Swarmer, Inc. (SWMR) widens loss as cash rises to $25.3M in Q2 2026
Swarmer, Inc., a defense-focused autonomous drone swarm and AI software company, reported modest revenue but significantly higher losses for the three and six months ended June 30, 2026. Revenue was $216,413 for the quarter and $236,738 year-to-date, roughly flat versus 2025.
Operating expenses rose sharply as the company scaled up post-IPO. Selling, general and administrative costs reached $5.7 million in the quarter and $8.7 million year-to-date, driven by headcount growth, stock-based compensation and public-company costs. Research and development expenses were $1.8 million for the quarter and $3.3 million year-to-date. Net loss widened to $7.3 million in the quarter and $11.8 million for six months, compared with losses of $1.6 million and $2.3 million a year earlier.
Liquidity improved materially: cash and cash equivalents increased to $25.3 million from $9.3 million at year-end, supported by a January Series A-1 preferred round, a March IPO raising about $15.0 million net, and an equity line of credit with Lucid that provided about $13.5 million by June 30. Management concludes existing cash is sufficient to fund operations for at least twelve months. The company also secured about $3.9 million in SkyKnight software license contracts and committed up to $4.9 million to a Ukraine UAV deployment and integration program, accounted for as a combined arrangement with significant customer concentration risk.
Positive
- Cash and cash equivalents increased to $25.3 million at June 30, 2026, from $9.3 million at December 31, 2025, supported by the IPO, preferred financing and ELOC draws, providing at least twelve months of funding under management’s current plan.
- The company secured approximately $3.9 million in initial lump-sum software license fees under the SkyKnight program through the A&R MB MSA and Progress MSA, a step change relative to historical revenue levels.
- Management completed an IPO raising about $15.0 million net and established an Equity Line of Credit with Lucid for up to 3,000,000 shares (up to $181.0 million at the referenced price), enhancing financial flexibility.
Negative
- Net loss expanded substantially to $7.3 million for the quarter and $11.8 million for the six months ended June 30, 2026, compared with $1.6 million and $2.3 million in the prior-year periods, driven by sharply higher operating expenses.
- Selling, general and administrative expenses rose to $5.7 million for the quarter and $8.7 million year-to-date, up from $0.3 million and $0.5 million a year earlier, reflecting significant cost escalation relative to the company’s small revenue base.
- Revenue remained low at $236,738 for the first half of 2026 while accumulated deficit increased to $22.4 million, highlighting an early-stage business model with substantial ongoing losses.
- Customer concentration is high: the SkyKnight counterparty group accounted for approximately 99% of revenue for the quarter and 90% year-to-date, and the loss or reduction of such relationships could materially affect results.
Filing Explained
The equity line had issued 313,996 shares by June 30, with additional dilution possible from future draws, warrants, options, and restricted stock units.
Swarmer’s Form 10-Q is an unaudited quarterly report, and it records that the Lucid equity line was available from
The Form S-1 registration covers resale of shares sold through the facility; registration itself does not issue or sell shares. The equity line remains optional for Swarmer, is priced at a 2% discount to the defined volume-weighted average price, and is subject to a 4.99% holder limit and an Exchange Cap absent stockholder approval.
Separately, 1,799,970 pre-funded warrants remain outstanding and are exercisable for common shares at $0.01 each, with the remaining exercise price paid at issuance. The filing also reports 2,999,950 warrants exercisable at $3.3334 per share, 2,599,815 unvested restricted stock units, and 9,424,765 outstanding stock options as of
After quarter-end, the company reported 642,484 total ELOC shares sold for approximately
Key Figures
Key Terms
Equity Line of Credit financial
Simple Agreement for Future Equity financial
pre-funded warrants financial
beneficial ownership limitation financial
business-to-business-to-government financial
Earnings Snapshot
FAQ
How much revenue did Swarmer, Inc. (SWMR) generate in Q2 2026?
What was Swarmer, Inc. (SWMR)’s net loss for the three and six months ended June 30, 2026?
What is Swarmer, Inc. (SWMR)’s cash position and liquidity outlook as of June 30, 2026?
What are the key terms of Swarmer, Inc. (SWMR)’s equity line of credit with Lucid?
How large are Swarmer, Inc. (SWMR)’s SkyKnight contracts and related UAV commitments?
Does Swarmer, Inc. (SWMR) face customer concentration risk?
What is Swarmer, Inc. (SWMR)’s accumulated deficit and going concern assessment?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 10, 2026, the registrant had
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are based on our management’s beliefs and assumptions and on information currently available to our management. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, plans for our products, future research and development costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in the “Risk Factors” sections of this Quarterly Report on Form 10-Q, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, filed with the Securities and Exchange Commission on May 14, 2026, and the final prospectus for our initial public offering, dated as of March 16, 2026, and filed with the Securities and Exchange Commission, pursuant to Rule 424(b)(4) on March 17, 2026. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect.
We do not use the ® or ™ symbol in each instance in which one of our trademarks appears in this report, but this should not be construed as any indication that we will not assert our rights thereto to the fullest extent under applicable law.
i
Table of Contents
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PART I. |
FINANCIAL INFORMATION |
1 |
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Item 1. |
Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) |
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Condensed Consolidated Statements of Cash Flows |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. |
Controls and Procedures |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
28 |
Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
28 |
Item 3. |
Defaults Upon Senior Securities |
29 |
Item 4. |
Mine Safety Disclosures |
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Item 5. |
Other Information |
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Item 6. |
Exhibits |
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Signatures |
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ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
SWARMER, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
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June 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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Accounts receivable |
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Receivable from sale of common stock |
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— |
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UAV deployment program advance payment |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Intangible assets |
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Deferred offering costs |
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Other assets |
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Total assets |
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Liabilities, convertible preferred stock and shareholders' equity (deficit) |
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Current liabilities: |
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Accounts payable |
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Accrued expenses and other current liabilities |
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Grant advance |
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Deferred revenue |
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Operating lease liability - current |
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Advances received under combined arrangement |
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Total current liabilities |
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Operating lease liability - non-current |
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Total liabilities |
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Convertible preferred stock, par value $ |
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Series A preferred stock: |
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Commitments and contingencies (Note 10) |
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Shareholders' equity (deficit) |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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Total shareholders' equity (deficit) |
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Total liabilities, convertible preferred stock and shareholders' equity (deficit) |
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$ |
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$ |
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The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
1
SWARMER, INC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2026 |
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2025 |
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2025 |
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Revenue |
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Cost of revenue |
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Gross margin |
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Operating expenses: |
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Selling, general and administrative |
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Research and development |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Change in fair value of Simple Agreement for Future Equity ("SAFE") liability |
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( |
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( |
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Change in fair value of Equity Line of Credit ("ELOC") derivative |
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( |
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Other income |
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Loss before income taxes |
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Income tax expense |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Net loss per share of common stock, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Weighted-average shares of common stock outstanding, basic and diluted |
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Comprehensive loss: |
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Foreign currency translation adjustments |
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Total comprehensive loss |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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$ |
( |
) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
2
SWARMER, INC
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
For the Three Months Ended June 30, 2026
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Total |
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Balance at March 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of common stock on vesting of restricted stock and restricted stock units |
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— |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Issuance of shares under ELOC |
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— |
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— |
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Reclassification of deferred financing costs to additional paid-in capital upon consummation of public offering and sale of Series A convertible preferred stock |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Foreign currency translation adjustments |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at June 30, 2026 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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|||||
