What changed in this filing

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Item 1A. Risk Factors

2022-07-27 compared with 2021-08-12 · 854 added, 956 removed, 293 unchanged (86% of the section changed)

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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.

We may need additional capital to fund our expanding

operations until we reach profitability, and if we are not able to obtain sufficient capital, we may be forced to limit or curtail our

During the fiscal year ended April 30, 2022, we acquired

Skypersonic and Teal Drones.

Our other businesses include Rotor Riot and Fat Shark.

Historically, only Fat Shark has reported profits

and it was not profitable in fiscal 2022.

There can be no assurance that any of our operating businesses will reach profitability in the

If additional equity and/or debt financing is not

available, then we may not be able to continue to develop our business activities, and we will have to modify our business plan.

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

If we are unable to raise 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.

and/or debt 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 and/or debt 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.

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as of April 30, 2022.

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

equity, net current assets,

and working capital.

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

There can be no assurances that

we will be able to do so or to reach profitability.

We operate in an emerging and rapidly growing

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and rapidly growing industries include:

Generating sufficient revenue to

cover operating costs and sustain operations;

Acquiring and maintaining market

Generating sufficient revenue to cover

operating costs and sustain operations;

Acquiring and maintaining market share;

Attracting and retaining qualified

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marketing new products:

Accessing the capital markets to

raise additional capital, on reasonable terms, if and when required to sustain operations or to grow the business.

Accessing the capital markets to raise

additional capital, on reasonable terms, if and when required to sustain operations or to grow the business.

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.

which could negatively impact our financial condition and results of operations.

We operate in the drone industry which is a highly

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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.

include accounting standards, taxation requirements, product safety, trade restrictions, 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.

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.

regulation and we may incur additional compliance costs or be forced to suspend or cease operations if we fail to comply.

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 both.

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.

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.

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.

We are, or may in the future be, subject

to these laws and regulations.

Our products may be 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 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.

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.

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.

These developments 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;

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.

that have substantially greater resources which challenges our ability to establish market share, grow our business segments, 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 us.

in the Enterprise segment include transportation companies like United Parcel Service, Federal Express and Amazon, as well as defense

companies such as Lockheed Martin Corporation, Northrop Grumman Corporation, and AeroVironment.

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 (i) develop competing products and technologies, (ii) leverage their financial

strength to utilize economies of scale and offer lower pricing, and (iii) hire more qualified personnel by offering more generous compensation

In order to secure orders and 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.

We may not be able to keep pace with technological

advances in the drone industry.

The drone industry continues to undergo significant

changes, primarily related to technological developments.

The rapid growth of technology and shifting consumer tastes makes it impossible

to predict the overall effect these factors could have on the drone industry.

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 will continue to rely on components (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 our future products will depend

on advances in these and other technologies by other companies.

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

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

Such activities might not result in useful technologies

or components for us but may help our competitors.

If critical components 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

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from customers may lead to a rapid decline in sales.

All customers issue purchase orders solely at their

Our 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.

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 any

If our customers do not continue to purchase our products, then our 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.

to protect us from the negative financial effects of a decline in demand for products.

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.

As a result of lack of long-term

purchase orders and purchase commitments, we may experience a rapid decline in sales.

Our products require a continuing investment

in 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.

to all the risks associated with the development of new products based on emerging and innovative technologies.

This includes, for

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

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, an inability to increase revenues and increasing operating losses.

The nature of our business involves significant

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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.

may not be available, including (i) those using advanced and unproven technologies and drones, and (ii) those that collect, distribute

and analyze various types of information.

Failure of certain of our products could result in

1 unchanged sentence

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.

trespass, conversion and similar concepts.

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 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

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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 product except in certain European countries that mandate 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.

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.

Prices of established consumer and enterprise 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 the markets in which we compete.

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 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

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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.

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

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

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.

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 29 granted United States and foreign patents and 13 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 at all.

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;

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.

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

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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’

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

Unauthorized parties may attempt to copy or otherwise

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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,

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.

We may initiate proceedings or litigation against third parties.

or enforce our intellectual property rights 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.

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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

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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 .

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 similar marks

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

Our operations may be adversely affected if

we lose our rights under our third-party technology licenses.

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.

We could lose our exclusivity or other rights to use the technology 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.

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.

platforms or technologies, and if the access is withdrawn, denied, or is not available, or if the platforms or technologies change without

notice, then our 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.

