NOTE 8 – LONG-TERM EQUITY INVESTMENTS

On August 12, 2025, the Company purchased a non-controlling interest in Rift Dynamics AS (“Rift”), a Norway-based defense technology company specializing in affordable, mass-producible combat drone systems, for the aggregate price of $587 thousand, representing approximately 10% ownership in Rift.

On November 20, 2025, the Company purchased Series B-3 Preferred Stock in Performance Drone Works (“PDW”), a veteran-led defense-technology engineer and manufacturer of advanced robotics for mission-critical national security missions, for the aggregate price of $35 million, representing approximately 3% ownership in PDW. The Series B-3 Preferred Stock is convertible into PDW common stock at the option of the holder and ranks senior to PDW’s common stock with respect to liquidation and dividend rights. The investment is subject to customary transfer restrictions and provides the Company with certain investor rights, including information rights and the right to appoint a non-voting observer to PDW’s board of directors, subject to specified conditions.

These long-term equity investments consist of equity investments in private companies through common and preferred stock. The Company accounts for these equity securities under the measurement alternative because they do not have a readily determinable fair value and do not qualify for the equity method of accounting. Accordingly, the investments are carried at cost, less impairment, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company concluded that it does not have significant influence over either of the investees. Amounts are classified as a long-term equity investment on our Consolidated Balance Sheets. Dividends or other distributions, if and when declared by the investee, are recognized by the Company as investment income upon receipt with adjustments recognized in Other (expense) income, net on our Consolidated Statements of Operations. The Company has determined that the equity investments do not have a readily determinable fair value and elected the measurement alternative. Therefore, the equity investments’ carrying amount will be adjusted to fair value at the time of the next observable price change for the identical or similar investment of the same issuer or when an impairment is recognized. Each reporting period, the Company performs a qualitative assessment to evaluate whether the investment is impaired. The assessment includes a review of recent operating results and trends, recent transactions involving the investee securities, and other publicly available data. If the investment is impaired, the Company writes it down to its estimated fair value. No impairment charges were recognized for the year ended December 31, 2024 or 2025. As of December 31, 2025 the long-term equity investments had a carrying value of $35.6 million.