For the Three Months Ended June 30, 2025
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Total |
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Balance at March 31, 2025 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Issuance of common stock on vesting of restricted stock |
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( |
) |
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— |
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— |
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— |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation adjustments |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
3
SWARMER, INC
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
For the Six Months Ended June 30, 2026
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Series A Convertible Preferred Stock |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Total |
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Balance at December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Sale of Series A-1 convertible preferred stock |
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— |
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— |
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Issuance of common stock and pre-funded warrants for conversion of Series A convertible preferred stock |
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( |
) |
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( |
) |
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— |
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— |
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Issuance of common stock under initial public offering, net of underwriters discounts |
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— |
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— |
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— |
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— |
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Issuance of shares under ELOC |
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— |
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— |
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— |
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— |
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||||
Reclassification of deferred financing costs to additional paid-in capital upon consummation of public offering and sale of Series A convertible preferred stock |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Issuance of common stock upon exercise of stock options |
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— |
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— |
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( |
) |
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— |
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— |
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— |
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Issuance of common stock on vesting of restricted stock and restricted stock units |
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— |
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— |
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|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2026 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||||
For the Six Months Ended June 30, 2025
|
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
|
|
|||||||||
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Income (Loss) |
|
|
Deficit |
|
|
Total |
|
||||||
Balance at December 31, 2024 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
Issuance of common stock on vesting of restricted stock |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
||
Share-based compensation |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foreign currency translation adjustments |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2025 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
4
SWARMER, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Six Months Ended June 30, |
|
|||||
Operating activities: |
|
2026 |
|
|
2025 |
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation expense |
|
|
|
|
|
— |
|
|
Amortization of ROU asset |
|
|
|
|
|
— |
|
|
Change in fair value of ELOC derivative |
|
|
|
|
|
— |
|
|
Change in fair value of SAFE liability |
|
|
— |
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
— |
|
Unbilled revenue |
|
|
|
|
|
|
||
UAV deployment program advance payment |
|
|
( |
) |
|
|
— |
|
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
|
|
|
( |
) |
|
Deferred revenue |
|
|
|
|
|
|
||
Advances received under combined arrangement |
|
|
|
|
|
— |
|
|
Operating lease liability |
|
|
( |
) |
|
|
— |
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Investing activities: |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
— |
|
Purchase of intangible assets |
|
|
( |
) |
|
|
— |
|
Cash used in investing activities |
|
|
( |
) |
|
|
— |
|
Financing activities: |
|
|
|
|
|
|
||
Proceeds from initial public offering, net of underwriting discounts |
|
|
|
|
|
|
||
Proceeds from ELOC |
|
|
|
|
|
— |
|
|
Proceeds from sale of Series A-1 convertible preferred stock |
|
|
|
|
|
— |
|
|
Payment of financing costs |
|
|
( |
) |
|
|
— |
|
Cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rates on cash and cash equivalents |
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash and cash equivalents at the beginning of the period |
|
|
|
|
|
|
||
Cash and cash equivalents at the end of the period |
|
$ |
|
|
$ |
|
||
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
||
Conversion of Series A Preferred Stock into Common Stock |
|
$ |
|
|
$ |
— |
|
|
Common stock issued under ELOC in exchange for receivable from sale of common stock |
|
$ |
|
|
$ |
— |
|
|
Derivative asset recognized for draw priced but unsettled under the ELOC (Note 6) |
|
$ |
|
|
$ |
— |
|
|
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
5
SWARMER, INC
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Swarmer, Inc (“Swarmer,” the “Company,” “we,” “us,” and “our”), a Delaware corporation, together with its wholly owned subsidiaries, is a provider of autonomous drone swarm software and artificial intelligence solutions, specializing in vendor-agnostic technologies that address critical operational challenges faced by modern military forces. The Company’s primary customer base consists of drone manufacturers who license Swarmer’s software for integration with their hardware platforms. Swarmer delivers software platforms and AI systems that enable military organizations to deploy and coordinate large-scale unmanned systems operations without requiring proportional increases in trained operators. The Company’s primary mission areas include autonomous swarm coordination, multi-domain unmanned systems integration, AI-powered collaborative autonomy, and command and control software for distributed robotic operations.
During January 2026, the Company sold
On February 18, 2026, the Company’s board of directors approved a
On March 18, 2026, the Company completed its initial public offering (“IPO”) of
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. The Company has incurred recurring losses and negative cash flows from operations since inception, and, as of June 30, 2026, the Company had cash and cash equivalents of $
Since its inception in May 2023, the Company has funded its operations through the sale of simple agreements for equity (“SAFEs”), the sale of Series A convertible preferred stock and product sales, its initial public offering and the issuance of common stock under its ELOC. Based on the Company’s current operating plan, expected operating expenditures, and existing cash and cash equivalents, management has concluded that the Company’s current capital resources are sufficient to fund operations for at least twelve months from the date the accompanying condensed consolidated financial statements are issued.
As the Company continues to pursue its business plan, it may seek to finance its operations through additional equity offerings, debt financings, or other capital sources. However, there can be no assurance that any additional financing or strategic arrangements will be available to the Company on acceptable terms, if at all.
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Swarmer, Inc and its wholly owned subsidiaries, Autonomous Robotics Systems LLC ("ARS") and Swarmer Estonia OÜ ("Estonia"). All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial
6
information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to Quarterly Reports on Form 10-Q. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual financial statements.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair statement of the interim periods presented. Interim results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 31, 2026 or any future period.
The December 31, 2025 Condensed Consolidated Balance Sheet included herein was derived from the audited financial statements as of that date but does not include all disclosures required by U.S. GAAP for annual financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s final prospectus filed with the SEC pursuant to Rule 424(b)(4) filed on March 17, 2026.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the consolidated financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. Significant estimates include the fair value of the ELOC derivative and, for comparative periods, the SAFE liability; the standalone selling prices of performance obligations; share-based compensation; the valuation allowance recorded against deferred tax assets; and the useful lives of long-lived and intangible assets.
Foreign Currency Translation
The consolidated financial statements are presented in U.S. dollars, the reporting currency of the Company. The functional currency of ARS and Estonia is the Ukrainian Hryvnia and the Euro, respectively. Expenses have been translated into U.S. dollars at average exchange rates prevailing during the period.
Assets and liabilities have been translated at the rates of exchange on the balance sheet dates and equity accounts at their historic rates. The net effect of these translation adjustments is shown as a component of accumulated other comprehensive income (loss).
Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit risk consist primarily of cash and cash equivalents, which at times, may exceed the Federal Deposit Insurance Corporation ("FDIC") coverage limit of $
The Company’s revenue is concentrated among a small number of customers. The loss of, or a significant reduction in orders from, any such customer could have a material adverse effect on the Company’s results of operations.
Intangible Assets
Intangible assets acquired individually are recorded at cost, including directly attributable acquisition costs. Intangible assets with indefinite useful lives are not amortized and are tested for impairment at least annually, and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.
7
Income Taxes
The Company computes its interim income tax provision by applying its estimated annual effective tax rate to year-to-date pre-tax loss, adjusted for discrete items arising in the period. The Company recorded
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The requirements will be applied prospectively with the option for retrospective application. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its consolidated financial statements and disclosures.
In May 2025, the FASB issued ASU 2025-03, “Business Combination and Consolidation: Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity” provides clarifying guidance on determining the accounting acquirer in certain transactions involving VIEs. The update aims to improve consistency and comparability in financial reporting, especially when companies merge with a special-purpose acquisition company (“SPAC”). ASU 2025-03 requires entities to apply the same factors used for determining the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026 including interim periods within those annual periods, with early adoption permitted. The Company has evaluated ASU 2025-03 and does not expect its adoption to have a material impact on its consolidated financial statements, as the Company does not currently have variable interest entity arrangements.
