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Item 1A. Risk Factors

2026-05-14 compared with 2025-11-14 · 16 added, 2081 removed, 0 unchanged (100% of the section changed)

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.

Factors Summary

business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”

immediately following this summary.

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

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;

fines and penalties;

disruptions of our business operations;

reputational harm;

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 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.

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.

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

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;

of product development, including aircraft and related technologies;

and compliance activities;

our manufacturing and commercialization infrastructure.

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:

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.

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.

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

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 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.

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;

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.

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;

(ii) for our Training segment:

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

Tactical Air Defense Services Inc.

and Top Aces Inc.;

(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.

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.

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.

Any of the above factors could seriously harm our business.

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;

supplier capacity constraints for other reasons;

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.

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;

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);

additional reporting requirements and/or oversight;

restrictions on processing sensitive information (including personal data);

(including class claims);

indemnification obligations;

negative publicity;

reputational harm;

monetary fund diversions;

management attention;

interruptions in our operations (including availability of data);

financial loss and other similar harms.

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.

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

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

Inspectors General, routinely audit and investigate government contractors.

These agencies review a contractor’s compliance with

applicable laws, regulations and contract terms, regarding, among other things, contract pricing, contract performance, cost structure

and business systems.

government audits and investigations often take years to complete, and many result in no adverse action against

Like many U.S.

government contractors, we have received audit and investigative reports recommending the reduction of certain contract

prices or that certain payments be repaid, delayed, or withheld, and may involve substantial amounts.

Similarly, like other U.S.

contractors, audits and investigations also occur related to cost reimbursements that are based upon our final allowable incurred costs

for each year.

We have unaudited or unsettled incurred cost claims related to past years, which limits our ability to issue final billings

on contracts for which authorized and appropriated funds may be expiring or can result in delays in final billings and our ability to

close out a contract.

an audit or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties and administrative

sanctions, including reductions of the value of contracts, contract modifications or terminations, forfeiture of profits, suspension

of payments, penalties, fines or suspension or debarment from doing business with the U.S.

Suspension or debarment could

have a material adverse effect on us because of our dependence on contracts with the U.S.

In addition, we could suffer serious

reputational harm if allegations of impropriety were made against us.

Similar government oversight and risks to our business and reputation

exist in most other countries where we conduct business.

government contracts are frequently awarded only after formal, protracted competitive proposal processes and, in many cases, unsuccessful

offerors for U.S.

government contracts are provided the opportunity to protest contract awards through various agency, administrative

and judicial channels.

Competing for U.S.

government contracts presents a number of risks, including the following:

need to bid on programs in advance of the completion of their design, which may result in unforeseen technological difficulties and

cost overruns;

substantial cost and managerial time and effort that must be spent to prepare bids and proposals for contracts that may not be awarded

need to estimate accurately the resources and cost structure that will be required to service any contract we are awarded;

expense and delay that may arise if our competitors protest or challenge contract awards made to us pursuant to competitive bidding.

military chooses winning proposals based on such factors as cost, certainty of fulfilling the needs of a specific task order, safety

records, and other criteria stated in solicitations.

For example, while our Training segment is an approved provider under U.S.

contracts with a limited number of competitors, the U.S.

military periodically releases task order solicitations requesting specific

services pursuant to a competitive process.

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

government contracts typically involve long lead times for design and development, and are subject to significant changes in scheduling.

Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years.

Consequently, programs

are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

The termination

or reduction of funding for a government program would result in a loss of anticipated future revenue attributable to that program.

addition, U.S.

government contracts generally contain provisions permitting termination, in whole or in part, at the government’s

Because a substantial majority of our revenue is dependent on the procurement, performance and payment under our U.S.

contracts, the termination of one or more critical government contracts could have a negative impact on our results of operations and

financial condition.

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

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.

derive a significant portion of our total sales from the U.S.

government and its agencies, either as a prime contractor or subcontractor,

particularly in connection with our Drones and Training segments.

The DoD is our principal U.S.

government customer.

We believe that

the success and growth of our business for the foreseeable future will continue to depend to a significant degree on our ability to win

government contracts, in particular from the DoD.

Additionally, the military and defense market is significantly dependent upon government

budget trends, particularly the DoD budget.

In addition to normal business risks, our supply of products to the U.S.

government is subject

to unique risks largely beyond our control.

DoD budgets could be negatively impacted by several factors, including, but not limited to,

a change in defense spending policy as a result of the presidential election or otherwise, the U.S.

government’s budget deficits,

spending priorities (for example, shifting funds to efforts to combat the impact of the pandemic or efforts to assist Ukraine in the

Russia and Ukraine conflict), the cost of sustaining the U.S.

military presence internationally, possible political pressure to reduce

government military spending and the ability of the U.S.

government to enact appropriations bills and other relevant legislation,

each of which could cause the DoD budget to remain unchanged or to decline.

In recent years, the U.S.

government has been unable to complete

its budget process before the end of its fiscal year, resulting in both governmental shutdowns and continuing resolutions providing only

enough funds for U.S.

government agencies to continue operating at prior- year levels.

Further, if 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 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.

government contracting party may modify, curtail or terminate its contracts with us, without prior notice and either at its convenience

or for default based on performance.

In addition, funding pursuant to our U.S.

government contracts may be reduced or withheld as part

Congressional appropriations process due to fiscal constraints, changes in U.S.

national security strategy and/or priorities

or other reasons.

Historically, our Training segment has received some U.S.

government contract funding under programs designed to benefit

“small businesses” as defined under certain provisions of the U.S.

Small Business Administration (“SBA”) regulations.

