What changed in this filing

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Item 1A. Risk Factors

2021-08-12 compared with 2020-08-13 · 1216 added, 497 removed, 33 unchanged (98% of the section changed)

Risks Related

to our Business

COVID-19 pandemic has adversely impacted, and poses risks to, our business, results of operations and financial condition, the

nature and extent of which are highly uncertain and unpredictable.

global spread of COVID-19 is having, and will continue to have, an adverse impact on our operations, sales and delivery and supply

Many countries including the United States have implemented measures such as quarantine, shelter-in-place, curfew,

travel restrictions and similar isolation measures, including government orders and other restrictions on the conduct of business

It remains uncertain what impact the pandemic will have on our ability to generate sales and customer interest

even once conditions begin to improve.

The COVID-19 pandemic has also impacted our supply chain as we have experienced disruptions

or delays in shipments of certain materials or components of our products.

Prices of our supplies have also increased as

a result of the pandemic.

Accordingly, COVID-19 has negatively affected our business.

Given the rapid and evolving nature of the

virus, it is uncertain how materially COVID-19 will affect our operations generally if these impacts persist, worsen or re-emerge

over an extended period of time.

Additionally,

the COVID-19 pandemic caused significant volatility and uncertainty in U.S.

and international markets, which may result

in a prolonged economic downturn.

A disruption of financial markets may reduce our ability to access capital and increase the

cost of doing so.

There are no assurances that the credit markets or the capital markets will be available to us in the

future or that financing will be available.

cannot reasonably estimate the length or severity of the COVID-19 pandemic or the related response, or the extent to

which the disruption may continue to impact our business, financial position, results of operations and cash flows.

the COVID-19 pandemic could have a material adverse impact on our business, financial position, results of operations

and cash flows.

We may not be able to continue operating as a going concern.

We have experienced losses from operations

since inception and have never generated positive cash flow.

The success of our business plan during the next 12 months and beyond

will be contingent upon generating sufficient revenue to cover our operating costs and obtaining additional financing.

from our independent registered public accounting firm for the fiscal year ended April 30, 2019 includes an explanatory paragraph

stating the Company has recurring net losses from operations, negative operating cash flows, does not yet generate revenue from

operations and will need additional working capital for ongoing operations These factors, among others, raise substantial doubt

about the Company's ability to continue as a going concern.

If we are unable to obtain sufficient funding, our business, prospects,

financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going

We are presently seeking to address

these going concern doubts through a number of actions including efforts to (a) raise capital through the public markets, (b) release

our first commercial product and (c) pursue acquisitions of complementary, revenue generating companies which are accretive to

our operating results.

We can provide no assurance that any of these efforts will be successful or, that even if successful, that

they will alleviate doubts about our ability to continue as a going concern.

Item 1A Risk Factors

Risks Related to our Business

We will need additional capital to fund our

expanding operations, and if we are not able to obtain sufficient capital, we may be forced to limit the scope of our operations.

We expect that our expansion of business activities

will require additional working capital.

Fat Shark’s level of sales far exceeds our historic sales and will require additional

working capital to continue which we may not be able to secure.

Rotor Riot’s e-commerce platform business operating at www.rotorriot.com

has not attained profitability.

The planned release of our first software product, DroneBox, will require working capital to finish product

development, support its market release, and provide technical customer support upon its commercial release.

We plan to offer DroneBox

under a software-as-a-service (“SaaS”) platform which may require a higher number of customers in order to reach profitability.

There can be no assurance that either or both of our operating businesses will reach profitability.

If adequate additional debt and/or equity financing

is not available on reasonable terms or at all, then we may not be able to continue to develop our business activities, and we will have

to modify our business plan.

These factors could have a material adverse effect on our future operating results and our financial condition.

If we are unable to raise needed additional funds to continue as a going concern, we could be forced to cease our business activities

and dissolve.

In such an event, we may incur additional financial obligations, including the accelerated maturity of debt obligations,

lease termination fees, employee severance payments, and other creditor and dissolution-related obligations.

Our ability to raise financing through sales of equity

securities depends on general market conditions and the demand for our common stock.

We may be unable to raise adequate capital through

sales of equity securities, and if our stock has a low market price at the time of such sales, our existing stockholders could experience

substantial dilution.

If adequate financing is not available or unavailable on acceptable terms, we may find we are unable to fund expansion,

continue offering products and services, take advantage of acquisition opportunities, develop or enhance services or products, or to

respond to competitive pressures in the industry which may jeopardize our ability to continue operations.

We have incurred net losses since inception.

We have accumulated net

losses of approximately $2.6 million as of April 30, 2020.

These losses have had an adverse effect on our financial condition,

stockholders’

equity, net current assets, and working capital.

We will need to generate higher revenues and control operating

costs in order to attain profitability.

There can be no assurances that we will be able to do so or to reach profitability.

We will need additional capital to fund

our expanding operations, and if we are not able to obtain sufficient capital, we may be forced to limit the scope of our operations.

We expect that our planned

expansion of business activities will require additional working capital.

Rotor Riot’s e-commerce platform business operating

at www.rotorriot.com is growing but has not attained profitability.

The planned release of our first software product, DroneBox,

will require working capital to finish its product development, support its market release, and provide technical customer support

upon its commercial release.

We plan to offer DroneBox under a software-as-a-service (“SAAS”) platform which may require

a higher number of customers in order to reach profitability.

There can be no assurance that either or both of our operating businesses

will reach profitability.

If adequate additional

debt and/or equity financing is not available on reasonable terms or at all, then we may not be able to continue to develop our

business activities, and we will have to modify our business plan.

These factors could have a material adverse effect on our future

operating results and our financial condition.

If we are unable to raise

needed additional funds to continue as a going concern, we could be forced to cease our business activities and dissolve.

an event, we will incur additional financial obligations, including the accelerated maturity of debt obligations, lease termination

fees, employee severance payments, and other creditor and dissolution-related obligations.

Our ability to raise financing

through sales of equity securities depends on general market conditions and the demand for our common stock.

We may be unable to

raise adequate capital through sales of equity securities, and if our stock has a low market price at the time of such sales, our

existing stockholders could experience substantial dilution.

If adequate financing is not available or unavailable on acceptable

terms, we may find we are unable to fund expansion, continue offering products and services, take advantage of acquisition opportunities,

develop or enhance services or products, or to respond to competitive pressures in the industry which may jeopardize our ability

to continue operations.

We operate in an emerging and rapidly

growing industry which makes it difficult to evaluate our business and future prospects.

The drone industry is relatively new and is

growing rapidly.

We have accumulated net losses of approximately $15,800,000

as of April 30, 2021.

These losses have had an adverse effect on our financial condition, stockholders’

equity, net current assets,

and working capital.

We will need to generate higher revenues and control operating costs in order to attain profitability.

be no assurances that we will be able to do so or to reach profitability.

We operate in an emerging and rapidly growing

industry which makes it difficult to evaluate our business and future prospects.

The drone industry is relatively new and is growing

As a result, it is difficult to evaluate our business and future prospects.

We cannot accurately predict whether,

and even when, demand for our products will increase, if at all.

The risks, uncertainties and challenges encountered by companies

operating in emerging and rapidly growing industries include:

We cannot accurately predict whether, and even when,

demand for our products will increase, if at all.

The risks, uncertainties and challenges encountered by companies operating in emerging

and rapidly growing industries include:

Generating sufficient revenue to

9 unchanged sentences

and government regulations which could complicate and delay our ability to introduce products, maintain compliance, and avoid violations,

which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial

condition and results of operations.

We operate in the drone industry which is a

highly regulated environment in the US and international markets.

The FAA, state and local governmental entities and foreign governments

may regulate aspects of the industry, including the production or distribution of our products, software or services.

These regulations

may include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised

tax law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters,

environmental regulations, products directed toward children or hobbyists, and other administrative and regulatory restrictions.

While we endeavor to take all the steps necessary to comply with these laws and regulations, there can be no assurance that we

can maintain compliance on a continuing basis.

Failure to comply could result in monetary liabilities and other sanctions which

could increase our costs or decrease our revenue resulting in a negative impact on our business, financial condition and results

of operations.

The drone industry is subject

to various laws and government regulations which could complicate and delay our ability to introduce products, maintain compliance,

and avoid violations, which could lead to increased costs or the interruption of normal business operations that could negatively

impact our financial condition and results of operations.

We operate in the drone industry which is a

highly regulated environment in the US and international markets.

Federal, state and local governmental entities and foreign governments

may regulate aspects of the industry, including the production or distribution of our products, software or services.

These regulations

may include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised

tax law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters,

environmental regulations, products directed toward children or hobbyists, and other administrative and regulatory restrictions.

While we endeavor to take all the steps necessary to comply with these laws and regulations, there can be no assurance that we

can maintain compliance on a continuing basis.

Failure to comply could result in monetary liabilities and other sanctions which

could increase our costs or decrease our revenue resulting in a negative impact on our business, financial condition and results

of operations.

We face competition from larger

companies that have substantially greater resources which challenges our ability to establish market share, grow the business,

and reach profitability.

The drone industry

is attracting a wide range of significantly larger companies which have substantially greater financial, management, research and

marketing resources than we have.

These competitors include transportation companies like United Parcel Service, Federal Express

and Amazon, as well as defense companies such as Lockheed Martin Corporation and Northrop Grumman Corporation.

Our competitors

may be able to provide customers with different or greater capabilities than we can provide, including technical qualifications,

pricing, and key technical support.

Many of our competitors may utilize their greater resources to develop competing products and

technologies, leverage their financial strength to utilize economies of scale and offer lower pricing, and hire more qualified

personnel by offering more generous compensation packages.

In order to secure contracts, we may have to offer comparable products

and services at lower pricing which could adversely affect our operating margins.

Our inability to compete effectively against

these larger companies could have a material adverse effect on our business, financial condition and operating results.

which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial condition

and results of operations.

We operate in the drone industry which is a highly

regulated environment in the US and international markets.

Federal, state and local governmental entities and foreign governments may

regulate aspects of the industry, including the production or distribution of our products, software or services.

These regulations may

include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised tax law

interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters, environmental

regulations, products directed toward children or hobbyists, and other administrative and regulatory restrictions.

While we endeavor

to take all the steps necessary to comply with these laws and regulations, there can be no assurance that we can maintain compliance

on a continuing basis.

Failure to comply could result in monetary liabilities and other sanctions which could increase our costs or decrease

our revenue resulting in a negative impact on our business, financial condition and results of operations.

Our business and products are subject to government

regulation and may incur additional compliance costs or, if we fail to comply with applicable regulations, may incur fines or be forced

to suspend or cease operations.

In our current business and as we expand into new

markets and product categories, we must comply with a wide variety of laws, regulations, standards and other requirements governing,

among other things, electrical safety, wireless emissions, health and safety, e-commerce, consumer protection, export and import requirements,

hazardous materials usage, product-related energy consumption, packaging, recycling and environmental matters.

Compliance with these

laws, regulations, standards, and other requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to

jurisdiction (including from country to country), further increasing the cost of compliance and doing business.

