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Item 1A. Risk Factors

2025-11-14 compared with 2025-08-13 · 1136 added, 1148 removed, 945 unchanged (71% of the section changed)

Investing in our common

stock involves a high degree of risk.

You should carefully consider the following risks and uncertainties, together with all of the

other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and

related notes included elsewhere in this Quarterly Report on Form 10-Q, and the section titled “Management’s Discussion and

Analysis of Financial Condition and Results of Operations,” before making an investment decision.

in our common stock involves a high degree of risk.

You should carefully consider the following risks and uncertainties, together with

all of the other information contained in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements

and related notes included elsewhere in this Quarterly Report on Form 10-Q, and the section titled “Management’s Discussion

and Analysis of Financial Condition and Results of Operations,” before making an investment decision.

The risks described below

are not the only ones facing us.

The occurrence of any of the following risks, or of additional risks and uncertainties not

presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, prospects,

financial condition or results of operations.

In such case, the trading price of our common stock could decline, and you may lose

part or all of your investment.

The occurrence of any of the following risks, or of additional risks and uncertainties not presently

known to us or that we currently believe to be immaterial, could materially and adversely affect our business, prospects, financial condition

or results of operations.

In such case, the trading price of our common stock could decline, and you may lose part or all of your investment.

Factors Summary

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The following is a summary of the principal risks we face:

have a limited operating history in new and evolving markets, which may make it difficult

to evaluate our current business and future prospects and increase the risk of your investment.

are an early-stage company with a history of losses, and we expect to incur significant expenses

and continuing losses for the foreseeable future.

failure to comply with covenants under debt instruments could adversely affect our business

and financial condition.

have made and may in the future make acquisitions and investments, which involve numerous

may not be able to successfully integrate the businesses and personnel of acquired companies

and businesses, including those acquired in the Put-Together Transaction, and may not realize

the anticipated synergies and benefits of such acquisitions.

face significant competition from other companies, many of which have substantially greater

resources than we do.

may not be able to keep pace with technological advances and we depend on advances in technology

by other companies.

have a limited operating history in new and evolving markets, which may make it difficult to evaluate our current business and future

prospects and increase the risk of your investment.

are an early-stage company with a history of losses, and we expect to incur significant expenses and continuing losses for the foreseeable

failure to comply with covenants under debt instruments could adversely affect our business and financial condition.

have made and may in the future make acquisitions and investments, which involve numerous risks.

may not be able to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired

in the Put-Together Transaction, and may not realize the anticipated synergies and benefits of such acquisitions.

face significant competition from other companies, many of which have substantially greater resources than we do.

may not be able to keep pace with technological advances and we depend on advances in technology by other companies.

may not be able to produce aircraft in the volumes or on the timelines that we anticipate.

order to reach production for our aircraft, we need to develop complex software and technology

systems in coordination with our partners and suppliers, and there can be no assurance such

systems will be successfully developed.

may be unable to acquire additional aircraft to support our Training segment on acceptable

terms or at all.

to the nature of our products and services, a product safety failure, quality issue or other

failure affecting our or our customers’ or suppliers’ products or systems could

seriously harm our business.

future success depends on the continuing efforts of our key personnel and on our ability

to attract and retain highly skilled personnel and senior management.

rely on a limited number of suppliers in Canada and Europe for critical components and raw

materials used to manufacture and develop our products.

rely on independent dealers and distributors to sell our Avionics products, and disruption

to these channels would harm our business.

currently, and may in the future, use and develop generative AI technologies throughout our

business, which may expose us to certain regulatory and other risks that could adversely

affect our results of operations and financial condition.

our information technology systems or data, or the third parties with whom we work, are or

were compromised, we could experience adverse consequences resulting from such compromise,

including but not limited to regulatory investigations or actions;

order to reach production for our aircraft, we need to develop complex software and technology systems in coordination with our partners

and suppliers, and there can be no assurance such systems will be successfully developed.

may be unable to acquire additional aircraft to support our Training segment on acceptable terms or at all.

to the nature of our products and services, a product safety failure, quality issue or other failure affecting our or our customers’

or suppliers’ products or systems could seriously harm our business.

future success depends on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel

and senior management.

rely on a limited number of suppliers in Canada and Europe for critical components and raw materials used to manufacture and develop

our products.

rely on independent dealers and distributors to sell our Avionics products, and disruption to these channels would harm our business.

currently, and may in the future, use and develop generative AI technologies throughout our business, which may expose us to certain

regulatory and other risks that could adversely affect our results of operations and financial condition.

our information technology systems or data, or the third parties with whom we work, are or were compromised, we could experience

adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or

loss of customers or sales;

and other adverse consequences, risks which are amplified

by our work for world governments.

commercial aviation products, systems and services businesses are affected by global demand

and economic factors that could negatively impact our financial results.

market for eVTOL aircraft and electric air mobility has not been clearly defined, is still

emerging and may not achieve the growth potential we expect or may grow more slowly than

expected, which may harm our business, financial condition, and results of operations.

are still developing our eVTOL aircraft, have not yet obtained FAA certification of our eVTOL

aircraft under development and we have yet to manufacture or deliver any aircraft to customers,

which makes evaluating our business and future prospects difficult and increases the risk

of investment.

may be reluctance by consumers to adopt a new form of mobility, or an unwillingness to pay

aircraft operators’ projected prices.

are subject to extensive government regulation, and our failure to comply with applicable

regulations may subject us to significant financial liability, penalties, and other government

actions that restrict our ability to conduct our business.

government contracts are subject to a competitive bidding process, are generally not fully

funded at inception, and contain certain terms that may be unfavorable to us, which could

result in contracts and opportunities consuming significant resources without generating

loss of revenue or profits;

loss of customers or

and other adverse consequences, risks which are amplified by our work for world governments.

commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively

impact our financial results.

market for eVTOL aircraft and electric air mobility has not been clearly defined, is still emerging and may not achieve the growth

potential we expect or may grow more slowly than expected, which may harm our business, financial condition, and results of operations.

are still developing our eVTOL aircraft, have not yet obtained FAA certification of our eVTOL aircraft under development and we have

yet to manufacture or deliver any aircraft to customers, which makes evaluating our business and future prospects difficult and increases

the risk of investment.

may be reluctance by consumers to adopt a new form of mobility, or an unwillingness to pay aircraft operators’ projected prices.

are subject to extensive government regulation, and our failure to comply with applicable regulations may subject us to significant

financial liability, penalties, and other government actions that restrict our ability to conduct our business.

government contracts are subject to a competitive bidding process, are generally not fully funded at inception, and contain certain

terms that may be unfavorable to us, which could result in contracts and opportunities consuming significant resources without generating

revenue or profit.

rely to a significant degree on sales to the U.S.

government, particularly to agencies of

the Department of Defense, and a decline in government budgets, funding, changes in spending

or budgetary priorities, or delays in contract awards may materially adversely affect our

future revenue, business, financial condition, results of operations, cash flow and equity.

government, particularly to agencies of the DoD, and a decline in government budgets,

funding, changes in spending or budgetary priorities, or delays in contract awards may materially adversely affect our future revenue,

business, financial condition, results of operations, cash flow and equity.

government may modify, curtail or terminate one or more of our contracts.

business may benefit in part from government funding, and our inability to receive such financial

support could harm our business.

of our products and services are subject to local, state, federal and international regulatory

frameworks that are costly to comply with, are subject to interpretation, may be dependent

on political pressures and factors and/or are subject to change.

business is highly regulated and our ability to generate revenues and profit may be limited

by regulatory restrictions and/or changes and the speed with which such restrictions and/or

changes occur.

government shutdown could affect contracting and FAA certifications needed to deliver products and services to the market

which could materially impair our business and financial condition.

business may benefit in part from government funding, and our inability to receive such financial support could harm our business.

of our products and services are subject to local, state, federal and international regulatory frameworks that are costly to comply

with, are subject to interpretation, may be dependent on political pressures and factors and/or are subject to change.

business is highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes

and the speed with which such restrictions and/or changes occur.

are subject to the risks associated with conducting international business operations.

we fail to protect, or incur significant costs in defending or enforcing, our intellectual

property and other proprietary rights, our business, financial condition, and results of

operations could be materially harmed.

we fail to protect, or incur significant costs in defending or enforcing, our intellectual property and other proprietary rights,

our business, financial condition, and results of operations could be materially harmed.

have identified material weaknesses in our internal control over financial reporting.

we are unable to effectively remediate these material weaknesses, identify additional material

weaknesses in the future, or otherwise fail to maintain effective internal control over financial

reporting, then we may not be able to accurately or timely report our financial condition

or results of operations, which may adversely affect our business.

Risks Related to Our Limited Operating History, Financial Position and

Need for Additional Capital

We have a limited operating history in new and evolving markets,

which may make it difficult to evaluate our current business and future prospects and increase the risk of your investment.

We were organized in August 2021 for the purpose of acquiring and integrating

various companies in the aerospace and defense industry and the history of operating each of our businesses together is relatively short.

Our limited operating history and rapidly evolving business make it difficult to evaluate our current business, future prospects and plan

In addition, our drones, eVTOL aircraft and other products are sold or will be sold in new and rapidly evolving markets.

our business and future prospects may be difficult to evaluate, the extent to which demand for our products and services will increase,

if at all, could be impacted by our ability to do the following:

attract new customers to our products or services;

develop, renew and expand contracts;

acquire and maintain market share;

attract, integrate, train and retain leadership and other highly qualified personnel;

achieve or manage growth in our operations;

acquire new technologies;

adapt to required redirection or changes in services or direction caused by geopolitical crises;

successfully develop and commercially market new products and services;

keep pace with technological developments;

timely address the increasingly sophisticated needs of our customers, including as a result of changes in government regulation related to our products and services;

secure sufficient quantities or cost-effective production of our products due to supply chain challenges;

adapt to new or changing policies and spending priorities of governments and government agencies;

generate sufficient revenue to achieve or maintain profitability;

access initial and additional capital when required and on reasonable terms.

If we fail to address these and other challenges, risks and uncertainties

successfully, our business, results of operations, prospects and financial condition would be materially harmed.

We are an early-stage company with a history of losses, and we expect

to incur significant expenses for the foreseeable future.

We have incurred significant net losses since inception,

with the exception of the six months of June 30, 2025, during which we reported net income of $3.9 million.

In contrast, we incurred net

losses of $7.6 million for the six months ended June 30, 2024, and $38.7 million and $32.5 million for the years ended December 31, 2024

and 2023, respectively.

As of June 30, 2025, we had an accumulated deficit of $202.6 million.

Although we raised approximately $69 million in gross

proceeds from our initial public offering, including the full exercise of the over-allotment option, we expect to continue incurring net

losses as we invest in scaling and expanding our operations.

Developing and commercializing products and services in the defense and broader

aerospace industry is capital intensive and subject to long development timelines.

We have allocated significant resources to our R&D

programs, and we may not ultimately generate products that achieve market acceptance or meaningful revenue.

Looking ahead, we expect our operating expenses to

increase substantially in connection with:

If we are unable to effectively remediate these

material weaknesses, identify additional material weaknesses in the future, or otherwise fail to maintain effective internal control

over financial reporting, then we may not be able to accurately or timely report our financial condition or results of operations,

which may adversely affect our business.

Related to Our Limited Operating History, Financial Position and Need for Additional Capital

have a limited operating history in new and evolving markets, which may make it difficult to evaluate our current business and future

prospects and increase the risk of your investment.

were organized in August 2021 for the purpose of acquiring and integrating various companies in the aerospace and defense industry and

the history of operating each of our businesses together is relatively short.

Our limited operating history and rapidly evolving business

make it difficult to evaluate our current business, future prospects and plan for growth.

In addition, our drones, eVTOL aircraft and

other products are sold or will be sold in new and rapidly evolving markets.

Accordingly, our business and future prospects may be difficult

to evaluate, the extent to which demand for our products and services will increase, if at all, could be impacted by our ability to do

the following:

new customers to our products or services;

renew and expand contracts;

and maintain market share;

integrate, train and retain leadership and other highly qualified personnel;

or manage growth in our operations;

new technologies;

to required redirection or changes in services or direction caused by geopolitical crises;

develop and commercially market new products and services;

pace with technological developments;

address the increasingly sophisticated needs of our customers, including as a result of changes in government regulation related

to our products and services;

sufficient quantities or cost-effective production of our products due to supply chain challenges;

to new or changing policies and spending priorities of governments and government agencies;

sufficient revenue to achieve or maintain profitability;

initial and additional capital when required and on reasonable terms.

we fail to address these and other challenges, risks and uncertainties successfully, our business, results of operations, prospects and

financial condition would be materially harmed.

are an early-stage company with a history of losses, and we expect to incur significant expenses for the foreseeable future.

have incurred significant net losses since inception including net losses of $4.1 million and $37.9 million for the nine months ended

September 30, 2025 and 2024, and $38.7 million and $32.5 million for the years ended December 31, 2024 and 2023, respectively.

September 30, 2025, we had an accumulated deficit of $210.5 million.

we raised approximately $121.7 million in net proceeds from our IPO and the Follow-on Offering, including the full exercise of the

over-allotment options in both the IPO and the Follow-on Offering, net of cash used in connection with the Repurchase, we expect to continue

incurring net losses as we invest in scaling and expanding our operations.

Developing and commercializing products and services in the

defense and broader aerospace industry is capital intensive and subject to long development timelines.

We have allocated significant

resources to our R&D programs, and we may not ultimately generate products that achieve market acceptance or meaningful revenue.

ahead, we expect our operating expenses to increase substantially in connection with:

of our headcount;

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our manufacturing and commercialization infrastructure.

In addition, as a newly public company, we expect

to incur increased legal, accounting and compliance costs.

To achieve and sustain profitability, we must generate substantial additional revenue.

Our ability to do so depends

on a number of factors, including the successful development, approval, and market adoption of our products.

If our revenue does not grow

sufficiently to offset our operating expenses, we may not achieve or maintain profitability.

Furthermore, while we believe our current

capital position provides us with a strong foundation, we may need to raise additional capital to support our R&D and commercialization

If we are unable to obtain financing on acceptable terms when needed, we may be forced to delay or reduce our operations, which

could materially and adversely affect our business, financial condition, and results of operations.

Our failure to comply with covenants under our debt instruments could

adversely affect our business and financial condition.

We have incurred significant

indebtedness, including in connection with the Put-Together Transaction, and may incur additional debt for acquisitions, operations,

R&D and capital expenditures, or for other reasons related to our overall capital deployment strategy.

As of June 30, 2025 and

December 31, 2024, we had outstanding indebtedness of $29.0 million and $105.7 million, respectively.

The agreements governing our

indebtedness contain restrictive covenants, including but not limited to, our ability to incur additional indebtedness, grant liens

and pay any dividends or make distributions, as well as financial maintenance covenants, including debt service coverage ratios,

that will limit our and our subsidiaries’ ability to engage in activities that may be in our and their long-term best

addition, as a newly public company, we expect to incur increased legal, accounting and compliance costs.

achieve and sustain profitability, we must generate substantial additional revenue.

Our ability to do so depends on a number of factors,

including the successful development, approval, and market adoption of our products.

If our revenue does not grow sufficiently to offset

our operating expenses, we may not achieve or maintain profitability.

Furthermore, while we believe our current capital position provides

us with a strong foundation, we may need to raise additional capital to support our R&D and commercialization efforts.

unable to obtain financing on acceptable terms when needed, we may be forced to delay or reduce our operations, which could materially

and adversely affect our business, financial condition, and results of operations.

failure to comply with covenants under our debt instruments could adversely affect our business and financial condition.

have incurred significant indebtedness, including in connection with the Put-Together Transaction, and may incur additional debt for

acquisitions, operations, R&D and capital expenditures, or for other reasons related to our overall capital deployment strategy.

As of September 30, 2025 and December 31, 2024, we had outstanding indebtedness of $12.8 million and $105.7 million, respectively.

agreements governing our indebtedness contain restrictive covenants, including but not limited to, our ability to incur additional indebtedness,

grant liens and pay any dividends or make distributions, as well as financial maintenance covenants, including debt service coverage

ratios, that will limit our and our subsidiaries’ ability to engage in activities that may be in our and their long-term best interests.

Any additional debt, to the extent we are able to incur it, may further restrict the manner in which we conduct business.

Such restrictions, prohibitions and limitations could impact our ability to implement elements of our strategy, including in the

following ways:

our flexibility to plan for, or react to, competitive challenges in our business and the pharmaceutical and in the aerospace and defense industry may be compromised;

we may be put at a competitive disadvantage relative to competitors that do not have as much debt as we have, and competitors that may be in a more favorable position to access additional capital resources;

our ability to make acquisitions and execute business development activities through acquisitions will be limited and may, in future years, continue to be limited;

our ability to resolve regulatory and litigation matters may be limited.

Furthermore, the creditors

who hold our debt have in the past, and may in the future, accelerate amounts due in the event that we default on these covenants,

which has in the past, and may in the future, trigger a default or acceleration of the maturity of our other debt.