The SBA regulations address multiple different programs that have varying eligibility requirements.

Moreover, the SBA regulations are

subject to different interpretations, and the U.S.

government may determine, under a changed interpretation, that we should no longer

be classified as small.

government made such a determination, it could terminate, cancel, or decide not to award options

on existing agreements.

loss or anticipated loss or reduction of expected funding and/or modification, curtailment, or termination of one or more of our U.S.

government contracts could have a material adverse effect on our earnings, cash flow and/or financial position, as well as our access

to government testing facilities and/or our ability to secure pre-certification operating experience and/or revenues.

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

may receive subsidies and grants from governments in some countries.

These programs are subject to periodic review by the relevant governments,

and if any of these programs are curtailed or discontinued, this could have a material adverse effect on our business, financial condition

and results of operations.

As the availability of government funding is outside our control, we cannot guarantee that we will continue

to benefit from government support or that sufficient alternative funding will be available if we lose such support.

For example, we

previously entered into discussions with the federal and the provincial government of Quebec to provide funding for our aircraft development

program and Quebec’s Minister of Economy and Innovation has conditionally agreed to financially support the program.

mechanisms have not yet been determined but it is anticipated that they would include grants and/or tax rebates.

If we do not receive

this funding, our aircraft development program could be adversely affected.

Additionally,

government contracting party may modify, curtail or terminate its contracts and subcontracts with us, without prior notice and

either at its convenience or for default based on performance.

In addition, funding pursuant to our U.S.

government contracts may be

reduced or withheld as part of the U.S.

Congressional appropriations process due to changes in U.S.

national security strategy and/or

priorities, fiscal constraints, including enforceable spending caps, a sequester or a lack of funding available to pay incurred obligations,

or for other reasons.

Further uncertainty with respect to ongoing programs could result in the U.S.

government financing its operations

through temporary funding measures such as continuing resolutions rather than full-year appropriations.

Any loss or anticipated loss

or reduction of expected funding and/or modification, curtailment or termination of one or more large programs could have a material

adverse effect on our financial position, results of operations and/or cash flows.

federal government could materially impair our business and financial condition.

Congress may fund U.S.

government departments and agencies with one or more continuing resolutions, which could delay new programs

or competitions and/or negatively impact the execution of certain program activities.

A lapse in appropriations for government departments

or agencies would result in a full or partial government shutdown, which could impact our operations.

In the event of a prolonged shutdown,

requirements to furlough employees in the U.S.

DoD, the Department of Transportation, including the FAA, or other government agencies

could result in an impact to our operations, negatively impact future contracts, and/or cause other disruptions or delays.

There is uncertainty

regarding which government functions would shut down or continue operations during a lapse in appropriations, and corresponding uncertainty

regarding the extent or magnitude of potential impacts to our operations.

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

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.

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

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

manufacturers and aircraft operators are subject to extensive regulatory and legal requirements that involve significant compliance costs.

The Civil Aviation Authorities may issue regulations relating to the operation of aircraft that could require significant expenditures.

Implementation of the requirements created by such regulations may result in increased costs for our electric air mobility passengers

Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly

increase the cost of our operations or reduce the demand for air travel.

If adopted, these measures could have the effect of raising

fares, reducing revenue and increasing costs.

Moreover, the nature of and the speed with which these regulations are completed and implemented

pose a risk for our financial performance and condition, timing of growth and overall potential.

As a result, we cannot ensure that these

and other laws or regulations enacted in the future will not have a negative impact on our business, financial condition, and results

of operations.

and regulatory agencies in the markets where we manufacture and sell drone products may enact additional regulations relating to product

safety and consumer protection in the future, and may also increase the penalties for failure to comply with product safety and consumer

protection regulations.

In addition, one or more of our customers might require changes in our products, such as the non-use of certain

materials, in the future.

Complying with any such additional regulations or requirements could impose increased costs on our business.

Similarly, increased penalties for non-compliance could subject us to greater expenses in the event any of our products were found to

not comply with such regulations.

Such increased costs or penalties could have a negative impact on our business, financial condition,

and results of operations.

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

addition to our U.S.

operations, we also have international operations in Canada and Denmark, sell our products and services to international

dealers and customers, including foreign governments and engage in sales and marketing efforts in many foreign jurisdictions.

In international

sales, we face substantial competition from both U.S.

manufacturers and international manufacturers whose governments sometimes provide

R&D assistance, marketing subsidies and other assistance for their products and services.

International sales present risks that

are different and potentially greater than those encountered in our U.S.

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.

government and by

direct commercial sales (“DCS”) to international customers.

FMS contracts with the U.S.

government are subject to the FAR

and the DFARS.

Because the U.S.

government functions as an intermediary in FMS sales, we are reliant on the capacity and speed of the

DoD’s administration of requests from non-U.S.

countries to convert requests to sales.

In contrast, DCS transactions represent

sales directly to international customers and are subject to U.S.

and foreign laws and regulations, including product testing, import-export

control, economic sanctions, technology transfer restrictions, investments, taxation, repatriation of earnings, exchange controls, the

Foreign Corrupt Practices Act and other anti-corruption laws and regulations, and the anti-boycott provisions of the U.S.

Export Control

Reform Act of 2018.

While we have extensive policies in place to comply with such laws and regulations, failure by us, our employees

or others working on our behalf to comply with these laws and regulations could result in administrative, civil, or criminal liabilities,

including suspension, debarment from bidding for or performing government contracts, or suspension of our export privileges, which could

have a material adverse effect on us.

We frequently team with international subcontractors and suppliers who also are exposed to similar

believe DCS transactions present a higher level of potential risks because they involve direct commercial relationships with parties

with which we typically have less familiarity.