In July 2025, the Financial Accounting Standards Board issued ASU 2025-05, "Measurement of Credit Losses for Accounts Receivable and Contract Assets", which amends ASC 326 and provides a practical expedient for entities when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change over the remaining life of such financial assets, thereby reducing the complexity associated with developing reasonable and supportable forecasts. The update also permits entities that are not public business entities to elect an accounting policy to consider subsequent collection activity when estimating expected credit losses; this provision is not applicable to the Company. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those annual reporting periods, with early adoption permitted. The Company adopted this ASU on January 1, 2026, prospectively and the impact was not material to the unaudited condensed consolidated financial statements.
SAFEs represent financing instruments with characteristics of both debt and equity. The Company accounts for its SAFEs in accordance with ASC 480, Distinguishing Liabilities from Equity. Through September 22, 2025, the Company had outstanding SAFEs that met the definition of a liability, as the instruments included terms that affected conversion based on the next round of financing and provided for potential cash settlement upon the occurrence of certain liquidity events. Accordingly, the SAFEs were recorded as liabilities at fair value.
8
The SAFE liability was remeasured at each balance sheet date until the occurrence of a triggering event, including an equity financing, change in control, or dissolution, with changes in fair value recognized in the consolidated statements of operations and comprehensive loss. The fair value estimate incorporated significant unobservable inputs and was classified as a Level 3 measurement within the fair value hierarchy. The valuation considered probability-weighted outcomes under various scenarios, including: (i) an equity financing in which the SAFEs would convert into convertible preferred stock; (ii) a liquidity event in which SAFE holders would receive the greater of the cash-out amount or the amount payable based on the number of shares of common stock equal to the purchase amount divided by the liquidity price; and (iii) a dissolution event in which SAFE holders would receive a portion of the remaining cash.
The Company recognized the change in fair value of the SAFE liability in earnings; for the three and six months ended June 30, 2025, this resulted in a net loss of approximately $
Multiple scenarios expected term (in years) |
|
||
Volatility |
|
% |
|
Discount rate |
|
% |
|
Probability of equity financing |
|
% |
|
Probability of liquidity event |
|
% |
|
Probability of dissolution |
|
% |
|
On September 22, 2025, in connection with the issuance of Series A-1 convertible preferred stock, all outstanding SAFEs automatically converted into shares of Series A preferred stock in accordance with their terms.
The Company did
As described in Note 12, on June 10, 2026 the Company entered into the Purchase Agreement with Lucid establishing the ELOC, under which the Company may, in its sole discretion, sell up to
Fair Value of ELOC Derivative
The ELOC derivative is measured at fair value on a recurring basis and is classified within Level 3 of the fair value hierarchy, as its measurement reflects significant unobservable inputs, including the expected timing and volume of future sales under the facility. At June 30, 2026, the Company’s derivative asset of $
Balance at December 31, 2025 |
$ |
|
|
Loss on change in fair value recognized through earnings |
|
( |
) |
Amounts settled through the issuance of common stock |
|
|
|
Balance at June 30, 2026 |
$ |
|
9
During June 2026, the Company made an advance payment of $
Accrued expenses and other current liabilities consisted of:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Liability under D&O insurance premium financing |
|
$ |
|
|
$ |
— |
|
|
Consulting and professional fees |
|
|
|
|
|
|
||
Compensation |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
10
During the second quarter of 2026, the Company entered into a series of interrelated agreements associated with the SkyKnight drone program. The agreements were negotiated and executed contemporaneously with the same counterparty group and were economically linked and mutually dependent. Accordingly, the Company evaluated the agreements collectively and determined that they represent a single combined arrangement for accounting purposes. As part of the overall arrangement, the Company entered into two software licensing agreements: (i) a Master Supplier Agreement with Meta Bureau LLC, originally executed on May 11, 2026 and amended and restated on June 25, 2026, and (ii) a Master Supplier Agreement with Progress TRW S.R.O. Collectively, these agreements provide for licensing of the Company's software for aggregate contractual consideration of $
Because the software licensing agreements and purchase agreements were negotiated with the same counterparty group, in contemplation of one another, and in furtherance of a single commercial objective, the Company concluded that the agreements should be accounted for as a combined arrangement. Accordingly, the amounts payable under the purchase agreements were evaluated under the guidance for consideration payable to a customer in ASC 606. The Company concluded that the UAVs represent distinct goods for which fair value could be reasonably estimated based on available market data. Based on its valuation analysis, the Company determined that the aggregate supported fair value of the UAVs was approximately $
During the three months ended June 30, 2026, the Company recognized revenue for software licenses delivered under the combined arrangement and recorded deferred revenue related to future support obligations. Amounts invoiced in excess of revenue recognized and deferred revenue recorded are presented as advances received under combined arrangement on the unaudited Condensed Consolidated Balance Sheet as of June 30, 2026.
The Company paid an aggregate advance of $
In the ordinary course of business, the Company may be subject to certain other legal actions and claims, which may arise from time to time. The Company is not aware of any such pending legal or other proceedings that are reasonably likely to have a material impact on the Company. Notwithstanding, legal proceedings are subject to inherent uncertainties, and an unfavorable outcome could include, monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and/or cash flows. Additionally, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations and/or cash flows.
Ukraine UAV Deployment Program
On June 25, 2026, the Company entered into two agreements with an unaffiliated third-party facilitator organized in the Czech Republic, in connection with a program to procure, deploy, and integrate the Company's proprietary software onto unmanned aerial vehicles for use by designated military units of the Armed Forces of Ukraine:
11
The aggregate contractual commitment under the two agreements is $
Each agreement is subject to termination and pro-rata refund provisions if the underlying services are not completed by specified milestone dates, and disputes are subject to binding arbitration administered by the SCC Arbitration Institute, seated in Stockholm, Sweden, with the substantive law of England and Wales governing. The $
Operating Lease
In October 2025, the Company entered into a
The maturity of the Company’s operating lease liability as of June 30, 2026 was as follows:
|
|
Operating leases |
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
Total lease payments |
|
|
|
|
Less: present value adjustment |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
At June 30, 2026, the remaining lease term was
In November 2025, the Company entered into an agreement for office space in Poland, which may be terminated at any time with 90-day notice. Rent expense related to this agreement was de minimis for the three and six months ended June 30, 2026.
The following table summarizes revenue recognized for each respective period, disaggregated by timing of recognition (point-in-time versus over-time) and by type of performance obligation:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Performance obligations satisfied at point in time |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance obligations satisfied over time |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Substantially all of the Company’s revenue for the three and six months ended June 30, 2026 and 2025 was derived in Europe.
Contract liabilities consist of amounts received prior to satisfying the revenue recognition criteria, which are recorded as deferred revenue in the Company’s consolidated balance sheets.
12
The following table summarizes the changes in deferred revenue:
|
|
Six Months Ended June 30, |
|
|
|||||
|
|
2026 |
|
|
2025 |
|
|
||
Balance, beginning of period |
|
$ |
|
|
$ |
— |
|
|
|
Deferral of revenue |
|
|
|
|
|
|
|
||
Recognition of unearned revenue |
|
|
( |
) |
|
|
( |
) |
|
Balance, end of period |
|
$ |
|
|
$ |
|
|
||
Preferred Stock Financing and Conversion
From September through December 2025, the Company issued and sold an aggregate of
During the six months ended June 30, 2026, the Company issued an additional
Immediately prior to the closing of the Company’s IPO on
Upon conversion, holders received an aggregate of
Following the completion of the IPO, no shares of Series A convertible preferred stock remained issued or outstanding.