Such restrictions,

prohibitions and limitations could impact our ability to implement elements of our strategy, including in the following ways:

flexibility to plan for, or react to, competitive challenges in our business and the pharmaceutical and in the aerospace and defense

industry may be compromised;

may be put at a competitive disadvantage relative to competitors that do not have as much debt as we have, and competitors that may

be in a more favorable position to access additional capital resources;

ability to make acquisitions and execute business development activities through acquisitions will be limited and may, in future

years, continue to be limited;

ability to resolve regulatory and litigation matters may be limited.

the creditors who hold our debt have in the past, and may in the future, accelerate amounts due in the event that we default on these

covenants, which has in the past, and may in the future, trigger a default or acceleration of the maturity of our other debt.

civil actions were filed against CDI and individual guarantors in the Tioga County Court, State of Pennsylvania, in July 2023.

claimant, FCCB, alleged that payment under certain promissory notes was due, and FCCB sought recovery of the outstanding amounts.

FCCB obtained judgments against all named defendants.

On March 27, 2025, we and

FCCB agreed to payment terms and a release whereby $0.2 million in amounts due would be paid by April 30, 2025.

As of June 30, 2025,

all amounts due to FCCB were paid.

The acceleration of significant indebtedness may cause us to renegotiate, repay, or refinance the

affected obligations, and there is no assurance

that such efforts would be successful or on terms we deem attractive.

In addition, any acceleration could result in a downgrade of

any credit ratings then applicable to us, which could result in additional events of default or limit our ability to obtain

additional financing.

In addition, we entered into

the Put-Together Transaction Notes with the equity holders of certain of the businesses we acquired as part of the Put-Together

The Put-Together Transaction Notes with AIRO Drone, Agile Defense and CDI were amended to be convertible, in part, into

shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed to such holders to be paid

upon the closing of the BCA Transactions.

We also agreed to assume other Fixed Conversion Obligations, which were also amended to be

convertible, in part, into shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed to

such holders to be paid upon the closing of the BCA Transactions.

Given that the BCA

Transactions were not consummated, in conjunction with the IPO, we issued approximately 2.0 million shares and used IPO proceeds of

$3.3 million to partially satisfy the Fixed Conversion Obligations during the six months ended June 30, 2025.

We will continue to

fund the remaining $8.5 million to satisfy the Fixed Conversion Obligations during 2025.

As of June 30, 2025, we have third

party obligations of $3.0 million of Investor Notes as described within Note 2—Revolving Lines of Credit and Long-Term Debt,

$3.8 million of Investor Notes as described in Note 12—Related Party Transactions, and $3.8 million of Investor Notes at fair

value as described in Note 2—Revolving Lines of Credit and Long-Term Debt, collectively which total $10.6 million.

Investor Notes are in the form of unsecured promissory notes with no collateral and no guarantees.

See the section titled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations” and

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investor Notes” for

The claimant,

FCCB, alleged that payment under certain promissory notes was due, and FCCB sought recovery of the outstanding amounts.

FCCB obtained

judgments against all named defendants.

On March 27, 2025, we and FCCB agreed to payment terms and a release whereby $0.2 million in

amounts due would be paid by April 30, 2025.

As of September 30, 2025, all amounts due to FCCB were paid.

The acceleration of significant

indebtedness may cause us to renegotiate, repay, or refinance the affected obligations, and there is no assurance that such efforts would

be successful or on terms we deem attractive.

In addition, any acceleration could result in a downgrade of any credit ratings then applicable

to us, which could result in additional events of default or limit our ability to obtain additional financing.

addition, we entered into the Put-Together Transaction Notes with the equity holders of certain of the businesses we acquired as part

of the Put-Together Transaction.

The Put-Together Transaction Notes with AIRO Drone, Agile Defense and CDI were amended to be convertible,

in part, into shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed to such holders

to be paid upon the closing of the BCA Transactions.

We also agreed to assume other Fixed Conversion Obligations, which were also amended

to be convertible, in part, into shares of our common stock upon the closing of the BCA Transactions, with the remaining principal owed

to such holders to be paid upon the closing of the BCA Transactions.

of September 30, 2025, we have third party obligations of $2.8 million of Investor Notes as described within Note 2—Revolving Lines

of Credit and Long-Term Debt, $3.8 million of Investor Notes as described in Note 12—Related Party Transactions, and $1.7 million

of Investor Notes at fair value as described in Note 2—Revolving Lines of Credit and Long-Term Debt, collectively which total $8.3

The Investor Notes are in the form of unsecured promissory notes with no collateral and no guarantees.

See the section titled

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Combinations”

and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investor Notes” for

additional information regarding the promissory notes.

If we are unable to satisfy our existing obligations, our business and

financial condition could be adversely affected.

Risks Related to Our Business

We have made and may in the future make acquisitions and investments,

which involve numerous risks.

We have made certain

acquisitions, including our acquisitions of the Acquired Companies in connection with the Put-Together Transaction, and continue to

routinely evaluate potential acquisitions, investments and strategic alliances involving complementary technologies, teams, products

and companies.

If we are unable to satisfy our existing obligations, our business and financial

condition could be adversely affected.

Related to Our Business

have made and may in the future make acquisitions and investments, which involve numerous risks.

have made certain acquisitions, including our acquisitions of the Acquired Companies in connection with the Put-Together Transaction,

and continue to routinely evaluate potential acquisitions, investments and strategic alliances involving complementary technologies,

teams, products and companies.

We expect to continue to pursue such transactions if appropriate opportunities arise.

For example, in November 2023,

we signed non-binding letters of intent to acquire two businesses for the Training segment, including a flight training school.

parties have undertaken due diligence to determine whether a binding purchase agreement will be negotiated.

For example, in

November 2023, we signed non-binding letters of intent to acquire two businesses for the Training segment, including a flight training

The parties have undertaken due diligence to determine whether a binding purchase agreement will be negotiated.

The total anticipated

purchase price for the acquisitions is expected to range from $5.1 million to $7.7 million, which would be paid in a combination of

cash and shares of our common stock, and if consummated on the terms anticipated, would result in dilution to current investors.

As of June 30, 2025, we did not have any binding agreements or commitments to enter into any material

acquisitions.

Moreover, we may not be able to identify other potentially suitable transactions

in the future or if we do identify such transactions, we may not be able to complete them on commercially acceptable terms or at all and

may face intense competition for such opportunities.

In pursuing transactions, we have and will continue to face numerous risks, including

diverting management’s attention from normal daily operations of our business;

difficulties in integrating the financial reporting

capabilities and operating systems of any acquired operations to maintain effective internal control over financial reporting and disclosure

controls and procedures;

potential loss of key personnel of the acquired company as well as their know-how, relationships and expertise;

challenges successfully integrating acquired personnel, operations and businesses;

failing to realize the anticipated synergies and benefits

of an acquisition;

maintaining favorable business relationships of acquired operations;

generating insufficient revenue from completed

transactions to offset expenses associated with our efforts;

purchase price for the acquisitions is expected to range from $5.1 million to $7.7 million, which would be paid in a combination of cash

and shares of our common stock, and if consummated on the terms anticipated, would result in dilution to current investors.

As of September

30, 2025, we did not have any binding agreements or commitments to enter into any material acquisitions.

we may not be able to identify other potentially suitable transactions in the future or if we do identify such transactions, we may not

be able to complete them on commercially acceptable terms or at all and may face intense competition for such opportunities.

transactions, we have and will continue to face numerous risks, including diverting management’s attention from normal daily operations

of our business;

difficulties in integrating the financial reporting capabilities and operating systems of any acquired operations to

maintain effective internal control over financial reporting and disclosure controls and procedures;

potential loss of key personnel

of the acquired company as well as their know-how, relationships and expertise;

challenges successfully integrating acquired personnel,

operations and businesses;

failing to realize the anticipated synergies and benefits of an acquisition;

maintaining favorable business

relationships of acquired operations;

generating insufficient revenue from completed transactions to offset expenses associated with

acquiring material or unknown liabilities associated with any acquired operations;

litigation associated with merger and acquisition transactions;

and increasing expense associated with amortization or depreciation of

intangible and tangible assets we acquire.

Our acquisitions, including the Put-Together Transaction, have required

and continue to require significant management time and attention relating to the transactions.

Past transactions, whether completed or

abandoned by us, have resulted, and in the future may result, in significant time and attention, costs, expenses, liabilities and charges

The accounting treatment for any future transaction may result in significant amortizable intangible assets which, when amortized,

will negatively affect our consolidated results of operations.

The accounting treatment may also result in significant goodwill, which,

if impaired, will negatively affect our consolidated results of operations.

Furthermore, we may incur additional debt or issue equity

securities to pay for transactions.

The incurrence of additional debt could limit our operating flexibility and be detrimental to our

profitability, and the issuance of equity securities would be dilutive to our existing stockholders.

Any or all of the above factors may

differ from the investment community’s expectations in a given quarter, which could negatively affect our stock price.

we make future investments, the investments may decline in value, we may lose all or part of our investment.

We may not be able to successfully integrate the businesses and personnel

of acquired companies and businesses, including those acquired in the Put-Together Transaction, and may not realize the anticipated synergies

and benefits of such acquisitions.

We may not be able to realize the expected benefits from acquisitions,

including the Put-Together Transaction, because of integration difficulties or other challenges.

The success of our acquisitions will

depend, in part, on our ability to realize all or some of the anticipated synergies and other benefits from integrating the acquired businesses

with our existing businesses.

Integration activities can be costly, complex and time consuming.

The potential difficulties we may face

in integrating the operations of our acquisitions include, among others:

the failure to implement our business plans for the combined

businesses and consolidation or expansion of production capacity as planned and where applicable;

unexpected losses of key employees,

customers or suppliers of our acquired companies and businesses;

unanticipated issues in conforming our acquired companies’ and

businesses’ standards, processes, procedures and controls with our operations;

litigation associated with merger and

acquisition transactions;

and increasing expense associated with amortization or depreciation of intangible and tangible assets we acquire.

acquisitions, including the Put-Together Transaction, have required and continue to require significant management time and attention

relating to the transactions.

Past transactions, whether completed or abandoned by us, have resulted, and in the future may result, in

significant time and attention, costs, expenses, liabilities and charges to earnings.

The accounting treatment for any future transaction

may result in significant amortizable intangible assets which, when amortized, will negatively affect our consolidated results of operations.

The accounting treatment may also result in significant goodwill, which, if impaired, will negatively affect our consolidated results

of operations.

Furthermore, we may incur additional debt or issue equity securities to pay for transactions.

The incurrence of additional

debt could limit our operating flexibility and be detrimental to our profitability, and the issuance of equity securities would be dilutive

to our existing stockholders.

Any or all of the above factors may differ from the investment community’s expectations in a given

quarter, which could negatively affect our stock price.

In the event we make future investments, the investments may decline in value,

we may lose all or part of our investment.

may not be able to successfully integrate the businesses and personnel of acquired companies and businesses, including those acquired

in the Put-Together Transaction, and may not realize the anticipated synergies and benefits of such acquisitions.

may not be able to realize the expected benefits from acquisitions, including the Put-Together Transaction, because of integration difficulties

or other challenges.

The success of our acquisitions will depend, in part, on our ability to realize all or some of the anticipated synergies

and other benefits from integrating the acquired businesses with our existing businesses.

Integration activities can be costly, complex

and time consuming.

The potential difficulties we may face in integrating the operations of our acquisitions include, among others:

failure to implement our business plans for the combined businesses and consolidation or expansion of production capacity as planned

and where applicable;

unexpected losses of key employees, customers or suppliers of our acquired companies and businesses;

unanticipated

issues in conforming our acquired companies’ and businesses’ standards, processes, procedures and controls with our operations;

coordinating new product and process development;

increasing the scope, geographic diversity and complexity of our operations;

diversion of management’s attention from other business

adverse effects on our or our acquired companies’ and businesses’ existing business relationships;

unanticipated

changes in applicable laws and regulations;

operating risks inherent in our acquired companies’ and businesses’ business and

of management’s attention from other business concerns;

adverse effects on our or our acquired companies’ and businesses’

existing business relationships;

unanticipated changes in applicable laws and regulations;

operating risks inherent in our acquired companies’

and businesses’ business and operations;

unanticipated expenses and liabilities;

potential unfamiliarity with our acquired companies and businesses technology, products

and markets, which may place us at a competitive disadvantage;

and other difficulties in the assimilation of our acquired companies and

businesses operations, technologies, products and systems.

Any acquired companies and businesses may have unanticipated or larger

than anticipated liabilities for patent and trademark infringement claims, violations of applicable laws, rules and regulations, commercial

disputes, taxes and other known and unknown types of liabilities.

There may be liabilities that we underestimated or did not discover

in the course of performing our due diligence investigation of our acquired companies and businesses.

We may have no recourse or limited

recourse under the applicable acquisition-related agreement to recover damages relating to the liabilities of our acquired companies and

We may not be able to maintain or increase the levels of revenue, earnings

or operating efficiency that we, and each of our acquired companies and businesses, had historically achieved or might achieve separately.

In addition, we may not accomplish the integration smoothly, successfully or within the anticipated costs or timeframe.

If we experience

difficulties with the integration process or if the business of our acquired companies or businesses deteriorates, the anticipated cost

savings, growth opportunities and other synergies of our acquired companies and businesses may not be realized fully or at all, or may

take longer to realize than expected.

If any of the above risks occur, our business, financial condition, results of operations and cash

flows may be materially and adversely impacted, we may fail to meet the expectations of investors or analysts, and our stock price may

decline as a result.

We face significant competition from other companies, many of which

have substantially greater resources than we do.

The defense and broader aerospace industry is highly competitive and generally

characterized by intense competition to win contracts.

While we expect to be one of the pioneering companies to market eVTOL aircraft,

we expect this industry to be increasingly competitive, and it is possible that our competitors could get to market before us, either

generally or in specific markets.

Our current principal competitors include the following:

potential unfamiliarity with our acquired companies

and businesses technology, products and markets, which may place us at a competitive disadvantage;

and other difficulties in the assimilation

of our acquired companies and businesses operations, technologies, products and systems.

acquired companies and businesses may have unanticipated or larger than anticipated liabilities for patent and trademark infringement

claims, violations of applicable laws, rules and regulations, commercial disputes, taxes and other known and unknown types of liabilities.

There may be liabilities that we underestimated or did not discover in the course of performing our due diligence investigation of our

acquired companies and businesses.

We may have no recourse or limited recourse under the applicable acquisition-related agreement to

recover damages relating to the liabilities of our acquired companies and businesses.

may not be able to maintain or increase the levels of revenue, earnings or operating efficiency that we, and each of our acquired companies

and businesses, had historically achieved or might achieve separately.

In addition, we may not accomplish the integration smoothly, successfully

or within the anticipated costs or timeframe.

If we experience difficulties with the integration process or if the business of our acquired

companies or businesses deteriorates, the anticipated cost savings, growth opportunities and other synergies of our acquired companies

and businesses may not be realized fully or at all, or may take longer to realize than expected.

If any of the above risks occur, our

business, financial condition, results of operations and cash flows may be materially and adversely impacted, we may fail to meet the

expectations of investors or analysts, and our stock price may decline as a result.

face significant competition from other companies, many of which have substantially greater resources than we do.

defense and broader aerospace industry is highly competitive and generally characterized by intense competition to win contracts.

we expect to be one of the pioneering companies to market eVTOL aircraft, we expect this industry to be increasingly competitive, and

it is possible that our competitors could get to market before us, either generally or in specific markets.

Our current principal competitors

include the following:

(i) for our Drones segment:

Da Jiang Innovations,

Elbit Systems Ltd., Lockheed Martin Corporation, L3Harris Technologies, Inc.’s FVR-90, L3 Technologies, Inc., Martin UAV, LLC, Northrop

Grumman Corporation’s V-Bat, Teledyne Technologies, Inc., and Textron Inc.’s Aerosonde;

Da Jiang Innovations, Elbit Systems Ltd., Lockheed Martin Corporation, L3Harris Technologies,

Inc.’s FVR-90, L3 Technologies, Inc., Martin UAV, LLC, Northrop Grumman Corporation’s V-Bat, Teledyne Technologies, Inc.,

and Textron Inc.’s Aerosonde;

(ii) for our Training segment:

Tactical Advantage Company, LLC, Draken International, Inc., Tactical Air Defense Services Inc.

Airborne Tactical Advantage Company, LLC, Draken International, Inc.,

Tactical Air Defense Services Inc.

and Top Aces Inc.;

(iii) for our Avionics

Avidyne Corporation, Collins Aerospace, Dynon Avionics, Inc., Garmin Ltd., Honeywell International Inc., L3Harris Technologies,

Inc., and uAvionix Corporation;

and (iv) for our Electric Air Mobility segment:

Archer Aviation Inc., BETA Technologies, Inc., Eve Holding

Inc., Joby Aviation, Inc., Lilium N.V., Vertical Aerospace Ltd., Volocopter GmbH, and Wisk Aero LLC, in addition to ground transportation

services, such as Lyft, Inc.

and Uber Technologies, Inc., and incumbent aircraft carrier services, such as Blade Air Mobility, Inc.

