Airship AI Holdings, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparative period is Q1 2023. Airship AI provides edge-based AI data management products and services, primarily to government and law-enforcement customers. The December 2023 business combination with BYTE Acquisition Corp. was accounted for as a reverse recapitalization.
Key financial results
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $10.58 million | $2.94 million |
| Gross profit / margin | $2.63 million / 24.9% | $0.80 million / 27.4% |
| Operating expenses | $4.03 million | $2.51 million |
| Operating loss | $1.40 million | $1.70 million |
| Net loss | $31.96 million | $1.71 million |
| Cash used in operating activities | $1.70 million | $0.99 million |
Revenue growth was driven mainly by product sales: product revenue rose to $9.40 million from $1.70 million, while post-contract support revenue was $1.18 million versus $1.24 million. Higher equipment costs and product mix contributed to lower gross margin. SG&A increased to $3.34 million, including higher insurance and professional fees, with some fees related to the merger and Nasdaq listing.
The net loss included $30.37 million of losses from fair-value changes in earnout, warrant and convertible-note liabilities, plus a $0.16 million loss on note conversion. These items were principally noncash; management reported total noncash charges of approximately $30.88 million. Basic and diluted loss per share was $1.40, compared with $0.08.
Financial position and liquidity
- Cash and cash equivalents were $1.73 million at March 31, 2024, down from $3.12 million at December 31, 2023. Operating cash use was partly offset by $0.29 million from warrant exercises; cash declined by approximately $1.40 million overall.
- Current assets were $3.46 million and current liabilities were $13.40 million. The company reported an adjusted working-capital deficit of approximately $2.00 million, excluding current deferred revenue of $3.74 million and convertible debt of approximately $4.20 million.
- Total liabilities were $52.71 million, including $26.62 million of earnout liability, $7.52 million of warrant liabilities and $4.20 million of fair-valued convertible notes. Stockholders’ deficit was $48.05 million.
- The February 2024 amended Platinum note has a $2.00 million principal amount, a 110% repayment amount, 6% annual interest and a June 22, 2024 maturity. It is convertible at the holder’s option under specified price terms. Management expects the convertible debt to convert to equity. Two other notes totaling $600,000 plus interest converted into shares in March.
- Founder advances were $1.75 million at quarter-end, non-interest-bearing and expected to be repaid within one year. The CEO committed to temporary additional funding if needed.
Material changes, outlook and risks
- Management said federal-agency purchase orders exceeded $13 million; the company shipped against orders and began receiving cash in Q1. It stated that cash, orders, projections and potential short-term founder funding are expected to support operations for at least 12 months. This is management’s estimate and is subject to uncertainty; no formal revenue or earnings guidance was provided.
- Remaining performance obligations were approximately $8.0 million, consisting of deferred service contracts. The company expects to recognize about 36% in fiscal 2024 and the balance in fiscal 2025 and later.
- One customer represented 78% of Q1 2024 revenue, attributed to fulfillment of a large prior order. Two customers accounted for approximately 52% and 27% of receivables at quarter-end.
- The company cautioned that a greater mix of lower-margin hardware solutions may pressure margins. It also cited geopolitical supply-chain risks affecting Taiwan-based products and warned that unavailable or unsatisfactory financing could require it to delay, scale back or eliminate opportunities; equity financing could dilute shareholders.
- Fair-value liabilities are sensitive to share price and other assumptions, creating potentially significant noncash earnings volatility. The earnout liability rose sharply during the quarter as the share price increased; no earnout milestones had been met by March 31.
- Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting. The filing reported no material pending legal proceeding and no material subsequent event through issuance.
Investor verification priorities
- Track conversion, repayment or refinancing of the Platinum note at its June 2024 maturity and any related dilution.
- Reconcile reported cash and the adjusted working-capital deficit against near-term obligations, deferred-revenue delivery requirements and the stated 12-month liquidity outlook.
- Verify shipment, collection and renewal of the federal-agency orders, and assess the durability of revenue after the large customer order that drove Q1 sales.
- Monitor customer concentration, receivable collections and gross margins as product mix changes.
- Review potential dilution from outstanding options, SARs, warrants, convertible securities and up to 5.0 million earnout shares, along with the earnings impact of recurring fair-value remeasurement.