Initial Public Offering
On March 18, 2026, the Company completed its IPO of
Equity Line of Credit
On June 10, 2026, the Company entered into the Purchase Agreement with Lucid, establishing an ELOC. Under the Purchase Agreement, the Company has the right, but not the obligation, in its sole discretion, to sell up to
The facility commenced on June 15, 2026 upon effectiveness of the related resale registration statement. During the period from commencement through June 30, 2026, the Company sold
13
June 30, 2026 and approximately $
Common Stock
As of June 30, 2026, the Company had
Pre-Funded Warrants
As of June 30, 2026, the Company had
Each pre-funded warrant is exercisable for
The Company evaluated the pre-funded warrants in accordance with ASC 815-40 and concluded that they meet the criteria for equity classification. Accordingly, the pre-funded warrants are recorded within stockholders’ equity.
Common Stock Purchase Warrants
As of June 30, 2026, the Company had
The Company evaluated these warrants under ASC 815-40 and concluded that they meet the criteria for equity classification. Accordingly, these warrants are included within stockholders’ equity.
In 2023, the Company adopted the 2023 Stock Plan, followed by the adoption of the 2024 Stock Plan in 2024. In connection with the Company’s IPO, the Company adopted the 2026 Equity Plan (the “2026 Plan”), which superseded the 2023 Stock Plan and the 2024 Stock Plan with respect to future equity award grants. Under the Company’s equity compensation plans, employees, officers, directors, consultants, and advisors are eligible to receive stock options, restricted stock awards (“RSAs”), and other share-based awards. No further grants will be made under the 2023 Stock Plan or the 2024 Stock Plan following adoption of the 2026 Plan, although awards previously granted under those plans remain outstanding in accordance with their terms. The 2026 Plan initially authorized the issuance of
Share-Based Compensation
The Company recorded total share-based compensation expense of $
14
|
|
Three Months Ended June 30, |
|
|
Six months ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Share-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock Options
The Company has issued incentive stock options and non-statutory stock options that have a contractual life of
The following table summarizes stock option activity for the Plan:
|
|
|
|
|
|
|
Weighted |
|
|||
|
|
|
|
|
|
|
Average |
|
|||
|
|
|
|
Weighted |
|
|
Remaining |
|
|||
|
Number of |
|
|
Average |
|
|
Contractual |
|
|||
|
Shares |
|
|
Exercise Price |
|
|
Term (years) |
|
|||
Outstanding at December 31, 2025 |
|
|
|
$ |
|
|
|
— |
|
||
Granted |
|
|
|
|
|
|
|
— |
|
||
Exercised |
|
( |
) |
|
|
— |
|
|
|
— |
|
Forfeited |
|
( |
) |
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2026 |
|
|
|
$ |
|
|
|
|
|||
Vested and Exercisable at June 30, 2026 |
|
|
|
$ |
|
|
|
|
|||
The weighted average grant date fair value of options granted during the three and six months ended June 30, 2026, was $
The fair value of each option granted during the three and six months ended June 30, 2026 and 2025, was estimated on the date of grant using the weighted average assumptions in the table below:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Expected volatility |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Risk-free interest rate |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Expected term (in years) |
|
|
|
|
|
|
|
|
|
|
|
||||
Expected dividend yield |
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Performance-based stock options
The table above includes
15
Restricted Stock
In May 2023, the Company issued
|
Number of Shares |
|
|
Weighted Average Grant |
|
||
Unvested at December 31, 2025 |
|
|
|
$ |
|
||
Vested |
|
( |
) |
|
|
|
|
Unvested at June 30, 2026 |
|
|
|
$ |
|
||
Restricted Stock Units
In connection with the closing of the Company's initial public offering on March 18, 2026, the Company granted an aggregate of
The RSUs granted to Mr. Kupriienko vest in 48 substantially equal monthly installments commencing one month after the March 18, 2026 grant date, subject to his continued service through each vesting date. As originally granted, Mr. Fink's RSU award was subject to the same vesting schedule. On April 15, 2026, the Compensation Committee of the Board of Directors modified the vesting schedule of Mr. Fink's RSU award to align it with the expiration of his post-offering lock-up. As modified, 6/48ths of Mr. Fink's RSUs vest on September 16, 2026, with the remaining 42/48ths vesting in 42 substantially equal monthly installments thereafter, subject in each case to Mr. Fink's continued service through each vesting date. The total number of shares subject to the award, the grant date fair value, and the total service period were not changed by the modification. The Company evaluated the modification and concluded that no incremental compensation cost arose, as the modification did not change the probability of vesting; accordingly, the Company continues to recognize the original grant date fair value over the requisite service period. Both awards provide for full acceleration of vesting upon a change of control, as defined in the 2026 Plan and the applicable award agreements.
The Company recognizes stock-based compensation expense related to these awards on a straight-line basis over the four-year requisite service period, with cumulative expense at each reporting date no less than the grant date fair value of the vested portion of each award. Forfeitures are accounted for as they occur. During the three and six months ended June 30, 2026, the Company recognized $
|
Number of Shares |
|
|
Weighted Average Grant |
|
||
Unvested at December 31, 2025 |
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
||
Vested |
|
( |
) |
|
|
|
|
Unvested at June 30, 2026 |
|
|
|
$ |
|
||
Net loss per common share is calculated in accordance with ASC 260, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, including
16
Securities that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share for the three and six months ended June 30, 2026 and 2025, are as follows:
|
|
Three and Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Common stock warrants |
|
|
|
|
|
— |
|
|
Unvested restricted stock awards |
|
|
|
|
|
|
||
Unvested restricted stock units |
|
|
|
|
|
— |
|
|
Unvested stock options exercisable for nominal consideration |
|
|
|
|
|
|
||
Stock options |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
The Company operates as a single reportable segment, which is the provision of autonomous drone swarm software and artificial intelligence solutions, specializing in vendor-agnostic technologies that address critical operational challenges faced by modern military forces.
Other segment items included in consolidated net loss consist primarily of the change in the fair value of the ELOC derivative of $
The following table presents segment revenue, the significant segment expense categories regularly provided to the CODM and other segment items for the periods presented, reconciled to consolidated net loss, which is the measure of segment profit or loss:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other segment items |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Segment net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The Company has evaluated subsequent events occurring after June 30, 2026 through the date these condensed consolidated financial statements were issued and, except as described below, identified no events requiring adjustment to or disclosure in these condensed consolidated financial statements.
On July 1, 2026, the Company issued the shares of common stock deliverable in respect of the draw under the ELOC facility priced on June 30, 2026, settling the derivative asset described in Note 6, and in July 2026 the Company collected the $
On July 24, 2026, the Board of Directors of Swarmer, Inc approved a realignment of the Company’s senior management team and a reallocation of the duties and responsibilities among certain of its executives, each effective immediately. In connection with the realignment, Mr. Alexander Fink, the Company’s President and Chief Executive Officer (U.S.), assumed additional responsibilities, and became the Company’s principal executive officer reporting directly to the Board. Mr. Fink's compensation was unchanged in connection with this leadership transition.
17
On July 26, 2026, Serhii Kupriienko resigned as the Company’s Chief Executive Officer (Global), and as Chief Executive Officer (Global) of ARS, effective immediately. Mr. Kupriienko continues to serve as a member of the Company’s Board of Directors. As noted above, Alexander Fink, the Company’s President and Chief Executive Officer (U.S.), now serves as the Company’s principal executive officer, and the Company does not intend to appoint a successor to the Chief Executive Officer (Global) role. Mr. Kupriienko is entitled to the compensation and benefits accrued through the effective date of his resignation in accordance with the terms of his employment agreement and the Company’s equity incentive plans.
