AIRO Group Holdings, Inc. Segments Disclosure

 

13.	Segment Information

 

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. The Company’s chief operating decision maker (“CODM”) has been identified as the chief executive officer. The Company will continue to reevaluate its reportable and operating segments. The Company manages its business primarily based upon four operating segments: Avionics, Drones, Electric Air Mobility and Training. In accordance with the segment reporting accounting standard, the Company evaluated the economic similarity of its operating segments and determined that each of these operating segments represents a reportable segment.

 

●	Avionics: This segment develops, manufactures, and sells avionics and GPS sensors for the general aviation (“GA”), unmanned aircraft systems (“UAS”) and eVTOL market segments. The Company’s avionics products are focused on GA aftermarket, OEM display, integration and connected panel solutions.
●	Drones: This segment offers direct operation of drones and drone systems, provision of drone-derived information, and the development of drone-optimized communication services. Additionally, it consists of development and commercialization of market leading MUAS for professional users, primarily in the defense and security markets. The MUAS includes internally developed software, hardware, and mechanical system components. Operations cover sourcing, manufacturing, assembly, quality assurance testing activities and logistics.
●	Electric Air Mobility: This segment includes designing, licensing and ultimately the manufacturing of air vehicles incorporating slowed rotor compound technology that is capable of transporting people and packages operated by pilots or autonomous flight systems.

 

 

●

Training: This segment provides and operates military aircraft for U.S. military services and Department of Defense (“DOD”) contractors. Segment revenues are earned from (1) flying training missions as part of armed forces training groups, and (2) providing aircraft and support services to DOD contractors.

 

The Company evaluates the performance of its reportable segments based on the net income (loss) for each reporting segment. Presented below are reconciliations of the reportable segment total revenues to the consolidated revenues and the reportable segment total net income (loss) to the consolidated net loss for the years ended December 31, 2025 and 2024:

 Schedule of Segment Information

		Avionics				Drones				Electric Air Mobility				Training				Total
		December 31, 2025
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Revenue		$	6,921			$	79,080			$	-			$	4,906			$	90,907
Cost of revenue			4,461				28,102				-				3,929				36,492
Gross profit			2,460				50,978				-				977				54,415
Research and development			1,824				8,328				7,566				-				17,718
Sales and marketing			1,181				3,448				-				1,986				6,615
General and administrative			3,604				11,348				1,200				13,716				29,868
Interest expense			23				427				-				243				693
Interest income			(2	)			(333	)			-				-				(335	)
Gain on extinguishment of debt			(13,091	)			-				-				-				(13,091	)
Other expense (income), net			670				(160	)			(23,098	)			(2,677	)			(25,265	)
Income tax expense			-				(6,106	)			-				-				(6,106	)
Segment profit (loss)		$	8,251			$	21,814			$	14,332			$	(12,291	)			32,106
Unallocated amounts:
Corporate expenses																			28,979
Interest expense, net																			9,442
Gain on extinguishment of debt																			(2,468	)
Other income, net																			(680	)
Income tax expense																			937
Net loss																		$	(4,104	)

 

		Avionics				Drones				Electric Air Mobility				Training				Total
		December 31, 2024
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Revenue		$	8,665			$	74,691			$	-			$	3,579			$	86,935
Cost of revenue			5,764				19,854				-				3,000				28,618
Gross profit			2,901				54,837				-				579				58,317
Research and development			1,028				4,512				7,593				-				13,133
Sales and marketing			1,286				3,146				-				1,990				6,422
General and administrative			1,868				8,190				2,115				2,600				14,773
Goodwill impairment			-				-				17,024				20,970				37,994
Interest expense			129				2,150				-				278				2,557
Interest income			-				(271	)			-				-				(271	)
Other expense (income), net			77				205				(2,401	)			(74	)			(2,193	)
Income tax benefit (expense)			(7,528	)			(9,051	)			4,035				4,244				(8,300	)
Segment (loss) profit		$	(9,015	)		$	27,854			$	(20,296	)		$	(20,941	)			(22,398	)
Unallocated amounts:
Corporate expenses																			3,428
Interest expense, net																			1,478
Loss on extinguishment of debt																			10,461
Other expense, net																			20
Other (income) expense, net																			20
Income tax expense																			909
Net loss																		$	(38,694	)