Our products may require

regulatory approvals or satisfaction of other regulatory concerns in the various jurisdictions in which they are manufactured, sold or

These requirements create procurement and design challenges that require us to incur additional costs identifying suppliers and

manufacturers who can obtain and produce compliant materials, parts and products.

Failure to comply with such requirements can subject

us to liability, additional costs, and reputational harm and, in extreme cases, force us to recall products or prevent us from selling

our products in certain jurisdictions.

If there is a new regulation, or change to an existing regulation, that significantly increases

our costs of manufacturing or causes us to significantly alter the way that we manufacture our products, this would have a material adverse

effect on our business, financial condition and results of operations.

Additionally, while we have implemented policies and procedures

designed to ensure compliance with applicable laws and regulations, there can be no assurance that our employees, contractors, and agents

will not violate such laws and regulations or our policies and procedures.

Our products must comply with certain requirements

Federal Communications Commission (“FCC”) regulating electromagnetic radiation in order to be sold in the United

States and with comparable requirements of the regulatory authorities of the European Union (“EU”), Japan, China and other

jurisdictions in order to be sold in those jurisdictions.

Our FPV products include wireless radios and receivers which require additional

emission testing.

We are also subject to various environmental laws and governmental regulations related to toxic, volatile, and other

hazardous chemicals used in the third-party components incorporated into our products, including the Restriction of Certain Hazardous

Substances Directive (the “RoHS”) and the EU Waste Electrical and Electronic Equipment Directive (the “WEEE Directive”),

as well as the implementing legislation of the EU member states.

This directive restricts the distribution of products within the EU

that exceed very low maximum concentration amounts of certain substances, including lead.

Similar laws and regulations have been passed

or are pending in China, Japan, and numerous countries around the world and may be enacted in other regions, including in the United

States, and we are, or may in the future be, subject to these laws and regulations.

From time to time, our products are subject to new

domestic and international requirements.

Compliance with regulations enacted in the future could substantially increase our cost of doing

business or otherwise have a material adverse effect on our results of operations and our business.

Any inability by us to comply with

regulations in the future could result in the imposition of fines or in the suspension or cessation of our operations or sales in the

applicable jurisdictions.

Any such inability by us to comply with regulations may also result in our not being permitted, or limit our

ability, to ship our products which would adversely affect our revenue and ability to achieve or maintain profitability.

Although we encourage our contract manufacturers

and major component suppliers to comply with the supply chain transparency requirements, such as the RoHS Directive, we cannot provide

assurance that our manufacturers and suppliers consistently comply with these requirements.

In addition, if there are changes to these

or other laws (or their interpretation) or if new related laws are passed in other jurisdictions, we may be required to re-engineer our

products to use components compatible with these regulations.

This re-engineering and component substitution could result in additional

costs to us or disrupt our operations or logistics.

The WEEE Directive requires electronic goods producers

to be responsible for the collection, recycling and treatment of such products.

Changes in interpretation of the directive may cause

us to incur costs or have additional regulatory requirements to meet in the future in order to comply with this directive, or with any

similar laws adopted in other jurisdictions.

Our failure to comply with past, present, and future similar laws could result in reduced

sales of our products, substantial product inventory write-offs, reputational damage, penalties and other sanctions, which could harm

our business and financial condition.

We also expect that our products will be affected by new environmental laws and regulations on

an ongoing basis.

To date, our expenditures for environmental compliance have not had a material impact on our results of operations

or cash flows and, although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs

and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured,

which could have a material adverse effect on our business and financial condition.

We face competition from larger companies

that have substantially greater resources which challenges our ability to establish market share, grow the business, and reach profitability.

The drone industry is attracting a wide

range of significantly larger companies which have substantially greater financial, management, research and marketing resources than

These competitors include transportation companies like United Parcel Service, Federal Express and Amazon, as well as defense

companies such as Lockheed Martin Corporation and Northrop Grumman Corporation.

Our competitors may be able to provide customers with

different or greater capabilities than we can provide, including technical qualifications, pricing, and key technical support.

our competitors may utilize their greater resources to develop competing products and technologies, leverage their financial strength

to utilize economies of scale and offer lower pricing, and hire more qualified personnel by offering more generous compensation packages.

In order to secure contracts, we may have to offer comparable products and services at lower pricing which could adversely affect our

operating margins.

Our inability to compete effectively against these larger companies could have a material adverse effect on our business,

financial condition and operating results.

Fat Shark operates in a highly competitive

market and the size, resources and brand name of some of its competitors may allow them to compete more effectively than Fat Shark can,

which could result in a loss of market share and a decrease in revenue and profitability.

The market for head-worn display devices,

including FPV HMDs, is highly competitive.

Further, we expect competition to intensify in the future as existing competitors introduce

new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets.

We compete against established, well-known diversified consumer electronics manufacturers such as Samsung Electronics Co., Sony Corporation,

LG Electronics (LGE), HTC, Lenovo, and large software and other products companies such as Alphabet Inc.

(Google), Microsoft Corporation,

Facebook and Snap.

In the FPV drone market we compete with additional established, well-known manufacturers such as Epson, Yuneec, Boscam,

Eachine, Walkera, SkyZone, MicroLED and DJI.

Many of our current competitors have substantial market share, diversified product lines,

well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development

and other resources than we do.

In addition, many of our existing and potential competitors enjoy substantial competitive advantages,

longer operating histories;

•the capacity to leverage their

sales efforts and marketing expenditures across a broader portfolio of products;

•broader distribution and established

relationships with channel partners;

•access to larger established

customer bases and known branding;

•greater resources to fund research

and development and to make acquisitions;

•larger intellectual property

•the ability to bundle competitive

offerings with other products and services.

Moreover, smartphones, tablets, and new wearable

devices with ever growing larger video display screens and computing power have significantly improved the mobile personal computing

In the future, the manufacturers of these devices, such as Apple Inc., Samsung, LGE, Lenovo, Google/Fitbit, Snap, Garmin,

Facebook, Microsoft and others may design or develop products similar to ours.

In addition to competition or potential competition from

large, established companies, new companies may emerge and offer competitive products.

Increased competition may result in pricing pressures

and reduced profit margins and may impede our ability to increase the sales of our products, any of which could substantially harm our

business and results of operations.

We may not be able to keep pace with

technological advances;

The drone industry in general,

and the software and hardware industries in particular, continue to undergo significant changes, primarily due to technological

developments.

Because of the rapid growth 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, software and hardware or training directed to the drone industry.

It is impossible to predict the overall effect these factors

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

advances, then our revenues, profitability and results from operations may be materially adversely affected.

We may not be able to successfully release

and sell our software solutions.

Our first software product,

Dronebox, is presently in beta testing in order to identify any operating issues and to secure user feedback on its features, including

both those presently part of the software and those that might be added to enhance the product.

While we expect to commercially

release Dronebox by the end of 2020, there are numerous risks that could prevent us from attaining this timeline.

FAA has not issued any formal rules and regulations regarding software applications used by drones.

However, it could decide to

issue formal rules and regulations which could delay the release of Dronebox or cause us to withdraw it from the market.

possible that we may not be able to comply with any rules and regulations issued by the FAA.

Dronebox will compete against

software solutions which are already available in the marketplace.

These include competing products offered by Airdata, a small

company, and Skyward which is owned by Verizon.

We plan to include features in Dronebox that we believe will provide a competitive

These include (i) flight analyzation and replay, (ii) an embedded, encrypted ticket system, and (iii) live support assistance.

However, users may not perceive our enhancements as providing added value and may determine not to migrate to Dronebox.

Verizon could provide sales and marketing support to Skyward that could distract users and cause them not to focus on the enhanced

features provided by Dronebox.

These risks could adversely impact the number of users that subscribe to Dronebox and have a material

adverse impact on our operating results.

If critical components used

to assemble our products become scarce or unavailable, then we may incur delays in fulfilling sales orders which could adversely

impact our business.

We obtain components

for our drones from a limited number of suppliers.

Most of these components are sourced from China which has been engaged in a

trade war with the United States over the past few years.

We do not have a long term agreement with these suppliers that obligates

them to sell components to us.

Our reliance on these suppliers entails significant risks and uncertainties, including whether these

suppliers will provide an adequate quantity of components, at a reasonable price, and on a timely basis.

While there are options

to purchase certain components from suppliers based in the United States, we would be forced to pay higher prices which would adversely

impact our gross margin and operating results.

Our operating results could be materially, adversely impacted if our suppliers do

not provide the critical components used to assemble our products on a timely basis, at a reasonable price, and in sufficient quantities.

Our results of operations may fluctuate

from period to period which could cause volatility in our stock price.

Results of operations for

any company developing untested technology can be expected to fluctuate until the products are in the market and could fluctuate

thereafter even when products are in the marketplace.

There is significant lead time in developing software and manufacturing hardware.

Unanticipated delays can adversely impact the release of software products and drone-related equipment into the marketplace.

generated through our e-commerce site have been growing but could be adversely impacted if a lack of working capital limits our

ability to purchase new items for sale.

We cannot predict with certainty when our first software analytics product will be released

commercially and what level of sales will be generated.

Our results of operations

depend significantly upon the appeal of our content to our customers, the timing of releases of our products and the commercial

success of our products, none of which can be predicted with certainty.

Accordingly, our revenues and results of operations may

fluctuate from period to period.

The results of one period may not be indicative of the results of any future period.

quarterly fluctuations that we report in the future may not match the expectations of market analysts and investors.

could cause the price of our common stock to fluctuate significantly.

The loss of key personnel may adversely

affect our business.

Our success greatly depends

on the performance of our executive management team, including Jeffrey Thompson, our Chief Executive Officer, who has significant

experience raising capital for emerging technology companies.

In addition, Chad Kapper, our Chief Marketing Officer and Drew Camden,

President of Rotor Riot, have significant experience in the drone industry and are recognized as experts in the FPV sector of the

drone industry which is a core focus of our e*commerce store.

None of these individuals have employment agreements which would

likely include anti-compete provisions.

As a result, any of these individuals could terminate their employment and immediately

compete against the Company.

The loss of the services of any member of our core executive management team or other key persons

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

Litigation could harm our business or

otherwise distract management.

Substantial, complex or

extended litigation could cause us to incur large expenditures and could distract management.

For example, lawsuits by licensors,

consumers, employees or stockholders or litigation with federal, state or local governments or regulatory bodies could be very

costly and disrupt business.

While disputes from time to time are not uncommon, we may not be able to resolve such disputes on

terms favorable to us which could have a material, adverse impact on our results of operations and financial condition.

If we fail to protect our intellectual

property rights, we could lose our ability to compete in the marketplace.

Our intellectual property

and proprietary rights are important to our ability to remain competitive and for the success of our products and our business.

Patent protection can be limited and not all intellectual property is or can be patented.

We rely on a combination of patent, trademark,

copyright, and trade secret laws as well as confidentiality agreements and procedures and other contractual provisions to protect

our intellectual property, other proprietary rights and our brand.

We have little protection when we must rely on trade secrets

and nondisclosure agreements.

Our intellectual property rights may be challenged, invalidated or circumvented by third parties.

We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees

or competitors.

Furthermore, our competitors may independently develop technologies and products that are substantially equivalent

or superior to our technologies and/or products, which could result in decreased revenues for us.

