NYSE American.

Management fees

Management fees for the year ended December 31, 2025 was $707,507 compared to $232,000 for the year ended December 31, 2024, with an increase of $475,507. In 2025, the Company paid cash management fees of $310,097 to the Company’s former CEO for overseeing the day to day operations, and issued options to the Company’s former CEO, accounting for $397,410 in stock -based compensation reported as part of management fees.

Office and administrative

During the year ended December 31, 2025, we incurred office and administrative expenses of $286,033 compared to $166,196 for the year ended December 31, 2024, an increase of $119,837 year over year. The increase in administrative expenses is correlated to the additional administrative work required to facilitate the Company's efforts to go public and financings undertaken in 2025, as well as certain administrative expenditures incurred by the Company to service providers such as Space Florida in relation to its flight activities.

Listing fees

During the year ended December 31, 2025, we incurred listing fees of $37,202 compared to $292,293 for the year ended December 31, 2024, a decrease of $255,091 year over year. The year over year decrease relates to certain fees incurred in the prior year to facilitate the Company's efforts to go public.

Professional fees

During the year ended December 31, 2025, we incurred professional fees of $2,521,680 compared to $786,338 for the year ended December 31, 2024, an increase of $1,735,342 year over year. In 2025, professional fees included $1,610,845 in stock -based compensation related to options and RSUs issued for services from a number of individuals, including the Company’s CFO. The year over year increase relates to additional legal, audit, and accounting fees incurred to facilitate the Company’s efforts to go public and financings undertaken in 2025, as well as to fulfill the Company’s increased reporting obligations as a result of becoming a public company in 2025.

Relocation costs

During the year ended December 31, 2025, we incurred relocation costs of $51,723 compared to $0 for the year ended December 31, 2024, an increase of $51,723 period-over-period. We incurred costs in relation to relocation of assets and operations to Midland, Texas, in accordance with the Economic Development Agreement with the MDC. Reimbursements we received from MDC on these costs are recognized as grant income.

Rent expense

During the year ended December 31, 2025, we incurred rent expense of $542,879 compared to $294,611 for the year ended December 31, 2024, an increase of $248,268 year over year. The Company entered into a new short-term lease for office spaces commencing December 2024, and a new temporary hangar lease in Texas commencing June 2025, which increased the rent expense incurred during 2025.

Repairs and maintenance

During the year ended December 31, 2025, we incurred repair and maintenance expenses of $36,909 compared to $44,504 for the year ended December 31, 2024, which remained relatively consistent year over year.

Research and development

During the year ended December 31, 2025, we incurred research and development expenses of $1,027,203 compared to $0 for the year ended December 31, 2024, an increase of $1,027,203 year-over-year. During fiscal 2025, the Company has undertaken a number of flight tests related to the Company's StarLaunch platform.

Travel and entertainment

During the year ended December 31, 2025, we incurred travel and entertainment expenditures of $609,376 compared to $231,207 for the year ended December 31, 2024, an increase of $378,169 year over year. During the year ended December 31, 2025, the Company was actively travelling and entertaining prospective investors.

Amortization of debt discount

During the year ended December 31, 2025, the Company recognized amortization of the discount on its convertible debt was $500,937, compared to $1,777,505 for the year ended December 31, 2024, a decrease of $1,276,568 year over year. The discount on the convertible debt relates to the fair value of the conversion option, which is bifurcated, and the transaction costs incurred for the financing and is amortized over the term of the convertible debt. The decrease year over year reflects less significant unwinding of debt discount, as there had been no new issuance of convertible debt since August 2024, and a shorter remaining term of the convertible debentures during the year.

Change in fair value of derivative liability

During the year ended December 31, 2025, the Company recorded a change in the fair value of its derivative liability of $970,866, compared to $1,642,697 for the year ended December 31, 2024. The derivative liability results from the conversion option on the Company's convertible debt which has been bifurcated as the number of shares to be issued upon conversion may vary.  The change in fair value reflects updates to key valuation inputs into the Monte Carlo valuation, including the Company's share price, expected volatility and time to maturity. Fair value changes of a smaller magnitude were recognized in the current year, reflecting reduced uncertainty in key valuation inputs as the Company approached its public listing, including changes in expected volatility, time to maturity and other model assumptions.

Other income

During the year ended December 31, 2025, we earned other income of $516,640 compared to $234,900 for the year ended December 31, 2024, an increase of $281,740 year over year. Other income consists of ancillary income earned for providing pilot training and equipment testing services, and varies with the availability of airspace, equipment and personnel.