 

 

The following table presents revenues by geographic area for the years ended December 31:

 Schedule of Revenue by Geographic Area

		Avionics				Drones				Electric Air Mobility				Training				Total
		2025
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
United States		$	4,307			$	98			$	-			$	4,906			$	9,311
Europe			1,586				76,398				-				-				77,984
Other			1,028				2,584				-				-				3,612
Revenue		$	6,921			$	79,080			$	-			$	4,906			$	90,907

 

		Avionics				Drones				Electric Air Mobility				Training				Total
		2024
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
United States		$	5,318			$	1,169			$	-			$	3,579			$	10,066
Europe			1,793				73,522				-				-				75,315
Other			1,554				-				-				-				1,554
Revenue		$	8,665			$	74,691			$	-			$	3,579			$	86,935

 

The following table presents revenues by products and services for the years ended December 31:

 Schedule of Revenue by Products and Services

		Avionics				Drones				Electric Air Mobility				Training				Total
		2025
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Products		$	6,907			$	73,012			$	-			$	902			$	80,821
Services			14				6,068				-				4,004				10,086
Revenue		$	6,921			$	79,080			$	-			$	4,906			$	90,907

 

		Avionics				Drones				Electric Air Mobility				Training				Total
		2024
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Products		$	8,618			$	71,856			$	-			$	202			$	80,676
Services			47				2,835				-				3,377				6,259
Revenue		$	8,665			$	74,691			$	-			$	3,579			$	86,935

 

 

The following table presents capital expenditures, depreciation and amortization, stock-based compensation and contingent consideration fair value adjustments for the years ended December 31:

 Schedule of Capital Expenditures, Depreciation and Amortization

		Avionics				Drones				Electric Air Mobility				Training				Total
		2025
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Depreciation and amortization		$	458			$	1,679			$	6,801			$	3,071			$	12,009
Stock-based compensation 1			1,717				151				166				10,087				12,121
Contingent consideration fair value adjustments			-				(365	)			(17,223	)			(2,684	)			(20,272	)
Capital expenditures			361				2,014				-				1,004				3,379

 

1	During the year ended December 31, 2025, the Company also recognized $7.8 million as part of corporate expense.

 

		Avionics				Drones				Electric Air Mobility				Training				Total
		2024
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
Depreciation and amortization		$	496			$	1,943			$	6,802			$	3,399			$	12,640
Stock-based compensation			-				-				716				-				716
Contingent consideration fair value adjustments			-				-				(2,400	)			-				(2,400	)
Capital expenditures			6				783				-				-				789

 

The following table presents tangible long-lived assets by geographic area as of December 31:

 Schedule of Tangible Long Lived Assets by Geographic Area

		Avionics				Drones				Electric Air Mobility				Training				Total
		2025
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
United States		$	544			$	-			$	3			$	5,484			$	6,031
Europe			-				2,955				-				-				2,955
Total		$	544			$	2,955			$	3			$	5,484			$	8,986

 

		Avionics				Drones				Electric Air Mobility				Training				Total
		2024
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Total
United States		$	201			$	-			$	2			$	5,339			$	5,542
Europe			-				1,292				-				-				1,292
Total		$	201			$	1,292			$	2			$	5,339			$	6,834

 

Total segment assets reconciled to consolidated amounts are as follows as of December 31:

 Schedule of Segment Assets

						Total Segment assets
(In Thousands)		Avionics				Drones				Electric Air Mobility				Training				Corporate				Total
2025		$	3,795			$	178,064			$	506,214			$	30,387			$	55,679			$	774,139
2024		$	1,208			$	150,722			$	514,152			$	32,378			$	2,539			$	700,999

 

Government Regulation

 

The Company is subject to various local, state, federal and international laws and regulations relating to the development, manufacturing, sale and distribution of its products, systems and services, and it is the Company’s policy to comply with the applicable laws in each jurisdiction in which it conducts business. Regulations include but are not limited to those related to import and export controls, corruption, bribery, environment, government procurement, wireless communications, competition, product safety, workplace health and safety, employment, labor and data privacy.