Moreover, the laws of foreign

countries may not protect our intellectual property rights to the same extent as the laws of the U.S.

Litigation may be necessary

to enforce our intellectual property rights, which could result in substantial costs to us and substantial diversion of management

If we do not adequately protect our intellectual property, our competitors could use it to enhance their products.

inability to adequately protect our intellectual property rights could adversely affect our business and financial condition and

the value of our brand and other intangible assets.

If we fail to protect our intellectual

property rights, our ability to pursue the development of our technologies and products would be negatively affected.

Our success will depend

in part on our ability to obtain patents and maintain adequate protection of our intellectual property and technologies.

countries lack rules and methods for defending intellectual property rights and do not protect proprietary rights to the same extent

as the United States.

We have not filed for any patent protection rights outside the United States, and many companies have had

difficulty protecting their proprietary rights in foreign countries.

We may not be able to prevent misappropriation of our proprietary

The patent process is subject

to numerous risks and uncertainties and there can be no assurance that we will be successful in protecting our technologies by

obtaining and enforcing patents.

These risks and uncertainties include the following:

patents that may be issued or licensed may

be challenged, invalidated, or circumvented, or otherwise may not provide any competitive advantage;

our competitors, many of which

have substantially greater resources than us and many of which have made significant investments in competing technologies, may

seek, or may already have obtained, patents that will limit, interfere with, or eliminate our ability to make, use, and license

our technologies either in the United States or in international markets;

there may be significant pressure on the United States

government and other international governmental bodies to limit the scope of patent protection both inside and outside the United

States for technologies that prove successful as a matter of public policy regarding security concerns;

countries other than the

United States may have less restrictive patent laws than those upheld by United States courts, allowing foreign competitors the

ability to exploit these laws to create, develop, and market competing products.

Moreover, any patents issued

to us may not provide us with meaningful protection, or others may challenge, circumvent or narrow our patents.

Third parties may

also independently develop technologies similar to ours or design around any patents on our technologies.

In addition, the USPTO

and patent offices in other jurisdictions have often required that patent applications concerning software inventions be limited

or narrowed substantially to cover only the specific innovations exemplified in the patent application, thereby limiting the scope

of protection against competitive challenges.

Thus, even if we or our licensors are able to obtain patents, the patents may be

substantially narrower than anticipated.

Our success depends on

our patents, patent applications that may be licensed exclusively to us, and other patents to which we may obtain assignment or

We may not be aware, however, of all patents, published applications, or published literature that may affect our business

by blocking our ability to commercialize our products, by preventing the patentability of future products or services to us or

our licensors, or by covering the same or similar technologies that may invalidate our patents, limit the scope of our future patent

claims or adversely affect our ability to market our products and services.

In addition to patents,

we rely on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions, and security measures

to protect our confidential and proprietary information.

These measures may not adequately protect our trade secrets or other proprietary

If they do not adequately protect our rights, third parties could use our technology, and we could lose any competitive

advantage we may have.

In addition, others may independently develop similar proprietary information or techniques or otherwise

gain access to our trade secrets, which could impair any competitive advantage we may have.

Patent protection and other

intellectual property protection are crucial to the success of our business and prospects, and there is a substantial risk that

such protections will prove inadequate.

Other companies may claim that we infringe

their intellectual property, which could materially increase our costs and harm our ability to generate future revenue and profit.

While we are not aware

that our technologies infringe the proprietary rights of any third party, we do not regularly conduct freedom to operate searches.

Claims of infringement are becoming increasingly common and third parties may assert infringement claims against us.

of companies, including competing companies, are actively developing extensive patent portfolios on aerial drones.

These companies

include big players like Amazon, Google, IBM, Qualcomm, Verizon, Walmart, Boeing, Lockhead Martin, SZ DJI, as well as a variety

of smaller companies, universities and startups.

It may be difficult or impossible to identify, prior to receipt of notice from

a third party, the trade secrets, patent position or other intellectual property rights of a third party, either in the United

States or in foreign jurisdictions.

Any such assertion may result in litigation or may require us to obtain a license for or otherwise

restrict our use of the intellectual property rights of third parties.

If we are required to obtain licenses to use any third-party

technology, we would have to pay royalties, which may significantly reduce any profit on our products.

In addition, any such litigation

could be expensive and disruptive to our ability to generate revenue or enter into new market opportunities.

If any of our products

are found to infringe other parties’

proprietary rights

and we are unable to come to terms regarding a license with such parties, we may be forced to modify our products to make them

non-infringing or to cease production of such products altogether.

nature of our business involves significant risks and uncertainties that may not be covered by insurance or indemnity.

develop and sell products where insurance or indemnification may not be available, including:

Designing and developing

products using advanced and unproven technologies and drones [true?];

Designing and developing

products to collect, distribute and analyze various types of information.

of certain of our products could result in loss of life or property damage.

Certain products may raise questions with respect

to issues of civil liberties, intellectual property, trespass, conversion and similar concepts, which may raise new legal issues.

Indemnification to cover potential claims or liabilities resulting from a failure of technologies developed or deployed may be

available in certain circumstances, but not in others.

We are not able to maintain insurance to protect against all operational

risks and uncertainties.

Substantial claims resulting from an accident, failure of our product, or liability arising from our

products in excess of any indemnity or insurance coverage (or for which indemnity or insurance is not available or was not obtained)

could harm our financial condition, cash flows, and operating results.

Any accident, even if fully covered or insured, could negatively

affect our reputation among our customers and the public, and make it more difficult for us to compete effectively.

we depend on advances in technology by other companies.

The drone industry in general, and the software

and hardware industries in particular, continue to undergo significant changes, primarily due to technological developments.

of the rapid growth 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, software and hardware or training

directed to the drone industry.

It is impossible to predict the overall effect these factors could have on our ability to compete effectively

in a changing market, and if we are not able to keep pace with these technological advances, then our revenues, profitability and results

from operations may be materially adversely affected.

We rely on and will continue to rely on components

of our products (including micro-display panels organic light-emitting diode (“OLED”) and liquid crystal (“LC”)

displays for our goggle displays, transmitters and cameras) that are developed and produced by other companies.

The commercial success

of certain of our planned future products will depend in part on advances in these and other technologies by other companies.

from time to time, contract with and support companies developing key technologies in order to accelerate the development of such products

for our specific uses.

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

We may not be able to successfully launch, compete

and sell our DroneBox software.

Our first software product, DroneBox, is presently

in beta testing in order to identify operating issues and to secure user feedback on its features, including both those presently part

of the software and those that might be added to enhance the product.

To date, the FAA has not issued any formal rules and regulations

regarding software applications used by drones.

However, it could decide to issue formal rules and regulations which could delay the

release of DroneBox or cause us to withdraw it from the market.

It is possible that we may not be able to comply with any rules and regulations

issued by the FAA.

DroneBox will compete against software solutions

which are already available in the marketplace.

These include competing products offered by Airdata, a small company, and Skyward which

is owned by Verizon.

We plan to include features in DroneBox that we believe will provide a competitive advantage.

These include (i)

flight analyzation and replay, (ii) an embedded, encrypted ticket system, and (iii) live support assistance.

However, users may not perceive

our enhancements as providing added value and may determine not to migrate to DroneBox.

In addition, Verizon could provide sales and

marketing support to Skyward that could distract users and cause them not to focus on the enhanced features provided by DroneBox.

risks could adversely impact the number of users that subscribe to DroneBox and have a material adverse impact on our operating results.

If Fat Shark fails to keep pace with changing

consumer preferences or technologies our business and results of operations may be materially adversely affected.

Rapidly changing customer requirements, evolving

technologies and industry standards characterize the consumer electronics, wearables, and display industries.

To achieve these goals,

we seek to enhance existing products and develop and market new products that keep pace with continuing changes in industry standards,

requirements, and customer preferences.

Our success depends on our ability to originate new

products and to identify trends as well as to anticipate and react to changing customer demands in a timely manner.

If are unable to

introduce new products or novel technologies in a timely manner or new products or technologies are not accepted by customers, our competitors

may introduce more attractive products, which could hurt our competitive position.

New products might not receive customer acceptance

if customer preferences shift to other products, and future success depends in part on the ability to anticipate and respond to these

Failure to anticipate and respond in a timely manner to changing customer preferences could lead to, among other things, lost

business, lower revenue and excess inventory levels.

If critical components used to assemble our

products become scarce or unavailable, then we may incur delays in fulfilling sales orders which could adversely impact our business.

We obtain components for our drones from a limited

number of suppliers.

Most of these components are sourced from China which has been engaged in a trade war with the United States over

the past few years.

We do not have a long term agreement with these suppliers that obligates them to sell components to us.

on these suppliers entails significant risks and uncertainties, including whether these suppliers will provide an adequate quantity of

components, at a reasonable price, and on a timely basis.

While there are options to purchase certain components from suppliers based

in the United States, we would be forced to pay higher prices which would adversely impact our gross margin and operating results.

operating results could be materially, adversely impacted if our suppliers do not provide the critical components used to assemble our

products on a timely basis, at a reasonable price, and in sufficient quantities.

Lack of long-term purchase orders and commitments

from customers may lead to a rapid decline in sales.

All customers issue purchase orders solely at their

own discretion, often shortly before the requested date of shipment.

Customers are generally able to cancel orders (without penalty)

or delay the delivery of products on relatively short notice.

In addition, current customers may decide not to purchase products for

If those customers do not continue to purchase products, sales volume could decline rapidly with little or no warning.

We cannot rely on long-term purchase orders or commitments

to protect from the negative financial effects of a decline in demand for products and typically plans production and inventory levels

based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially.

Customers give rolling

forecasts and issue purchase orders but they have options to reschedule or pay cancellation fees.

The uncertainty of product orders makes

it difficult to forecast sales and allocate resources in a manner consistent with actual sales.

Moreover, expense levels and the amounts

invested in capital equipment and new product development costs are based in part on expectations of future sales and, if expectations

regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.

Similar factors

apply to the lead times for our software and SaaS products.

As a result of lack of long-term purchase orders and purchase commitments,

and long software development lead times, we may experience a rapid decline in sales.

As a result of these and other factors, investors

should not rely on revenues and operating results for any one quarter or year as an indication of future revenues or operating results.

If quarterly revenues or results of operations fall below expectations of investors or public market analysts, the price of the common

stock could fall substantially.

If we do not effectively maintain and further

develop sales channels for products, including developing and supporting retail sales channel, value added resellers (VARs) and distributors,

our business could be harmed.

We depend upon effective sales channels in reaching

the customers who are the ultimate purchasers of HMD products and primarily sell products either from in-house sales teams directly to

retail outlets such as hobby shops or through websites and VARs.

Distributors, third-party online resellers and VARs

generally offer products from several different manufacturers.

Accordingly, we are at risk that these distributors, resellers and VARs

may give higher priority to selling other companies’

If we were to lose the services of a distributor, online reseller,

or VAR, they might need to find another in that area, and there can be no assurance of the ability to do so in a timely manner or on

favorable terms.