Many of these companies have substantially greater financial, management,

research and marketing resources than we do.

Our competitors may be able to provide customers with different or greater capabilities or

benefits than we can provide in areas such as technical qualifications, past contract performance, geographic presence, price and the

availability of key professional personnel, including those with security clearances.

Furthermore, many of our competitors may be able

to utilize their substantially greater resources and economies of scale to develop competing products and technologies, manufacture in

high volumes more efficiently, divert sales away from us by winning broader contracts or hire away our employees by offering more lucrative

compensation packages.

In particular, our competitors may be able to obtain the relevant certification and approvals for their aircraft

Small business competitors may be able to offer more cost competitive products and services, due to their lower overhead costs,

and take advantage of small business incentives and set-aside programs for which we are ineligible.

In order to secure contracts successfully

when competing with larger, well-financed companies, we may be forced to agree to contractual terms that provide for lower aggregate payments

to us over the life of the contract, which could adversely affect our margins.

We may not be able to keep pace with technological advances and we

depend on advances in technology by other companies.

The defense and broader aerospace industry continues to undergo significant

changes, primarily due to technological developments.

Because of the rapid growth and advancement of technology, shifting consumer tastes

and the popularity and availability of other forms of activities, it is impossible to predict the overall effect these factors could have

on potential revenue from, and profitability of, the defense and broader aerospace industry.

The development of specialized software and

hardware is a costly, complex and time-consuming process, and investments in product development often involve a long wait until a return,

if any, can be achieved on such investment.

We might face difficulties or delays in the development process that will result in our inability

to timely offer products that satisfy the market, which might allow competing products to emerge during the development and certification

We anticipate making significant investments in R&D relating to our products and technology, but such investments are inherently

speculative and require substantial capital expenditures.

Any unforeseen technical obstacles and challenges that we encounter in the R&D

process could result in delays in or the abandonment of product commercialization, may substantially increase development costs, and may

negatively affect our results of operations.

In the time it takes to develop or improve upon a product, that product may become obsolete.

It is impossible to predict the overall effect these factors could have

on our ability to compete effectively in a changing market, and if we are not able to keep pace with these technological advances, then

our revenues, profitability and results of operations may be materially adversely affected.

However, if we struggle to adapt to an industry-shifting

technological advancement or competitor offerings that render our products relatively less attractive or obsolete, including due to competitive

pressures we face relative to other drone companies, it could have a material adverse effect on our business.

Further, we rely on and will continue to rely on components of our products

that are developed and produced by other companies over which we have limited control.

The commercial success of certain of our planned

future products will depend in part on advances in these and other technologies by other companies, and our ability to procure them from

such third parties in a timely manner and on economically feasible terms.

We may, from time-to-time, contract with and support companies

developing key technologies in order to accelerate the development of such products for our specific uses.

Such activities might not result

in useful technologies or components for us.

We may be unable to acquire additional aircraft to support our Training

segment on acceptable terms or at all .

The success of our Training segment, including our ability to bid and complete

future task orders under certain multiple awards and IDIQ contracts issued by the U.S.

military, is dependent on our financing or leasing

additional aircraft that meet our customers’ needs.

To date, a lack of funding has inhibited our ability to independently finance

or lease potential aircraft.

Even if we receive sufficient funding, there are a limited number of aircraft available that meet our customers’

needs and potential seller countries have been retaining aircraft in light of the Ukrainian conflict and instability in other areas of

the world as well as delayed deliveries from manufacturers of new aircraft, creating more limited supply.

In addition, as a result of

policy changes regarding aircraft transfers to the United States, purchased aircraft often need to be disassembled, imported into the

United States, and appropriately modified to meet customer needs.

This requires significant capital and lead time to put an aircraft into

Delays or failure in obtaining suitable aircraft could adversely impact financial results and growth plans due to missed task

order bidding opportunities.

Due to the nature of our products and services, a product safety

failure, quality issue or other failure affecting our or our customers’ or suppliers’ products or systems could seriously

harm our business.

Our products and services are highly sophisticated and specialized, involve

complex advanced technologies, are often integrated with third-party products and services, and are utilized for specific purposes that

require precision, reliability, and durability.

Many of our products and services include both hardware and software that involve industrial

machinery and intricate aviation and defense systems, including commercial and military jet engines, power and control systems, and other

aircraft parts, and military sensors and command and control systems.

Technical, mechanical, quality, electronic, and other failures may

occur from time to time, whether as a result of manufacturing or design defect, operational process, or production issue attributable

to us, our customers, suppliers, partners, third party integrators, or others.

Product design changes and updates could also have associated

cost and schedule impacts.

In addition, our products could fail as a result of cyber-attacks, such as those that seize control and result

in misuse or unintended use of our products, or other intentional acts.

The impact of a catastrophic product or system failure or similar

event affecting our or our customers’ or suppliers’ products or services could be significant, and could result in injuries

or death, property damage, loss of strategic capabilities, loss of intellectual property, loss of reputation, and other significant negative

A product or system failure, or perceived failure, could lead to negative publicity, a diversion of management attention, and

damage to our reputation that could reduce demand for our products and services.

It could also result in product recalls and product liability

and warranty claims (including claims related to the safety or reliability of our products) and related expenses, other service, repair

and maintenance costs, labor and material costs, customer support costs, significant damages, and other costs, including fines and other

remedies, and regulatory and environmental liabilities.

We may also incur increased costs, delayed payments, reputational harm, or lost

equipment or services revenue in connection with a significant issue with a third party’s product with which our products are integrated.

Further, our insurance coverage may not be adequate to cover all related costs and we may not otherwise be fully indemnified for them.

Any of the foregoing could have a material adverse effect on our competitive position, results of operations, financial condition, or

Our customers may experience service failures or interruptions due

to defects in the software, infrastructure, components or engineering system that compromise our products and services, or due to errors

in product installation, any of which could harm our business.

Our products and services may contain undetected defects in the software,

infrastructure, components or engineering system.

Sophisticated software and applications, such as those adopted and offered by us in

connection with or as a part of our eVTOL, drone, and avionics offerings, may contain “bugs” that can unexpectedly interfere

with the software and applications’ intended operations.

Our communication services may from time to time experience outages, service

slowdowns or errors.

Defects may also occur in components or processes used in our products or for our services.

There can be no assurance that we will be able to detect and fix all defects

in the hardware, software and services we offer.

Failure to do so could result in decreases in sales of our products and services, lost

revenues, significant warranty and other expenses, decreases in customer confidence and loyalty, losing market share to our competitors,

and harm to our reputation.

Our future success depends on the continuing efforts of our key personnel

and on our ability to attract and retain highly skilled personnel and senior management.

Due to the specialized nature of our business, our future performance is

highly dependent upon the continued services of our key technical personnel and executive officers, including the contributions of Captain

(iii) for our Avionics segment:

Avidyne Corporation, Collins Aerospace, Dynon Avionics,

Inc., Garmin Ltd., Honeywell International Inc., L3Harris Technologies, Inc., and uAvionix Corporation;

and (iv) for our Electric Air

Mobility segment:

Archer Aviation Inc., BETA Technologies, Inc., Eve Holding Inc., Joby Aviation, Inc., Lilium N.V., Vertical Aerospace

Ltd., Volocopter GmbH, and Wisk Aero LLC, in addition to ground transportation services, such as Lyft, Inc.

and Uber Technologies, Inc.,

and incumbent aircraft carrier services, such as Blade Air Mobility, Inc.

and NetJets Inc.

of these companies have substantially greater financial, management, research and marketing resources than we do.

Our competitors may

be able to provide customers with different or greater capabilities or benefits than we can provide in areas such as technical qualifications,

past contract performance, geographic presence, price and the availability of key professional personnel, including those with security

Furthermore, many of our competitors may be able to utilize their substantially greater resources and economies of scale

to develop competing products and technologies, manufacture in high volumes more efficiently, divert sales away from us by winning broader

contracts or hire away our employees by offering more lucrative compensation packages.

In particular, our competitors may be able to

obtain the relevant certification and approvals for their aircraft before us.

Small business competitors may be able to offer more cost

competitive products and services, due to their lower overhead costs, and take advantage of small business incentives and set-aside programs

for which we are ineligible.

In order to secure contracts successfully when competing with larger, well-financed companies, we may be

forced to agree to contractual terms that provide for lower aggregate payments to us over the life of the contract, which could adversely

affect our margins.

may not be able to keep pace with technological advances and we depend on advances in technology by other companies.

defense and broader aerospace industry continues to undergo significant changes, primarily due to technological developments.

of the rapid growth and advancement of technology, shifting consumer tastes and the popularity and availability of other forms of activities,

it is impossible to predict the overall effect these factors could have on potential revenue from, and profitability of, the defense

and broader aerospace industry.

The development of specialized software and hardware is a costly, complex and time-consuming process,

and investments in product development often involve a long wait until a return, if any, can be achieved on such investment.

face difficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market,

which might allow competing products to emerge during the development and certification process.

We anticipate making significant investments

in R&D relating to our products and technology, but such investments are inherently speculative and require substantial capital expenditures.

Any unforeseen technical obstacles and challenges that we encounter in the R&D process could result in delays in or the abandonment

of product commercialization, may substantially increase development costs, and may negatively affect our results of operations.

time it takes to develop or improve upon a product, that product may become obsolete.

is impossible to predict the overall effect these factors could have on our ability to compete effectively in a changing market, and

if we are not able to keep pace with these technological advances, then our revenues, profitability and results of operations may be

materially adversely affected.

However, if we struggle to adapt to an industry-shifting technological advancement or competitor offerings

that render our products relatively less attractive or obsolete, including due to competitive pressures we face relative to other drone

companies, it could have a material adverse effect on our business.

we rely on and will continue to rely on components of our products that are developed and produced by other companies over which we have

limited control.

The commercial success of certain of our planned future products will depend in part on advances in these and other

technologies by other companies, and our ability to procure them from such third parties in a timely manner and on economically feasible

We may, from time-to-time, contract with and support companies developing key technologies in order to accelerate the development

of such products for our specific uses.

Such activities might not result in useful technologies or components for us.

may be unable to acquire additional aircraft to support our Training segment on acceptable terms or at all .

success of our Training segment, including our ability to bid and complete future task orders under certain multiple awards and IDIQ

contracts issued by the U.S.

military, is dependent on our financing or leasing additional aircraft that meet our customers’ needs.

To date, a lack of funding has inhibited our ability to independently finance or lease potential aircraft.

Even if we receive sufficient

funding, there are a limited number of aircraft available that meet our customers’ needs and potential seller countries have been

retaining aircraft in light of the Ukrainian conflict and instability in other areas of the world as well as delayed deliveries from

manufacturers of new aircraft, creating more limited supply.

In addition, as a result of policy changes regarding aircraft transfers

to the United States, purchased aircraft often need to be disassembled, imported into the United States, and appropriately modified to

meet customer needs.

This requires significant capital and lead time to put an aircraft into operation.

Delays or failure in obtaining

suitable aircraft could adversely impact financial results and growth plans due to missed task order bidding opportunities.

to the nature of our products and services, a product safety failure, quality issue or other failure affecting our or our customers’

or suppliers’ products or systems could seriously harm our business.

products and services are highly sophisticated and specialized, involve complex advanced technologies, are often integrated with third-party

products and services, and are utilized for specific purposes that require precision, reliability, and durability.

Many of our products

and services include both hardware and software that involve industrial machinery and intricate aviation and defense systems, including

commercial and military jet engines, power and control systems, and other aircraft parts, and military sensors and command and control

Technical, mechanical, quality, electronic, and other failures may occur from time to time, whether as a result of manufacturing

or design defect, operational process, or production issue attributable to us, our customers, suppliers, partners, third party integrators,

Product design changes and updates could also have associated cost and schedule impacts.

In addition, our products could fail

as a result of cyber-attacks, such as those that seize control and result in misuse or unintended use of our products, or other intentional

The impact of a catastrophic product or system failure or similar event affecting our or our customers’ or suppliers’

products or services could be significant, and could result in injuries or death, property damage, loss of strategic capabilities, loss

of intellectual property, loss of reputation, and other significant negative effects.

A product or system failure, or perceived failure,

could lead to negative publicity, a diversion of management attention, and damage to our reputation that could reduce demand for our

products and services.

It could also result in product recalls and product liability and warranty claims (including claims related to

the safety or reliability of our products) and related expenses, other service, repair and maintenance costs, labor and material costs,

customer support costs, significant damages, and other costs, including fines and other remedies, and regulatory and environmental liabilities.

We may also incur increased costs, delayed payments, reputational harm, or lost equipment or services revenue in connection with a significant

issue with a third party’s product with which our products are integrated.

Further, our insurance coverage may not be adequate

to cover all related costs and we may not otherwise be fully indemnified for them.

Any of the foregoing could have a material adverse

effect on our competitive position, results of operations, financial condition, or liquidity.

customers may experience service failures or interruptions due to defects in the software, infrastructure, components or engineering

system that compromise our products and services, or due to errors in product installation, any of which could harm our business.

products and services may contain undetected defects in the software, infrastructure, components or engineering system.

Sophisticated

software and applications, such as those adopted and offered by us in connection with or as a part of our eVTOL, drone, and avionics

offerings, may contain “bugs” that can unexpectedly interfere with the software and applications’ intended operations.

Our communication services may from time to time experience outages, service slowdowns or errors.

Defects may also occur in components

or processes used in our products or for our services.

can be no assurance that we will be able to detect and fix all defects in the hardware, software and services we offer.

Failure to do

so could result in decreases in sales of our products and services, lost revenues, significant warranty and other expenses, decreases

in customer confidence and loyalty, losing market share to our competitors, and harm to our reputation.

future success depends on the continuing efforts of our key personnel and on our ability to attract and retain highly skilled personnel

and senior management.

to the specialized nature of our business, our future performance is highly dependent upon the continued services of our key technical

personnel and executive officers, including the contributions of Captain Joseph D.

Burns, our Chief Executive Officer, Dr.

Chirinjeev Kathuria, our Executive Chairman, and John Uczekaj, our President and Chief

Operating Officer, as well as other members of our management team, and the hiring, development, and retention of qualified technical,

engineering, manufacturing, marketing, sales, and management personnel for our operations.

The loss of services of any of these individuals

could make it more difficult to achieve our business plans.

Although we have executed employment agreements or offer letters with each

member of our senior management team, these agreements are terminable at will with or without notice and, therefore, we may not be able

to retain their services.

We do not currently maintain “key person” life insurance on the lives of our executives.

of insurance means that we may not have adequate compensation for the loss of the services of these individuals.

We aim to significantly increase our headcount in the near-term, but have

experienced, and continue to experience, challenges hiring highly qualified personnel including engineers, pilots, skilled laborers, and

security clearance holders.

Currently, there is a shortage of pilots that could exacerbate over time as more pilots in the industry approach

mandatory retirement age which will affect our Training segment.

Kathuria, our Executive Chairman, and John Uczekaj, our President and Chief Operating Officer, as well as other members of our management

team, and the hiring, development, and retention of qualified technical, engineering, manufacturing, marketing, sales, and management

personnel for our operations.

The loss of services of any of these individuals could make it more difficult to achieve our business plans.

Although we have executed employment agreements or offer letters with each member of our senior management team, these agreements are

terminable at will with or without notice and, therefore, we may not be able to retain their services.

We do not currently maintain “key

person” life insurance on the lives of our executives.

This lack of insurance means that we may not have adequate compensation

for the loss of the services of these individuals.

aim to significantly increase our headcount in the near-term, but have experienced, and continue to experience, challenges hiring highly

qualified personnel including engineers, pilots, skilled laborers, and security clearance holders.

Currently, there is a shortage of

pilots that could exacerbate over time as more pilots in the industry approach mandatory retirement age which will affect our Training

We expect these difficulties to continue in the future.

the cost of labor remains high.

Some candidates and new personnel may have job-related expectations that differ from our current workforce

and are inconsistent with our corporate culture.

With respect to existing personnel, some may become required to receive various security

clearances and substantial training in order to work on certain programs or perform certain tasks.

Necessary security clearances may be

delayed, which may impact our ability to perform on our U.S.

In addition, the cost of labor remains high.

Some candidates and new

personnel may have job-related expectations that differ from our current workforce and are inconsistent with our corporate culture.

respect to existing personnel, some may become required to receive various security clearances and substantial training in order to work

on certain programs or perform certain tasks.

Necessary security clearances may be delayed, which may impact our ability to perform on

government contracts.

We also may not be successful in training or developing

qualified personnel with the requisite relevant skills or security clearances.

Moreover, some of our employees are covered by collective

bargaining agreements.

If we have additional challenges renegotiating agreements or if our employees pursue new collective representation,

then we could experience additional costs and/or be subject to work stoppages.