On August 6, 2026, the Compensation Committee of the Board of Directors of Swarmer, Inc approved grants of
On August 13, 2026, the Board of Directors of Swarmer, Inc approved option grants to each of the non-employee directors in two tranches, each tranche with a grant-date fair value of $
18
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal year ended December 31, 2025 included in the final prospectus for our initial public offering (“IPO”), dated as of March 16, 2026 and filed with the Securities and Exchange Commission (the “SEC”), pursuant to Rule 424(b)(4) on March 17, 2026. This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
We are a provider of autonomous drone swarm software and AI solutions, specializing in vendor-agnostic technologies that address critical operational challenges faced by modern military forces. Our primary customer base consists of drone manufacturers who license our software for integration with their hardware platforms. While not our direct customers, the ultimate end-users of our Swarmer-enabled systems are military forces and defense organizations.
With a focus on affordability, rapid development, and proven combat performance, we deliver software platforms and AI systems that enable military organizations to deploy and coordinate large-scale unmanned systems operations without requiring proportional increases in trained operators. Our primary mission areas include autonomous swarm coordination, multi-domain unmanned systems integration, AI-powered collaborative autonomy, and command and control software for distributed robotic operations.
Our combat-tested approach, proven deployment record since 2024, and demonstrated execution of over 100,000 combat missions flown by drones that were equipped with the Swarmer Operating System ("Swarmer OS"), operating at varying degrees of autonomy depending on each end-user’s requirements and tactics, have enabled us to deliver operational value to drone manufacturers, defense system integrators, and the military end-users they serve.
For the three and six months ended June 30, 2026 and 2025, our net loss was $7.3 million and $11.8 million and $1.6 million and $2.3 million, respectively. As of June 30, 2026 and December 31, 2025, we had an accumulated deficit of $22.4 million and $10.6 million, respectively. Historically substantially all of our net losses have resulted from costs incurred in connection with our research and development related to engineering of our core software technology products, and more recently, from selling, general and administrative costs associated with our operations due to a rise in stock-based compensation, consulting and professional services as we prepared to operate as a public company, increased travel, office supplies, and rent as we ramped up our operations and opened new corporate offices in the U.S. and EU.
Recent Developments
Sale of Series A-1 Preferred Stock
During January 2026, the Company sold 558,116 shares of Series A-1 convertible preferred stock at a price of $6.2711 per share for gross proceeds of approximately $3.5 million.
Forward Stock Split
On February 18, 2026, our board of directors approved an amendment to our amended and restated certificate of incorporation providing a 1.8813-for-1 forward stock split of our issued and outstanding common stock. The forward stock split became effective on February 18, 2026.
Initial Public Offering
On March 18, 2026, we completed our IPO, in which we issued and sold 3,450,000 shares of our common stock, which includes the full exercise by the underwriters of their option to purchase 450,000 additional shares of our common stock, at a public offering price of $5.00 per share, which resulted in gross proceeds of $17.3 million, before deducting underwriting discounts and commissions and offering expenses. Our common stock began trading on the Nasdaq Capital Market on March 17, 2026.
19
Equity Line of Credit
On June 10, 2026, we entered into a common stock purchase agreement (“Purchase Agreement”) in connection with an equity line of credit (“ELOC”) with Lucid Capital Markets, LLC (“Lucid”), providing us with the ability, at our discretion, to sell up to 3,000,000 shares of our common stock over a 24-month period, subject to the terms and limitations of the agreement. We control the timing and amount of any sales and are under no obligation to sell any shares. Shares sold are priced at 98% of the volume-weighted average price of the common stock determined as provided in the Purchase Agreement (a 2% discount). Sales are subject to a 4.99% beneficial ownership limitation and, absent stockholder approval, to an aggregate limit of 2,240,930 shares (the “Exchange Cap”), representing approximately 19.99% of the shares of common stock outstanding at the time of the execution of the Purchase Agreement. No commitment fee was paid and no commitment shares were issued. We agreed to reimburse certain of Lucid’s legal fees up to approximately $0.1 million. The resale of the shares issuable pursuant to the Purchase Agreement is registered under the Company’s registration statement on Form S-1 (File No. 333-296678).
The facility became available on June 15, 2026 following the effectiveness of the related resale registration statement. During the period from commencement through June 30, 2026, we sold 313,996 shares of common stock under the ELOC for aggregate gross proceeds of approximately $13.5 million.
From its commencement on June 15, 2026 through August 10, 2026, we sold a total of 642,484 shares of common stock under the ELOC facility for aggregate gross proceeds of approximately $26.8 million.
Swarmer Awarded $3.9 Million in Contracts to Outfit SkyKnight Drones With Swarming Software
On May 11, 2026, our wholly owned subsidiary, Swarmer Estonia OÜ ("Estonia"), a private limited company organized under the laws of Estonia, entered into a Master Supplier Agreement (the “MB MSA”) with Meta Bureau LLC (“MB”) for the use of our proprietary software in MB’s quadcopter bombers and other unmanned aerial vehicles pursuant to three licenses. The MB MSA includes initial lump-sum license fees in an aggregate amount of approximately $2.9 million, ongoing support services, and has an initial term of one year, which term shall automatically renew for successive one-year periods subject to termination upon 30 days written notice. The MB MSA also provides for additional software upgrades upon MB’s election with additional fees of up to approximately $10.4 million upon any such election in full.
On June 25, 2026, Estonia entered into an Amended and Restated Master Supplier Agreement (the “A&R MB MSA”) with MB, pursuant to which the initial lump-sum license fees payable by MB were reduced to approximately $2.5 million and the option for additional software upgrades under the MB MSA were eliminated. The A&R MB MSA retains the initial one-year term, which shall automatically renew for successive one-year periods subject to termination upon 30-days written notice.
On June 25, 2026, in connection with the entry into the A&R MB MSA, Estonia entered into a Master Supplier Agreement (“Progress MSA”) with Progress TRW S.R.O. (“Progress”) for the use of our proprietary software in MB’s quadcopter bombers and other unmanned aerial vehicles. The Progress MSA includes initial lump-sum license fees in an aggregate amount of approximately $1.4 million, for an aggregate of approximately $3.9 million in initial lump-sum license fees payable to us pursuant to the A&R MB MSA and Progress MSA. Additionally, the Progress MSA provides for additional software upgrades upon Progress’ election, with additional fees of up to approximately $10.4 million upon any such election in full, which upgrades were previously reflected in the MB MSA prior to its amendment. The Progress MSA has an initial term of one year, which term shall automatically renew for successive one-year periods subject to termination upon 30-days written notice. See Note 9 to our unaudited condensed consolidated financial statements for further discussion.
Factors Affecting Our Performance
Acquiring New Customers
We believe there is substantial opportunity to continue to grow our customer base. We intend to drive new customer acquisitions by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness and drive adoption of our software platforms and AI systems. We also plan to continue to invest in building brand awareness within the defense communities. As of June 30, 2026 and 2025, we had approximately six and seven customers, respectively. Our ability to attract new customers will depend on a number of factors, including the effectiveness and pricing of our software platforms, AI systems, offerings of our competitors, and the effectiveness of our marketing efforts.
Expanding our product portfolio and team through strategic acquisitions
We believe there is a significant opportunity to acquire best-in-class technologies and world-class teams in related and adjacent defense technology markets. As a hardware-agnostic software company, we have good visibility into the ecosystem and real-world data
20
that helps us understand which technologies work well and which teams deliver good value to the battlefield. We plan to explore the market and look for opportunities to expand our presence and market position through strategic acquisitions, and we believe that they will contribute to our long-term growth.
Expanding Within Our Existing Customer Base
Our base of customers represents a significant opportunity for further sales expansion. We believe that our business model allows us to efficiently increase revenue from our existing customer base as they ramp up production to meet expanding military demand. We intend to continue to invest in enhancing awareness of our brand and developing more products, features and functionality, which we believe are important factors to achieve widespread adoption of our platform. Our ability to increase sales to existing customers will depend on a number of factors, including our customers’ satisfaction with our solution, competition, pricing and overall changes in our customers’ spending levels.