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

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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.

technical support, firmware or software updates, they may choose not to purchase our products which would adversely impact business and

operating results.

Our business relies 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

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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.

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 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 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;

A deterioration in global economic, financial, and/or

public health conditions, including global pandemics, economic recessions and political turmoil 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.

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 drone industry.

Our results of operations may suffer if we are

not able to successfully manage our 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

As our business grows, more of our sales and production costs may be denominated in other currencies.

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.

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.

dollar against these other currencies.

Most of our current expenditures are incurred

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

If the exchange

rates change adversely or are allowed to increase, then 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.

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 associated with our exposure to foreign currency fluctuations.

Our international operations, including the

use of foreign contract manufacturers, subjects us to international operational, financial, legal, political and public health risks which

could harm our operating results.

A substantial part of our operations, including manufacturing

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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,

Risks associated with our doing business outside of the United States include:

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, and 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;

economic instability and high levels of inflation in the countries where our suppliers are located 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.

difficulties in collecting accounts receivable and longer accounts receivable payment cycles;

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

Foreign Corrupt Practices Act or similar anti-bribery laws in other jurisdictions in which we operate.

The global nature of our business creates various

domestic and local regulatory challenges and subject us to risks associated with our international operations.

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) 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.

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, U.S.

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

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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.

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

established by the Treasury Department’s Office of Foreign Assets Controls.

Exports of our products must be made in compliance with

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.

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

sanctions, our products 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.

may be adversely impacted.

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 adversely impacted.

In 2018, the Trump Administration introduced a list of thousands of categories of goods that began facing tariffs of which may be increased

in the future.

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 performance.

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.

and other countries may have adverse impacts on our business, results of operations and financial condition.

government has indicated its intent to alter

its approach to international trade policy through the renegotiation, and potential termination, of certain trade agreements and treaties

with China, countries in EMEA and other countries.

These changes could include the imposition of tariffs on a wide range of products.

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

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.

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.

If we deem 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

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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.

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.

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, then system interruptions or delays could occur that would adversely affect our operating results.

We utilize third-party vendors for our customer-facing

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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.

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

We may collect, store, process and use the 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 the personally

identifiable information of our customers and other data in our transactions with them.

We also 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,

While we take reasonable measures 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 consent.

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

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.

These laws 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.

Data protection legislation is 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.

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expenditures in order to comply.

Cybersecurity risks could adversely affect

our business and disrupt our operations.

Cybersecurity risks could adversely affect our

business and disrupt our operations.

The threats to network and data security are increasingly

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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.

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 could lose the services of key management

personnel of the companies that we have acquired which could adversely impact our ability to operate and execute our subsidiaries effectively.

In recent years, we have completed four acquisitions

which have resulted in a significant expansion in the number of key management personnel and our reliance on them.

the former President of Fat Shark is now Chief Operating Officer of Red Cat Holdings.

George Matus has remained as President of

Drew Camden has remained as President of Rotor Riot, LLC.

Giuseppe Santangelo has remained as President of Skypersonic.

Each of these individuals were critical to the founding and growth of their companies prior to their being acquired by Red Cat Holdings.

They have specific knowledge and insight regarding the operations of their respective companies, and the loss of any of them could adversely

affect the efficiency of the operations of the related subsidiary.

Our efforts to do so are likely to result in difficulties in

effectively growing their businesses and higher operating costs which would adversely impact our operating results.

We must recruit and retain highly trained and

experienced employees, especially engineers, in order to succeed in our business.

We will need to hire and retain highly skilled technical

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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.

skilled technical, managerial, and other personnel can be 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

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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.

Acquisitions could

divert the attention of key personnel, be difficult to integrate, dilute our existing shareholders and adversely impact our financial

Since January 2020, we have completed four acquisitions

which have significantly increased the scope of our operations and our employee headcount.

Acquisitions include a wide range of risks,

any of which could hurt our business, including the following:

* difficulties in integrating the operations of

a newly acquired company including existing products and contracts, differences in corporate culture, operating systems and other integration

* challenges supporting and transitioning the

customers of acquired companies and the loss of any acquired customers will adversely impact our revenues and operating results;

* assumption of known and unknown operating problems

and our potential inability to address them in a timely and efficient manner;

* risks of entering new geographic markets where

we have no prior experience and are required to gain an understanding of the legal, regulatory, labor and business laws of these new markets;

In addition, there are many financial risks associated

with the cost of acquisitions.