Additionally, international procurement and local country rules and regulations, contract

laws and judicial systems differ from those in the United States and, in some cases, may be less predictable than those in the United

States, which could impair our ability to enforce contracts and increase the risk of adverse or unpredictable outcomes, including the

possibility that certain matters that would be considered civil matters in the United States are treated as criminal matters in other

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.

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.

and foreign laws, regulations, and rules, contractual

obligations, industry standards, policies and other obligations related to data privacy and security.

Our (or the third parties with

whom we work) actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions;

(including class claims) and mass arbitration demands;

fines and penalties;

disruptions of our business operations;

reputational harm;

loss of revenue or profits;

loss of customers or sales;

and other adverse business consequences.

the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure,

dispose of, transmit, and share (collectively, process) personal data and other sensitive information, including proprietary and confidential

business data, intellectual property, and sensitive third-party data.

Our data processing activities subject us to numerous data privacy

and security obligations, such as various laws, regulations, guidance, industry standards, external and internal privacy and security

policies, contractual requirements, and other obligations relating to data privacy and security.

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

Obligations.”

the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach

notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other

similar laws (e.g., wiretapping laws).

In the past few years, numerous U.S.

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.

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.

For example, the

European Union’s General Data Protection Regulation, the United Kingdom’s General Data Protection Regulation (collectively,

the “GDPR”), and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law

13,709/2018) impose strict requirements for processing personal data.

In Canada, the Personal Information Protection and Electronic

Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, may apply to our operations.

employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal data in generative

AI technologies is subject to various privacy laws and other privacy obligations.

Governments have passed and are likely to pass additional

laws regulating generative AI.

Our use of this technology could result in additional compliance costs, regulatory investigations and

actions, and lawsuits.

If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.

We use AI/machine learning to assist us in making certain decisions, which is regulated by certain privacy laws.

Due to inaccuracies

or flaws in the inputs, outputs, or logic of the AI/machine learning, the model could be biased and could lead us to make decisions that

could bias certain individuals (or classes of individuals), and adversely impact their rights, employment, and ability to obtain certain

pricing, products, services, or benefits.

the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (the “EEA”) and the United Kingdom (the “UK”) have significantly restricted

the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate.

jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

there are currently various mechanisms that may be used to transfer personal data from the EEA and the United Kingdom to the United States

in compliance with law, such as the EEA standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum,

and the EU-U.S.

Data Privacy Framework and the UK extension thereto (which allows for transfers to relevant U.S.-based organizations

who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance

that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for

us to transfer personal data from the EEA, the United Kingdom or other jurisdictions to the United States, or if the requirements for

a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation

of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as

Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer

data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data

necessary to operate our business.

Additionally, companies that transfer personal data out of the EEA and the United Kingdom to other

jurisdictions, particularly to the United States, are subject to increased scrutiny from regulators, individual litigants, and activist

Some European regulators have ordered certain companies to suspend or permanently cease certain transfers out of Europe for allegedly

violating the GDPR’s cross-border data transfer limitations.

addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and, we are,

or may become subject to such obligations in the future.

We are also bound by contractual obligations related to data privacy and security,

and our efforts to comply with such obligations may not be successful.

We publish privacy policies, marketing materials and other statements

regarding data privacy and security.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive,

unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse

consequences.

related to data privacy and security (and consumers’ data privacy expectations) are quickly changing, becoming increasingly stringent,

and creating uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be

inconsistent or conflict among jurisdictions.

Preparing for and complying with these obligations requires us to devote significant resources,

which may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that

process personal data on our behalf.

We may at times fail (or be perceived to have failed) in our efforts to comply with our data privacy

and security obligations.

Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such

obligations, which could negatively impact our business operations.

we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and

security obligations, we could face significant consequences, including but not limited to:

government enforcement actions (e.g., investigations,

fines, penalties, audits, inspections, and similar);

litigation (including class-action claims) and mass arbitration demands;

reporting requirements and/or oversight;

bans or restrictions on processing personal data;

and orders to destroy or not use personal

In particular, plaintiffs have become increasingly active in bringing privacy-related claims against companies, including class

claims and mass arbitration demands.

Some of these claims allow for the recovery of statutory damages on a per violation basis, and,

if viable, carry the potential for monumental statutory damages, depending on the volume of data and the number of violations.

these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to,

loss of customers;

inability to process personal data or to operate in certain jurisdictions;

limited ability to develop or commercialize

our products;

expenditure of time and resources to defend any claim or inquiry;

adverse publicity;

or substantial changes to our business

model or operations.

international operations require us to comply with U.S.

and certain foreign anti-corruption laws and regulations, export and import controls,

economic sanctions and embargoes.

We could face liability and other serious consequences for violations, which could materially adversely

affect our business and reputation.

are subject to anti-corruption laws and regulations, including the Foreign Corrupt Practices Act (“FCPA”), the U.S.

bribery statute contained in 18 U.S.C.

§ 201, the U.S.

Travel Act and other state and national anti-bribery laws in the countries

in which we currently conduct activities, as well as those of any countries in which we may conduct activities in the future.

Anti-corruption

laws are interpreted broadly and generally prohibit companies and their employees, agents, contractors and other third-party collaborators

from offering, promising, giving, soliciting, receiving, or authorizing others to give, solicit, or receive anything of value, either

directly or indirectly through third parties, to any person in the public or private sector to obtain or retain business.

The FCPA also

requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and

to devise and maintain an adequate system of internal accounting controls.