Further, resellers and distributors can at times build inventories in anticipation of future sales, and if such sales

do not occur as rapidly as they anticipate, resellers and distributors will decrease the size of their future product orders.

also subject to the risks of distributors, resellers and VARs encountering financial difficulties, which could impede their effectiveness

and also expose us to financial risk, for example if they are unable to pay for the products they purchase or ongoing disruptions in

business, for example from natural disasters or the effects of COVID-19.

Any reduction in sales by current distributors or VARs, loss

of key distributors and VARs or decrease in revenue from distributors and VARs could adversely affect our revenue, operating results,

and financial condition.

create awareness of brands and products;

convert consumer awareness into actual

product purchases;

effectively manage marketing costs

(including creative and media) in order to maintain acceptable operating margins and return on marketing investment;

successfully offer to sell products

or license technology to third-party companies for sale.

Planned marketing expenditures are unknown and may

not result in increased total sales or generate sufficient levels of product and brand name awareness.

We may not be able to manage marketing

expenditures on a cost-effective basis.

Our products require ongoing research and development

and may experience technical problems or delays, which could lead the business to fail.

Our research and development efforts remain subject

to all of the risks associated with the development of new products based on emerging and innovative technologies, including, for example,

unexpected technical problems or the possible insufficiency of funds for completing development of these products.

If technical problems

or delays arise, further improvements in products and the introduction of future products could be adversely impacted, and we could incur

significant additional expenses and the business may fail.

If HMD’s and pilot gear do not gain greater

acceptance in the marketplace, the business strategy may fail.

The acquisition of Fat Shark was based upon the acceptance

of HMD wearables for FPV control of drones and the continuation of the attractiveness of that method for piloting drones.

Fat Shark has

experienced declining revenues over the past several years and such trend may continue or accelerate.

Advances in other technologies

may overcome their current market limitations and permit them to remain or become more attractive technologies for FPV applications,

which could limit the potential market for our products and cause our business strategy to fail.

If end-users fail to accept HMDs in

the numbers we anticipate or as soon as we anticipate, the sales of our FPV products and our results of operations would be adversely

affected and our business strategy may fail.

There are a number of competing providers of

micro-display-based personal display technology, including HMDs, and we may fail to capture a substantial portion of the FPV personal

wearable display market.

In addition to competing with other HMD manufacturers

and distributors for FPV displays, we also compete with micro-display-based personal display technologies that have been developed by

other companies.

Numerous start-up companies have announced their intentions to offer HMD products and developer kits in the near future.

Further, industry blogs have speculated that companies such as Apple may offer HMDs in the near future.

Most of our competitors have greater financial, marketing,

distribution, and technical resources than we do.

Moreover, our competitors may succeed in developing new micro-display-based personal

display technologies and products that are more affordable or have more desirable features than our technology.

If our products are unable

to capture a reasonable portion of the HMD market, our business strategy may fail.

The nature of our business involves significant

risks and uncertainties that may not be covered by insurance or indemnity.

We develop and sell products where insurance or indemnification

may not be available, including:

Designing and developing products using advanced and unproven technologies

Designing and developing products to collect, distribute and analyze

various types of information.

Failure of certain of our products could result in

loss of life or property damage.

Certain products may raise questions with respect to issues of civil liberties, intellectual property,

trespass, conversion and similar concepts, which may raise new legal issues.

Indemnification to cover potential claims or liabilities

resulting from a failure of technologies developed or deployed may be available in certain circumstances, but not in others.

do not and are not able to maintain insurance to protect against our risks and uncertainties.

Substantial claims resulting from an accident,

failure of our product, or liability arising from our products in excess of any indemnity or insurance coverage (or for which indemnity

or insurance is not available or was not obtained) could harm our financial condition, cash flows, and operating results.

Any accident,

even if fully covered or insured, could negatively affect our reputation among our customers and the public, and make it more difficult

for us to compete effectively.

Product quality issues and a higher-than-expected

number of warranty claims or returns could harm our business and operating results.

The products that we sell could contain defects in

design or manufacture.

Defects could also occur in the products or components that are supplied to us.

There can be no assurance we will

be able to detect and remedy all defects in the hardware and software we sell, which could result in product recalls, product redesign

efforts, loss of revenue, reputational damage and significant warranty and other remediation expenses.

Similar to other mobile and consumer

electronics, our products have a risk of overheating in the course of usage or upon malfunction.

Any such defect could result in harm

to property or in personal injury.

If we determine that a product does not meet product quality standards or may contain a defect, the

launch of such product could be delayed until we remedy the quality issue or defect.

The costs associated with any protracted delay necessary

to remedy a quality issue or defect in a new product could be substantial.

We generally provide a one-year warranty on all of

our products, except in certain European countries where it can be two years for some consumer-focused products.

The occurrence of any

material defects in our products could expose us to liability for damages and warranty claims in excess of our current reserves, and

we could incur significant costs to correct any defects, warranty claims or other problems.

In addition, if any of our product designs

are defective or are alleged to be defective, we may be required to participate in a recall campaign.

In part due to the terms of our

warranty policy, any failure rate of our products that exceeds our expectations may result in unanticipated losses.

Any negative publicity

related to the perceived quality of our products could affect our brand image and decrease retailer, distributor and consumer confidence

and demand, which could adversely affect our operating results and financial condition.

Further, accidental damage coverage and extended

warranties are regulated in the United States at the state level and are treated differently within each state.

Additionally, outside

of the United States, regulations for extended warranties and accidental damage vary from country to country.

Changes in interpretation

of the regulations concerning extended warranties and accidental damage coverage on a federal, state, local or international level may

cause us to incur costs or have additional regulatory requirements to meet in the future in order to continue to offer our support services.

Our failure to comply with past, present and future similar laws could result in reduced sales of our products, reputational damage,

penalties and other sanctions, which could harm our business and financial condition.

Our products will likely experience declining

unit prices and we may not be able to offset that decline with production cost decreases or higher unit sales.

In the markets in which we compete, prices of established

consumer electronics, displays, personal computers, and mobile products tend to decline significantly over time or as new enhanced versions

are introduced, frequently every 12 to 24 months.

In order to maintain adequate product profit margins over the long term, we believe

that we will need to continuously develop product enhancements and new technologies that will either slow price declines of our products

or reduce the cost of producing and delivering our products.

While we anticipate many opportunities to reduce production costs over time,

we may not be able to reduce our component costs.

We expect to attempt to offset the anticipated decrease in our average selling price

by introducing new products, increasing our sales volumes or adjusting our product mix.

If we fail to do so, our results of operations

will be materially and adversely affected.

Our products could infringe on the intellectual

property rights of others.

Companies in the consumer electronics, wireless communications,

semiconductor, IT, and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable

and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual

property rights.

Our products could be found to infringe on the intellectual property rights of others.

Other companies may hold or obtain

patents or inventions or other proprietary rights in technology necessary for our business.

Periodically, other companies inquire about

our products and technology in their attempts to assess whether we violate their intellectual property rights.

If we are forced to defend

against infringement claims, we may face costly litigation, diversion of technical and management personnel, and product shipment delays,

even if the allegations of infringement are unwarranted.

If there is a successful claim of infringement against us and we are unable

to develop non-infringing technology or license the infringed or similar technology on a timely basis, or if we are required to cease

using one or more of our business or product names due to a successful trademark infringement claim against us, it could adversely affect

our business.

Our intellectual property rights and proprietary

rights may not adequately protect our products.

Our commercial success will depend substantially

on the ability to obtain patents and other intellectual property rights and maintain adequate legal protection for products in the United

States and other countries.

We will be able to protect our intellectual property from unauthorized use by third parties only to the extent

that these assets are covered by valid and enforceable patents, trademarks, copyrights or other intellectual property rights, or are

effectively maintained as trade secrets.

As of the date of this filing, we own 12 granted United States and foreign patents and 5 pending

United States and foreign patent applications.

patents and patent applications include claims to, among other things, a drone,

a printed circuit board, and HMD technology.

We apply for patents covering our products, services, technologies, and designs, as

we deem appropriate.

We may fail to apply for patents on important products, services, technologies or designs in a timely fashion, or

We do not know whether any of our patent applications will result in the issuance of any patents.

Even if patents are issued,

they may not be sufficient to protect our products, services, technologies, or designs.

Our existing and future patents may not be sufficiently

broad to prevent others from developing competing products, services technologies, or designs.

Intellectual property protection and patent

rights outside of the United States are even less predictable.

As a result, the validity and enforceability of patents cannot be predicted

with certainty.

Moreover, we cannot be certain whether:

we were the first to conceive, reduce to practice, invent, or file

the inventions covered by each of our issued patents and pending patent applications;

others will independently develop similar or alternative products,

technologies, services or designs or duplicate any of our products, technologies, services or designs;

any patents issued to us will provide us with any competitive advantages,

or will be challenged by third parties;

we will develop additional proprietary products, services, technologies

or designs that are patentable;

the patents of others will have an adverse effect on our business.

The patents we own or license and those that may

be issued to us in the future may be challenged, invalidated, rendered unenforceable or circumvented, and the rights granted under any

issued patents may not provide us with proprietary protection or competitive advantages.

Moreover, third parties could practice our inventions

in territories where we do not have patent protection or in territories where they could obtain a compulsory license to our technology

where patented.

Such third parties may then try to import products made using our inventions into the United States or other territories.

We cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth, validity

and enforceability of the claims upheld in our and other companies’

Unauthorized parties may attempt to copy or otherwise

use aspects of our processes and products that we regard as proprietary.

Policing unauthorized use of our proprietary information and

technology is difficult and can be costly, and our efforts to do so may not prevent misappropriation of our technologies.

We may become

engaged in litigation to protect or enforce our patent and other intellectual property rights or in International Trade Commission proceedings

to abate the importation of goods that would compete unfairly with our products and, if unsuccessful, these actions could result in the

loss of patent or other intellectual property rights protection for the key technologies on which our business strategy depends.

We rely in part on unpatented proprietary technology,

and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology.

employees, contractors, consultants, financial advisors, suppliers, and strategic partners to enter into confidentiality and intellectual

property assignment agreements (as appropriate), but these agreements may not provide sufficient protection for our trade secrets, know-how

or other proprietary information.

The laws of certain countries do not protect intellectual

property and proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, we may

be unable to protect our products, services, technologies and designs adequately against unauthorized third-party copying, infringement

or use, which could adversely affect our competitive position.

To protect or enforce our intellectual property rights, we may initiate

proceedings or litigation against third parties.

Such proceedings or litigation may be necessary to protect our trade secrets or know-how,

products, technologies, designs, brands, reputation, likeness, authorship works or other intellectual property rights.

Such proceedings

or litigation also may be necessary to determine the enforceability, scope and validity of the proprietary rights of others.

Any proceedings

or lawsuits that we initiate could be expensive, take significant time and divert management’s attention from other business concerns.

Additionally, we may provoke third parties to assert claims against us, which could invalidate or narrow the scope of our own intellectual

property rights.

We may not prevail in any proceedings or lawsuits that we initiate and the damages or other remedies awarded, if any,

may be commercially valuable.

The occurrence of any of these events may adversely affect our business, financial condition and operating

We have registered and applied to register certain

of our trademarks in several jurisdictions worldwide.

In some jurisdictions where we have applied to register our trademarks, other applications

or registrations exist for the same, similar, or otherwise related products or services.