Sustaining Innovation and Technology Leadership
Our success is dependent on our ability to sustain innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built software platforms and AI systems that enable military organizations to deploy and coordinate large-scale unmanned systems operations without requiring proportional increases in trained operators. We employ a business-to-business-to-government (“B2B2G”) model that enables manufacturers to enhance products with advanced autonomous capabilities without developing proprietary swarm technology, significantly reducing research & development (“R&D”) costs and time-to-market. Our efficient B2B2G model enables us to prioritize significant investment in innovation. We intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our software platforms and AI systems to new use cases. We also intend to continue to evaluate strategic acquisitions and investments in businesses and technologies to drive product and market expansion. Our future success is dependent on our ability to successfully develop, market and sell existing and new products to both new and existing customers.
Expanding Internationally
We believe there is a significant opportunity to expand usage of our software platforms and AI systems. For the three months ended June 30, 2026, substantially all of our revenue was derived from customers in Europe. We have made and plan to continue to make significant investments to expand geographically, particularly in the European Union (“EU”) and United States (“U.S.”). Although these investments may adversely affect our operating results in the near term, we believe that they will contribute to our long-term growth.
Components of Results of Operations
Revenue
We earn revenue through software license sales. License sales include multiple performance obligations, including the license, video streaming and cloud storage services and updates and technical support. The license is a non-exclusive, non-transferable, non-sublicensable license to use our software. Support and maintenance include access to our support center, software upgrades and updates, and error investigation. We recognize revenues from software licenses at a point in time and generally when the software is activated within the corresponding hardware it was installed. Revenues from maintenance and support, including data storage-related services, are recognized ratably over the contractual term which is generally one year.
Cost of Revenue
Our cost of revenue consists primarily of third-party hosting fees and certain allocated consulting and professional service costs related to engineering and sales support.
Operating Expenses
R&D Expenses
Our R&D expense consists primarily of consulting and outside professional services costs related to engineering and product development, stock-based compensation, and other supporting overhead expenses associated with the development of our software offerings.
Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most
21
instances, the Company’s products are released soon after technological feasibility has been established. Costs incurred subsequent to achievement of technological feasibility were not significant, and software development costs were expensed as incurred.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of consulting fees for our management team, facilities related costs, legal fees related to intellectual property and corporate matters, other professional fees for accounting and consulting services, insurance, and other administrative expenses.
We expect that our selling, general and administrative expense will increase for the foreseeable future as we continue to support our expanding headcount and operation to support the growth of our business.
Other Income (Expense)
Change in Fair Value of SAFE Liability
Change in fair value of SAFE liability consists of gains and losses associated with the change in fair value of our SAFE liabilities and primarily attributable to the timing and probability in which we anticipated completing a qualified financing to which the SAFE liabilities would be settled and no longer subject to remeasurement each reporting period.
Change in the Fair Value of ELOC Derivative
Change in fair value of ELOC derivative consists of gains and losses associated with the change in fair value of the ELOC derivative each reporting period.
Other Income
Other income is primarily related to foreign exchange gains and losses associated with our international operations, consulting services provided outside the normal course of business, government grant proceeds and interest earned on our cash and cash equivalents held with financial institutions.
Consolidated Results of Operations
Comparison of the three and six months ended June 30, 2026 and 2025
The following table sets forth key components of the unaudited condensed consolidated statements of operations data during the three and six months ended June 30, 2026 and 2025:
|
|
Three Months Ended June 30, |
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
2026 |
|
|
2025 |
|
|
$ Change |
|
||||||
Revenue |
|
$ |
216,413 |
|
|
$ |
138,206 |
|
|
$ |
78,207 |
|
|
$ |
236,738 |
|
|
$ |
248,910 |
|
|
$ |
(12,172 |
) |
Cost of revenue |
|
|
32,816 |
|
|
|
56,176 |
|
|
|
(23,360 |
) |
|
|
72,740 |
|
|
|
101,718 |
|
|
|
(28,978 |
) |
Gross margin |
|
|
183,597 |
|
|
|
82,030 |
|
|
|
101,567 |
|
|
|
163,998 |
|
|
|
147,192 |
|
|
|
16,806 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Selling, general and administrative |
|
|
5,657,638 |
|
|
|
277,591 |
|
|
|
5,380,047 |
|
|
|
8,662,517 |
|
|
|
532,872 |
|
|
|
8,129,645 |
|
Research and development |
|
|
1,805,532 |
|
|
|
577,256 |
|
|
|
1,228,276 |
|
|
|
3,291,614 |
|
|
|
1,099,454 |
|
|
|
2,192,160 |
|
Total operating expenses |
|
|
7,463,170 |
|
|
|
854,847 |
|
|
|
6,608,323 |
|
|
|
11,954,131 |
|
|
|
1,632,326 |
|
|
|
10,321,805 |
|
Loss from operations |
|
|
(7,279,573 |
) |
|
|
(772,817 |
) |
|
|
(6,506,756 |
) |
|
|
(11,790,133 |
) |
|
|
(1,485,134 |
) |
|
|
(10,304,999 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Change in fair value of SAFE liability |
|
|
- |
|
|
|
(869,000 |
) |
|
|
869,000 |
|
|
|
- |
|
|
|
(869,000 |
) |
|
|
869,000 |
|
Change in fair value of ELOC derivative |
|
|
(251,455 |
) |
|
|
- |
|
|
|
(251,455 |
) |
|
|
(251,455 |
) |
|
|
- |
|
|
|
(251,455 |
) |
Other income |
|
|
205,990 |
|
|
|
14,635 |
|
|
|
191,355 |
|
|
|
257,715 |
|
|
|
32,975 |
|
|
|
224,740 |
|
Loss before income taxes |
|
|
(7,325,038 |
) |
|
|
(1,627,182 |
) |
|
|
(5,697,856 |
) |
|
|
(11,783,873 |
) |
|
|
(2,321,159 |
) |
|
|
(9,462,714 |
) |
Income tax expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
$ |
(7,325,038 |
) |
|
$ |
(1,627,182 |
) |
|
$ |
(5,697,856 |
) |
|
$ |
(11,783,873 |
) |
|
$ |
(2,321,159 |
) |
|
$ |
(9,462,714 |
) |
Revenue
Revenue was $0.2 million for each of the three and six months ended June 30, 2026, as compared to $0.1 million and $0.2 million for the three and six months ended June 30, 2025, respectively. Of the $1.5 million invoiced under the SkyKnight master supplier
22
agreements, $0.2 million was recognized as revenue and $0.1 million was recorded as deferred revenue, with the remainder presented as advances received under combined arrangement, reflecting the reduction of the transaction price for consideration payable to the counterparty group. See Note 9 to our unaudited condensed consolidated financial statements for further discussion.
Cost of Revenue
Cost of revenue remained relatively consistent, primarily due to fixed hosting and engineering support costs associated with maintaining our software infrastructure and the timing and volume of license deliveries.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $0.3 million and $0.5 million during the three and six months ended June 30, 2025, respectively, to $5.7 million and $8.7 million during the three and six months ended June 30, 2026, respectively.
The $5.4 million increase for the three months ended June 30, 2026, as compared to the prior year period, was primarily attributable to a $1.8 million increase in salaries, wages and benefits associated with increased headcount, a $1.2 million increase in stock-based compensation, and a $1.0 million rise in consulting and professional services, largely in connection with our public financing initiatives. In addition, our transition to a public company resulted in incremental expenses of $0.2 million for software subscriptions and license fees, $0.2 million for public relations, media, and conferences, $0.1 million for insurance, $0.1 million for board-related costs, $0.1 million for depreciation, and $0.3 million for other general operating expenses. We also increased travel, office supplies, and rent by approximately $0.4 million as we ramped up our operations and opened new corporate offices in the U.S. and EU.