We also may not be successful in training or developing qualified personnel with the requisite relevant

skills or security clearances.

Moreover, some of our employees are covered by collective bargaining agreements.

If we have additional

challenges renegotiating agreements or if our employees pursue new collective representation, then we could experience additional costs

and/or be subject to work stoppages.

Any of the above factors could seriously harm our business.

We rely on a limited number of suppliers in Canada and Europe for

critical components and raw materials used to manufacture and develop our products.

If we are forced to use suppliers outside these jurisdictions

and, as a result, such materials become scarce or unavailable, or such suppliers fail, then we may incur delays in development, manufacture

and delivery of our products, which could damage our business.

We obtain hardware components, raw materials, and various systems and subsystems

from a limited group of suppliers located in Canada and Europe, some of which are sole source suppliers.

We do not have long-term agreements

with any of these suppliers that obligate them to continue to sell such components, materials, systems or subsystems to us.

on these suppliers involves significant risk and uncertainty, including whether such suppliers will provide an adequate supply of products

of sufficient quality, will increase prices for the products and will perform their obligations on a timely basis.

Changes in business

conditions, wars, governmental changes, political intervention, and other factors beyond our control or which we do not presently anticipate,

could also affect our suppliers’ ability to deliver components to us on a timely basis.

For instance, global supply chain disruptions

in 2021 and 2022 impacted our ability to procure raw materials, microelectronics, and certain commodities.

These disruptions were driven

by supply chain market constraints and macroeconomic conditions, including inflation and geopolitical conditions.

In addition, current

high inflation levels have increased material and component prices, labor rates, and supplier costs, and put pressure on our margins.

Credit market conditions, including higher interest rates and the availability of credit, have impacted some of our suppliers and subcontractors

As a result of these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn,

hindered our ability to perform on our commitments to customers and negatively affected our results of operations.

The timing of the impacts of these supply chain risks and issues and our

ability to mitigate them are uncertain and difficult to predict.

However, we expect the current supply chain, inflation, price issues

and potential tariffs and their negative impacts on our business to continue into 2025.

rely on a limited number of suppliers in Canada and Europe for critical components and raw materials used to manufacture and develop

our products.

If we are forced to use suppliers outside these jurisdictions and, as a result, such materials become scarce or unavailable,

or such suppliers fail, then we may incur delays in development, manufacture and delivery of our products, which could damage our business.

obtain hardware components, raw materials, and various systems and subsystems from a limited group of suppliers located in Canada and

Europe, some of which are sole source suppliers.

We do not have long-term agreements with any of these suppliers that obligate them to

continue to sell such components, materials, systems or subsystems to us.

Our reliance on these suppliers involves significant risk and

uncertainty, including whether such suppliers will provide an adequate supply of products of sufficient quality, will increase prices

for the products and will perform their obligations on a timely basis.

Changes in business conditions, wars, governmental changes, political

intervention, and other factors beyond our control or which we do not presently anticipate, could also affect our suppliers’ ability

to deliver components to us on a timely basis.

For instance, global supply chain disruptions in 2021 and 2022 impacted our ability to

procure raw materials, microelectronics, and certain commodities.

These disruptions were driven by supply chain market constraints and

macroeconomic conditions, including inflation and geopolitical conditions.

In addition, current high inflation levels have increased

material and component prices, labor rates, and supplier costs, and put pressure on our margins.

Credit market conditions, including

higher interest rates and the availability of credit, have impacted some of our suppliers and subcontractors as well.

As a result of

these procurement issues, the production flow in our factories has been negatively impacted, which has, in turn, hindered our ability

to perform on our commitments to customers and negatively affected our results of operations.

timing of the impacts of these supply chain risks and issues and our ability to mitigate them are uncertain and difficult to predict.

However, we expect the current supply chain, inflation, price issues and potential tariffs and their negative impacts on our business

to continue into 2025.

We expect to experience intermittent delays throughout 2025.

Furthermore, the existing supply chain issues could be compounded by

other events, such as an economic downturn;

Furthermore, the existing supply chain issues could

be compounded by other events, such as an economic downturn;

supplier capacity constraints for other reasons;

supplier quality issues (for example, defects

or fraudulent parts);

supplier quality issues

(for example, defects or fraudulent parts);

supplier closing, bankruptcy, or financial difficulties;

price increases for various reasons;

and worsening shortages

of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster (including the effects of

climate change), health pandemic or other business continuity events, or transport and distribution issues, any of which could further

negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore incrementally affect

our results of operations, financial condition, and liquidity.

Furthermore, if we experience significant increased demand, or need to

replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required

on terms that are acceptable to us, or at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements

or fill our orders in a timely manner.

In addition, certain components and raw materials used in the development and manufacture of our

products are periodically at risk of supply shortages, and our business is subject to the risk of price increases and periodic delays

If shortages occur and we are unable to obtain components from third party suppliers in the quantities and of the quality

we require, on a timely basis and at acceptable prices, then we may not be able to timely complete development of or deliver our products

on a timely or cost effective basis to our customers, which could cause customers to terminate their contracts with us, increase our costs

and seriously harm our business, results of operations, prospects and financial condition.

Moreover, if any of our suppliers become financially

unstable, or otherwise unable or unwilling to provide us with raw materials or components, then we may have to find new suppliers.

may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different

Even if we are successful at locating alternative suppliers the costs of the components may be higher than the original supplier’s

components or we may be required to purchase in larger quantities than we normally would, which may result in higher inventory levels

than desired.

We may experience significant delays in manufacturing and shipping our products to customers and incur additional development,

manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our

We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable

cost, if at all.

We do not control our suppliers’ labor or other compliance practices,

including environmental, health and safety practices.

If our current suppliers, or any other suppliers we may use in the future, violate

or foreign laws or regulations, we may be subjected to extra duties, significant monetary penalties, adverse publicity, the seizure

and forfeiture of products that we are attempting to import or the loss of our import privileges.

The effects of these factors could render

the conduct of our business in a particular country undesirable or impractical and have a negative impact on our operating results.

We rely on independent dealers and distributors to sell our Avionics

products, and disruption to these channels would harm our business.

A significant portion of aftermarket sales in our Avionics segment are

made through a worldwide network of independent dealers and distributors, which subjects us to many risks, including risks related to

their inventory levels and support for our products.

If dealers and distributors attempt to reduce their levels of inventory or if they

do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.

Many of our dealers and distributors also sell products offered by our

If our competitors offer our dealers and distributors more favorable terms, those dealers and distributors may de-emphasize

or decline to carry our products.

In the future, we may not be able to retain or attract a sufficient number of qualified dealers and

distributors.

If we are unable to maintain successful relationships with dealers and distributors or to expand our distribution channels,

our business will suffer.

We currently, and may in the future, use and develop generative AI

technologies throughout our business, which may expose us to certain regulatory and other risks that could adversely affect our results

of operations and financial condition.

We use AI, machine learning and automated decision-making technologies,

including proprietary AI and machine learning algorithms and models (“AI Technologies”) in our business.

For example, AIRO

Drone expects to operate drones in an AI-based commercial inspection service known as DaaS and build and operate a worldwide drone datacom

network known as “AIRO-NET.” As with many technological innovations, there are significant risks involved in developing, maintaining

and deploying these technologies and there can be no assurance that the usage of, or our investments in, such technologies will always

enhance our products or services or be beneficial to our business, including our efficiency or profitability.

In particular, if the models

underlying our AI Technologies are incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate, biased

or otherwise poor quality data or on data to which we do not have sufficient rights or in relation to which we and/or the providers of

such data have not implemented sufficient legal compliance measures;

used without sufficient oversight and governance to ensure their

responsible use;

and/or adversely impacted by unforeseen defects, technical challenges, cybersecurity threats or material performance

issues, the performance of our products, services and business, as well as our reputation, and the reputations of our customers, could

suffer or we could incur liability resulting from the violation of laws or contracts to which we are party or civil claims.

overall regulatory framework for AI Technologies is rapidly evolving as many federal, state and foreign government bodies and agencies

have introduced, or are currently considering, additional laws and regulations.

Additionally, existing laws and regulations may be interpreted

in ways that would affect the operation of our AI Technologies.

As a result, implementation standards and enforcement practices are likely

to remain uncertain for the foreseeable future.

If our information technology systems or data, or the third parties

with whom we work, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not

limited to regulatory investigations or actions;

fines and penalties;

and worsening shortages of raw materials or commodities, including as a result of war or other geopolitical actions, natural disaster

(including the effects of climate change), health pandemic or other business continuity events, or transport and distribution issues,

any of which could further negatively impact our ability to meet our commitments to customers or increase our operating costs and therefore

incrementally affect our results of operations, financial condition, and liquidity.

if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies

of component parts will be available when required on terms that are acceptable to us, or at all, or that any supplier would allocate

sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner.

In addition, certain components and

raw materials used in the development and manufacture of our products are periodically at risk of supply shortages, and our business

is subject to the risk of price increases and periodic delays in delivery.

If shortages occur and we are unable to obtain components

from third party suppliers in the quantities and of the quality we require, on a timely basis and at acceptable prices, then we may not

be able to timely complete development of or deliver our products on a timely or cost effective basis to our customers, which could cause

customers to terminate their contracts with us, increase our costs and seriously harm our business, results of operations, prospects

and financial condition.

Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us

with raw materials or components, then we may have to find new suppliers.

It may take several months to locate alternative suppliers,

if required, or to redesign our products to accommodate components from different suppliers.

Even if we are successful at locating alternative

suppliers the costs of the components may be higher than the original supplier’s components or we may be required to purchase in

larger quantities than we normally would, which may result in higher inventory levels than desired.

We may experience significant delays

in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish

alternative sources of supply if we lose any of these sources or are required to redesign our products.

We cannot predict if we will

be able to obtain replacement components within the time frames that we require at an affordable cost, if at all.

do not control our suppliers’ labor or other compliance practices, including environmental, health and safety practices.

current suppliers, or any other suppliers we may use in the future, violate U.S.

or foreign laws or regulations, we may be subjected

to extra duties, significant monetary penalties, adverse publicity, the seizure and forfeiture of products that we are attempting to

import or the loss of our import privileges.

The effects of these factors could render the conduct of our business in a particular country

undesirable or impractical and have a negative impact on our operating results.

rely on independent dealers and distributors to sell our Avionics products, and disruption to these channels would harm our business.

significant portion of aftermarket sales in our Avionics segment are made through a worldwide network of independent dealers and distributors,

which subjects us to many risks, including risks related to their inventory levels and support for our products.

If dealers and distributors

attempt to reduce their levels of inventory or if they do not maintain sufficient levels to meet customer demand, our sales could be

negatively impacted.

of our dealers and distributors also sell products offered by our competitors.

If our competitors offer our dealers and distributors

more favorable terms, those dealers and distributors may de-emphasize or decline to carry our products.

In the future, we may not be

able to retain or attract a sufficient number of qualified dealers and distributors.

If we are unable to maintain successful relationships

with dealers and distributors or to expand our distribution channels, our business will suffer.

currently, and may in the future, use and develop generative AI technologies throughout our business, which may expose us to certain

regulatory and other risks that could adversely affect our results of operations and financial condition.

use AI, machine learning and automated decision-making technologies, including proprietary AI and machine learning algorithms and models

(“AI Technologies”) in our business.

For example, AIRO Drone expects to operate drones in an AI-based commercial inspection

service known as DaaS and build and operate a worldwide drone datacom network known as “AIRO-NET.” As with many technological

innovations, there are significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance

that the usage of, or our investments in, such technologies will always enhance our products or services or be beneficial to our business,

including our efficiency or profitability.

In particular, if the models underlying our AI Technologies are incorrectly designed or implemented;

trained or reliant on incomplete, inadequate, inaccurate, biased or otherwise poor quality data or on data to which we do not have sufficient

rights or in relation to which we and/or the providers of such data have not implemented sufficient legal compliance measures;

sufficient oversight and governance to ensure their responsible use;

and/or adversely impacted by unforeseen defects, technical challenges,

cybersecurity threats or material performance issues, the performance of our products, services and business, as well as our reputation,

and the reputations of our customers, could suffer or we could incur liability resulting from the violation of laws or contracts to which

we are party or civil claims.

Finally, the overall regulatory framework for AI Technologies is rapidly evolving as many federal, state

and foreign government bodies and agencies have introduced, or are currently considering, additional laws and regulations.

Additionally,

existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies.

As a result, implementation

standards and enforcement practices are likely to remain uncertain for the foreseeable future.

our information technology systems or data, or the third parties with whom we work, are or were compromised, we could experience adverse

consequences resulting from such compromise, including but not limited to regulatory investigations or actions;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse consequences, risks which are amplified by our work for

world governments.

In the ordinary course of our business, we and the third parties with whom

we work may process proprietary, confidential, and sensitive data, including personal data, and third-party intellectual property.

In conjunction with defense procurements, some international customers

require contractors to comply with industrial cooperation regulations, including entering into industrial participation, industrial development

or localization agreements, sometimes referred to as offset agreements or offset contracts, as a condition to obtaining orders for our

products and services.

These offset agreements generally extend over several years and obligate the contractor to perform certain commitments,

which may include in-country purchases, technology transfers, local manufacturing support, consulting support to in-country projects,

investments in joint ventures and financial support projects, and preference for local suppliers or subcontractors.

The customer’s

expectations in respect of the scope of offset commitments can be substantial, including high-value content, and may exceed existing local

technical capability.

Failure to meet these commitments, which can be subjective and outside of our control, may result in significant

penalties, and could lead to a reduction in sales to a country.

Furthermore, some of our existing offset agreements are dependent upon

the successful operation of joint ventures that we do not control and involve products and services that are outside of our core business,

which may increase the risk of breaching our obligations, exposing us to compliance risks of the joint venture, and impairing our ability

to recover our investment.

For more information on our industrial development obligations, including the notional value of our remaining

industrial development obligations and potential penalties for non-compliance, see the section titled “Management’s Discussion

and Analysis of Financial Condition and Results of Operations—Contractual Commitments”.

Cyberattacks, malicious internet-based activity, and online and offline

fraud are prevalent and continue to increase.

These threats are becoming increasingly difficult to detect and as a government contractor,

these security threats are amplified.

These threats come from a variety of sources, including traditional computer “hackers,”

threat actors, personnel (such as through theft or misuse), “hacktivists,” organized criminal threat actors, sophisticated

nation-states, and nation-state-supported actors.

Some actors now engage and are expected to continue to engage in cyberattacks, including

without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.

times of war and other major conflicts, we and the third parties with whom we work may be vulnerable to a heightened risk of these attacks,

including retaliatory cyberattacks that could materially disrupt our systems and operations, supply chain, and ability to produce, sell

and distribute our products.

We and the third parties with whom we work may be subject to a variety of other evolving threats, including,

but not limited to, social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as

fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat

intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks,

supply chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology

assets, adware, telecommunications failures, attacks enhanced or facilitated by artificial intelligence, and other similar threats.

particular, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors,

are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, ability

to provide our products and services, loss of data, loss of income, significant extra expenses to restore data or systems, reputational

loss and the diversion of funds.

To alleviate the financial, operational and reputational impact of a ransomware attack, it may be preferable

to make extortion payments, but we may be unwilling or unable to do so (including, for example, if applicable laws prohibit such payments).

Additionally, hybrid and remote work has become more common and has increased

risks to our information technology systems and data, as more of our employees utilize network connections, computers, and devices outside

our premises or network, including working at home, while in transit, and in public locations.

Future or past business transactions (such

as acquisitions or integrations) could also expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively

affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Furthermore, we may discover security

issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies

into our information technology environment and security program.

We rely upon third parties and technologies to operate critical business

systems to process sensitive information in a variety of contexts, including, without limitation, cloud-based infrastructure, encryption

and authentication technology, employee email, and other functions.

Our ability to monitor these third parties’ information security

practices is limited, and these third parties may not have adequate information security measures in place.

While we may be entitled to

damages if the third parties with whom we work fail to satisfy their privacy or security-related obligations to us, any award may be insufficient

to cover our damages, or we may be unable to recover such award.

In addition, supply chain attacks have increased in frequency and severity,

and we cannot guarantee that third parties’ infrastructure in our supply chain or that of the third parties with whom we work have

not been compromised.

We may share or receive sensitive information with or from third parties.

While we have implemented security measures designed to protect against

security incidents, there can be no assurance that these measures will be effective.

We take steps designed to detect, mitigate and remediate

vulnerabilities in our information security systems (such as our hardware and/or software, including that of third parties with whom we

work), but we may not be able to detect, mitigate, and remediate all such vulnerabilities including on a timely basis.

It may also be

difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident.

Further, we may experience delays

in developing and deploying remedial measures and patches designed to address identified vulnerabilities.

Vulnerabilities could be exploited

and result in a security incident.

Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain,

and remediate a security incident could result in outages, data losses, and disruptions of our business.