We may engage third parties to sell our products or to obtain

necessary permits, licenses, patent registrations, and other regulatory approvals outside the United States.

We can be held liable for

the corrupt or other illegal activities of our employees, agents, contractors, and other partners, even if we do not explicitly authorize

or have actual knowledge of such activities.

Any violation of the laws and regulations described above may result in substantial civil

and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract

and fraud litigation, reputational harm, and other consequences.

are also subject to export control and import laws and regulations and economic and financial sanctions and trade embargoes, including

Export Administration Regulations (“EAR”) administered and enforced by the U.S.

Department of Commerce, the International

Traffic in Arms Regulations (“ITAR”) administered and enforced by the U.S.

Department of State, U.S.

Customs regulations,

and various economic and financial trade sanctions regulations administered and enforced by the U.S.

Treasury Department’s Office

of Foreign Assets Controls, the U.S.

Department of State, the United Nations Security Council, the EU and other relevant export controls

and sanctions authorities.

to these laws and regulations, we are required, among other things, to (i) maintain a registration under the ITAR (which controls the

export of defense-related items and services), (ii) determine the proper licensing jurisdiction and export classification of products,

software, and technology under U.S., EU and other applicable laws, and (iii) obtain licenses or other forms of government authorization

to engage in the conduct of our business.

Furthermore, U.S.

export control laws and economic sanctions prohibit the provision of certain

products and services to countries, governments and persons targeted by U.S.

EU sanctions and export controls operate in a

similar manner.

Changes in U.S., EU or foreign trade control laws and regulations, or reclassifications of our products or technologies,

may restrict our operations.

Compliance with applicable regulatory requirements regarding the export of our products may create delays

in the introduction of our products in international markets or, in some cases, prevent the export of our products to some countries

The inability to secure and maintain necessary licenses and other authorizations could negatively impact our ability to compete

successfully or to operate our business as planned.

Any changes in export control laws and regulations or U.S., EU and other government

licensing policy may restrict our operations.

For example, given the great discretion the government has in issuing or denying such authorizations

to advance U.S.

national security and foreign policy interests, there can be no assurance we will be successful in our future efforts

to secure and maintain necessary licenses, registrations, or other U.S.

government regulatory approvals.

we maintain written policies, and have implemented procedures and safeguards, that are reasonably designed to maintain compliance with

export controls, import laws, and economic and financial sanctions, there is no certainty that all of our employees or agents for which

we may be held responsible, suppliers, manufacturers, contractors or collaborators, or those of our affiliates, will comply with all

applicable anti-corruption, export and import control, and sanctions laws and regulations.

Our global operations expose us to the risk

of violating, or being accused of violating, economic and trade sanctions laws and regulations.

Violations of these laws and regulations

could result in significant penalties, including:

criminal sanctions against us, our officers, or our employees;

imprisonment;

the closing down of facilities, including those of our suppliers and manufacturers;

disgorgement of profits;

injunctions and debarment

from government contracts;

requirements to obtain export licenses;

cessation of business activities in sanctioned countries;

implementation

of compliance programs;

and prohibitions on the conduct of our business.

Any such violations could include prohibitions on our ability

to offer our products in one or more countries, as well as difficulties in manufacturing or continuing to develop our products, and could

materially adversely affect our reputation, our brand, our international expansion efforts, our ability to attract and retain employees,

and our business, prospects, operating results and financial condition.

may be unable to source and sell our products profitably or at all if new trade protections are imposed or existing protections become

more burdensome.

United States and the countries in which our products are produced or sold have imposed and may impose additional quotas, duties, tariffs,

or other measures, or may adversely adjust prevailing quota, duty, or tariff levels.

Such actions could have an adverse effect on our

financial statements for the period or periods for which the applicable final determinations are made.

Countries impose, modify, and

remove tariffs and other trade measures in response to a diverse array of factors, including global and national economic and political

conditions, which make it impossible for us to predict future developments regarding tariffs, customs, and other trade measures.

protections, including tariffs, quotas, safeguards, duties, and customs restrictions, could increase the cost or reduce the supply of

products available to us, could increase shipping times, or may require us to modify our supply chain organization or other current business

practices, any of which could harm our business, financial condition, and results of operations.

Related to Our Intellectual Property

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.

success depends, in large part, on our ability to protect our intellectual property and other proprietary rights.

We rely primarily on

patents, trademarks, copyrights, trade secrets and unfair competition laws, as well as license agreements and other contractual provisions,

to protect our intellectual property and other proprietary rights.

In addition, a portion of our technology is not patented, and we may

be unable or may not seek to obtain patent protection for this technology.

In addition, the U.S.

government has licenses for certain

of our patents and certain other intellectual property that are developed or used in performance of government contracts, and it may

use or authorize others to use such patents and intellectual property for government and other purposes.

We co-own, with Centro Italiano

Ricerche Aerospaziali Spca, US patents 9,983,023;

and 11,639,858, which describe technology related to determining angle

of attack of an aircraft without a dedicated angle of attack sensor.

As co-owner, Centro Italiano Ricerche Aerospaziali Spca may make,

use, sell, offer for sale, or import the technology protected by these patents or authorize others to do so.

If Centro Italiano Ricerche

Aerospaziali Spca chooses to compete with us or sells any or all of these patents and/or grants licenses to any or all of such patents

to our competitors, we would not be able to enforce our rights to the technology protected by these patents against such lawful owners

or licensees.

A subset of our patents are co-owned, and our co-owner may use or authorize others to use technology protected by such

Moreover, existing U.S.

legal standards relating to the validity, enforceability and scope of protection of intellectual property

rights offer only limited protection, may not provide us with any competitive advantages, and our rights may be challenged by third parties.