Grant income

During the year ended December 31, 2025, we earned grant income of $163,723 compared to $0 for the year ended December 31, 2024, an increase of $163,723 period-over-period. Grant income consists of expense reimbursement received or is receivable by the Company in connection with rent expenses and costs of relocation of assets and operations to Midland, Texas, in accordance with the Economic Development Agreement with the MDC.

Interest expense

During the year ended December 31, 2025, we incurred interest expense of $555,985 compared to $486,669 for the year ended December 31, 2024, an increase of $69,316 year over year. Interest expense consists of interest on convertible debentures of the Company which are carried at 5% per annum and raised to 8% per annum in February 2025, and note payable to Space Florida which is carried at 3% per annum. The increase year over year is due to a higher interest rate charged on the convertible debentures during the year ended December 31, 2025, partially offset by a shorter period as these loans outstanding are converted into common stock upon the Company's listing on the NYSE American in December 2025.

Interest income

During the year ended December 31, 2025, we earned interest income of $153,020 compared to $66,323 for the year ended December 31, 2024, an increase of $86,697 year over year.

Liquidity and Capital Resources

We continually monitor and manage cash flow to assess the liquidity necessary to fund operations and capital projects. We manage our capital resources and adjust them to take into account changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital resources, we may, where necessary, control the amount of working capital, pursue financing or manage the timing of our capital expenditures. As of December 31, 2025, we had a positive working capital of $17,091,337 (current assets of $20,143,416, less current liabilities of $3,052,079) and as of December 31, 2024, we had a working capital deficit of $7,676,263 (current assets of $8,352,629, less current liabilities of $16,028,892).

Our continuing operations are dependent upon our ability to obtain debt or equity financing until such time that we achieve profitable operations. There can be no assurance that we will gain adequate market acceptance for our products or be able to generate sufficient gross margins to reach profitability.

Since our inception, we have incurred operating losses and have experienced negative cash flows from operations. While the Company had positive working capital as at December 31, 2025, a significant portion of these assets are expected to be utilized to fund ongoing operations and capital commitments, such as acquisition of aircrafts. As such, we do not anticipate that cash on hand will be adequate to satisfy our obligations in the ordinary course of business over the next 12 months. Based on this assessment, we have material uncertainties about our business that may cast substantial doubt about our ability to continue as a going concern. Accordingly, our ability to continue as a going concern is dependent upon our ability to raise sufficient funds to pay ongoing operating expenditures and to meet our obligations. See further discussion related to our ability to continue as a going concern within our notes to our audited consolidated financial statements for the years ended December 31, 2025 and 2024 under " Basis of Presentation - Going concern."

As of December 31, 2025 and 2024, we had $4,631,720 and $7,100,699 in cash (including restricted cash), respectively. We are actively managing current cash flows until such time that we are profitable.

The chart below highlights our cash flows for the periods indicated:

For the years ended December 31,

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

(Decrease)/Increase in cash and restricted cash

Cash Used in Operating Activities

Our net cash used in operating activities is primarily due to cash payments for operating expenses that we incur in the day-to-day operations of the business. Net cash used in operating activities for the year ended December 31, 2025 was $8,227,372, compared to $3,864,714 for the year ended December 31, 2024. The loss for the year ended December 31, 2025 of $16,543,616 was offset by $719,246 in working capital items and $7,596,998 in non-cash items consisting mainly of stock -based compensation, the amortization of the convertible debt discount and change in fair value of derivative liability. This compares to a loss of $7,908,777 for the prior year, which was offset by $543,514 in working capital items and $3,500,549 in non-cash items consisting mainly of the amortization of the convertible debt discount and change in fair value of derivative liability.

Cash Used in Investing Activities

Net cash used in investing activities for the year ended December 31, 2025 was $20,293,757 and relates to the purchase of short-term investments of $16,560,779, deposits made towards aircraft and equipment acquisitions of $5,945,911, and the purchase of property, plant and equipment of $150,763, for purchase of a display jet, netted off by redemption of short-term investments of $2,363,696. Net cash used in investing activities during the comparative period was $1,256,052 and relates to deposits made toward the purchase of property, plant and equipment of $550,000 and the purchase of short-term investments of $1,295,252, netted off by redemption of short-term investments of $589,200.

Cash Provided by Financing Activities

We have funded our business to date from the issuance of our common stock, warrants and convertible debentures through Reg A financing, private placements, and from loans from related parties.

Net cash provided by financing activities for the year ended December 31, 2025 was $26,052,150 compared to $10,527,356 for the year ended December 31, 2024.