The $8.1 million increase for the six months ended June 30, 2026, as compared to the prior year period, was primarily attributable to a $2.6 million increase in salaries, wages and benefits associated with increased headcount, a $1.4 million increase in stock-based compensation, and a $2.0 million rise in consulting and professional services, largely in connection with our public financing initiatives. In addition, our transition to a public company resulted in incremental expenses of $0.3 million for software subscriptions and license fees, $0.2 million for public relations, media, and conferences, $0.2 million for insurance, $0.1 million for board-related costs, $0.1 million for depreciation, and $0.3 million for other general operating expenses. We also increased travel, office supplies, and rent by approximately $0.9 million as we ramped up our operations and opened new corporate offices in the U.S. and EU.
R&D Expenses
R&D expenses increased from $0.6 million and $1.1 million for the three and six months ended June 30, 2025, respectively, to $1.8 million and $3.3 million for the three and six months ended June 30, 2026, respectively. The $1.2 million increase for the three months ended June 30, 2026, as compared to the prior year period, was driven primarily by a $0.7 million increase in salary, wages and benefits associated with increased headcount, and a $0.5 million increase in R&D hardware, testing and software related to engineering and product development initiatives. The $2.2 million increase for the six months ended June 30, 2026, as compared to the prior year period, was driven primarily by a $1.5 million increase in salary, wages and benefits associated with increased headcount, and a $0.8 million increase in R&D hardware, testing and software costs related to engineering and product development initiatives, partially offset by a $0.1 million decrease in outsourced engineering consulting fees.
Change in Fair Value SAFE Liability
During the three and six months ended June 30, 2025, we recorded a noncash charge of $0.9 million associated with the change in fair value of our SAFE liabilities and primarily attributable to the timing and probability in which we anticipated completing a qualified financing to which the SAFE liabilities would be settled and no longer subject to remeasurement each reporting period.
Change in Fair Value of ELOC Derivative
During the three and six months ended June 30, 2026, we recorded a noncash charge of $0.3 million for the change in fair value of the ELOC derivative.
Other Income
Other income during the three and six months ended June 30, 2026 reflects $0.2 million and $0.3 million, respectively, of foreign exchange gains associated with our European subsidiaries, as the U.S. dollar was comparably weaker to the euro during these reporting periods.
23
Liquidity and Capital Resources
Source of Liquidity
Since our inception in 2023, we have devoted substantially all of our efforts and financial resources to building our organization, including raising capital, research and development, business planning, and providing selling, general and administrative support for these operations. To date, we have funded our operations primarily through the issuance of SAFEs, the sale of Series A-1 preferred stock, the issuance of common stock in our IPO and the sale of our common stock through our ELOC with Lucid.
From inception through June 30, 2026, we raised aggregate net proceeds of approximately $3.2 million from the issuance and sale of SAFEs. The SAFE instruments were previously accounted for as liabilities and remeasured at fair value each reporting period until their conversion into Series A preferred stock in connection with the Company’s preferred stock financing completed during 2025. In multiple closings held from September 2025 through January 2026, we issued and sold an aggregate of 2,491,721 shares of Series A-1 convertible preferred stock for aggregate gross proceeds of approximately $15.6 million. In connection with these financings, we issued warrants to purchase 2,999,950 shares of common stock at an exercise price of $3.3334 per share. The warrants are immediately exercisable and expire on March 22, 2027.
On March 18, 2026, we completed our IPO, in which we issued and sold 3,450,000 shares of common stock, including the full exercise by the underwriters of their option to purchase an additional 450,000 shares of common stock, at a public offering price of $5.00 per share, resulting in gross proceeds of approximately $17.3 million before deducting underwriting discounts, commissions and offering expenses.
On June 10, 2026, we entered into an ELOC with Lucid providing us with the ability, at our discretion, to sell up to 3,000,000 shares of our common stock over a 24-month period, subject to the terms and limitations of the agreement. The facility became available on June 15, 2026 following the effectiveness of the related resale registration statement. During the period from commencement through June 30, 2026, we sold 313,996 shares of common stock under the ELOC for aggregate gross proceeds of approximately $13.5 million.
From its commencement on June 15, 2026 through August 10, 2026, we sold a total of 642,484 shares of common stock under the ELOC facility for aggregate gross proceeds of approximately $26.8 million.
Future Funding Requirements
Our primary uses of cash are to fund our operations, which consist primarily of research and development expenditures related to our product and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant and increasing expenses for the foreseeable future as we expand our corporate infrastructure, including the costs associated with being a public company, further our research and development initiatives for our product, and incur costs associated with sales and marketing. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we may require additional funding in connection with our continuing operations.
We believe that our current capital resources, which consist of cash and cash equivalents, will be sufficient to fund operations for at least the next twelve months from the date the financial statements included in this Quarterly Report on Form 10-Q are issued based on our current operating plan. As we continue to pursue our business plan, we may seek to finance our operations through additional equity offerings, debt financings, or other capital sources. However, there can be no assurance that any additional financing or strategic arrangements will be available to us on acceptable terms, if at all.
Cash Flows
The following table sets forth our cash flow activity for the six months ended June 30, 2026 and 2025:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash used in operating activities |
|
$ |
(11,137,430 |
) |
|
$ |
(1,431,500 |
) |
Cash used in investing activities |
|
|
(445,665 |
) |
|
|
— |
|
Cash provided by financing activities |
|
|
27,387,239 |
|
|
|
— |
|
Effect of exchange rate changes on cash |
|
|
201,550 |
|
|
|
14,261 |
|
Net increase (decrease) in cash and cash equivalents |
|
$ |
16,005,694 |
|
|
$ |
(1,417,239 |
) |
24
Operating Activities
Net cash used in operating activities was $11.1 million for the six months ended June 30, 2026, and reflected our net loss of $11.8 million; partially offset by the change in advances received under the combined arrangement described in Note 9 and changes in net working capital.
During the six months ended June 30, 2025, cash used in operating activities was $1.4 million, and reflected our net loss of $2.3 million, which included the $0.9 million non-cash change in fair value of the SAFE liability.
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026, was approximately $0.4 million and related to the $0.3 million purchase of property and equipment and the $0.1 million purchase of intangibles.
Financing Activities
During the six months ended June 30, 2026, cash provided by financing activities was $27.4 million and primarily related to proceeds from the IPO, proceeds from the issuance of common stock under our ELOC with Lucid, and the sale of Series A-1 convertible preferred stock.
Contractual Obligations
Following the consummation of the IPO, our contractual obligations consist primarily of operating lease commitments, a D&O premium financing arrangement and our commitment to procure, deploy, and integrate our proprietary software onto unmanned aerial vehicles for use by designated military units of the Armed Forces of Ukraine. See Note 8, "Accrued Expenses and Other Current Liabilities", Note 9, "Advances Received Under Combined Arrangement", and Note 10, "Commitments and Contingencies", to our unaudited condensed consolidated financial statements for further details.
Critical Accounting Policies and Significant Judgments and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported expenses during the reporting periods. These estimates are based on historical experience and other factors that management believes are reasonable under the circumstances. Actual results may differ from these estimates, and such differences may be material.