Threat actors may also gain access

to other networks and systems after a compromise of our networks and systems.

Any of the previously identified or similar threats could cause a security

incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss,

alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third

parties with whom we work.

A security incident or other interruption could disrupt our ability (and that of third parties with whom we

work) to provide our products and services.

We may expend significant resources or modify our business activities to try to protect against

security incidents.

Certain data privacy and security obligations require us to implement and maintain specific industry-standard or otherwise

reasonable security measures to protect our information technology systems and sensitive information.

Applicable data security and public company disclosure obligations may

require us, or we may voluntarily choose, to notify relevant stakeholders of certain security incidents, including affected individuals,

customers, regulators and investors, or to take other actions, such as providing credit monitoring and identity theft protection services.

Such disclosures and related actions can be costly, and the disclosures or the failure to comply with such applicable requirements, could

lead to adverse consequences.

If we (or a third party with whom we work) experience a security incident or are perceived to have experienced

a security incident, we may experience adverse consequences.

adverse consequences, risks which are amplified by our work for world governments.

the ordinary course of our business, we and the third parties with whom we work may process proprietary, confidential, and sensitive

data, including personal data, and third-party intellectual property.

conjunction with defense procurements, some international customers require contractors to comply with industrial cooperation regulations,

including entering into industrial participation, industrial development or localization agreements, sometimes referred to as offset

agreements or offset contracts, as a condition to obtaining orders for our products and services.

These offset agreements generally extend

over several years and obligate the contractor to perform certain commitments, which may include in-country purchases, technology transfers,

local manufacturing support, consulting support to in-country projects, investments in joint ventures and financial support projects,

and preference for local suppliers or subcontractors.

The customer’s expectations in respect of the scope of offset commitments

can be substantial, including high-value content, and may exceed existing local technical capability.

Failure to meet these commitments,

which can be subjective and outside of our control, may result in significant penalties, and could lead to a reduction in sales to a

Furthermore, some of our existing offset agreements are dependent upon the successful operation of joint ventures that we do

not control and involve products and services that are outside of our core business, which may increase the risk of breaching our obligations,

exposing us to compliance risks of the joint venture, and impairing our ability to recover our investment.

For more information on our

industrial development obligations, including the notional value of our remaining industrial development obligations and potential penalties

for non-compliance, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual

Commitments”.

Cyberattacks,

malicious internet-based activity, and online and offline fraud are prevalent and continue to increase.

These threats are becoming increasingly

difficult to detect and as a government contractor, these security threats are amplified.

These threats come from a variety of sources,

including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), “hacktivists,”

organized criminal threat actors, sophisticated nation-states, and nation-state-supported actors.

Some actors now engage and are expected

to continue to engage in cyberattacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with

military conflicts and defense activities.

During times of war and other major conflicts, we and the third parties with whom we work

may be vulnerable to a heightened risk of these attacks, including retaliatory cyberattacks that could materially disrupt our systems

and operations, supply chain, and ability to produce, sell and distribute our products.

We and the third parties with whom we work may

be subject to a variety of other evolving threats, including, but not limited to, social-engineering attacks (including through deep

fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms),

malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential

harvesting, personnel misconduct or error, ransomware attacks, supply chain attacks, software bugs, server malfunctions, software or

hardware failures, loss of data or other information technology assets, adware, telecommunications failures, attacks enhanced or facilitated

by artificial intelligence, and other similar threats.

In particular, ransomware attacks, including those from organized criminal threat

actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions,

delays, or outages in our operations, ability to provide our products and services, loss of data, loss of income, significant extra expenses

to restore data or systems, reputational loss and the diversion of funds.

To alleviate the financial, operational and reputational impact

of a ransomware attack, it may be preferable to make extortion payments, but we may be unwilling or unable to do so (including, for example,

if applicable laws prohibit such payments).

Additionally,

hybrid and remote work has become more common and has increased risks to our information technology systems and data, as more of our

employees utilize network connections, computers, and devices outside our premises or network, including working at home, while in transit,

and in public locations.

Future or past business transactions (such as acquisitions or integrations) could also expose us to additional

cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated

entities’ systems and technologies.

Furthermore, we may discover security issues that were not found during due diligence of such

acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security

rely upon third parties and technologies to operate critical business systems to process sensitive information in a variety of contexts,

including, without limitation, cloud-based infrastructure, encryption and authentication technology, employee email, and other functions.

Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate

information security measures in place.

While we may be entitled to damages if the third parties with whom we work fail to satisfy their

privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such

In addition, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’

infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.

We may share or receive

sensitive information with or from third parties.

we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will

be effective.

We take steps designed to detect, mitigate and remediate vulnerabilities in our information security systems (such as our

hardware and/or software, including that of third parties with whom we work), but we may not be able to detect, mitigate, and remediate

all such vulnerabilities including on a timely basis.

It may also be difficult and/or costly to detect, investigate, mitigate, contain,

and remediate a security incident.

Further, we may experience delays in developing and deploying remedial measures and patches designed

to address identified vulnerabilities.

Vulnerabilities could be exploited and result in a security incident.

Actions taken by us or the

third parties with whom we work to detect, investigate, mitigate, contain, and remediate a security incident could result in outages,

data losses, and disruptions of our business.

Threat actors may also gain access to other networks and systems after a compromise of

our networks and systems.

of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized,

unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive

information or our information technology systems, or those of the third parties with whom we work.

A security incident or other interruption

could disrupt our ability (and that of third parties with whom we work) to provide our products and services.

We may expend significant

resources or modify our business activities to try to protect against security incidents.

Certain data privacy and security obligations

require us to implement and maintain specific industry-standard or otherwise reasonable security measures to protect our information

technology systems and sensitive information.

data security and public company disclosure obligations may require us, or we may voluntarily choose, to notify relevant stakeholders

of certain security incidents, including affected individuals, customers, regulators and investors, or to take other actions, such as

providing credit monitoring and identity theft protection services.

Such disclosures and related actions can be costly, and the disclosures

or the failure to comply with such applicable requirements, could lead to adverse consequences.

If we (or a third party with whom we

work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences.

These consequences may include:

government enforcement actions (for example,

investigations, fines, penalties, audits, and inspections);

government enforcement actions (for example, investigations, fines, penalties, audits, and inspections);

additional reporting requirements and/or oversight;

restrictions on processing

sensitive information (including personal data);

litigation (including class claims);

restrictions on processing sensitive information (including personal data);

(including class claims);

indemnification obligations;

2 unchanged sentences

monetary fund diversions;

diversion of management attention;

interruptions in our operations (including availability

management attention;

interruptions in our operations (including availability of data);

financial loss and other similar harms.

Our contracts may not contain limitations of liability, and even where

they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages,

or claims related to our data privacy and security obligations.

In addition, our insurance coverage may not be adequate or sufficient

to protect us from or to mitigate liabilities arising out of our privacy and security practices or that such coverage will continue to

be available on commercially reasonable terms or at all, or that such coverage will pay future claims.

In addition to experiencing a security incident, third parties may gather,

collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive

details about our organization and could be used to undermine our competitive advantage or market position.

Sensitive information of us

or our customers could also be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s,

or vendor’s with whom we work use of generative AI Technologies.

Our commercial aviation products, systems and services businesses

are affected by global demand and economic factors that could negatively impact our financial results.

The operating results of our commercial aviation products, systems and

services businesses – particularly our Electric Air Mobility and Avionics segments – have been and may in the future be adversely

affected by downturns in the global demand for air travel, which impacts new aircraft production and orders, and global flying hours,

which impacts air transport, regional and business aircraft utilization rates and pilot training needs.

The aviation industry is highly

cyclical, and the level of demand for air travel is correlated to the strength of the U.S.

and international economies and is impacted

by long-term trends in airline passenger and cargo traffic.

The results of our commercial aviation businesses also depend on other factors,

including general economic growth, political stability in both developed and emerging markets, pricing pressures, trends in capital goods

markets and changes in OEM production rates.

Extreme weather, natural disasters and other adverse events could

have a material adverse effect on our business, results of operations and financial condition.

Adverse weather conditions and natural disasters, such as hurricanes, winter

snowstorms or earthquakes, can cause flight cancellations or significant delays.

Cancellations or delays due to adverse weather conditions

or natural disasters, air traffic control problems or inefficiencies, breaches in security or other factors may affect us to a greater

degree than our competitors who may be able to recover more quickly from these events, and therefore could have a material adverse effect

on our business, results of operations and financial condition to a greater degree than other air carriers.

The sizes of the markets for our current and future solutions may

be smaller than we estimate.

Our estimates of the total addressable market for our current products

and services are based on a number of internal and third-party estimates.

While we believe our assumptions and the data underlying our

estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates

may change at any time, thereby reducing the predictive accuracy of these underlying factors.

As a result, our estimates of the total

addressable market for our current or future products and services may prove to be incorrect.

If the actual number of customers who will

use our products and services, the price at which we can sell our products and services or the total addressable market for our products

and services is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business, financial condition

and results of operations.

The market for eVTOL aircraft and electric air mobility has not been

clearly defined, is still emerging and may not achieve the growth potential we expect or may grow more slowly than expected, which may

harm our business, financial condition, and results of operations.

The electric air mobility market is still emerging and has not been clearly

We are uncertain as to what extent market acceptance will grow, if at all.

Our customers will likely initially launch operations

in a limited number of metropolitan areas.

The success of these markets, if any, and the opportunity for future growth in these and other

markets may not be representative of the potential market for electric air mobility in other metropolitan areas.

Our success will depend

to a substantial extent on regulatory approval and availability of eVTOL technology, as well as the willingness of commuters and travelers

to widely adopt air mobility as an alternative for ground transportation.

If the public does not perceive electric air mobility as beneficial,

or chooses not to adopt electric air mobility as a result of concerns regarding safety, affordability, value proposition or for other

reasons, then the market for our aircraft may not develop, may develop more slowly than we expect or may not achieve the growth potential

Any of the foregoing could materially adversely affect our business, financial condition, prospects, and results of operations.

We are still developing our eVTOL aircraft, have not yet obtained

FAA certification of our eVTOL aircraft under development and we have yet to manufacture or deliver any aircraft to customers, which makes

evaluating our business and future prospects difficult and increases the risk of investment.

We have a limited operating history in designing, developing, and working

to certify an eVTOL aircraft.

Our eVTOL aircraft is in the development stage, and we do not expect our first passenger production aircraft

to be certified by the TCCA under existing CAR 529 Transport Category Rotorcraft airworthiness rules until 2031 or later and certification

of our 33% scaled cargo version to be certified under drone rules until 2027 or later.

As a result, we have no experience as an organization

in volume manufacturing of aircraft.

Many of our current and potential competitors are larger and have substantially greater resources

than we currently have or expect to have in the future.

As a result, those competitors may be able to allocate greater resources to the

development of their current and future technologies, the promotion and sale of their offerings, and/or offer their technologies at lower

Notably, our competitors may be able to receive Type, Airworthiness or Production certification from the FAA covering their eVTOL

aircraft prior to us receiving such certifications.

Our current and potential competitors may also establish cooperative or strategic

relationships amongst themselves or with third parties that may further enhance their resources and offerings.

Further, it is possible

that domestic or foreign companies or governments, some with greater experience in the aerospace industry or greater financial resources

than we possess, will seek to provide products or services that compete directly or indirectly with ours in the future.

Any such foreign

competitor, for example, could benefit from subsidies from, or other protective measures by, its home country.

We cannot assure you that we

or our partners will successfully develop manufacturing and supply chain capabilities that will enable us to meet the quality, price,

engineering, design and production standards, as well as the production volumes, required to successfully commercialize our aircraft.

There may be reluctance by consumers to adopt a new form of mobility,

or an unwillingness to pay aircraft operators’ projected prices.

Our growth is highly dependent upon the adoption by consumers of an entirely

new form of mobility offered by eVTOL aircraft and the electric air mobility market.

If consumers do not adopt this new form of mobility

or are not willing to pay the projected prices for the aerial ridesharing services provided by our customers, our prospects, financial

condition and operating results will be harmed.

This market is new, rapidly evolving, characterized by rapidly changing technologies,

price competition, additional competitors, evolving government regulation and industry standards, new aircraft announcements and changing

consumer demands and behaviors.

There may be heightened public skepticism of this nascent technology and its adopters.

In particular,

there could be negative public perception surrounding eVTOL aircraft, including the overall safety and the potential for injuries or death

occurring as a result of accidents involving eVTOL aircraft, regardless of whether any such safety incidents involve our aircraft.

of the foregoing risks and challenges could adversely affect our prospects, business, financial condition, and results of operations.

Our success in a given market will depend on our customers’ ability

to develop a network of passengers and accurately assess and predict passenger demand and price sensitivity.

Demand and price sensitivity

may fluctuate based on a variety of factors, including macroeconomic factors, quality of service, negative publicity, safety incidents,

corporate reporting related to safety, quality of customer support, perceived political or geopolitical affiliations, or dissatisfaction

with our products and offerings in general.

If the operators of our aircraft fail to attract passengers or fail to accurately predict

demand and price sensitivity, it could reduce demand for our aircraft and harm our financial performance.

In addition, while our aircraft will be operating within the existing aviation

airspace and infrastructure, long-term continued adoption of electric air mobility will depend on operators’ ability to develop

and operate vertiports in desirable locations in metropolitan locations.

Developing and operating vertiport locations will require permits

and approvals from federal, state, and local regulatory authorities and government bodies, and operation of our aircraft will depend on

such permits and approvals.

If our operators are prohibited, restricted, or delayed from developing and operating desirable vertiport

locations, then demand for our aircraft could decline and our business could be adversely affected.

We expect that a large driver of passenger demand for electric air mobility

will be time savings when compared with alternative modes of transportation.

Should operators of our aircraft be unable to deliver a sufficient

level of time savings for passengers, or if expected time savings are impacted by delays or cancellations, it could reduce consumer demand

and, in turn, demand for our aircraft.

If demand does not materialize or falls, our business, financial conditions, prospects, and results

of operations could be adversely affected.

Operators of our aircraft may be unable to reduce end-user pricing

over time at rates sufficient to stimulate demand for our aircraft, drive expected growth and accomplish planned production.

Operators of our aircraft may not be able to successfully reduce end-user

pricing over time to increase demand, address new market segments and develop a significantly broader customer base.

We expect that initial

end-user pricing may be most applicable to relatively affluent consumers, and operators will need to address additional markets and expand

their customer demographic in order to further grow their electric air mobility business.

If operators are unable to meet their end-user

pricing projections, then demand for our aircraft will decline and we will be unable to meet our production plans, resulting in an increase

in our per-unit costs, adversely affecting our results of operations.

Our aircraft may not perform at the level we expect, and may have

design or manufacturing deficiencies, such as higher than expected noise profiles, lower payloads than initially estimated, shorter ranges

and/or shorter useful lives than we anticipate.

Our aircraft may contain defects in design or manufacture that may cause

them not to perform as expected or that may require repair.

For example, our aircraft may have a higher noise profile than we expect or

carry a lower payload or have a shorter maximum battery range than we estimate.

Our aircraft also use a substantial amount of software

code to operate.

Software products are inherently complex and often contain defects and errors when first introduced.

There can be no

assurance that we will be able to detect and fix any such defects in these products prior to their use.

While we have performed extensive

testing, in some instances we are still relying on projections and models to validate the projected performance of our aircraft.

we have been unable to validate the performance of our aircraft over the expected lifetime of the aircraft.

Accidents or safety incidents involving eVTOL aircraft, us or our

competitors could have a material adverse effect on our business, financial condition, and results of operations.

Test flying prototype aircraft is inherently risky, and accidents or incidents

involving our aircraft are possible.

Urban environments may present particular challenges to the operators of UAS, such as an increased

risk of collisions resulting in property damage, injury or death.

As the usage of UAS has increased, the danger of such collisions has

Any such occurrence would negatively impact our development, testing and certification efforts, and could result in re-design,

certification delay and/or postponements or delays to the sales of our aircraft.

In addition, such occurrences could significantly damage

the reputation of and support for UAS in general.

The operation of aircraft is subject to various risks, and we expect demand

for our aircraft to be impacted by accidents or other safety issues regardless of whether such accidents or issues involve our aircraft.

Such accidents or incidents could also have a material impact on our ability to obtain certification from the Civil Aviation Authorities

for our aircraft, or to obtain such certification in a timely manner.

Such events could impact confidence in a particular aircraft type

or the air transportation services industry as a whole, particularly if such accidents or disasters were due to a safety fault.

that regulators and the general public are still forming their opinions about the safety and utility of aircraft that are highly reliant

on lithium-ion batteries and/or advanced flight control software capabilities.

An accident or other safety incident involving either our

aircraft or a competitor’s aircraft during these early stages of opinion formation could have a disproportionate impact on the longer-term

view of the emerging electric air mobility market.

Further, if our personnel, our aircraft or other types of aircraft are

involved in a public incident, accident, catastrophe or regulatory enforcement action, we could be exposed to significant reputational

harm and potential legal liability.