If we are not successful in arguing that there

is no likelihood of confusion between our marks and the marks that are the subject of the other applications or registrations owned by

third parties, our applications may be denied, preventing us from obtaining trademark registrations and adequate protection for our marks

in the relevant jurisdictions, which could impact our ability to build our brand identity and market our products and services in those

jurisdictions.

Whether or not our application is denied, third parties may claim that our trademarks infringe their rights.

we could be forced to pay significant settlement costs or cease the use of these trademarks and associated elements of our brand in the

United States or other jurisdictions.

Even in those jurisdictions where we are able to

register our trademarks, competitors may adopt or apply to register similar trademarks to ours, may register domain names that mimic

ours or incorporate our trademarks, or may purchase keywords that are identical or confusingly similar to our brand names as terms in

Internet search engine advertising programs, which could impede our ability to build our brand identity and lead to confusion among potential

customers of our products and services.

If we are not successful in proving that we have prior rights in our marks and arguing that there

is a likelihood of confusion between our marks and the marks of these third parties, our inability to prevent these third parties from

using may negatively impact the strength, value and effectiveness of our brand names and our ability to market our products and prevent

consumer confusion.

If we lose our rights under our third-party

technology licenses, our operations could be adversely affected .

Our business depends in part on technology rights

and software licensed from third parties.

We could lose our exclusivity or other rights to use the technology under our licenses if we

fail to comply with the terms and performance requirements of the licenses.

In addition, certain licensors may terminate a license upon

our breach and have the right to consent to sublicense arrangements.

If we were to lose our rights under any of these licenses, or if

we were unable to obtain required consents to future sublicenses, we could lose a competitive advantage in the market, and may even lose

the ability to commercialize certain products or technologies completely.

Either of these results could substantially decrease our revenues.

Our business depends in part on access to third-party

platforms or technologies, and if the access is withdrawn, denied, or is not available on terms acceptable, or if the platforms or technologies

change without notice, business and operating results could be adversely affected.

With the growth of mobile devices and personal voice

assistants, cloud services and artificial intelligence (“AI”), the number of supporting platforms has grown, and with it

the complexity and increased need for us to have business and contractual relationships with the platform owners in order to produce

products compatible with these platforms and enable access to and use of these platforms with our products.

Our product strategy includes

current and future products designed for use with third-party platforms or software, such as iPhone, Android phones, Google Assistant

and Amazon Alexa, as well as gaming platforms.

Our business in these categories relies on our access to the platforms of third parties,

some of whom are our competitors.

Platform owners that are competitors may limit or decline access to their platforms, and in any case

have a competitive advantage in designing products for their own platforms and may produce products that work better, or are perceived

to work better, than our products in connection with those platforms.

As we expand the number of platforms and software applications

with which our products are compatible, we may not be successful in launching products for those platforms or software applications and/or

we may not be successful in establishing strong relationships with the new platform or software owners, which could negatively impact

our ability to develop and produce high-quality products on a timely basis for those platforms and software applications.

We may otherwise

fail to navigate various new relationships, which could adversely affect our relationships with existing platform or software owners.

Our access to third-party platforms may also require

paying a royalty or licensing fee, which lowers our product margins or may otherwise be on terms that are not acceptable to us.

the third-party platforms or technologies used to interact with our product portfolio can be delayed in production or can change without

prior notice to us, which can result in our having excess inventory, lower margins, or customer support issues.

If we are unable to access third-party platforms

or technologies, or if our access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies

are delayed or change without notice to us, our business and operating results could be adversely affected.

If our customers are not satisfied with our

technical support, firmware or software updates on some products, they may choose not to purchase our products, which would adversely

impact business and operating results.

Our business relies, in part, on our customers’

satisfaction with the technical support, firmware, software and security updates we provide to support our products.

If we fail to provide

technical support services and necessary updates that are responsive, satisfy our customers’

expectations and resolve issues that

they encounter with our products, customers may choose not to purchase additional products and we may face brand and reputational harm,

which could adversely affect our operating results.

Our use of open source software could negatively

affect our ability to sell our products and could subject us to possible litigation.

We incorporate open source software into our products.

Open source software is generally licensed by its authors or other third parties under open source licenses.

Some of these licenses contain

requirements that we make available source code for modifications or derivative works we create based upon the open source software,

and that we license such modifications or derivative works under the terms of a particular open source license or other license granting

third parties certain rights of further use.

Additionally, if a third-party software provider has incorporated open source software into

software that we license from such provider, we could be required to disclose any of our source code that incorporates or is a modification

of our licensed software.

If an author or other third-party that distributes open source software that we use or license were to allege

that we had not complied with the conditions of the applicable license, we could be required to incur significant legal expenses defending

against those allegations and could be subject to significant damages, enjoined from offering or selling our products that contained

the open source software and be required to comply with the foregoing conditions.

Any of the foregoing could disrupt and harm our business

and financial condition.

Our dependence on sales to VARs, resellers,

and distributors increases the risks of managing our supply chain and may result in excess inventory or inventory shortages.

The majority of our various reseller relationships

for our HMD products and their accessories could involve them taking inventory positions and reselling to multiple customers.

typical distributor relationships, we would not recognize revenue until the distributors sell the product to their end user customers

and receive payment thereon;

however, at this time we do not currently enter into these types of arrangements.

Our distributor and VAR

relationships may reduce our ability to forecast sales and increase risks to our business.

Since our distributors and VARs would act

as intermediaries between us and the end user customers or resellers, we would be required to rely on our distributors to accurately

report inventory levels and production forecasts.

This may require us to manage a more complex supply chain and monitor the financial

condition and credit worthiness of our distributors and VARs and their major end user customers.

Our failure to manage one or more of

these risks could result in excess inventory or shortages that could adversely impact our operating results and financial condition.

Our operating results may be adversely impacted

by worldwide political, economic and public health uncertainties and specific conditions in the markets we address.

Any worsening of global economic, financial, or public

health conditions, including global pandemics, could materially adversely affect (i) our ability to raise, or the terms of needed capital;

(ii) demand for our current and future products;

and (iii) the supply of components for our products.

We cannot predict the timing, strength,

or duration of any economic slowdown or subsequent economic recovery, worldwide, or in the display industry.

Our results of operations may suffer if we

are not able to successfully manage our increasing exposure to foreign exchange rate risks.

A substantial majority of our sales and cost of components

are denominated in U.S.

As our business grows, both our sales and production costs may increasingly be denominated in other

Where such sales or production costs are denominated in other currencies, they are converted to U.S.

dollars for the purpose

of calculating any sales or costs to us.

Our sales may decrease as a result of any appreciation of the U.S.

dollar against these other

The majority of our current expenditures are incurred

dollars and many of our components come from countries that currently peg their currency against the U.S.

If the pegged

exchange rates change adversely or are allowed to float up, additional U.S.

dollars will be required to fund our purchases of these components.

Although we do not currently enter into currency

option contracts or engage in other hedging activities, we may do so in the future.

There is no assurance that we will undertake any

such hedging activities or that, if we do so, they will be successful in reducing the risks to us of our exposure to foreign currency

fluctuations.

Due to our significant level of international

operations, including the use of foreign contract manufactures, we are subject to international operational, financial, legal, political

and public health risks which could harm our operating results.

A substantial part of our operations, including manufacturing

of certain components used in our products, are outside of the United States and many of our customers and suppliers have some or all

of their operations in countries other than the United States.

Risks associated with our doing business outside of the United States

compliance burdens and costs with a wide variety of foreign laws and

regulations, particularly labor, environmental and other laws and regulations that govern our operations in those countries;

legal uncertainties regarding foreign taxes, tariffs, border taxes,

quotas, export controls,

export licenses, import controls and other trade barriers;

economic instability and high levels of inflation in the countries

of our suppliers and

customers, particularly in the Asia-Pacific region, causing delays

or reductions in orders for their products and therefore our sales;

political or public health instability, including global pandemics,

in the countries in which our suppliers operate;

changes or volatility in currency exchange rates;

difficulties in collecting accounts receivable and longer accounts

receivable payment cycles;

Any of these factors could harm our own, our suppliers’

customers’

international

operations and businesses and impair our and/or their ability to continue

expanding into international markets.

We could be adversely affected by violations

Foreign Corrupt Practices Act, the U.K.

Bribery Act or similar anti-bribery laws in other jurisdictions in which we operate.

The global nature of our business and the significance

of our international revenue create various domestic and local regulatory challenges and subject us to risks associated with our international

We operate in areas of the world that experience corruption by government officials to some degree and, in certain circumstances,

compliance with anti-bribery and anticorruption laws may conflict with local customs and practices.

Our global operations require us

to import and export to and from several countries, which geographically expands our compliance obligations.

In addition, changes in

such laws could result in increased regulatory requirements and compliance costs which could adversely affect our business, financial

condition, and results of operations.

Foreign Corrupt Practices Act (FCPA), the

Bribery Act 2010 (U.K.

Bribery Act), and similar anti-bribery and anticorruption laws in other jurisdictions generally prohibit

U.S.-based companies and their intermediaries from making improper payments to non-U.S.

officials for the purpose of obtaining or retaining

business, directing business to another, or securing an advantage.

In addition, U.S.

public companies are required to maintain records

that accurately and fairly represent their transactions and have an adequate system of internal accounting controls.

Under the FCPA,

companies may be held liable for the corrupt actions taken by directors, officers, employees, agents, or other strategic or local

partners or representatives.

As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation,

governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties

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

We are subject to governmental export and import

controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.

and various foreign governments have imposed

controls, export license requirements and restrictions on the import or export of some technologies.

Our products are subject to U.S.

export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions

regulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our products must be made

in compliance with these laws.

Furthermore, U.S.

export control laws and economic sanctions prohibit the provision of products and services

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

Even though we take precautions to prevent our products from being

provided to targets of U.S.

sanctions, our products, including our firmware updates, could be provided to those targets or provided by

our customers despite such precautions.

Any such provision could have negative consequences, including government investigations, penalties,

and reputational harm.

Our failure to obtain required import or export approval for our products could harm our international and domestic

sales and adversely affect our revenue.

If significant tariffs or other restrictions

are placed and maintained on Chinese imports or any related counter-measures are taken by China, our revenue and results of operations

may be materially harmed.

If significant tariffs or other restrictions are

placed on Chinese imports or any related counter-measures are taken by China, our revenue and results of operations may be materially

In July 2018, the Trump Administration introduced a list of thousands of categories of goods that begun facing tariffs of 10%,

which may be increased to 25% in 2019 if a new trade deal with China is not concluded.

These tariffs currently affect some of our products

and we may be required to raise our prices on those products due to the tariffs, which may result in a loss of customers and harm our

operating performance.

If the existing tariffs are expanded or interpreted by a court or governmental agency to apply to any of our other

products, we may be required to raise our prices on those products, which may further result in a loss of customers and harm our operating

It is possible further tariffs will be imposed on imports of our products, or that our business will be impacted by retaliatory

trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes

to our operations, any of which could materially harm our revenue or operating results.