 

 

Drones

 

Because it contracts with the DoD and other agencies of the U.S. government—and, for certain of those contracts, requires access to classified information—the Company’s Drones segment is subject to extensive federal statutes and regulations, including the Federal Acquisition Regulation, the Defense Federal Acquisition Regulation Supplement, the Truthful Cost and Pricing statute, the Foreign Corrupt Practices Act, the False Claims Act, and the regulations implementing the National Industrial Security Program Operating Manual (“NISPOM”). The NISPOM regulations establish the security requirements applicable to classified contracts and programs, facility security clearances, and personnel security clearances. The federal government audits and reviews contractors’ performance on contracts, pricing practices, cost accounting systems and practices, and compliance with applicable laws, regulations and standards. Like most government contractors, the Drones segment’s contracts are audited and reviewed regularly by federal agencies, including the Defense Counterintelligence and Security Agency, the Defense Contract Management Agency and the Defense Contract Audit Agency.

 

In addition, the Drones segment is subject to industry-specific regulations due to the nature of the products and services it provides. For example, certain aspects of its business are subject to further regulation by additional U.S. government authorities, including: (i) the Federal Aviation Administration (“FAA”), which regulates airspace for all air vehicles in the U.S. National Airspace System (“NAS”); (ii) the National Telecommunications and Information Administration and the Federal Communications Commission, which regulate the wireless communications upon which its UAS depend in the U.S. and also regulate any device that emits radiofrequency emissions as a result of its operations; (iii) the Directorate of Defense Trade Controls of the U.S. Department of State, which administers the International Traffic in Arms Regulations that regulate the export of controlled technical data, defense articles and defense services and (iv) the Bureau of Industry and Security of the U.S. Department of Commerce, which regulates matters relating to U.S. national security and technology.

 

Electric Air Mobility

 

A transport category type certification is the highest level in safety provided by the Civil Aviation Authorities. Jaunt intends to certify under CAR 529, single pilot (instrument flight rules and comply with Category Enhanced of European Union Aviation Safety Agency (“EASA”) SC-VTOL-01 by:

 

	●	using System Safety Assessment processes (Aerospace Recommended Practice (“ARP”) 4761 with ARP 4754A) that are industry standard for commercial transport aircraft (Exposure Draft 79A);
	●	designing flight critical systems to meet the requirements of a probability of catastrophic failure of less than 10-9 per flight hour (less than once every billion flight hours);
	●	developing robust software design processes to meet Development Assurance Level A for functions that could exhibit catastrophic failures; and
	●	meeting requirements for bird strike, fatigue and damage tolerance, lightning strike, fire protection, and designing and incorporating elements for crashworthiness right from conceptual stage.

 

In the near-term, the efforts of the Electric Air Mobility segment will focus on obtaining FAA certification of its aircraft and engaging with key decision makers in cities in the United States in which it anticipates its aircraft and urban air mobility (“UAM”) service will initially operate. Its aircraft will be required to comply with regulations governing aircraft design, production and airworthiness. In the United States, this primarily includes regulations put forth by the FAA and the Department of Transportation (“DOT”). Outside the United States, similar requirements are generally administered by the national civil aviation and transportation authorities of each country.

 

Avionics

 

Aspen Avionics designs and manufactures equipment under worldwide aviation regulatory agency approvals. These include but are not limited to FAA, EASA, Transport Canada Civil Aviation, and National Civil Aviation Agency of Brazil regulations. These govern the design, test, certification, installation, and manufacturing of Aspen’s equipment.

 

 

The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft. Similar rules apply in other countries. All aircraft must be maintained under a continuous condition monitoring program and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repair procedures for the various types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians. Certification and conformance are required prior to installation of a part on an aircraft. Aircraft operators must maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes. In addition, the FAA requires that various maintenance routines be performed on aircraft engines, some engine parts, and airframes at regular intervals based on cycles or flight time. Engine maintenance must also be performed upon the occurrence of certain events, such as foreign object damage in an aircraft engine or the replacement of life-limited engine parts. Such maintenance usually requires that an aircraft engine be taken out of service. Aspen Avionics’ operations may in the future be subject to new and more stringent regulatory requirements. In that regard, Aspen Avionics closely monitors the FAA and industry trade groups in an attempt to understand how possible future regulations might impact it. The Company’s businesses that sell defense products directly to the U.S. government or for use in systems delivered to the U.S. government can be subject to various laws and regulations that govern pricing and other factors.