During the year ended December 31, 2025, the Company received gross proceeds from its initial public offering of $22,061,857 and gross proceeds from Reg A financing of $7,247,931. The Company paid issuance costs on equity financing amounting to $3,157,638, and repaid $100,000 in related party loans.

During the year ended December 31, 2024, the Company received gross proceeds from Reg A financing of $10,690,243 net of issuance costs of $735,634, gross proceeds from the issuance of convertible debentures of $743,400 net of debt issuance costs of $19,950 and repaid $45,000 in related party loans, and paid deferred financing costs of subsequent closings of the Reg A financing of $105,703.

Related Party Transactions

Due From Related Party

As of December 31, 2025 and 2024, $0 and $4,074, respectively, was due from the former CEO, who is also a significant shareholder. The amounts are unsecured, non-interest bearing and due on demand.

As of December 31, 2025, $6,833 (December 31, 2024 - $0) was due from the CFO, for expenses paid on behalf of the CFO by the Company prior to the initial public offering. The amounts are unsecured, non-interest bearing and due on demand.

Management Fees

During the years ended December 31, 2025 and 2024, management fees of $310,097 and $232,000, respectively, were incurred to the former CEO, who is also a significant shareholder of the Company. As of December 31, 2025 and 2024, $25,000 and $0, respectively, management fees were included in accounts payable and accrued liabilities. Management fees also included stock-based compensation arising from 500,000 options issued to the former CEO, amounting to $397,410 and $0, respectively, for the years ended December 31, 2025 and 2024. The grant date fair value of the 500,000 options granted was $868,102.

Consulting Fees

During the years ended December 31, 2025 and 2024, the Company incurred an expense of $35,000 and $25,000, respectively, of fees to a former BOD member.  As of December 31, 2025 and December 31, 2024, $0 and $0 of these fees were unpaid, respectively.

During the years ended December 31, 2025 and 2024, the Company incurred an expense of $0 and $90,000, respectively, of fees to a Company for which a BOD member is part of senior management.  As of December 31, 2025 and 2024, $0 and $0 of these fees were included in accounts payable and accrued liabilities, respectively.

During the years ended December 31, 2025 and 2024, the Company incurred an expense of $72,000 and $53,000, respectively, of fees to an entity owned by the spouse of the former CEO, who is also a significant shareholder.  As of December 31, 2025 and 2024, $6,000 and $0 of these fees were included in accounts payable and accrued expenses.

During the years ended December 31, 2025 and 2024, the Company incurred an expense of $40,606 and $0, respectively, of fees to the former BOD member of the Company.  As of December 31, 2025 and 2024, $0 and $0 of these fees were unpaid, respectively.

Contract Labor

During the years ended December 31, 2025 and 2024, the Company incurred expenses of $73,000 and $0, respectively, to an immediate family member of the former CEO, who is also a significant shareholder.  As of December 31, 2025 and 2024, $0 and $0 of these fees were unpaid, respectively.

Director Fees

During the years ended December 31, 2025 and 2024, directors fees of $168,000 and $164,000, respectively, were incurred. As of December 31, 2025 and 2024, $34,000 and $128,000, respectively, of directors fees were included in accounts payable and accrued liabilities.

Professional Fees

During the years ended December 31, 2025 and 2024, the Company incurred professional fee expenses of $101,000 and $95,000, respectively, with the CEO and VP of Development.  There were $8,000 and $0 owed to this related party as of December 31, 2025 and 2024, respectively.

During the years ended December 31, 2025 and 2024, the Company incurred professional fee expenses of $180,000 and $157,000, respectively, to the CFO of the Company. There were no amounts owed to this related party as of December 31, 2025 and 2024.

Stock-based Compensation

During the year ended December 31, 2024, the Company recognized no stock-based compensation, as there were no Options nor RSUs in issue.

During the year ended December 31, 2025, the Company granted the following Options and RSUs to related parties:

500,000 Options with grant date fair value of $868,102 to the former CEO, who is also a significant shareholder;

640,000 Options with grant date fair value of $1,113,101 to the spouse of the former CEO, who is also a significant shareholder;

250,000 Options with grant date fair value of $434,051 to the two immediate family members of the former CEO, who is also a significant shareholder;

125,000 Options with grant date fair value of $217,025 to the CEO and VP of Development;

125,000 Options with grant date fair value of $218,059 to a director;

750,000 RSUs with grant date fair value of $2,692,500 to the CFO; and

525,000 RSUs with grant date fair value of $1,884,750 to two directors and two former directors.