The laws of countries other than the United States may be even less protective of our intellectual property rights.

Accordingly, despite

our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property or otherwise

gaining access to our technology.

Unauthorized third parties may try to copy or reverse engineer our products or portions of our products

or otherwise obtain and use our intellectual property.

Moreover, many of our employees have access to our trade secrets and other intellectual

If one or more of these employees leave our employment to work for one of our competitors, then they may disseminate this proprietary

information despite our established procedures and policies to prevent such dissemination, which may as a result damage our competitive

If we fail to protect our intellectual property and other proprietary rights, then our business, results of operations or financial

condition could be materially harmed.

addition, affirmatively defending our intellectual property rights and investigating whether any of our products or services violate

the rights of others may entail significant expense.

Our intellectual property rights may be challenged by others or invalidated through

administrative processes or litigation.

If we resort to legal proceedings to enforce our intellectual property rights or to determine

the validity and scope of the intellectual property or other proprietary rights of others, then the proceedings could result in significant

expense to us and divert the attention and efforts of our management and technical employees, even if we prevail.

may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our

ability to use certain technologies in the future.

may become subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties.

Defending against, or otherwise addressing, any such claims, whether they are with or without merit, could be time-consuming and expensive,

and could divert our management’s attention away from the execution of our business plan.

Moreover, any settlement or adverse judgment

resulting from these claims could require us to pay substantial amounts or obtain a license to continue to use the disputed technology,

or otherwise restrict or prohibit our use of the technology.

We cannot ensure that we would be able to:

obtain from the third party asserting

the claim a license on commercially reasonable terms, if at all;

develop alternative technology on a timely basis, if at all;

a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected

An adverse determination also could prevent us from offering our products to others.

Infringement claims asserted against us

may have a material adverse effect on our business, results of operations or financial condition.

Related to Tax and Accounting Matters

ability to use our net operating loss carryforwards and certain tax credit carryforwards may be subject to limitation.

of December 31, 2024 and 2023, we had aggregate U.S.

federal and state net operating loss carryforwards of $79.0 million and $67.3 million,

respectively, which may be available to offset future taxable income for U.S.

income tax purposes.

If not utilized, a portion of the

net operating loss carryforwards may expire.

Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, (the “Code”)

an “ownership change” may limit the amount of our pre-change net operating loss carryforwards and certain other pre-change

tax attributes that could be utilized annually to offset our future taxable income, if any.

This limitation would generally apply in

the event of a cumulative change in the equity ownership of certain stockholders of our company of more than 50 percentage points within

a rolling three-year period.

We have experienced, and may in the future experience, ownership changes as a result of shifts in our stock

As a result, if we earn net taxable income, our ability to use our pre-change U.S.

net operating loss carryforwards and other

tax attributes to offset U.S.

taxable income may be subject to limitations, which could potentially result in increased future tax liability

Sales of our common stock by our existing stockholders or additional sales of our common stock by us could further limit our ability

to use our U.S.

net operating loss carryforwards and other tax attributes and have a material adverse effect on our results of operations

in future years.

Similar provisions of state tax law may also apply to limit our use of accumulated state tax net operating losses.

operating losses arising in taxable years beginning after December 31, 2017 are not subject to expiration, but may not be carried back

to prior taxable years, except that net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years.

Additionally,

the deductibility of such U.S.

federal net operating losses is limited to no more than 80% of our taxable income (with certain adjustments)

in any taxable year beginning after December 31, 2020.

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

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.

control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with GAAP.

Any failure to maintain effective internal

control over financial reporting could cause us to fail to accurately or timely report our financial condition or results of operations

to meet our reporting obligations.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial

reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements

will not be prevented or detected on a timely basis.

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 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,

if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude

that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable

to express an opinion as to the effectiveness of our internal controls over financial reporting when we are no longer an emerging growth

company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock

could be negatively affected.

As a result of such failures, we could also become subject to investigations by Nasdaq, the Securities

and Exchange Commission (“SEC”) or other regulatory authorities, and become subject to litigation from investors and stockholders,

which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.

failure to establish and maintain an effective system of disclosure controls and internal control over financial reporting, could adversely

affect our ability to produce timely and accurate financial statements or comply with applicable regulations.

a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations

of the applicable listing standards of Nasdaq.

We expect that the requirements of these rules and regulations will continue to increase

our legal, accounting, and financial compliance costs, make some activities more difficult, time consuming, and costly, and place significant

strain on our personnel, systems, and resources.

Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over

financial reporting.

We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure

that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and

reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the

Exchange Act, is accumulated and communicated to our principal executive and financial officers.

We are also continuing to improve our

internal controls over financial reporting.

For example, as we have prepared to become a public company, we have worked to improve controls

around our key accounting processes and quarterly close process.

To maintain and enhance the effectiveness of our disclosure controls

and internal control over financial reporting, we anticipate allocating significant resources, including accounting-related costs and

investments, to strengthen our accounting systems.

current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.

changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business

processes, systems, and controls to accommodate such changes.

We have limited experience with implementing the systems and controls that

will be necessary to operate as a public company, as well as adopting changes in accounting principles or interpretations mandated by

the relevant regulatory bodies.

Additionally, if these new systems, controls or standards and the associated process changes do not give

rise to the benefits that we expect or do not operate as intended, it could adversely affect our financial reporting systems and processes,

our ability to produce timely and accurate financial reports or the effectiveness of internal control over financial reporting.

our business may be harmed if we experience problems with any new systems and controls that result in delays in their implementation

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

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

reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act.