If we finance the cost of an acquisition using common stock, then our existing shareholders will

be diluted and our stock price could decrease.

If we finance the cost of an acquisition using debt, such financing could include

restrictive covenants that restrict our operating and financial flexibility.

If the stock market perceives that we overpaid for

the acquisition, then our stock price could decrease.

Our failure to effectively manage growth could

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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.

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

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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

With 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 acceptance.

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;

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.

The 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 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 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 Logistics :

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

We presently have facilities in Puerto Rico, Italy,

and in multiple locations in the United States.

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.

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.

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.

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.

and supply changes, any of which could disrupt our supply chain, increase our costs, and adversely impact our operating results

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

All of the components that go into our products

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.

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.

In addition, the lead times associated with certain

components are lengthy and preclude rapid changes in quantities and delivery schedules.

We have experienced component shortages, and the

availability of these components may be unpredictable in the future.

If we lose access to or experience a significant disruption

in the supply of products and components from a 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 affected.

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 fulfill our orders in a timely or cost-effective manner.

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.

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, and natural disasters, fire, acts

of terrorism or other catastrophic events, including global pandemics.

Several steps of our manufacturing 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

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

Our products 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.

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 enterprise or consumer markets, then our operating results could be significantly and adversely

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.

Many HMD companies including Fat Shark are introducing digital HMDs which could create shortages of components and provide 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.

These same risks exist in our Enterprise sector

where our competitors include some of the largest defense companies in the world.

We depend on third parties to provide integrated

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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.

If any of these third-party contractors or suppliers were unable or unwilling to supply these components, our sales and operating

results would be adversely impacted.

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.

If 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 Enterprise Segment

government contracts are generally not fully funded at

inception and may include provisions that are not favorable to us which could adversely impact our cash flows and results of operations

US government contracts often have long lead times

for design and development, and can be subject to significant changes in delivery timelines.

Congress normally appropriates funds

on its fiscal year basis, and it may not fully fund a program in the same fiscal year.

Depending upon the results of political

elections, the actions of Congress can change from one fiscal year to the next.

As a result, we may be required to expend funds

to fulfill existing orders, but subsequently have the delivery timeline extended or the order cancelled.

Such results would have

an adverse impact on our financial position and results of operations.

A decline in U.S.

government budgets, changes in spending priorities,

or delays in contract awards could adversely affect the revenues of our Teal subsidiary.

We presently expect that much of our future revenue growth will be

generated by our wholly owned subsidiary, Teal Drones, and that their primary customer is likely to be the U.S.

government and its agencies.

As a result, our business may be adversely impacted due to changes in the political environment, including those related to changes in

the leadership of the current and or future administrations.

We cannot provide assurance that the current levels of congressional funding,

for defense in general, and for drones specifically, will continue at their current levels or decrease in the future.

If annual budget

appropriations are not enacted on a timely basis, we could encounter government shutdowns which could adversely impact any existing programs

including the timely payment of prior shipments, as well as the receipt of future orders.

Our work for the U.S.

government could

expose us to security risks.

We expect that an increasing

percentage of our revenues will come from the U.S.

government and its agencies.

This may expose us to numerous security threats, including

cyber security attacks on our information technology infrastructure as well as threats to the physical safety of our facilities and our

We utilize numerous controls and procedures to monitor and prevent these threats, however, we can provide no assurance that

they will be effective.

Any improper use of our data, information technology systems or facilities could adversely impact our operations

and operating results.

We expect to incur substantial research and development costs

and devote significant resources to identifying and commercializing new products and services which could significantly reduce our profitability

and may never result in revenue to us.

Our future growth depends on expanding into new

markets, adapting existing products to new applications, and introducing new products and services that achieve market acceptance.

plan to incur substantial research and development costs as part of these efforts.

We spent $2.6 million, or 41% of our revenue, in our

fiscal year ended April 30, 2022, on internal research and development activities.

We believe that there are significant investment opportunities

in a number of business areas.

Because we account for internal research and development as an operating expense, these expenditures will

adversely affect our earnings in the future.

Further, our research and development programs may not produce successful results, and our

new products and services may not achieve market acceptance, create additional revenue or become profitable, which could materially harm

our business, prospects, financial results and liquidity.