The insurance we carry may be inapplicable or inadequate to cover any such incident, accident, catastrophe

In the event that our insurance is inapplicable or inadequate, we may be forced to bear substantial losses from an incident

or accident, which would adversely impact our business, results of operations and financial condition.

If we experience harm to our reputation and brand by customers, employees

or operators, our business, financial condition, and results of operations could be adversely affected.

Continuing to increase the strength of our reputation and brand for high-performing,

sustainable, safe and cost-effective electric air mobility is critical to our ability to attract and retain customers and partners.

addition, our growth strategy includes international expansion through joint ventures or other partnerships with local companies that

would benefit from our reputation and brand recognition.

The successful development of our reputation and brand will depend on several

factors, many of which are outside of our control.

Negative perception of our aircraft or company may harm our reputation and brand, including

as a result of:

complaints or negative publicity or reviews about us, independent third-party aircraft operators, passengers, or other brands or events that we associate with, even if factually incorrect or based on isolated incidents;

our involvement during times of war and other major conflicts, including the current conflicts between Russia and Ukraine and in the Middle East;

changes to our operations, safety and security or other policies that customers, end-users or others perceive as overly restrictive, unclear or inconsistent with our values;

illegal, negligent, reckless or otherwise inappropriate behavior by operators or independent third parties involved in the operation of our business or by our management team or other employees;

actual or perceived disruptions or defects in our aircraft;

litigation over, or investigations by regulators into, our operations or those of our independent third-party aircraft operators;

a failure to operate our business in a way that is consistent with our values;

negative responses by independent third-party aircraft operators to new mobility offerings;

any of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception of us or our industry as a whole.

Any of the foregoing could adversely affect our business, financial condition,

contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in

our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

In addition, our insurance coverage may not be adequate or sufficient to protect us from or to mitigate liabilities arising out of our

privacy and security practices or that such coverage will continue to be available on commercially reasonable terms or at all, or that

such coverage will pay future claims.

addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public

sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine

our competitive advantage or market position.

Sensitive information of us or our customers could also be leaked, disclosed, or revealed

as a result of or in connection with our employee’s, personnel’s, or vendor’s with whom we work use of generative AI

Technologies.

commercial aviation products, systems and services businesses are affected by global demand and economic factors that could negatively

impact our financial results.

operating results of our commercial aviation products, systems and services businesses – particularly our Electric Air Mobility

and Avionics segments – have been and may in the future be adversely affected by downturns in the global demand for air travel,

which impacts new aircraft production and orders, and global flying hours, which impacts air transport, regional and business aircraft

utilization rates and pilot training needs.

The aviation industry is highly cyclical, and the level of demand for air travel is correlated

to the strength of the U.S.

and international economies and is impacted by long-term trends in airline passenger and cargo traffic.

results of our commercial aviation businesses also depend on other factors, including general economic growth, political stability in

both developed and emerging markets, pricing pressures, trends in capital goods markets and changes in OEM production rates.

weather, natural disasters and other adverse events could have a material adverse effect on our business, results of operations and financial

weather conditions and natural disasters, such as hurricanes, winter snowstorms or earthquakes, can cause flight cancellations or significant

Cancellations or delays due to adverse weather conditions or natural disasters, air traffic control problems or inefficiencies,

breaches in security or other factors may affect us to a greater degree than our competitors who may be able to recover more quickly

from these events, and therefore could have a material adverse effect on our business, results of operations and financial condition

to a greater degree than other air carriers.

sizes of the markets for our current and future solutions may be smaller than we estimate.

estimates of the total addressable market for our current products and services are based on a number of internal and third-party estimates.

While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct

and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these

underlying factors.

As a result, our estimates of the total addressable market for our current or future products and services may prove

to be incorrect.

If the actual number of customers who will use our products and services, the price at which we can sell our products

and services or the total addressable market for our products and services is smaller than we have estimated, it may impair our sales

growth and have an adverse impact on our business, financial condition and results of operations.

market for eVTOL aircraft and electric air mobility has not been clearly defined, is still emerging and may not achieve the growth potential

we expect or may grow more slowly than expected, which may harm our business, financial condition, and results of operations.

electric air mobility market is still emerging and has not been clearly defined.

We are uncertain as to what extent market acceptance

will grow, if at all.

Our customers will likely initially launch operations in a limited number of metropolitan areas.

The success of

these markets, if any, and the opportunity for future growth in these and other markets may not be representative of the potential market

for electric air mobility in other metropolitan areas.

Our success will depend to a substantial extent on regulatory approval and availability

of eVTOL technology, as well as the willingness of commuters and travelers to widely adopt air mobility as an alternative for ground

transportation.

If the public does not perceive electric air mobility as beneficial, or chooses not to adopt electric air mobility as

a result of concerns regarding safety, affordability, value proposition or for other reasons, then the market for our aircraft may not

develop, may develop more slowly than we expect or may not achieve the growth potential we expect.

Any of the foregoing could materially

adversely affect our business, financial condition, prospects, and results of operations.

are still developing our eVTOL aircraft, have not yet obtained FAA certification of our eVTOL aircraft under development and we have

yet to manufacture or deliver any aircraft to customers, which makes evaluating our business and future prospects difficult and increases

the risk of investment.

have a limited operating history in designing, developing, and working to certify an eVTOL aircraft.

Our eVTOL aircraft is in the development

stage, and we do not expect our first passenger production aircraft to be certified by the TCCA under existing CAR 529 Transport Category

Rotorcraft airworthiness rules until 2031 or later and certification of our 33% scaled cargo version to be certified under drone rules

until 2027 or later.

As a result, we have no experience as an organization in volume manufacturing of aircraft.

Many of our current and

potential competitors are larger and have substantially greater resources than we currently have or expect to have in the future.

a result, those competitors may be able to allocate greater resources to the development of their current and future technologies, the

promotion and sale of their offerings, and/or offer their technologies at lower prices.

Notably, our competitors may be able to receive

Type, Airworthiness or Production certification from the FAA covering their eVTOL aircraft prior to us receiving such certifications.

Our current and potential competitors may also establish cooperative or strategic relationships amongst themselves or with third parties

that may further enhance their resources and offerings.

Further, it is possible that domestic or foreign companies or governments, some

with greater experience in the aerospace industry or greater financial resources than we possess, will seek to provide products or services

that compete directly or indirectly with ours in the future.

Any such foreign competitor, for example, could benefit from subsidies from,

or other protective measures by, its home country.

cannot assure you that we or our partners will successfully develop manufacturing and supply chain capabilities that will enable us to

meet the quality, price, engineering, design and production standards, as well as the production volumes, required to successfully commercialize

our aircraft.

may be reluctance by consumers to adopt a new form of mobility, or an unwillingness to pay aircraft operators’ projected prices.

growth is highly dependent upon the adoption by consumers of an entirely new form of mobility offered by eVTOL aircraft and the electric

air mobility market.

If consumers do not adopt this new form of mobility or are not willing to pay the projected prices for the aerial

ridesharing services provided by our customers, our prospects, financial condition and operating results will be harmed.

is new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government

regulation and industry standards, new aircraft announcements and changing consumer demands and behaviors.

There may be heightened public

skepticism of this nascent technology and its adopters.

In particular, there could be negative public perception surrounding eVTOL aircraft,

including the overall safety and the potential for injuries or death occurring as a result of accidents involving eVTOL aircraft, regardless

of whether any such safety incidents involve our aircraft.

Any of the foregoing risks and challenges could adversely affect our prospects,

business, financial condition, and results of operations.

success in a given market will depend on our customers’ ability to develop a network of passengers and accurately assess and predict

passenger demand and price sensitivity.

Demand and price sensitivity may fluctuate based on a variety of factors, including macroeconomic

factors, quality of service, negative publicity, safety incidents, corporate reporting related to safety, quality of customer support,

perceived political or geopolitical affiliations, or dissatisfaction with our products and offerings in general.

If the operators of

our aircraft fail to attract passengers or fail to accurately predict demand and price sensitivity, it could reduce demand for our aircraft

and harm our financial performance.

addition, while our aircraft will be operating within the existing aviation airspace and infrastructure, long-term continued adoption

of electric air mobility will depend on operators’ ability to develop and operate vertiports in desirable locations in metropolitan

Developing and operating vertiport locations will require permits and approvals from federal, state, and local regulatory

authorities and government bodies, and operation of our aircraft will depend on such permits and approvals.

If our operators are prohibited,

restricted, or delayed from developing and operating desirable vertiport locations, then demand for our aircraft could decline and our

business could be adversely affected.

expect that a large driver of passenger demand for electric air mobility will be time savings when compared with alternative modes of

transportation.

Should operators of our aircraft be unable to deliver a sufficient level of time savings for passengers, or if expected

time savings are impacted by delays or cancellations, it could reduce consumer demand and, in turn, demand for our aircraft.

does not materialize or falls, our business, financial conditions, prospects, and results of operations could be adversely affected.

of our aircraft may be unable to reduce end-user pricing over time at rates sufficient to stimulate demand for our aircraft, drive expected

growth and accomplish planned production.

of our aircraft may not be able to successfully reduce end-user pricing over time to increase demand, address new market segments and

develop a significantly broader customer base.

We expect that initial end-user pricing may be most applicable to relatively affluent

consumers, and operators will need to address additional markets and expand their customer demographic in order to further grow their

electric air mobility business.

If operators are unable to meet their end-user pricing projections, then demand for our aircraft will

decline and we will be unable to meet our production plans, resulting in an increase in our per-unit costs, adversely affecting our results

of operations.

aircraft may not perform at the level we expect, and may have design or manufacturing deficiencies, such as higher than expected noise

profiles, lower payloads than initially estimated, shorter ranges and/or shorter useful lives than we anticipate.

aircraft may contain defects in design or manufacture that may cause them not to perform as expected or that may require repair.

example, our aircraft may have a higher noise profile than we expect or carry a lower payload or have a shorter maximum battery range

than we estimate.

Our aircraft also use a substantial amount of software code to operate.

Software products are inherently complex and

often contain defects and errors when first introduced.

There can be no assurance that we will be able to detect and fix any such defects

in these products prior to their use.

While we have performed extensive testing, in some instances we are still relying on projections

and models to validate the projected performance of our aircraft.

To date, we have been unable to validate the performance of our aircraft

over the expected lifetime of the aircraft.

or safety incidents involving eVTOL aircraft, us or our competitors could have a material adverse effect on our business, financial condition,

and results of operations.

In order to reach production for our aircraft, we need to develop

complex software and technology systems in coordination with our partners and suppliers, and there can be no assurance such systems will

be successfully developed.

We anticipate that our aircraft will use a substantial amount of sophisticated

software and hardware to operate.

The development of such advanced technologies is inherently complex, and we will need to coordinate

with our partners and suppliers in order to reach production for our aircraft.

Defects and errors may be revealed over time and our control

over the performance of third-party services and systems may be limited.

If any of our partners and suppliers fail to adequately fulfill

their obligations towards us or experience interruptions or disruptions in production or provision of services due to, for example, bankruptcy,

natural disasters, labor strikes or disruption of its supply chain, we may experience a significant delay in the delivery of or fail to

receive previously ordered systems and parts, which would adversely affect our revenue and profitability and could jeopardize our ability

to meet the demands of our program participants or develop the necessary software and technology systems may harm our competitive position.

We are relying on third-party partners to develop a number of emerging

technologies for use in our products.

These technologies are not currently, and may not ever be, commercially viable.

There can be no

assurances that our partners will be able to meet the technological requirements, production timing, and volume requirements to support

our business plan.

In addition, the technology may not comply with the cost, performance, useful life, and warranty characteristics that

we anticipate in our business plan or may have performance problems related to mechanical or software defects.

As a result, our business

plan could be significantly adversely impacted, and we may incur significant liabilities under warranty claims, which could adversely

affect our business, prospects, and results of operations.

We may not be able to produce aircraft in the volumes or on the timelines

that we anticipate.

There are significant challenges associated with mass producing aircraft

in the volumes that we are anticipating.

The aerospace industry has traditionally been characterized by significant barriers to entry,

including large capital requirements, investment costs of designing and manufacturing aircraft, long lead times to bring aircraft to market

from the concept and design stage, the need for specialized design and development expertise, extensive regulatory requirements, difficulty

establishing a brand name and image, and the need to establish maintenance and service locations.

As a manufacturer of electric aircraft,

we face a variety of added challenges to entry that a traditional aircraft manufacturer would not encounter, including additional costs

of developing and producing an electric powertrain, regulations associated with the transport of lithium-ion batteries and unproven high-volume

consumer demand for a fully electric aerial mobility service.

Additionally, we are developing production lines for components and at volumes

for which there is little precedent within the traditional aerospace industry.

If we are not able to overcome these barriers, our business,

prospects, operating results and financial condition will be negatively impacted, and our ability to grow our business will be harmed.

There can also be no assurance that our operator customers will not experience

operational or process failures and other problems, including pilot error, cyberattacks or other intentional acts, that could result in

potential safety risks.

Any actual or perceived safety issues may result in significant reputational harm to the electric air mobility

industry and, accordingly, our business, in addition to tort liability, increased safety infrastructure and other costs that may arise.

Such issues could result in increased regulation or other systemic consequences.

Adverse publicity affecting the industry and our reputation

as a result of accidents, operational failures, or other safety incidents could have a material adverse effect on our business, financial

condition, prospects, and results of operation.

In addition, our aircraft may be grounded by regulatory authorities due to safety concerns

that could have a material adverse impact on our business, financial condition, operating results and prospects.

We will also need to do extensive testing to ensure that the aircraft is

in compliance with applicable TCCA safety regulations and other relevant regulations prior to beginning mass production.

In addition to

certification of the aircraft, we will be required to obtain TCCA approval to manufacture completed aircraft pursuant to a TCCA-approved

type design (e.g., type certificate).

Production approval involves initial TCCA manufacturing approval and extensive ongoing oversight

of mass-produced aircraft.

If we are unable to obtain production approval for the aircraft, or if TCCA imposes unanticipated restrictions

as a condition of approval, our projected costs of production could increase substantially.

The timing of our production

ramp is dependent upon finalizing certain aspects of the design, engineering, component procurement, testing, build out, and

manufacturing plans in a timely manner and upon our ability to execute these plans within the current timeline.

It is also dependent

on being able to timely obtain TCCA certification.

If we experience any delays in the execution of these plans or in obtaining TCCA

certification, our business, prospects, operating results and financial condition will be negatively impacted.

Risks Related to Our U.S.

flying prototype aircraft is inherently risky, and accidents or incidents involving our aircraft are possible.

Urban environments may

present particular challenges to the operators of UAS, such as an increased risk of collisions resulting in property damage, injury or

As the usage of UAS has increased, the danger of such collisions has increased.

Any such occurrence would negatively impact our

development, testing and certification efforts, and could result in re-design, certification delay and/or postponements or delays to

the sales of our aircraft.

In addition, such occurrences could significantly damage the reputation of and support for UAS in general.

operation of aircraft is subject to various risks, and we expect demand for our aircraft to be impacted by accidents or other safety

issues regardless of whether such accidents or issues involve our aircraft.

Such accidents or incidents could also have a material impact

on our ability to obtain certification from the Civil Aviation Authorities for our aircraft, or to obtain such certification in a timely

Such events could impact confidence in a particular aircraft type or the air transportation services industry as a whole, particularly

if such accidents or disasters were due to a safety fault.

We believe that regulators and the general public are still forming their

opinions about the safety and utility of aircraft that are highly reliant on lithium-ion batteries and/or advanced flight control software

capabilities.

An accident or other safety incident involving either our aircraft or a competitor’s aircraft during these early

stages of opinion formation could have a disproportionate impact on the longer-term view of the emerging electric air mobility market.

if our personnel, our aircraft or other types of aircraft are involved in a public incident, accident, catastrophe or regulatory enforcement

action, we could be exposed to significant reputational harm and potential legal liability.

The insurance we carry may be inapplicable

or inadequate to cover any such incident, accident, catastrophe or action.

In the event that our insurance is inapplicable or inadequate,

we may be forced to bear substantial losses from an incident or accident, which would adversely impact our business, results of operations

and financial condition.

we experience harm to our reputation and brand by customers, employees or operators, our business, financial condition, and results of

operations could be adversely affected.

to increase the strength of our reputation and brand for high-performing, sustainable, safe and cost-effective electric air mobility

is critical to our ability to attract and retain customers and partners.

In addition, our growth strategy includes international expansion

through joint ventures or other partnerships with local companies that would benefit from our reputation and brand recognition.

The successful

development of our reputation and brand will depend on several factors, many of which are outside of our control.