At such time, our independent

registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal

control over financial reporting is documented, designed or operating.

Any failure to maintain effective disclosure controls and internal

control over financial reporting could harm our business, results of operations, and financial condition and could cause a decline in

the trading price of our common stock.

corporate structure and intercompany arrangements are subject to the tax laws of various jurisdictions, which are subject to change,

and we could be obligated to pay additional taxes, which would harm our results of operations.

are or may be subject to income and non-income taxation in the United States under federal, state, and local jurisdictions and in certain

foreign jurisdictions in which we operate.

The amount of taxes we pay in these jurisdictions could increase substantially as a result

of changes in the applicable tax principles, including increased tax rates, new or revised tax laws or revised interpretations of existing

tax laws (which may have retroactive effect), policies and precedents by taxing authorities and courts in various jurisdictions.

authorities in these jurisdictions could review our tax returns or require us to file tax returns in jurisdictions in which we are not

currently filing and could impose additional tax, interest and penalties.

In addition, the authorities could claim that various withholding

requirements apply to us or our subsidiaries, assert that benefits of tax treaties are not available to us or our subsidiaries, or challenge

our methodologies for valuing developed technology or intercompany arrangements, including our transfer pricing.

The relevant taxing

authorities may determine that the manner in which we operate our business does not achieve the intended tax consequences.

determination were to be made, we could be required to pay additional taxes and interest and penalties.

Any increase in the amount of

taxes we pay or that are imposed on us could increase our worldwide effective tax rate and harm our business and results of operations.

changes in financial accounting standards or practices may cause adverse and unexpected revenue fluctuations and adversely affect our

reported results of operations.

changes in financial accounting standards may cause adverse, unexpected revenue fluctuations and affect our reported financial position

or results of operations.

Financial accounting standards in the United States are constantly under review and new pronouncements and

varying interpretations of pronouncements have occurred with frequency in the past and are expected to occur again in the future.

a result, we may be required to make changes in our accounting policies.

Those changes could affect our financial condition and results

of operations or the way in which such financial condition and results of operations are reported.

Compliance with new accounting standards

may also result in additional expenses.

As a result, we intend to invest all reasonably necessary resources to comply with evolving standards,

and this investment may result in increased general and administrative expenses and a diversion of management time and attention from

business activities to compliance activities.

See the section titled “Management’s Discussion and Analysis of Financial Condition

and Results of Operations—Recent Accounting Pronouncements.” As an emerging growth company, the JOBS Act allows us to delay

adoption of new or revised accounting standards applicable to public companies until such pronouncements are made applicable to private

We have elected to use the extended transition period for complying with new or revised accounting standards and as a result

of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

we may elect to early adopt any new or revised accounting standards whenever such early adoption is permitted for non-public companies.

We may take advantage of these exemptions up until the time that we are no longer an emerging growth company.

Related Ownership of Our Common Stock

active trading market for our common stock may not continue to develop or be sustained.

to the IPO, there was no public market for our common stock.

An active trading market for our shares may not continue to develop or be

The lack of an active market may impair the value of your shares, your ability to sell your shares at the time you wish to

sell them and the prices that you may obtain for your shares.

Further, an inactive trading market for our shares may also impair our

ability to raise capital by selling shares of our common stock or enter into strategic partnerships and transactions by issuing our shares

of common stock as consideration.

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:

announcements

of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

ability to effectively manage our growth;

or anticipated variations in quarterly operating results;

cash position;

failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;

in the market valuations of similar companies;

performance of the equity markets;

of our common stock by us or our stockholders in the future;

trading volume of our common stock, which may impair our ability to raise capital or enter into strategic collaborations and acquisitions

by using our common stock as consideration;

in accounting practices;

ineffectiveness

of our internal controls;

or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection

for our technologies;

lawsuits, including patent or stockholder litigation;

political and economic conditions;

events or factors, many of which are beyond our control.

addition, the stock market in general, and the market for aerospace and defense companies in particular, have experienced extreme price

and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

and industry factors, as well as local or global socio-economic and political factors, including the conflicts between Russia and Ukraine

and in the Middle East, may negatively affect the market price of our common stock, regardless of our actual operating performance.

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.

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

all matters requiring stockholder approval.

For example, these stockholders would be able to significantly influence elections of directors,

amendments of our governing documents, or approval of any merger, sale of assets, or other major corporate transaction.

This may prevent

or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of

our stockholders.

management team has limited experience managing a public company.

of the members of our management team have limited to no experience managing a publicly traded company, interacting with public company

investors and complying with the increasingly complex laws pertaining to public companies.

Our management team has not worked together

at prior companies that were publicly traded.

Our management team may not successfully or efficiently manage their new roles and responsibilities.

Our transition to being a public company subjects it to significant regulatory oversight and reporting obligations under the federal

securities laws and the continuous scrutiny of securities analysts and investors.

These new obligations and constituents will require

significant attention from our senior management and could divert their attention away from the day-to-day management of our business,

which could have a material adverse effect on our business, financial condition and results of operations.

issuances of debt or equity securities may adversely affect us, including the market price of our common stock, and may be dilutive to

existing stockholders.

the future, we may incur debt or issue equity-ranking senior to our common stock.

Those securities will generally have priority upon

Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating

Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges

more favorable than those of our common stock.

Because our decision to issue debt or equity in the future will depend on market conditions

and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising

As a result, future capital raising efforts may reduce the market price of our common stock and be dilutive to existing stockholders.

issuance of additional capital stock in connection with financings, acquisitions, investments, our stock incentive plan or otherwise

will dilute all other stockholders.

expect to issue additional capital stock in the future that will result in dilution to all other stockholders.