Changes in trade policy in the United States

and other countries, including changes in trade agreements and the imposition of tariffs and the resulting consequences, may have adverse

impacts on our business, results of operations and financial condition.

government has indicated and demonstrated

its intent to alter its approach to international trade policy through the renegotiation, and potential termination, of certain existing

bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods

from, China, countries in EMEA and other countries.

Given our manufacturing in those countries, and our lack of manufacturing elsewhere,

policy changes in the United States or other countries, such as the tariffs already proposed, implemented, and threatened, present particular

risks for us.

Tariffs already announced and implemented are having an adverse effect on certain of our products, tariffs announced but

not yet implemented may have an adverse effect on many of our products, and threatened tariffs could adversely affect more or all of

our products.

There are also risks associated with retaliatory tariffs and resulting trade wars.

We cannot predict future trade policy,

the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business.

A trade war could have a significant

adverse effect on world trade and the world economy.

To the extent that trade tariffs and other restrictions imposed by the United States

or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported

into the United States or other countries, or create adverse tax consequences, the sales, cost or gross margin of our products may be

adversely affected and the demand from our customers for products and services may be diminished.

Uncertainty surrounding international

trade policy and disputes and protectionist measures could also have an adverse effect on consumer confidence and spending.

it necessary to alter all or a portion of our activities or operations in response to such policies, agreements or tariffs, our capital

and operating costs may increase.

Our ongoing efforts to address these risks may not be effective and may have long-term adverse effects

on our operations and operating results that we may not be able to reverse.

Such efforts may also take time to implement or to have an

effect, and may result in adverse quarterly financial results or fluctuations in our quarterly financial results.

As a result, changes

in international trade policy, changes in trade agreements and tariffs could adversely affect our business, results of operations and

financial condition.

Any significant disruption to ecommerce business

could result in lost sales.

Our sales through ecommerce channels have been growing.

Sales through rotorriot.com, and fatshark.com and our related web stores generally have higher profit margins than sales

through resellers, and distributors.

Online sales are subject to a number of risks.

System interruptions or delays could cause potential

customers to fail to purchase our products and could harm our brand.

The operation of our direct to consumer ecommerce business depends

on our ability to maintain the efficient and uninterrupted operation of online order-taking and fulfillment operations.

Our ecommerce

operations subject us to certain risks that could have an adverse effect on our operating results, including risks related to the computer

systems that operate our website and related support systems, such as system failures, viruses, denial of services attacks, computer

hackers and similar disruptions.

If we are unable to continually add software and hardware, effectively upgrade our systems and network

infrastructure and take other steps to improve the efficiency of our systems, system interruptions or delays could occur that would adversely

affect our operating results.

We utilize third-party vendors for our customer-facing

ecommerce technology, portions of our order management system and fulfillment internationally.

We depend on our technology vendors to

manage “up-time”

of the front-end ecommerce store, manage the intake of our orders, and export orders for fulfillment.

failure on the part of our third-party ecommerce vendors or in our ability to transition third-party services effectively could result

in lost sales and harm our business.

We may collect, store, process and use our

customers’

personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations

related to privacy, information security and data protection.

Any cybersecurity breaches or our actual or perceived failure to comply

with such legal obligations by us, or by our third-party service providers or partners, could harm our business.

We may collect, store, process and use our customers’

personally identifiable information and other data in our transactions with them, and we rely on third parties that are not directly

under our control to do so as well.

While we take reasonable measures intended to protect the security, integrity and confidentiality

of the personal information and other sensitive information we collect, store or transmit, we cannot guarantee that inadvertent or unauthorized

use or disclosure will not occur, or that third parties will not gain unauthorized access to this information.

While our privacy policies

currently prohibit such activities, our third-party service providers or partners may engage in such activity without our knowledge or

If we or our third- party service providers were to experience a breach, disruption or failure of systems compromising our customers’

data, or if one of our third-party service providers or partners were to access our customers’

personal data without our authorization,

our brand and reputation could be adversely affected, use of our products could decrease and we could be exposed to a risk of loss, litigation

and regulatory proceedings.

Regulatory scrutiny of privacy, data collection,

use of data and data protection is intensifying globally, and the personal information and other data we collect, store, process and

use is increasingly subject to legislation and regulations in numerous jurisdictions around the world, especially in Europe.

often develop in ways we cannot predict and may materially increase our cost of doing business, particularly as we expand the nature

and types of products we offer.

For example, the General Data Protection Regulation (the "GDPR"), which came into effect in

the EU in May 2018 and superseded prior EU data protection legislation, imposes more stringent data protection requirements and provides

for greater penalties for noncompliance.

Further, data protection legislation is also becoming

increasingly common in the United States at both the federal and state level.

For example, in June 2018, the State of California enacted

the California Consumer Privacy Act of 2018 (the "CCPA"), which went into effect on January 1, 2020.

The CCPA requires companies

that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices,

allows consumers to opt out of certain data sharing with third parties and provides a new cause of action for data breaches.

Additionally,

the Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards

for the online collection, use, dissemination and security of data.

The burdens imposed by the CCPA and other similar laws that may be

enacted at the federal and state level may require us to modify our data processing practices and policies and/or to incur substantial

expenditures in order to comply.

Cybersecurity risks could adversely affect

our business and disrupt our operations.

The threats to network and data security are increasingly

diverse and sophisticated.

Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems,

and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks such as viruses

and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions

from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could

lead to interruptions, delays, loss of critical data, unauthorized access to user data, and loss of consumer confidence.

we may be the target of email scams that attempt to acquire personal information or company assets.

Despite our efforts to create security

barriers to such threats, we may not be able to entirely mitigate these risks.

Any cyber-attack that attempts to obtain our or our users’

data and assets, disrupt our service, or otherwise access our systems, or those of third parties we use, if successful, could adversely

affect our business, operating results, and financial condition, be expensive to remedy, and damage our reputation.

In addition, any

such breaches may result in negative publicity, adversely affect our brand, decrease demand for our products and services, and adversely

affect our operating results and financial condition.

We may lose the services of key management

personnel and may not be able to attract and retain other necessary personnel.

Changes in our management could have an adverse effect

on our business, and in particular while our staff is relatively small with under 25 employees, we are dependent upon the active participation

of several key management personnel, including Jeffrey Thompson, our founder, President and Chief Executive Officer, Chad Kapper, Rotor

Riot’s founder and Chief Executive Officer, Greg French, Fat Shark’s founder and Chief Technology Officer, and Allan Evans,

Fat Shark’s Chief Executive Officer.

Each of these executives are critical to the strategic direction and overall management of

our company as well as our manufacturing, and research and development process.

The loss of any of them could adversely affect our business,

financial condition, and operating results.

We do not carry key person life insurance on any of our senior management or other key personnel.

Greg French, the founder of Fat Shark on whom we expect to continue to rely, is a Canadian citizen, and has his principal residence in

China and is tied by family relationship to Fat Shark’s principal manufacturing supplier and Allan Evans resides in the Cayman

Islands where Fat Shark and its subsidiaries are domiciled.

If either becomes unable to legally or efficiently travel to or from work

in the United States, China or elsewhere where there is dependence on the manufacturing supply chain, their ability to perform some of

their duties could be materially adversely affected.

We will need to hire and retain highly skilled technical

personnel as employees and as independent contractors in order to develop our products and grow our business.

The competition for highly

skilled technical, managerial, and other personnel is at times intense.

Our recruiting and retention success is substantially dependent

upon our ability to offer competitive salaries and benefits to our employees.

We must compete with companies that possess greater financial

and other resources than we do and that may be more attractive to potential employees and contractors.

To be competitive, we may have

to increase the compensation, bonuses, stock options and other fringe benefits we offer to employees in order to attract and retain such

The costs of retaining or attracting new personnel may have a material adverse effect on our business and operating results.

If we fail to attract and retain the technical and managerial personnel required to be successful, our business, operating results and

financial condition could be materially adversely affected.

We may acquire other businesses or receive

offers to be acquired, which could require significant management attention, disrupt our business, dilute stockholder value and adversely

affect our operating results.

As part of our business strategy, we may make investments

in complementary businesses, products, services, or technologies.

We have not made any material acquisitions to date other than Rotor

Riot and the acquisition of Fat Shark and, as a result, our ability as an organization to successfully acquire and integrate other companies,

products, services or technologies is unproven.

We may not be able to find suitable acquisition candidates and we may not be able to

complete acquisitions on favorable terms, if at all.

If we do complete acquisitions, we may not ultimately strengthen our competitive

position or achieve our goals, and any acquisitions we complete could be viewed negatively by customers or investors.

In addition, if

we fail to successfully integrate such acquisitions, or the technologies associated with such acquisitions, into our company, the revenue

and operating results of the combined company could be adversely affected.

Any integration process will require significant time and

resources, and we may not be able to manage the process successfully.

We may not successfully evaluate or utilize the acquired technology

and accurately forecast the financial impact of an acquisition transaction, including accounting charges.

We may have to pay cash, incur

debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our

capital stock.

The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to our stockholders.

The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that

would impede our ability to manage our operations.

Additionally, we may receive indications of interest from other parties interested

in acquiring some or all of our business.

The time required to evaluate such indications of interest could require significant attention

from management, disrupt the ordinary functioning of our business and adversely affect our operating results.

Our failure to effectively manage growth could

harm our business.

We intend to expand the number and types of products

We will need to replace and regularly introduce on a timely basis new products and technologies, enhance existing products,

and effectively stimulate customer demand for new products and upgraded or enhanced versions of our existing products.

The replacement and expansion of our products places

a significant strain on our management, operations and engineering resources.

Specifically, the areas that are strained most by these

activities include the following:

New Product Launches:

the changes in and growth of our product portfolio, we will experience increased complexity in coordinating product development,

manufacturing, and shipping.

As this complexity increases, it places a strain on our ability to accurately coordinate the commercial

launch of our products with adequate supply to meet anticipated customer demand and effectively market to stimulate demand and market

We have experienced delays in the past.

If we are unable to scale and improve our product launch coordination, we could

frustrate our customers and lose possible retail shelf space and product sales;

Existing Products Impacted by New Introductions :

introduction of new products or product enhancements may shorten the life cycle of our existing products, or replace sales of some

of our current products, thereby offsetting the benefit of even a successful product introduction and may cause customers to defer

purchasing our existing products in anticipation of the new products and potentially lead to challenges in managing inventory of

existing products.

We may also provide price protection to some of our retailers as a result of our new product introductions and

reduce the prices of existing products.

If we fail to effectively manage new product introductions, our revenue and profitability

may be harmed;

Forecasting, Planning and Supply Chain

With the changes in and growth of our product portfolio, we will experience increased complexity in forecasting

customer demand, in planning for production, and in transportation and logistics management.

If we are unable to scale and improve

our forecasting, planning, production, and logistics management, we could frustrate our customers, lose product sales or accumulate

excess inventory.

Our facilities and information systems and

those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our

business operations.

Fat Shark operates the majority of its business from

one location in George Town, Grand Cayman, Cayman Islands and Rotor Riot operates the majority of its business from one location in Orlando,

The corporate headquarters of the Company is located in San Juan, Puerto Rico.

We also rely on third-party manufacturing plants

in the US and Asia and third-party logistics, sales and marketing facilities elsewhere in other parts of the world to provide key components

for our products and services.