During the years ended December 31, 2025, the Company incurred stock-based compensation arising from RSUs amounting to $549,633 to two directors, recognized in consulting fees; and $1,374,083 to the CFO, recognized in professional fees.

During the years ended December 31, 2025 the Company incurred stock-based compensation arising from options amounting to $397,410 to the former CEO, recognized in management fees; and $485,044 to the spouse of the former CEO, who is also a significant shareholder, recognized in consulting fees; and $198,705 to two immediate family members of the former CEO, recognized in contract labor and fuel; and $86,688 to a director, recognized in consulting fees; and $99,353 to the CEO and VP of Development, recognized in professional fees

Commitments and Contingencies

The Company entered into an agreement with a company owned 50% by the former CEO, who is also a significant shareholder.  The agreement is to buy jet engines.  The purchase price of the jet engines is $2,200,000.  As of December 31, 2025, the Company had total long-term deposits with this related party recorded for this agreement of $0 (December 31, 2024 - $1,300,000). The Company received the jet engines upon completion of listing on the NYSE American and had paid the contract price in full.  The Company placed the jet engines into service on December 18, 2025.

Notes Payable

On August 14, 2010, Company entered into a loan agreement with the former CEO, who is also a significant shareholder, in the amount of $865,000. The loan bears no interest, with no terms of repayment. During the years ended December 31, 2025 and 2024, repayments of $0 and $45,000, respectively, were made. During the year ended December 31, 2025, the Company applied $4,074 that was due from the former CEO against the outstanding balance of this loan. As of December 31, 2025 and 2024, $185,976 and $190,050, respectively, was outstanding for this loan.

On August 14, 2010, the Company entered into a loan agreement with an entity owned by the spouse of the former CEO, who is also a significant shareholder, in the amount of $865,000. The loan bears no interest, with no terms of repayment. As of December 31, 2025 and 2024, $865,000 was outstanding for this loan.

On April 10, 2016, the Company entered into a loan agreement with a company owned 50% by the former CEO, who is also a significant shareholder in the amount of $100,000. The loan bears no interest, with no terms of repayment. During the years ended December 31, 2025 and 2024, repayments of $100,000 and $0, respectively, were made. As of December 31, 2025 and 2024, $0 and $100,000, respectively, was outstanding for this loan.

On August 1, 2022, the Company entered into a loan agreement with the CEO, who is also a significant shareholder, in the amount of $475,150. The loan bears no interest, with no terms of repayment. As of December 31, 2025 and 2024, $475,150 was outstanding for this loan.

Contractual Obligations

Issuance of options to consultant and officer

On September 1, 2023, the Company entered into an agreement with a consultant. Under the agreement, the Company was obligated to issue 100,000 options.  Both the Company and the consultant have agreed to delay issuance of these options until an Offering price has been established as part of an initial public offering or other public offering ("Offering Price"). The agreement also calls for 150,000 contingent Options, subject to future approval by the Board of Directors, with an exercise price equal to the Offering Price.

On August 12, 2025, the Company granted 100,000 restricted stock units, with a fair value of $359,000, to the consultant in satisfaction of the original obligation to issue 100,000 options.

On January 1, 2024, the Company entered into an agreement with the Chief Financial Officer (the "CFO"). Under the agreement, the Company was obligated to issue 100,000 options.  Both the Company and the CFO have agreed to delay issuance of these options until an Offering price has been established as part of an initial public offering or other public offering. The agreement also calls for 150,000 contingent Options, subject to future approval by the Board of Directors, with an exercise price equal to the Offering Price.

On August 12, 2025, the Company granted 750,000 restricted stock units, with a fair value of $2,692,500, to the CFO in satisfaction of all obligations of issuance of the 250,000 options.

Capital Management

Capital is comprised of our stock holder’ equity (deficiency) and any debt that we may issue. Our objectives when managing capital are to maintain financial strength and to protect our ability to meet ongoing liabilities, to continue as a going concern, to maintain creditworthiness and to maximize returns for our shareholders over the long term. Protecting the ability to pay current and future liabilities includes maintaining capital above minimum regulatory levels, current financial strength rating requirements and internally determined capital guidelines and calculated risk management levels. We manage capital structure to maximize financial flexibility by making adjustments in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. We do not presently utilize any quantitative measures to monitor our capital, but rather we rely on our management's expertise to sustain the future development of the business. Management reviews its capital management approach on an ongoing basis and believes that this approach, given our size, is reasonable.