We expect to grant equity

awards to employees, directors, and consultants under our stock incentive plan.

We may also raise capital through equity financings in

As part of our business strategy, we may acquire or make investments in complementary companies, products, or technologies

and issue equity securities to pay for any such acquisition or investment.

Any such issuances of additional capital stock, including

as a result of the exercise of any warrants to purchase shares of common stock, may cause stockholders to experience significant dilution

of their ownership interests and the per share value of our common stock to decline.

significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the

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.

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

price of our common stock.

These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell

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.

the future, we may also issue our securities in connection with investments or acquisitions.

The amount of our securities issued in connection

with an investment or acquisition could constitute a material portion of the then-outstanding shares of our common stock.

of additional securities in connection with investments or acquisitions may result in additional dilution to our stockholders.

are an emerging growth company and a smaller reporting company and the reduced disclosure requirements applicable to emerging growth

companies and smaller reporting companies may make our common stock less attractive to investors.

are an “emerging growth company,” as defined in the JOBS Act, and may remain an emerging growth company until the last day

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

to the end of such five-year period.

For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions

from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

These exemptions

include, but are not limited to:

being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

being required to comply with the requirement of the Public Company Accounting Oversight Board regarding the communication of critical

audit matters in the auditor’s report on the financial statements;

ability to elect to defer compliance with new or revised accounting standards until such standards would apply to private companies;

disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements;

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.

following the termination of our status as an emerging growth company, we may be able to take advantage of the reduced disclosure requirements

applicable to “smaller reporting companies,” as that term is defined in Rule 12b-2 of the Exchange Act, and, in particular,

reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

To the extent that we are

no longer eligible to use exemptions from various reporting requirements, we may be unable to realize our anticipated cost savings from

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 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

designate (including the right to approve an acquisition or other change in our control);

that the authorized number of directors may be changed only by resolution of the board of directors;

that the board of directors or any individual director may only be removed with cause and the affirmative vote of the holders of

at least 66-2/3% of the voting power of all of our then outstanding common stock;

that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative

vote of a majority of directors then in office, even if less than a quorum;

our board of directors into three classes;

that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not

be taken by written consent;

that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors

at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content

of a stockholder’s notice;

not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to

vote in any election of directors to elect all of the directors standing for election, if they should so choose;

that special meetings of our stockholders may be called only by the Chairman of the board, our Chief Executive Officer or by the

board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock

and designate any rights, preferences and privileges thereto, requires approval by the holders of at least 66-2/3% of our then-outstanding

common stock.

addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law.

These provisions may prohibit

large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain

period of time.

A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation

or by amendment to its certificate of incorporation or bylaws approved by its stockholders.

However, we have not opted out of this provision.

and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make

it more difficult or costly for stockholders or potential acquirors to obtain control of our board of directors or initiate actions that

are opposed by our then-current board of directors, including delay or impede a merger, tender offer or proxy contest involving our company.

The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value

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’

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

under Delaware statutory or common law:

(i) any derivative claim or cause of action brought on our behalf;

(ii) any claim or cause of

action that is based upon a violation of a duty owed by any current or former director, officer, other employee or stockholder, to us

or our stockholders;

(iii) any claim or cause of action against us or any current or former director, officer or other employee, arising

out of or pursuant to any provision of the Delaware General Corporation Law, our Certificate of Incorporation or our Bylaws;

claim or cause of action seeking to interpret, apply, enforce or determine the validity of our Certificate of Incorporation or our Bylaws

(including any right, obligation, or remedy thereunder);

(v) any claim or cause of action as to which the Delaware General Corporation

Law confers jurisdiction on the Court of Chancery of the State of Delaware;

and (vi) any claim or cause of action against us or any current

or former director, officer or other employee, governed by the internal-affairs doctrine or otherwise related to our internal affairs,

in all cases to the fullest extent permitted by applicable law and subject to the court having personal jurisdiction over the indispensable

parties named as defendant;

provided, however, that if the designation of such court as the sole and exclusive forum for a claim or action

referred to in foregoing clauses (i) through (vi) would violate applicable law, then the United States District Court for the District

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.

Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act

Accordingly, both state and federal courts have jurisdiction to entertain such claims.

Additionally, investors cannot waive

compliance with the federal securities laws and the rules and regulations thereunder.

To prevent having to litigate claims in multiple

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

of any complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant

named in such complaint.

While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder

may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.

In such instance, we

would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate

of incorporation.

This may require significant additional costs associated with resolving such action in other jurisdictions and there

is uncertainty as to whether the provisions will be enforced by a court in those other jurisdictions.

choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes

with us or our directors, officers or other employees and may discourage these types of lawsuits and result in increased costs for investors

to bring a claim.

If a court were to find the choice of forum provisions contained in our amended and restated certificate of incorporation

to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

securities analysts do not publish research or reports about our business or if they downgrade our common stock or our sector, our common

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.

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 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 directors.

are evaluating these rules and regulations, and cannot predict or estimate the amount of additional costs we may incur or the timing

of such costs.

These rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity,

and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure

and governance practices.

to Section 404 of the Sarbanes-Oxley Act we will be required to furnish a report by our management on our internal control over financial

reporting beginning with our second filing of an Annual Report on Form 10-K with the SEC after we become a public company.

However, while

we remain an emerging growth company or smaller reporting company, we will not be required to include an attestation report on internal

control over financial reporting issued by our independent registered public accounting firm.