If major disasters such as earthquakes, hurricanes, tropical storms pandemics, fires, floods, wars, terrorist

attacks, computer viruses, transportation disasters or other events occur in any of these locations, or the effect of climate change

on any of these factors or our locations, or our information systems or communications network or those of any of our key component suppliers

breaks down or operates improperly as a result of such events, our facilities or those of our key suppliers may be seriously damaged,

and we may have to stop or delay production and shipment of our products.

We may also incur expenses relating to such damages.

If production

or shipment of our products or components is stopped or delayed or if we incur any increased expenses as a result of damage to our facilities,

our business, operating results and financial condition could be materially adversely affected.

Risks Related to HMD Manufacturing

We do not control our contract manufacturers

or suppliers or require them to comply with a formal code of conduct, and actions that they might take could harm our reputation and

We do not control our contract manufacturers or suppliers,

including their labor, environmental or other practices, or require them to comply with a formal code of conduct.

Though we may seek

to conduct periodic visits to some of our contract manufacturers and suppliers, these visits are not frequent or thorough enough to detect

non-compliance with applicable laws and good industry practices.

A violation of labor, environmental or other laws by our contract manufacturers

or suppliers, or a failure of these parties to follow ethical business practices, could lead to negative publicity and harm our reputation.

In addition, we may choose to seek alternative manufacturers or suppliers if these violations or failures were to occur.

and qualifying new manufacturers or suppliers can be time consuming and we might not be able to substitute suitable alternatives in a

timely manner or at an acceptable cost.

Other consumer products companies have faced significant criticism for the actions of their manufacturers

and suppliers, and we could face such criticism ourselves.

Any of these events could adversely affect our brand, harm our reputation,

reduce demand for our products and harm our ability to meet demand if we need to identify alternative manufacturers or suppliers.

Our principal manufacturer of HMDs is located

in China and is owned by the wife of Fat Shark’s founder Greg French which could create conflicts of interest.

Fat Shark has historically made purchases and sales

of products and supplies for FPV and HMD products from and sold through three companies owned by the spouse of Greg French, Direct FPV

(China), Shenzhen FatShark Co., Ltd (China) and Zeng Linghao (China).

In light of these relationships these business activities

have and may, in the future, be subject to influences and may provide such parties with conflicts of interest and business opportunities

that may not be subject to reasonable assessment and may not be available to Fat Shark or to the Company.

These persons may also face

a conflict in selecting between the Fat Shark and their other business interests.

We have not formulated a policy for the resolution

of such conflicts.

These entities are not subject to restrictions on competition with Fat Shark or the Company.

We rely on third-party suppliers, some of which

are sole-source suppliers, to provide components for our products which may lead to supply shortages, long lead times for components,

and supply changes, any of which could disrupt our supply chain and may increase our costs.

Our ability to meet customer demand depends, in part,

on our ability to obtain timely and adequate delivery of components for our products.

All of the components that go into the manufacturing

are sourced from third-party suppliers.

Some of the key components used to manufacture our

products come from a limited or single source of supply, or by a supplier that could potentially become a competitor.

Our contract manufacturers

generally purchase these components on our behalf from approved suppliers.

We are subject to the risk of shortages and long lead times

in the supply of these components and the risk that our suppliers discontinue or modify components used in our products.

the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules.

in the past experienced and may in the future experience component shortages, and the availability of these components may be unpredictable.

If we lose access to components from a particular

supplier or experience a significant disruption in the supply of products and components from a current supplier, we may be unable to

locate alternative suppliers of comparable quality at an acceptable price, or at all, and our business could be materially and adversely

In addition, if we experience a significant increase in demand for our products, our suppliers might not have the capacity

or elect not to meet our needs as they allocate components to other customers.

Developing suitable alternate sources of supply for these

components may be time-consuming, difficult and costly, and we may not be able to source these components on terms that are acceptable

to us, or at all, which may adversely affect our ability to meet our development requirements or to fill our orders in a timely or cost-effective

Identifying a suitable supplier is an involved process that requires us to become satisfied with the supplier’s quality

control, responsiveness and service, financial stability, labor and other ethical practices, and if we seek to source materials from

new suppliers, there can be no assurance that we could do so in a manner that does not disrupt the manufacture and sale of our products.

Our reliance on single source, or a small number

of suppliers involves a number of additional risks, including risks related to supplier capacity constraints, price increases, timely

delivery, component quality, failure of a key supplier to remain in business and adjust to market conditions, delays in, or the inability

to execute on, a supplier roadmap for components and technologies;

and natural disasters, fire, acts of terrorism or other catastrophic

events, including global pandemics.

We do not currently own or operate any manufacturing

Certain components and services necessary for the manufacture of our products are available from only a limited number of

sources, and other components and services are only available from a single source.

We currently purchase almost all of components for

HMDs from manufacturers related by marriage to Greg French, the Fat Shark founder.

Our relationship generally is on a purchase order

basis and these firms do not have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis.

These firms could discontinue sourcing merchandise for us at any time.

If any of these firms were to discontinue its relationship with

us, or discontinue providing specific products to us, and we are unable to contract with a new supplier that can meet our requirements,

or if they or such other supplier were to suffer a disruption in their production, we could experience disruption of our inventory flow,

a decrease in sales and the possible need to re-design our products.

Any such event could disrupt our operations and have an adverse

effect on our business, financial condition and results of operations.

Several new and alternative suppliers have begun offering components

suitable for use in our products.

With new tooling and electronics, any one of these alternative displays could be incorporated into

our products but our costs of production could be higher, they may offer less performance, and, as a result, make our products too costly

and less desirable.

The manufacture of HMDs encompasses several

complex processes and several steps of our production processes are dependent upon certain critical machines and tools which could result

in delivery interruptions, which could adversely affect our operating results.

Our product technology and manufacturing processes

are evolving which can result in production challenges and difficulties.

We may be unable to produce our products in sufficient quantity

and quality to maintain existing customers and attract new customers.

In addition, we may experience manufacturing problems which could

result in delays in delivery of orders or product introductions.

Several steps of our production processes are

dependent upon certain critical machines and tools which could result in delivery interruptions and foregone revenues.

We currently have little equipment redundancy in

manufacturing locales.

If we experience any significant disruption in manufacturing or a serious failure of a critical piece of equipment,

we may be unable to supply products to our customers in a timely manner.

Interruptions in our manufacturing could be caused by equipment

problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment.

Lead-time for delivery, installation, testing, repair and maintenance of manufacturing equipment can be extensive.

We have experienced

production interruptions in the past and no assurance can be given that we will not lose potential sales or be able to meet production

orders due to future production interruptions in our manufacturing lines.

Our products are subject to lengthy development

Some HMDs are subject to lengthy product development

The time elapsed between initial sampling of our products, the custom design of our products to meet specific product requirements,

and the ultimate incorporation of our products into salable products is significant, often with a duration of between one to two years.

If our products fail to meet our customers’

cost, performance, or technical requirements or if unexpected technical challenges

arise in the integration of our products into consumer products, our operating results could be significantly and adversely affected.

Long delays in achieving customer qualification and incorporation of our products also could adversely affect our business.

companies including Fat Shark are introducing digital HMDs which could create shortages of components and provides an opportunity for

companies with significantly greater resources than us to accelerate migration to digital products in a manner or timeline which we cannot

meet, which could cause us to lose market share and harm our business and prospects.

We depend on third parties to provide integrated

circuit chip sets and other critical components for use in our products.

We do not manufacture the integrated circuit chip

sets, optics, micro-displays, backlights, projection engines, printed circuit boards or other electronic components which are used in

our products.

Instead, we purchase them from third-party suppliers or rely on third-party independent contractors for these integrated

circuit chip sets and other critical components, some of which are customized or custom made for us.

We also may use third parties to

assemble all or portions of our products.

Some of these third-party contractors and suppliers are small companies with limited financial

If any of these third-party contractors or suppliers were unable or unwilling to supply these HMDs may decrease.

As the availability

of components decreases, the cost of acquiring those components ordinarily increases.

High growth product categories such as the consumer

electronics and mobile phone markets have experienced chronic shortages of components during periods of exceptionally high demand.

we do not properly anticipate the need for or procure critical components, we may pay higher prices for those components, our gross margins

may decrease and we may be unable to meet the demands of our customers and end-users, which could reduce our competitiveness, cause a

decline in our market share and have a material adverse effect on our results of operations.

Risks Related To Our Common Stock

Our management has voting control of

the Company .

Our current officers and

directors currently own approximately 65% of the total issued and outstanding capital stock of the Company.

Our management has voting control of the Company .

Jeffrey Thompson, our Chairman and Chief Executive

Officer owns approximately 26% and our current officers and directors currently own approximately 32% of our total issued and outstanding

common stock.

In addition, the founder of Fat Shark owns approximately 10% of our issued and outstanding common stock.

If they act together,

they will be able to influence the outcome of all corporate actions requiring approval of our shareholders, including the election

of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders

do not agree.

This concentration of ownership may have the effect of delaying or preventing a change in control and may adversely

affect the market price of our common stock.

they will be able to influence the outcome of all corporate actions requiring approval of our shareholders, including the election of

directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not

This concentration of ownership may have the effect of delaying or preventing a change in control and may adversely affect the

market price of our common stock.

Our failure to maintain effective internal

controls over financial reporting could have an adverse impact on us .

We are required to establish

and maintain appropriate internal controls over financial reporting.

Failure to establish those controls, or any failure of those

controls once established, could adversely impact our public disclosures regarding our business, financial condition or results

of operations.

In addition, management’s assessment of internal controls over financial reporting may identify weaknesses

and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns

for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial

reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public

accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting

may have an adverse impact on the price of our Common Stock.

We have never paid dividends and we do

not expect to pay dividends for the foreseeable future

We intend to retain earnings, if any, to finance the growth and

development of our business and do not intend to pay cash dividends on shares of our common stock in the foreseeable future.

payment of future cash dividends, if any, depend upon, among other things, conditions then existing including earnings, financial

We are required to establish and maintain appropriate

internal controls over financial reporting.

Failure to establish those controls, or any failure of those controls once established, could

adversely impact our public disclosures regarding our business, financial condition or results of operations.

In addition, management’s

assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal

controls over financial reporting or other matters that may raise concerns for investors.

Any actual or perceived weaknesses and conditions

that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal

controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s

assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.

We have never paid dividends and we do not

expect to pay dividends for the foreseeable future

We intend to retain earnings, if any, to finance

the growth and development of our business and do not intend to pay cash dividends on shares of our common stock in the foreseeable future.

The payment of future cash dividends, if any, depend upon, among other things, conditions then existing including earnings, financial

condition and capital requirements, restrictions in financing agreements, business opportunities and other factors.

capital appreciation, if any, of our common stock, will be your sole source of gain for the foreseeable future.

An active, liquid trading market for

our common stock may not develop or be sustained.

If and when an active market develops the price of our common stock may be volatile.

Presently, our common stock is traded on the

OTC pink sheets and we are in our early stages, an investment in our company will require a long-term commitment, with no certainty

Presently there is limited trading in our stock and in the absence of an active trading market investors may have difficulty

buying and selling or obtaining market quotations, market visibility for shares of our common stock may be limited, and a lack

of visibility for shares of our common stock may have a depressive effect on the market price for shares of our common stock.