There have been no material changes to the methodologies applied by management in determining critical accounting estimates during the three and six months ended June 30, 2026 and 2025, as compared to those described in our audited financial statements included in our Registration Statement. For additional information regarding our critical accounting policies and estimates, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our final prospectus for our IPO, dated as of March 16, 2026 and filed with the SEC, pursuant to Rule 424(b)(4) on March 17, 2026.
Recent Accounting Pronouncements
See Note 3 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we may remain an emerging growth company for up to five years following the completion of our IPO. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
25
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period, and therefore, we are not subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies; however, we may adopt certain new or revised accounting standards early. We will remain an “emerging growth company” until the earliest to occur of: (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenue; (ii) the date on which we first qualify as a large accelerated filer under the rules of the SEC; (iii) the date on which we have, in any prior three-year period issued more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO.
We are also a smaller reporting company as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Off Balance Sheet Arrangements
We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Internal Control Over Financial Reporting
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.
We have identified the following material weaknesses in the design of our internal controls:
We are in the process of remediating such material weaknesses and there can be no assurance as to when or if we will fully remediate such material weaknesses. Our plan to remediate the material weaknesses in our internal control over financial reporting includes utilizing a portion of the working capital from our initial public offering to increase staffing within our accounting infrastructure sufficient to facilitate proper segregation of accounting functions and to enable appropriate review of our internally prepared consolidated financial statements. In addition, we plan to retain outside consultants, expert in, and specializing in technical accounting and SEC reporting for public company registrants.
26
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of the end of the period covered by this Quarterly Report on Form 10-Q.
Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There is an inadequate segregation of duties consistent with control objectives. Our management is composed of four persons, resulting in a situation where limitations on segregation of duties exist. Management plans to engage a third-party specialist to review our current internal controls and recommend design improvements to address the segregation of duties given the limited number of employees.
We can give no assurance that additional weaknesses in our internal control over financial reporting will not be identified in the future. Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations over Internal Controls
Our management, including our Chief Executive Officer (U.S.) and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. However, due to the material weaknesses in our internal control over financial reporting described elsewhere in this Quarterly Report on Form 10-Q, management concluded that our disclosure controls and procedures were not effective as of June 30, 2026.
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
27
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors described in Part II, Item 1A, "Risk Factors," of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (the "Q1 2026 Form 10-Q"), filed with the SEC on May 14, 2026, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also materially and adversely affect our business, financial condition or future results. Except as set forth below, there have been no material changes from the risk factors described in our Q1 2026 Form 10-Q.
It is not possible to predict the actual number of shares of our common stock we will sell under the Purchase Agreement, or the actual gross proceeds resulting from those sales or the dilution to stockholders from those sales. Further, our inability to access a part or all of the amount available under the Purchase Agreement, in the absence of any other financing sources, could have a material adverse effect on our business.
Pursuant to the Purchase Agreement, Lucid has committed to purchase up to 3,000,000 shares of common stock from us, subject to certain limitations and conditions set forth in the Purchase Agreement. The shares of our common stock that may be issued under the Purchase Agreement may be sold by us to Lucid at our discretion from time to time over a 24- month period from the date of the Purchase Agreement. The facility commenced on June 15, 2026 upon effectiveness of the related resale registration statement. During the period from commencement through June 30, 2026, we sold 313,996 shares of common stock under the facility, recorded at their issuance-date fair value, for aggregate gross proceeds of approximately $13.5 million, of which approximately $8.8 million had been received at June 30, 2026 and approximately $4.6 million was recorded as a receivable from the sale of common stock and collected in July of 2026.
We generally have the right to control the timing and amount of any sales of our common stock to Lucid under the Purchase Agreement. Sales of our common stock to Lucid under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Lucid all or some of the common stock that may be available for us to sell pursuant to the Purchase Agreement.
Because the purchase price per share of common stock to be paid by Lucid for additional common stock that we may elect to sell to Lucid under the Purchase Agreement, if any, will fluctuate based on the market prices of our common stock at the time we make such election, it is not possible for us to predict, as of the date of this quarterly report and prior to any such future sales, the number of additional shares of common stock that we will sell to Lucid under the Purchase Agreement, the purchase price per share that Lucid will pay for such additional shares of common stock purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from such future purchases by Lucid under the Purchase Agreement, if any.
Even if we elect to sell to Lucid all of the 3,000,000 shares of common stock pursuant to the Purchase Agreement, depending on the market price of our common stock at the time we elect to sell such shares to Lucid, the actual gross proceeds from the sale of all such shares may be substantially less than the amount available to us under the Purchase Agreement, which could materially and adversely affect our liquidity position. Further, if we are unable to access all or a portion of the amount available under the Purchase Agreement to meet our liquidity needs, we may be required to seek other financing sources and utilize more costly and time-consuming means of accessing the capital markets, which could have a material adverse effect on our business, liquidity and cash position.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Unregistered Sales of Equity Securities
None.
28
Use of Proceeds
On March 18, 2026, we completed our IPO, in which we issued and sold 3,450,000 shares of our common stock, including the full exercise by the underwriters of their option to purchase 450,000 additional shares of our common stock, at a public offering price of $5.00 per share, which resulted in gross proceeds to the Company of approximately $17.3 million, before deducting underwriting discounts and commissions and other offering expenses payable by the Company. The proceeds from the IPO are being used to fund ongoing operations, including expansion of capabilities and our product offerings, hiring employees, integration with the hardware of drone manufacturers, and for working capital and other general corporate purposes. A portion of the proceeds from the IPO are also being used to in-license, acquire and invest in products, technologies and businesses.
The offer and sale of all of the shares of our common stock in our IPO was effected through a Registration Statement on Form S-1 (File No. 333-293123) that was declared effective by the SEC on March 16, 2026.
There has been no material change in the planned use of proceeds from our IPO as described in the prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on March 17, 2026.
Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
10b5-1 Trading Arrangements
From time to time, our officers (as defined in Rule 16a-1(f) of the Exchange Act) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). During the three months and six months ended June 30, 2026, none of our officers or directors
29
Item 6. Exhibits.
The documents listed in the Exhibit List, which follows below, are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).
Exhibit Number |
|
Description |
3.1 |
|
Third Amended and Restated Certificate of Incorporation of Swarmer, Inc (incorporated by reference from Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 18, 2026). |
3.2 |
|
Amended and Restated Bylaws of Swarmer, Inc (incorporated by reference from Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 18, 2026). |
10.1
|
|
Common Stock Purchase Agreement, dated as of June 10, 2026, by and between Swarmer, Inc and Lucid Capital Markets, LLC (incorporated by reference from Exhibit 10.21 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on June 10, 2026). |
10.2 |
|
Registration Rights Agreement, dated as of June 10, 2026, by and between Swarmer, Inc and Lucid Capital Markets, LLC (incorporated by reference from Exhibit 10.22 to the Registrant’s Registration Statement on Form S-1 filed with the SEC on June 10, 2026). |
10.3#* |
|
Amended and Restated Master Supplier Agreement, dated June 25, 2026, by and between Swarmer Estonia OÜ and Meta Bureau LLC |
10.4#* |
|
Master Supplier Agreement, dated June 25, 2026, by and Between Swarmer Estonia OÜ and Progress TRW S.R.O. |
31.1* |
|
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1*~ |
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2*~ |
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
# Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets ([***]) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.
+ Denotes management compensation plan or contract.
^ Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules upon request by the U.S. Securities and Exchange Commission.
~ In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
Swarmer, Inc |
|
|
|
|
Date: August 14, 2026 |
By: |
/s/ Alexander Fink |
|
|
Alexander Fink |
|
|
Chief Executive Officer (U.S.) |
|
|
|
Date: August 14, 2026 |
By: |
/s/ Brooks Ensign |
|
|
Brooks Ensign |
|
|
Chief Financial Officer and Treasurer |
31