Risks Related to Our Consumer Business

Our Consumer Segment operates in a highly

competitive market and the size, resources, and brand name of its competitors may allow them to compete more effectively than our businesses

can which could result in a loss of market share and a decrease in revenues.

The market for drones and 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, Sony, LG Electronics (LGE),

HTC, Lenovo, and large software and other products companies such as Alphabet Inc.

(Google), Microsoft, Facebook and Snap.

drone market, we compete with established, well-known manufacturers such as Epson, Yuneec, Boscam, Eachine, Walkera, SkyZone, MicroLED

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, development and other resources than us.

many of our existing and potential competitors enjoy substantial competitive advantages, such as:

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.

Smartphones, tablets, and new wearable devices with

larger video display screens and computing power have significantly improved the mobile personal computing experience.

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, new companies may emerge and offer competitive products.

Increased competition

may result in pricing pressure and reduced profit margins and may impede our ability to increase the sales of our products.

factors could substantially harm our business and results of operations.

If our Consumer Segment fails to keep pace with

changing consumer preferences or technologies, then 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 succeed in the consumer marketplace,

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 develop new

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

If we are unable to

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

competitors may introduce more advanced and competitive products which could hurt our competitive position.

Our new products might not

receive customer acceptance if customer preferences shift to other products, and our future success depends on our ability to anticipate

and respond to these changes.

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 we do not maintain and develop sales channels

for products, then our sales could decline, and our operating losses could increase.

We depend upon effective sales channels in reaching

the customers who purchase our drone and HMD products.

We primarily sell products either from in-house sales teams directly to retail

outlets such as hobby shops or through websites and value-added resellers (“VARS”).

Distributors, third-party online resellers and VARs

generally offer products from several different manufacturers.

Accordingly, these distributors, resellers and VARs may give higher priority

to selling other companies’ products.

If we were to lose the services of a distributor, online reseller, or VAR, we might need to

find a replacement, and there can be no assurance of our ability to do so in a timely manner or on favorable terms.

Further, resellers

and distributors may 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.

We are 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.

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.

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 soon.

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.

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.

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 sales.

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.

Identifying 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 a related party 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.

was the former owner of Fat Shark and is presently a consultant to the Company.

These companies are Direct FPV Ltd.

(China), Shenzhen

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

As a result, 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 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.

Risks Related to Our Common Stock

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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.

Officer, owns approximately 23% of our common stock and our current officers and directors currently own approximately 31% of our common

In addition, the founder of Fat Shark owns approximately 7% 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

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 .

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 actions that other stockholders do not agree with.

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 the Company .

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.

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.

Failure to establish and maintain those controls could adversely impact 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 which may raise concerns for investors.

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, or disclosure of our public accounting firm’s attestation to 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 have reported net losses every year since inception.

We intend to retain future earnings, if any, to finance the growth and development of our business.

If we ever become profitable, we do

not expect 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.

As a result, capital appreciation, if any, of our common stock, will

be the sole source of gain for investors for the foreseeable future.

The listing of our securities on Nasdaq

subject us to additional regulations and compliance requirements.

We are required to maintain compliance with the continued

listing standards of Nasdaq.

These include 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, we must satisfy minimum financial and other continued listing requirements and

standards, including those regarding director and committee independence 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 an investor’s ability to sell or purchase our common

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 would allow our common stock to become listed again, stabilize the market price, 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.

shares of new classes of stock that could adversely affect current holders of our common stock.

Our Board of Directors has the power to authorize

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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.

These powers 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, in liquidation or on any other basis.

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.

debts and liabilities which increases the risk that investors could lose their entire investment.

Our shares of common stock are equity interests that

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The market prices of our shares may fluctuate significantly

in response to factors, some of which are beyond our control, including:

in response to a wide range of factors, many 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

General market conditions including factors unrelated to our operating performance

Recently, the stock market, in general, has experienced

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Future capital raises may dilute our existing

stockholders’

ownership and/or have other adverse effects on our operations.

stockholders’ ownership and adversely impact the fair value of their investment.

If we raise additional capital by issuing equity

securities, our existing stockholders’

percentage ownership may decrease, and these stockholders may experience substantial dilution.

securities, our existing stockholders’ 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

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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.

Any of these developments could adversely impact our stock price.

Risks Related to Covid-19

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.

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.

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.

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.

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

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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