There were no changes to our approach to capital management during the period. We are not subject to externally imposed capital requirements.

Critical Accounting Policies and Estimates

Our audited consolidated financial statements are prepared in accordance with generally accepted accounting principles in the U.S. The preparation of our audited consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our audited consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our summary of significant accounting policies are described in more detail in the notes to our audited consolidated financial statements. Please refer to Note 3.

Off-Balance Sheet Arrangements

We have not entered into any material off-balance sheet arrangements such as guarantee contracts, contingent interests in assets transferred to unconsolidated entities, derivative financial obligations, or with respect to any obligations under a variable interest equity arrangement.

Proposed Transactions

We have not entered into any proposed transactions that have not been disclosed herein.

Subsequent Events

On January 5, 2026, the Company issued an aggregate of 29,341 Common Shares pursuant to the cashless exercise of 30,000 warrants outstanding, at an exercise price of $0.33 per share.

On January 8, 2026, the Company issued 24,285 Common Shares pursuant to the cashless exercise of 25,000 warrants outstanding, at an exercise price of $0.33 per share.

On February 3, 2026, Rick Svetkoff withdrew and transferred $500,000 to accounts not held in Starfighters International, Inc.’s name. This transfer was made without approval of the Company’s Board of Directors or Audit Committee

On February 17, 2026, Rick Svetkoff withdrew $1,395,869 to repay amounts owing to Rick Svetkoff and RLB Aviation, Inc. This transaction was made without approval of the Company’s Board of Directors or Audit Committee.

On February 19, 2026, Rick Svetkoff, the former CEO, and Brenda Svetkoff, the former Secretary and spouse of the former CEO, resigned from the Company.

On February 19, 2026, the Options granted to Rick Svetkoff, the former CEO, and Brenda Svetkoff, the former Secretary and spouse of the former CEO, amounting to 500,000 Options and 640,000 Options, respectively, were automatically forfeited upon their respective resignations from the Company.

On February 22, 2026, Tim Franta was appointed as CEO of the Company.

On March 12, 2026, the Company issued 114,250 Common Shares upon vesting and settlement of 114,250 RSUs (Note 8), which had an acceleration of vesting upon the achievement of a benchmark of the share price of the Company's Common Shares being traded on the NYSE American for a period of 10 consecutive trading days after February 16, 2026.

On April 2, 2026, the Company issued 114,250 Common Shares upon vesting and settlement of 114,250 RSUs (Note 8), which had an acceleration of vesting upon the achievement of a benchmark of the share price of the Company’s Common Shares being traded on the NYSE American for a period of 10 consecutive trading days after March 18, 2026.

On April 9, 2026, former CEO and Director, Rick Svetkoff filed a complaint against the Company, and its board members in the 18 th Judicial Circuit in Brevard County, Florida. The complaint alleges that the defendants breached fiduciary duty, deceptive business practices, and improper control and alteration of corporate records and is seeking $26 million in damages. The Company denies all of the allegations of the complaint and intends to vigorously defend itself.

Implications of Being an Emerging Growth Company

The Company, as an issuer with less than $1.235 billion in total annual gross revenues during its last fiscal year, it will qualify as an "emerging growth company" under the Jumpstart Our Business Startups Act of 2012 (the " JOBS Act ") and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company, the Company:

•   will not be required to obtain an auditor attestation on its internal controls over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;

•   will not be required to provide a detailed narrative disclosure discussing its compensation principles, objectives and elements and analyzing how those elements fit with its principles and objectives (commonly referred to as "compensation discussion and analysis");

•   will not be required to obtain a non-binding advisory vote from its shareholders on executive compensation or golden parachute arrangements (commonly referred to as the "say-on-pay," "say-on-frequency" and "say-on-golden-parachute" votes);

•   will be exempt from certain executive compensation disclosure provisions requiring a pay-for-performance graph and CEO pay ratio disclosure;

•   may present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations (" MD&A "); and

•   will be eligible to claim longer phase-in periods for the adoption of new or revised financial accounting standards.

The Company intends to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act. The Company's election to use the phase-in periods may make it difficult to compare its financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, the Company may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after the Company's initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended, or such earlier time should it no longer meet the definition of an emerging growth company. In this regard, the JOBS Act provides that the Company would cease to be an "emerging growth company" if the Company has more than $1.235 billion in annual revenues, has more than $700 million in market value of its common stock held by non-affiliates, or issues more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to the Company due to the fact that it may also qualify, once subject to the reporting obligations under section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, as a "smaller reporting company" under the SEC's rules. For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.