Negative perception

of our aircraft or company may harm our reputation and brand, including as a result of:

or negative publicity or reviews about us, independent third-party aircraft operators, passengers, or other brands or events that

we associate with, even if factually incorrect or based on isolated incidents;

involvement during times of war and other major conflicts, including the current conflicts between Russia and Ukraine and in the

to our operations, safety and security or other policies that customers, end-users or others perceive as overly restrictive, unclear

or inconsistent with our values;

negligent, reckless or otherwise inappropriate behavior by operators or independent third parties involved in the operation of our

business or by our management team or other employees;

or perceived disruptions or defects in our aircraft;

over, or investigations by regulators into, our operations or those of our independent third-party aircraft operators;

failure to operate our business in a way that is consistent with our values;

responses by independent third-party aircraft operators to new mobility offerings;

of the foregoing with respect to our competitors, to the extent such resulting negative perception affects the public’s perception

of us or our industry as a whole.

of the foregoing could adversely affect our business, financial condition, and results of operations.

order to reach production for our aircraft, we need to develop complex software and technology systems in coordination with our partners

and suppliers, and there can be no assurance such systems will be successfully developed.

anticipate that our aircraft will use a substantial amount of sophisticated software and hardware to operate.

The development of such

advanced technologies is inherently complex, and we will need to coordinate with our partners and suppliers in order to reach production

for our aircraft.

Defects and errors may be revealed over time and our control over the performance of third-party services and systems

may be limited.

If any of our partners and suppliers fail to adequately fulfill their obligations towards us or experience interruptions

or disruptions in production or provision of services due to, for example, bankruptcy, natural disasters, labor strikes or disruption

of its supply chain, we may experience a significant delay in the delivery of or fail to receive previously ordered systems and parts,

which would adversely affect our revenue and profitability and could jeopardize our ability to meet the demands of our program participants

or develop the necessary software and technology systems may harm our competitive position.

are relying on third-party partners to develop a number of emerging technologies for use in our products.

These technologies are not

currently, and may not ever be, commercially viable.

There can be no assurances that our partners will be able to meet the technological

requirements, production timing, and volume requirements to support our business plan.

In addition, the technology may not comply with

the cost, performance, useful life, and warranty characteristics that we anticipate in our business plan or may have performance problems

related to mechanical or software defects.

As a result, our business plan could be significantly adversely impacted, and we may incur

significant liabilities under warranty claims, which could adversely affect our business, prospects, and results of operations.

may not be able to produce aircraft in the volumes or on the timelines that we anticipate.

are significant challenges associated with mass producing aircraft in the volumes that we are anticipating.

The aerospace industry has

traditionally been characterized by significant barriers to entry, including large capital requirements, investment costs of designing

and manufacturing aircraft, long lead times to bring aircraft to market from the concept and design stage, the need for specialized design

and development expertise, extensive regulatory requirements, difficulty establishing a brand name and image, and the need to establish

maintenance and service locations.

As a manufacturer of electric aircraft, we face a variety of added challenges to entry that a traditional

aircraft manufacturer would not encounter, including additional costs of developing and producing an electric powertrain, regulations

associated with the transport of lithium-ion batteries and unproven high-volume consumer demand for a fully electric aerial mobility

Additionally, we are developing production lines for components and at volumes for which there is little precedent within the

traditional aerospace industry.

If we are not able to overcome these barriers, our business, prospects, operating results and financial

condition will be negatively impacted, and our ability to grow our business will be harmed.

can also be no assurance that our operator customers will not experience operational or process failures and other problems, including

pilot error, cyberattacks or other intentional acts, that could result in potential safety risks.

Any actual or perceived safety issues

may result in significant reputational harm to the electric air mobility industry and, accordingly, our business, in addition to tort

liability, increased safety infrastructure and other costs that may arise.

Such issues could result in increased regulation or other

systemic consequences.

Adverse publicity affecting the industry and our reputation as a result of accidents, operational failures, or

other safety incidents could have a material adverse effect on our business, financial condition, prospects, and results of operation.

In addition, our aircraft may be grounded by regulatory authorities due to safety concerns that could have a material adverse impact

on our business, financial condition, operating results and prospects.

will also need to do extensive testing to ensure that the aircraft is in compliance with applicable TCCA safety regulations and other

relevant regulations prior to beginning mass production.

In addition to certification of the aircraft, we will be required to obtain

TCCA approval to manufacture completed aircraft pursuant to a TCCA-approved type design (e.g., type certificate).

Production approval

involves initial TCCA manufacturing approval and extensive ongoing oversight of mass-produced aircraft.

If we are unable to obtain production

approval for the aircraft, or if TCCA imposes unanticipated restrictions as a condition of approval, our projected costs of production

could increase substantially.

timing of our production ramp is dependent upon finalizing certain aspects of the design, engineering, component procurement, testing,

build out, and manufacturing plans in a timely manner and upon our ability to execute these plans within the current timeline.

also dependent on being able to timely obtain TCCA certification.

If we experience any delays in the execution of these plans or in obtaining

TCCA certification, our business, prospects, operating results and financial condition will be negatively impacted.

anticipated benefits of potential joint ventures may not be fully realized or take longer to realize than expected.

In addition, our

joint venture investments could expose us to risks and liabilities in connection with the formation of the new joint ventures, the operation

of such joint ventures without sole decision-making authority, and our reliance on joint venture partners who may have economic and business

interests that are inconsistent with our business interests.

have entered into joint ventures in the past and may enter into joint ventures in the future.

For example, in November 2025, AIRO Drone,

LLC and Nord Drone Group, LLC (“NDG”), entered into a Joint Venture and Operating Agreement (the “JV Agreement”)

pursuant to which we and NDG will form AIRO Nord-Drone, LLC, a Delaware limited liability company (the “JV”).Pursuant to

the terms of the JV Agreement, the JV will develop, manufacture, and commercialize unmanned aerial systems primarily designed for delivering

munitions, targeting U.S., NATO, and Ukrainian defense markets.

The consummation of the JV is subject to various closing conditions

and there can be no assurance that closing conditions under the JV Agreement will be satisfied or when or that the JV will be consummated

on the terms described herein or at all.

In addition, in October 2025, we entered into a non-binding letter of intent with Bullet (Degree-Trans

LLC), a Ukrainian developer of turbojet unmanned interceptor systems, to establish a 50/50 joint venture to produce and deploy Bullet’s

combat-proven fixed-wing UAV technology across the United States, NATO defense markets and Ukraine and there can be no assurance that

a definitive joint venture agreement will be entered into or that the joint venture will be consummated on the terms described herein

The success of these joint ventures and any future

joint ventures will depend, in part, on the successful collaboration between us and our joint venture partners, and we may not realize

all of the anticipated benefits.

Such joint ventures may be more difficult, time-consuming, or costly than expected and could result

in increased costs, decreases in the amount of expected revenues, and diversion of management’s time and energy, which could materially

impact our business, operating results, financial condition, and prospects.

In addition, these joint ventures involve material risks

including operational challenges related to operations in Ukraine during ongoing military conflict, complex export control and sanctions

compliance requirements, and potential regulatory scrutiny regarding foreign defense partnerships.

to successfully partner, or a failure to realize our expectations for the joint ventures, including any contemplated exit strategy from

a joint venture, could materially impact our business, operating results, financial condition, and prospects.

These joint ventures could

also be negatively impacted by inflation, supply chain issues, an inability to obtain financing on favorable terms or at all and development

and construction delays.

in the future, we may co-invest with other third parties through partnerships, joint ventures, or other entities in the future.

joint ventures could result in our acquisition of non-controlling interests in, or shared responsibility for, managing the affairs of

a property or portfolio of properties, partnership, joint venture, or other entity.

We may be subject to additional risks, including:

may not have the right to exercise sole decision-making authority regarding the properties, partnership, joint venture, or other

our partners become bankrupt or fail to fund their share of required capital contributions, we may choose to or be required to contribute

such capital;

partners may have economic, tax, or other business interests or goals which are inconsistent with our business interests or goals,

and may be in a position to take actions contrary to our interests or objectives;

joint venture partners may take actions that are not within our control, which could require us to dispose of the joint venture asset

or purchase the partner’s interests or assets at an above-market price;

joint venture partners may take actions unrelated to our business agreement but which reflect poorly on us because of our joint venture

relationship;

between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our management from

focusing their time and effort on our day-to-day business;

may in certain circumstances be liable for the actions of our third-party partners or guarantee all or a portion of the joint venture’s

liabilities, which may require us to pay an amount greater than its investment in the joint venture;

may need to change the structure of an established joint venture or create new complex structures to meet our business needs or the

needs of our partners which could prove challenging;

joint venture partner’s decision to exit the joint venture may not be at an opportune time for us or in our business interests.

of these factors may result in returns on these investments being less than we expect or in losses, and business, operating results,

financial condition, and prospects may be adversely affected.

Related to Our U.S.

Government Contracts

We are subject to extensive government regulation, and our failure

to comply with applicable regulations may subject us to significant financial liability, penalties, and other government actions that

restrict our ability to conduct our business.

As a contractor to the U.S.

government and provider of various technologies,

we are subject to and must comply with various government regulations that impact our revenue, operating costs, profit margins and the

internal organization and operation of our business.

We also need special security clearances and regulatory approvals to continue working

on certain projects with the U.S.

Our failure to comply with applicable regulations, rules and approvals, changes in the government’s

interpretation of such regulations, rules and approvals as have been and are applied to our contracts, proposals or business or misconduct

by any of our employees could result in financial liability, the imposition of fines and penalties, the loss of security clearances, a

decrease in profitability, the loss of our government contracts or our suspension or debarment from contracting with the U.S.

generally, any of which could harm our business, financial condition, and results of operations.

We are also subject to certain regulations

of comparable government agencies in other countries, and our failure to comply with these non-U.S.

regulations could also harm our business,

financial condition or results of operations.

are subject to extensive government regulation, and our failure to comply with applicable regulations may subject us to significant financial

liability, penalties, and other government actions that restrict our ability to conduct our business.

a contractor to the U.S.

government and provider of various technologies, we are subject to and must comply with various government regulations

that impact our revenue, operating costs, profit margins and the internal organization and operation of our business.

We also need special

security clearances and regulatory approvals to continue working on certain projects with the U.S.

Our failure to comply

with applicable regulations, rules and approvals, changes in the government’s interpretation of such regulations, rules and approvals

as have been and are applied to our contracts, proposals or business or misconduct by any of our employees could result in financial

liability, the imposition of fines and penalties, the loss of security clearances, a decrease in profitability, the loss of our government

contracts or our suspension or debarment from contracting with the U.S.

government generally, any of which could harm our business, financial

condition, and results of operations.

We are also subject to certain regulations of comparable government agencies in other countries,

and our failure to comply with these non-U.S.

regulations could also harm our business, financial condition or results of operations.

government agencies, including the FAA, the Defense Contract Audit Agency, the Defense Contract Management Agency and various agency

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Further, if the U.S.

government debt ceiling is

not raised and the national debt reaches the statutory debt ceiling, the U.S.

government debt ceiling is not raised and the national debt reaches the statutory debt ceiling,

government could default on its debts.

A significant decline

military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations

A significant decline in U.S.

military expenditures could result in a reduction in the

amount of our products sold to the various agencies and buying organizations of the U.S.

government may modify, curtail or terminate one or more of our contracts.

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regarding the extent or magnitude of potential impacts to our operations.

In March 2025, President Trump signed a continuing resolution

that funds federal agencies through September 30, 2025.

A continuing resolution authorizes federal agencies to operate generally at the

same funding levels from the prior year, but typically does not authorize new spending initiatives during this period.

If Congress is

unable to enact formal fiscal year 2026 appropriation bills by September 30, 2025, it may pass another continuing resolution.

if Congress fails to pass the formal appropriations bills or a continuing resolution, then the U.S.

government would shut down during

which federal agencies would cease all non-essential functions.

our Training segment, shutdown or extended continuing resolution could delay DoD IDIQ solicitations and task-order competitions, slow

or suspend new awards and funding modifications, and defer government inspection/acceptance and related payments, which could delay revenue

recognition for completed milestones.

the Avionics segment, we anticipate that the shutdown could impact the FAA’s processing of certain approvals for engine instruments

by the end of the year.

There are also concerns about delays that could occur resulting in less than normal efficiencies when the FAA

returns after the shutdown.

These events could delay revenues from new products planned for the fourth quarter of 2025.

the event of an extended U.S.

government shutdown, our business, program performance and results of operations could be impacted by the

resulting disruptions to federal government offices, workers, and operations, including risks relating to the funding of certain programs,

stop work orders, as well as delays in contract awards, new program starts, payments for work performed, and other actions.

experience similar impacts in the event of an extended period of continuing resolutions.

Generally, the significance of these impacts

will primarily be based on the length of the continuing resolution or shutdown.

Related to Legal and Regulatory Requirements

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are subject to interpretation, may be dependent on political pressures and factors and/or are subject to change.

of the products we develop and manufacture are highly dependent on our ability to meet local, state, federal and international regulations.

In particular, our ability to meet the certification requirements for our products in the United States and abroad could determine the

ability to sell, deliver, and manufacture our products, and therefore, could impact our operating results.

These regulations include

design and manufacture of products and components.

While a common framework exists among many regulatory authorities allowing for recognition

of different regulatory approvals by other regulatory entities, often times there are differences that require additional validation

to meet the requirements of a specific entity.

The risk not only lies in the viability of a particular product but also the time to market.

Delays in the process are not unusual and can lead to delays in bringing product to market.

These delays could result in financial and

competitive impacts on our operations.

of the products we develop and manufacture are highly dependent on our ability to meet local, state, federal and international

In particular, our ability to meet the certification requirements for our products in the United States and abroad

could determine the ability to sell, deliver, and manufacture our products, and therefore, could impact our operating results.

regulations include design and manufacture of products and components.

While a common framework exists among many regulatory

authorities allowing for recognition of different regulatory approvals by other regulatory entities, often times there are

differences that require additional validation to meet the requirements of a specific entity.

The risk not only lies in the

viability of a particular product but also the time to market.

Delays in the process are not unusual and can lead to delays in

bringing product to market.

These delays could result in financial and competitive impacts on our operations.

business is highly regulated and our ability to generate revenues and profit may be limited by regulatory restrictions and/or changes

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are different and potentially greater than those encountered in our U.S.

In 2024, a majority of our total net sales were from

international customers.

International sales are subject to numerous political and economic factors, including changes in foreign national

priorities, foreign government budgets, global economic conditions, and fluctuations in foreign currency exchange rates, the possibility

of trade sanctions and other government actions, regulatory requirements, significant competition, taxation, and other risks associated

with doing business outside the United States.

Sales of military products and services and any associated industrial development (offset)

agreements are subject to U.S.

export regulations and foreign policy, and there could be significant delays or other issues in reaching

definitive agreements for announced programs.

See “—We cannot predict the consequences of future macroeconomic conditions

or geopolitical events, but they may adversely affect market and economic conditions, the markets in which we operate, our ability to

insure against risks, our operations or our profitability.”

During the nine months ended September 2025 and 2024,

a majority of our total net sales were from international customers.

International sales are subject to numerous political and economic

factors, including changes in foreign national priorities, foreign government budgets, global economic conditions, and fluctuations in

foreign currency exchange rates, the possibility of trade sanctions and other government actions, regulatory requirements, significant

competition, taxation, and other risks associated with doing business outside the United States.

Sales of military products and services

and any associated industrial development (offset) agreements are subject to U.S.

export regulations and foreign policy, and there could

be significant delays or other issues in reaching definitive agreements for announced programs.

See “—We cannot predict the

consequences of future macroeconomic conditions or geopolitical events, but they may adversely affect market and economic conditions,

the markets in which we operate, our ability to insure against risks, our operations or our profitability.”

international business is conducted through foreign military sales (“FMS”) contracted through the U.S.

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Additionally,

changes in regulatory, geopolitical, social, economic, or monetary policies and other factors, may have a material adverse effect on our business in the future, or may

require us to exit a particular market or significantly modify our current business practices.

Abrupt political change, terrorist activity

and armed conflict pose a risk of general economic disruption in affected countries, including economic sanctions and export license

requirements, which could also result in an adverse effect on our business and results of operations.

changes in regulatory, geopolitical, social, economic, or monetary policies and other factors, may have a material adverse effect on

our business in the future, or may require us to exit a particular market or significantly modify our current business practices.

political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, including economic

sanctions and export license requirements, which could also result in an adverse effect on our business and results of operations.

and the third parties with whom we work are subject to stringent and evolving U.S.

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In the past few years, numerous U.S.

states—including California, Virginia, Colorado, Connecticut,

and Utah—have enacted comprehensive privacy laws that impose certain obligations on covered businesses, including providing specific

disclosures in privacy notices and affording residents with certain rights concerning their personal data.

As applicable, such rights

may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such

as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to

provide our products and services.

Certain states also impose stricter requirements for processing certain personal data, including sensitive

information, such as conducting data privacy impact assessments.

states have enacted comprehensive privacy laws that impose

certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain

rights concerning their personal data.

As applicable, such rights may include the right to access, correct, or delete certain personal

data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

exercise of these rights may impact our business and ability to provide our products and services.

Certain states also impose stricter

requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments.