To achieve compliance with Section 404

of the Sarbanes-Oxley Act within the prescribed period, we will be engaged in a process to document and evaluate our internal control

over financial reporting, which is both costly and challenging.

In this regard, we will need to continue to dedicate internal resources,

potentially engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial

reporting, continue steps to improve control processes as appropriate, validate through testing whether such controls are functioning

as documented and implement a continuous reporting and improvement process for internal control over financial reporting.

if we identify one or more material weaknesses as a result of this implementation and evaluation process, it could result in an adverse

reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

business and financial performance could be adversely affected by inflation.

recently, the inflation rate has generally been low in the geographies where we operate.

However, recently, the inflation rate in the

United States reached a 40-year high, primarily as a result of higher energy costs and global supply chain disruptions.

of a significant increase in consumer prices, particularly over an extended period of time, customer demand for our products and services

could be adversely affected and we could experience lower than expected sales.

In addition, if any of our suppliers implemented price

increases in response to higher raw material, labor, and energy costs or otherwise, we may not be able to pass along such price increased

to our customers and our profitability may be reduced.

The occurrence of any of these events could have a material adverse effect on

our business, financial condition, and results of operations.

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.

global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely

diminished liquidity and credit availability, rising inflation and monetary supply shifts, rising interest rates, supply chain constraints,

labor shortages, declines in consumer confidence, declines in economic growth, increases in unemployment rates, recession risks and uncertainty

about economic stability.

For instance, ongoing instability and current conflicts in global markets, including in Eastern Europe, the

Middle East and Asia, and the potential for other conflicts and future terrorist activities, as well as other recent geopolitical events

throughout the world, including new or increased tariffs and potential trade wars, have created and may continue to create economic and

political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability.

not experienced, and do not anticipate, any disruption in our supply chain or other business operations due to the ongoing conflict in

As the conflict expands or contracts, diminished sales would have little or no impact on our financial position, while increased

sales would be reflected in increased revenue.

Sanctions imposed by the United States and other countries in response to military conflicts,

including the one in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures

by the affected countries or others could exacerbate market and economic instability.

If credit in financial markets outside of the United

States tightened, it could adversely affect the ability of our international customers and suppliers to obtain financing and could result

in a decrease in or cancellation of orders for our products, systems and services or impact the ability of our customers to make payments.

In addition, the COVID-19 pandemic resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.

However, notwithstanding our current and anticipated position, these types of matters can cause uncertainty in financial markets and

may significantly increase the political, economic and social instability in geographic areas in which we operate now or may operate

in the future.

The extent of the impact of these conditions on our operational and financial performance, including our ability to execute

our business strategies and initiatives in the expected timeframe, as well as that of third parties upon whom we rely, will depend on

future developments which are uncertain and cannot be predicted.

There can be no assurance that further deterioration in credit and financial

markets and confidence in economic conditions will not occur.

Events involving limited liquidity, defaults, non-performance or other

adverse developments that affect financial institutions, or concerns or rumors about any events of these kinds or other similar risks,

have in the past and may in the future lead to market-wide liquidity problems.

Our general business strategy may be adversely affected

by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions.

If the current

equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth

strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.

In addition, there

is a risk that one or more of our current suppliers or other partners may not survive an economic downturn, which could directly affect

our ability to attain our operating goals on schedule and on budget.

quarterly results of operations, revenues and cash flows may fluctuate from period to period due to a number of factors, which makes

predicting financial results difficult.

expect our quarterly results of operations to continue to fluctuate due to a number of factors, including as a result of supply chain

issues, product introduction schedules, competitive products entering the market and the seasonality and uneven sales patterns of our

OEM customers.

example, a portion of sales in our Avionics segment is expected to be made to OEMs beginning in 2025, and we expect that a large portion

of the Avionics segment’s OEM sales in the future will consist of sales of products to a customer operating in the eVTOL market.

We are subject to changes in buying patterns among our OEM customers, including unpredictable circumstances such as failed certifications

and delayed production schedules.

Significant delays to the certification and production of the OEM aircraft could delay revenues to

future years and may result in cancelled orders by the OEM’s customers, which could have a material adverse effect on our business,

results of operations and financial condition.

As a result of these and other factors, quarter-to-quarter comparisons of our results

of operations may not be reliable indicators of our future performance.

of interest may arise because some members of our board of directors are representatives of our principal stockholders.

of our principal stockholders or their affiliates are venture capital funds or other investment vehicles that could invest in entities

that directly or indirectly compete with us.

As a result of these relationships, when conflicts arise between the interests of the principal

stockholders or their affiliates and the interests of other stockholders, members of our board of directors that are representatives

of the principal stockholders may not be disinterested.

Our business, financial condition and operating results

are affected by a number of factors, whether currently known or unknown, including risks specific to us or the aerospace and defense industry

as well as risks that affect businesses in general.

In addition to the information set forth in this Quarterly Report on Form 10-Q, you

should consider carefully the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the

fiscal year ended December 31, 2025, filed with the SEC on March 31, 2026.

The risks and uncertainties disclosed in such Annual Report

could materially adversely affect our business, financial condition, cash flows or results of operations and thus our stock price.

the first quarter of 2026, there were no material changes to our previously disclosed risk factors.

These risk factors may be important

to understanding other statements in this Quarterly Report and should be read in conjunction with the unaudited condensed

consolidated financial statements and related notes in Part I, Item 1, “ Financial Statements ” and Part I, Item 2,

“ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of this Quarterly

Because of such risk factors, as well as other factors affecting our financial condition and operating results, past

financial performance should not be considered to be a reliable indicator of future performance, and investors should not use

historical trends to anticipate results or trends in future periods.

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