The lack of an active market impairs your ability

to sell your shares at the time you wish to sell them or at a price that you consider reasonable.

The lack of an active market

may also reduce the fair market value of your shares.

An inactive market may also impair our ability to raise capital to continue

to fund operations by selling shares.

Trading in stocks

quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may

have little to do with our operations or business prospects.

The securities market has from time to time experienced significant

price and volume fluctuations that are not related to the operating performance of particular companies.

These market fluctuations

may also materially and adversely affect the market price of shares of our common stock .

the OTC pink sheets is not a stock exchange, and trading of securities is often more sporadic than the trading of securities listed

on a quotation system like Nasdaq or a national stock exchange like the NYSE.

Accordingly, stockholders may have difficulty reselling

any shares of common stock.

Our Board of Directors may authorize

and issue shares of new classes of stock that could be superior to or adversely affect current holders of our common stock.

As a result, capital

appreciation, if any, of our common stock, will be your sole source of gain for the foreseeable future.

Following the listing of our securities

on Nasdaq, we will become subject to additional regulations and continued requirements.

As a newly exchange-listed

public company, we will be required to meet the continued listing standards for Nasdaq.

Following the listing of our common stock on

Nasdaq, we must meet certain financial and liquidity criteria to maintain such listing.

If we fail to meet any of Nasdaq’s listing

standards, our securities may be delisted.

Nasdaq requires that the trading price of its listed stocks remain above one dollar in order

for the stock to remain listed.

If a listed stock trades below one dollar for more than 30 consecutive trading days, then it is subject

to delisting from Nasdaq.

In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing

requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’

equity, and certain corporate governance requirements.

If we are unable to satisfy these requirements or standards, we could be subject

to delisting, which would have a negative effect on the price of our common stock and would impair your ability to sell or purchase our

common stock when you wish to do so.

In the event of a delisting, we would expect to take actions to restore our compliance with the

listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed

again, stabilize the market price, or improve the liquidity of our common stock, or prevent future non-compliance with the listing requirements.

A delisting of our securities from Nasdaq may materially impair our stockholders’

ability to buy and sell our securities and could

have an adverse effect on the market price of, and the efficiency of the trading market for, our securities.

Our Board of Directors may authorize and issue

shares of new classes of stock that could be superior to or adversely affect current holders of our common stock.

Our board of directors has the power to authorize

and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations

and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without

further shareholder approval which could adversely affect the rights of the holders of our common stock.

In addition, our board

could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible

into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing

common stockholders.

and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and special

rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further shareholder

approval which could adversely affect the rights of the holders of our common stock.

In addition, our board could authorize the issuance

of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which

could decrease the relative voting power of our common stock or result in dilution to our existing common stockholders.

Any of these actions could significantly adversely

affect the investment made by holders of our common stock.

Holders of common stock could potentially not receive dividends that

they might otherwise have received.

In addition, holders of our common stock could receive less proceeds in connection with any

future sale of the Company, whether in liquidation or on any other basis.

Our shares will be subordinate to all

of our debts and liabilities, which increases the risk that you could lose your entire investment.

Our shares are equity interests that will be

subordinate to all of our current and future indebtedness with respect to claims on our assets.

Holders of common stock could potentially not receive dividends that they

might otherwise have received.

In addition, holders of our common stock could receive less proceeds in connection with any future sale

of the Company, in liquidation or on any other basis.

Our shares will be subordinate to all of our

debts and liabilities, which increases the risk that you could lose your entire investment.

Our shares of common stock are equity interests that

will be subordinate to all of our current and future indebtedness with respect to claims on our assets.

In any liquidation, all of our

debts and liabilities must be paid before any payment is made to our shareholders.

The market price of our shares of common

stock is subject to fluctuation.

prices of our shares may fluctuate significantly in response to factors, some of which are beyond our control, including:

The market price of our shares of common stock

is subject to fluctuation.

The market prices of our shares may fluctuate significantly

in response to factors, some of which are beyond our control, including:

The announcement of new products by our competitors

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Developments in our industry or target markets

General market conditions including factors

unrelated to our operating performance

the stock market, in general, has experienced extreme price and volume fluctuations.

Continued market fluctuations could result

in extreme market volatility in the price of our shares of common stock which could cause a decline in the value of our shares.

Our common stock may be deemed a “penny stock”

which may reduce the value of an investment in the stock.

Rule 15g-9 under the Exchange Act establishes

the definition of a “penny stock,”

for the purposes relevant to us, as any equity security that has a market price

of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions.

For any transaction

involving a penny stock, unless exempt, the rules require:

(a) that a broker or dealer approve a person’s account for transactions

in penny stocks;

and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the

identity and quantity of the penny stock to be purchased.

In order to approve a person’s account

for transactions in penny stocks, the broker or dealer must:

(a) obtain financial information and investment experience objectives

of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the

person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny

The broker or dealer must also deliver, prior

to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in

highlight form:

(a) sets forth the basis on which the broker or dealer made the suitability determination;

and (b) confirms that

the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be

less willing to execute transactions in securities subject to the “penny stock”

If our Common Stock is or becomes

subject to the “penny stock”

rules, it may be more difficult for investors to dispose of our common stock and cause

a decline in the market value of our common stock.

Disclosure also has to be made about the risks

of investing in penny stocks in both public offerings and in secondary trading and about commissions payable to both the broker

or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an

investor in cases of fraud in penny stock transactions.

Finally, monthly statements have to be sent disclosing recent price information

for the penny stock held in the account and information on the limited market in penny stocks.

Future capital raises may dilute our

existing stockholders’

General market conditions including factors unrelated to our operating

Recently, the stock market, in general, has experienced

extreme price and volume fluctuations.

Continued market fluctuations could result in extreme market volatility in the price of our shares

of common stock which could cause a decline in the value of our shares.

Future capital raises may dilute our existing

stockholders’

ownership and/or have other adverse effects on our operations.

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securities, our existing stockholders’

percentage ownership may decrease, and these stockholders may experience substantial

If we raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictions

on our operations, including liens on our assets.

If we raise additional funds through collaborations and licensing arrangements,

we may be required to relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable

to us or could diminish the rights of our stockholders.

We could experience system failures that

could negatively impact our Rotor Riot e-commerce platform and business.

Our ability to sell products on our Rotor Riot

platform depends on the the efficient and uninterrupted operation of the platform, relying on people, processes, and technology

to function effectively.

Any significant interruption to, failure of, or security breaches affecting, our platform could result

in significant expense, a loss of customers, and harm to our business and reputation.

Interruptions, system failures or security

breaches could result from a wide variety of causes, including disruptions to the Internet, malicious attacks or cyber incidents

such as unauthorized access, loss or destruction of data (including confidential and/or personal customer information), account

takeovers, computer viruses or other malicious code, and the loss or failure of systems over which we have no control.

of our platform, or the loss of data, could result in disruption to our operations, damage to our reputation and remediation costs,

which could adversely affect our business and brand.

percentage ownership may decrease, and these stockholders may experience substantial dilution.

If we raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictions on our operations,

including liens on our assets.

If we raise additional funds through collaborations and licensing arrangements, we may be required to

relinquish some rights to our technologies or products, or to grant licenses on terms that are not favorable to us or could diminish

the rights of our stockholders.

If securities or industry analysts do not publish

research or reports about our business, or if they adversely change their recommendations regarding our Shares, the market price for

our Shares and trading volume could decline.

The trading market for our common stock will be influenced

by research or reports that industry or securities analysts publish about our business.

If one or more analysts who cover us downgrade

our common stock, the market price for our common stock would likely decline.

If one or more of these analysts cease to cover us or fail

to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or

trading volume for our common stock to decline.

Negative publicity may harm our brand and reputation

and have a material adverse effect on our business.

Negative publicity about us, including our services,

management, business model and practices, compliance with applicable rules, regulations and policies, or our network partners may materially

and adversely harm our brand and reputation and have a material adverse effect on our business.

We cannot assure you that we will be

able to defuse any such negative publicity within a reasonable period of time, or at all.

Additionally, allegations, directly or indirectly

against us, may be posted on the internet by anyone on a named or anonymous basis, and can be quickly and widely disseminated.

posted may be inaccurate, misleading and adverse to us, and it may harm our reputation, business or prospects.

The harm may be immediate

without affording us an opportunity for redress or correction.

Our reputation may be negatively affected as a result of the public dissemination

of negative and potentially inaccurate or misleading information about our business and operations, which in turn may materially adversely

affect our relationships with our customers, employees or business partners, and adversely affect the price of our common stock.

Risks Related to Covid-19

The current outbreak of Covid-19 could have

a material and adverse effect on the Company’s business operations.

These could include disruptions or restrictions on the

Company’s ability to travel or to distribute its products, as well as temporary closures of officers and production facilities.

Any such disruption or delay would likely impact our sales and operating results.

In addition, Covid-19 has resulted in a widespread

health crisis that could adversely affect the economies and financial markets of many other countries, resulting in an economic

downturn that could affect demand for our products and significantly impact our operating results.

The extent to which our results continue to

be affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration

and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, demand for

our products, and our ability to provide our products, particularly as result of our employees working remotely and/or the closure

of certain offices and third party production facilities.

The COVID-19 outbreak also has a negative effect on our ability to access

capital markets.

While these factors are uncertain, the COVID-19 pandemic or the perception of its effects could continue to have

a material adverse effect on our business, financial condition, results of operations, or cash flows.

The COVID-19 pandemic has adversely impacted,

and poses risks to, our business, results of operations and financial condition, the nature and extent of which are highly uncertain

and unpredictable.

The global spread of COVID-19 is having, and will

continue to have, an adverse impact on our operations, sales and delivery and supply chains.

Many countries including the

United States have implemented measures such as quarantine, shelter-in-place, curfew, travel restrictions and similar isolation

measures, including government orders and other restrictions on the conduct of business operations.

It remains uncertain what impact

the pandemic will have on our ability to generate sales and customer interest even once conditions begin to improve.

COVID-19 pandemic has also impacted our supply chain as we have experienced disruptions or delays in shipments of certain materials

or components of our products.

Prices of our supplies have also increased as a result of the pandemic.

Accordingly, COVID-19 has

negatively affected our business.

Given the rapid and evolving nature of the virus, it is uncertain how materially COVID-19 will affect

our operations generally if these impacts persist, worsen or re-emerge over an extended period of time.

Additionally, the COVID-19 pandemic caused

significant volatility and uncertainty in U.S.

and international markets, which may result in a prolonged economic downturn.

of financial markets may reduce our ability to access capital and increase the cost of doing so.

There are no assurances that the

credit markets or the capital markets will be available to us in the future or that financing will be available.

We cannot reasonably estimate the length or severity

of the COVID-19 pandemic or the related response, or the extent to which the disruption may continue to impact our business,

financial position, results of operations and cash flows.

Ultimately, the COVID-19 pandemic could have a material adverse impact

on our business, financial position, results of operations and cash flows.

UNRESOLVED STAFF COMMENTS

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-K

Item 1A. Risk Factors