These state laws allow for statutory fines for noncompliance.

the California Consumer Privacy Act of 2018 (“CCPA”) applies to personal data of consumers, business representatives, and

employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests

of such individuals to exercise certain privacy rights.

The CCPA provides for fines of up to $7,500 per intentional violation and allows

private litigants affected by certain data breaches to recover significant statutory damages.

Similar laws are being considered in several

other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future.

For example, the California Consumer Privacy Act of 2018 (“CCPA”)

applies to personal data of consumers, business representatives, and employees who are California residents, and requires businesses

to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights.

provides for fines of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover

significant statutory damages.

Similar laws are being considered in several other states, as well as at the federal and local levels,

and we expect more states to pass similar laws in the future.

the United States, an increasing number of laws, regulations, and industry standards govern data privacy and security.

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will not be prevented or detected on a timely basis.

of June 30, 2025, December 31, 2024 and 2023, we had limited accounting personnel and other resources to address our internal

control over financial reporting.

In connection with the preparation of our consolidated financial statements for the years ended

December 31, 2024 and 2023, material weaknesses were identified in the design and operating effectiveness of our internal control

of September 30, 2025, December 31, 2024 and 2023, we had limited accounting personnel and other resources to address our internal control

over financial reporting.

In 2024, we identified material weaknesses due to ineffective information and communication controls,

resulting in lack of timely identification and accounting for certain key debt and other agreements.

During the course of the audit

for the fiscal year ended December 31, 2024, a significant audit adjustment was identified due to improper application of the

guidance under ASC 606, Revenue From Contracts With Customers.

Further, we did not timely review our debt agreements and amendments

for potential accounting implications, including debt extinguishments and modifications, as well as the potential accounting for

other terms such as the stock interest charge.

In 2023, we identified a material weakness in our internal control over financial

As further discussed in the section titled “Management’s Discussion and Analysis of Financial Condition and

Results of Operations,” we acquired six subsidiaries during the first two fiscal quarters of 2022.

Several of these

subsidiaries did not have adequate personnel to manage their accounting functions and did not maintain a segregation of duties

between different roles at their organizations.

In addition, in the course of preparing our consolidated financial statements for

the periods in which the acquisitions occurred, we did not have an effective risk assessment process that successfully identified

and assessed risks of material misstatement to ensure controls were designed and implemented to respond to those risks, and we did

not have an effective monitoring process to assess the consistent operation of internal control over financial reporting and

remediate known control deficiencies.

As a result of these deficiencies, we did not effectively implement and operate process-level

control activities related to the accounting and reporting for the six acquisitions, including the fair value of our common stock

issued in certain of the transactions, resulting in the restatement of our consolidated financial statements as of and for the year

ended December 31, 2022, as well as our unaudited condensed consolidated financial statements for the six-month period ended June

30, 2022, the nine-month period ended September 30, 2022, the three-month period ended March 31, 2023, the six-month period ended

June 30, 2023 and the nine-month period ended September 30, 2023.

Due to the delays we have experienced in securing funding, we have

not been able to hire and train sufficient staff at certain subsidiaries to remediate the previously identified material weaknesses

in our internal control over financial reporting.

we have made changes to our accounting processes and other internal controls and engaged additional accounting personnel in an

effort to remediate the foregoing material weaknesses and in preparation for operating as a public company, we cannot assure that

the measures we have taken to date, actions we continue to take, and actions we may take in the future, will be sufficient to

remediate the control deficiencies that led to these material weaknesses and restatement of our condensed consolidated financial

statements or to avoid potential future material weaknesses.

If the steps we take do not correct the material weaknesses in a timely

manner, we will be unable to conclude that we maintain effective internal control over financial reporting.

Accordingly, there could

continue to be a reasonable possibility that a material misstatement of our condensed consolidated financial statements would not be

prevented or detected on a timely basis.

In connection with the preparation of our consolidated financial statements for the years ended December 31,

2024 and 2023, material weaknesses were identified in the design and operating effectiveness of our internal control over financial reporting.

In 2024, we identified material weaknesses due to ineffective information and communication controls, resulting in lack of timely identification

and accounting for certain key debt and other agreements.

During the course of the audit for the fiscal year ended December 31, 2024,

a significant audit adjustment was identified due to improper application of the guidance under ASC 606, Revenue From Contracts With

Further, we did not timely review our debt agreements and amendments for potential accounting implications, including debt

extinguishments and modifications, as well as the potential accounting for other terms such as the stock interest charge.

identified a material weakness in our internal control over financial reporting.

As further discussed in the section titled “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” we acquired six subsidiaries during the first two fiscal

quarters of 2022.

Several of these subsidiaries did not have adequate personnel to manage their accounting functions and did not maintain

a segregation of duties between different roles at their organizations.

In addition, in the course of preparing our consolidated financial

statements for the periods in which the acquisitions occurred, we did not have an effective risk assessment process that successfully

identified and assessed risks of material misstatement to ensure controls were designed and implemented to respond to those risks, and

we did not have an effective monitoring process to assess the consistent operation of internal control over financial reporting and remediate

known control deficiencies.

As a result of these deficiencies, we did not effectively implement and operate process-level control activities

related to the accounting and reporting for the six acquisitions, including the fair value of our common stock issued in certain of the

transactions, resulting in the restatement of our consolidated financial statements as of and for the year ended December 31, 2022, as

well as our unaudited condensed consolidated financial statements for the six-month period ended June 30, 2022, the nine-month period

ended September 30, 2022, the three-month period ended March 31, 2023, the six-month period ended June 30, 2023 and the nine-month period

ended September 30, 2023.

Due to the delays we have experienced in securing funding, we have not been able to hire and train sufficient

staff at certain subsidiaries to remediate the previously identified material weaknesses in our internal control over financial reporting.

have initiated, and continue to implement, measures intended to remediate the material weaknesses described above and to strengthen our

internal control over financial reporting.

These measures include:

(i) hiring additional experienced accounting and SEC reporting personnel

at the corporate and subsidiary levels and enhancing segregation of duties;

(ii) engaging an independent internal auditor and establishing

an internal audit plan focused on revenue recognition, complex financing arrangements, and acquisition accounting, with periodic reporting

to the Audit Committee;

(iii) implementing formal contract-review controls including documented technical accounting reviews for new

or amended agreements;

(iv) standardizing and documenting our monthly and quarterly close processes, including review and approval controls,

checklists, and enhanced management review controls over significant estimates and judgments;

and (v) deploying certain technology solutions,

including a cloud-based planning and reporting system to reduce manual processes and improve data integrity and transparency.

we believe these actions represent important steps toward remediation, the material weaknesses will not be considered remediated until

the applicable controls are designed, implemented, and operate effectively for a sufficient period of time and management has concluded,

through testing, that they are operating effectively.

We can provide no assurance that the measures described above will fully remediate

the identified material weaknesses, that we will not identify additional material weaknesses in the future, or that our internal control

over financial reporting will be effective.

Accordingly, there could continue to be a reasonable possibility that a material misstatement

of our condensed consolidated financial statements would not be prevented or detected on a timely basis.

we fail to remediate our existing material weaknesses or identify new material weaknesses in our internal controls over financial reporting,

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or increased costs to correct any post-implementation issues that may arise.

weaknesses in our disclosure controls and internal control over financial reporting have occurred in the past and may be discovered

in the future.

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or

improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a

restatement of our condensed consolidated financial statements for prior periods.

Any failure to implement and maintain effective

internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual

independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial

reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in

our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq.

currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required

to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose.

company, we will be required to provide an annual management report on the effectiveness of our internal control over financial

reporting commencing with our second annual report on Form 10-K.

weaknesses in our disclosure controls and internal control over financial reporting have occurred in the past and may be discovered in

Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement

could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our condensed

consolidated financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial

reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting

firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required

to include in our periodic reports that will be filed with the SEC.

Ineffective disclosure controls and procedures and internal control

over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely

have a negative effect on the trading price of our common stock.

In addition, if we are unable to continue to meet these requirements,

we may not be able to remain listed on Nasdaq.

We are not currently required to comply with the SEC rules that implement Section 404

of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over

financial reporting for that purpose.

As a public company, we will be required to provide an annual management report on the effectiveness

of our internal control over financial reporting commencing with our second annual report on Form 10-K.

independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial

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trading price of our common stock may be volatile, and you could lose all or part of your investment.

trading price of our common stock may be highly volatile and may be subject to wide fluctuations

in response to various factors, some of which are beyond our control, including:

trading price of our common stock may be highly volatile and may be subject to wide fluctuations in response to various factors, some

of which are beyond our control, including:

announcements

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and in the Middle East, may negatively affect the market price of our common stock, regardless of our actual operating performance.

If the market price of our common stock does not exceed the price you paid for them, you may not realize

any return on your investment in us and may lose some or all of your investment.

In the past, securities class action litigation has

often been instituted against companies following periods of volatility in the market price of a company’s securities.

of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

the market price of our common stock does not exceed the price you paid for them, you may not realize any return on your investment in

us and may lose some or all of your investment.

In the past, securities class action litigation has often been instituted against companies

following periods of volatility in the market price of a company’s securities.

This type of litigation, if instituted, could result

in substantial costs and a diversion of management’s attention and resources.

do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not

anticipate declaring or paying any cash dividends for the foreseeable future.

Furthermore, future debt or other financing

arrangements may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

return to stockholders will therefore be limited to the appreciation of their stock.

principal stockholders and management own a significant percentage of our stock and are able

to exert significant control over matters subject to stockholder approval.

Our executive officers, directors, director nominees

and their affiliates, as well as our principal stockholders will beneficially hold a significant percentage of our outstanding voting stock.

currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate

declaring or paying any cash dividends for the foreseeable future.

Furthermore, future debt or other financing arrangements may contain

terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

Any return to stockholders will

therefore be limited to the appreciation of their stock.

principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters

subject to stockholder approval.

executive officers, directors, director nominees and their affiliates, as well as our principal stockholders will beneficially hold a

significant percentage of our outstanding voting stock.

These stockholders, acting together, would be able to significantly influence

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market price of our common stock to drop significantly, even if our business is doing well.

of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a

large number of stockholders intend to sell shares of our common stock, could reduce the market price of our common stock.

have registered all shares of common stock subject to equity awards issued or reserved for future issuance under our equity

compensation plans on a registration statement on Form S-8.

These shares can be freely sold in the public

market upon issuance, subject to volume limitations applicable to affiliates under Rule 144 under the Securities Act, market

standoff provisions and lock-up agreements.

Any sales of securities by these stockholders could have a negative

impact on the trading price of our common stock.

sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price

for our common stock to decline.

of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large

number of stockholders intend to sell shares of our common stock, could reduce the market price of our common stock.

have registered all shares of common stock subject to equity awards issued or reserved for future issuance under our equity compensation

plans on a registration statement on Form S-8.

These shares can be freely sold in the public market upon issuance, subject to volume

limitations applicable to affiliates under Rule 144 under the Securities Act, market standoff provisions and lock-up agreements.

sales of securities by these stockholders could have a negative impact on the trading price of our common stock.

sales, or the perception of future sales, by us or our stockholders in the public market could cause the market price for our common

stock to decline.

sale of shares of our common stock in the public market, or the perception that such sales could occur, could harm the prevailing market

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equity securities in the future at a time and at a price that we deem appropriate.

to our 2025 Plan, our management is authorized to grant stock options and other

equity-based awards to our employees, directors and consultants.

Additionally, the number of shares of our common stock reserved for

issuance under our 2025 Plan will automatically increase on January 1 of each calendar year, beginning on January 1, 2026 and continuing

through and including January 1, 2035, by 3% of the total number of shares of our common stock outstanding on December 31 of the preceding

calendar year, or a lesser number of shares determined by our board of directors.

Unless our board of directors elects not to increase

the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our

stock price to fall.

to our 2025 Plan, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants.

Additionally, the number of shares of our common stock reserved for issuance under our 2025 Plan will automatically increase on January

1 of each calendar year, beginning on January 1, 2026 and continuing through and including January 1, 2035, by 3% of the total number

of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our

board of directors.

Unless our board of directors elects not to increase the number of shares available for future grant each year, our

stockholders may experience additional dilution, which could cause our stock price to fall.

the future, we may also issue our securities in connection with investments or acquisitions.

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of the fiscal year following the fifth anniversary of the closing of the IPO.

However, if certain events occur prior to the end

of such five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion

or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior

However, if certain events occur prior to the end of such

five-year period, including if we become a “large accelerated filer,” our annual gross revenues exceed $1.235 billion or

we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior

to the end of such five-year period.

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from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously

have taken advantage of the reduced reporting burdens in this Quarterly Report on Form 10-Q and the information we provide to stockholders will be different

than the information that is available with respect to other public companies that are not emerging growth companies.

It is possible that this may cause investors to find our

common stock less attractive.

If some investors find our common stock less attractive as a result, there may be a less active trading

market for our common stock and our share price may be reduced or more volatile.

have taken advantage of the reduced reporting burdens in this Quarterly Report on Form 10-Q and the information we provide to stockholders

will be different than the information that is available with respect to other public companies that are not emerging growth companies.

It is possible that this may cause investors to find our common stock less attractive.

If some investors find our common stock less attractive

as a result, there may be a less active trading market for our common stock and our share price may be reduced or more volatile.

following the termination of our status as an emerging growth company, we may be able to take advantage of the reduced disclosure requirements

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these exemptions, which could have a material adverse impact on our operating results.

law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of

our common stock.

of our amended and restated certificate of incorporation and amended and restated bylaws, respectively, may delay or discourage transactions involving an actual or potential change in our

control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares

or transactions that our stockholders might otherwise deem to be in their best interests.

Therefore, these provisions could adversely

affect the price of our common stock.

Among other things, our amended and restated certificate of incorporation and amended and restated

law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender

offer or proxy contest difficult, thereby depressing the trading price of our common stock.

of our amended and restated certificate of incorporation and amended and restated bylaws, respectively, may delay or discourage transactions

involving an actual or potential change in our control or change in our management, including transactions in which stockholders might

otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests.

Therefore, these provisions could adversely affect the price of our common stock.

Among other things, our amended and restated certificate

of incorporation and amended and restated bylaws:

our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may

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in a corporate transaction.

amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and any appellate

court therefrom are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’

amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware and any appellate court

therefrom are the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative

forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings

amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum,

the Court of Chancery of the State of Delaware will be the sole and exclusive forum for the following types of actions or proceedings

under Delaware statutory or common law:

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of Delaware shall be the sole and exclusive forum for such claim or cause of action.

These provisions do not apply to suits brought

to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.

These provisions do not apply to suits brought to

enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction.

Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act

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jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated

certificate of incorporation further provides that unless we consent in writing to the selection of an alternative forum, to the

fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution

certificate of incorporation further provides that unless we consent in writing to the selection of an alternative forum, to the fullest

extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution

of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant

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stock price and trading volume could decline.

trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us

or our business.

trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us or

our business.

We do not control these analysts.

In addition, some financial analysts may have limited expertise with our model

and operations.

Furthermore, if one or more of the analysts who do cover us downgrade our common stock or industry, or the stock of

any of our competitors, or publish inaccurate or unfavorable research about our business, the price of our common stock could

If one or more of these analysts ceases to cover us or fails to initiate coverage or publish reports on us regularly, we

could lose visibility in the market, which in turn could cause our common stock price or trading volume to decline.

In addition, some financial analysts may have limited expertise with our model and operations.

Furthermore, if one or more of the analysts who do cover us downgrade our common stock or industry, or the stock of any of our competitors,

or publish inaccurate or unfavorable research about our business, the price of our common stock could decline.

If one or more of these

analysts ceases to cover us or fails to initiate coverage or publish reports on us regularly, we could lose visibility in the market,

which in turn could cause our common stock price or trading volume to decline.

will incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time

to new compliance initiatives and corporate governance practices.

a public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal,

accounting and other expenses that we did not incur as a private company.

The Sarbanes-Oxley Act, the Dodd-Frank Act, Nasdaq listing

requirements and other applicable securities rules and regulations impose various requirements on public companies, including

establishment and maintenance of effective disclosure and financial controls and corporate governance practices.

Our management and

other personnel needs to devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations

will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

For example, we

expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer

liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our board of

a public company, and particularly after we no longer qualify as an emerging growth company, we will incur significant legal, accounting

and other expenses that we did not incur as a private company.

The Sarbanes-Oxley Act, the Dodd-Frank Act, Nasdaq listing requirements

and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance

of effective disclosure and financial controls and corporate governance practices.

Our management and other personnel needs to devote

a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations will increase our legal and financial

compliance costs and will make some activities more time-consuming and costly.

For example, we expect that these rules and regulations

may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it

more difficult for us to attract and retain qualified members of our board of directors.

are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing

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of the principal stockholders may not be disinterested.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

DEFAULTS UPON SENIOR SECURITIES

MINE SAFETY DISCLOSURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors