Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Item 1A. Risk Factors” in this Annual Report on Form 10-K. Some of these principal risks include the following:
Risks Related to Our Business and Industry
| ● | We have incurred significant operating losses since inception and cannot assure you that we will ever achieve or sustain profitability. |
| ● | The Company operates in evolving markets, which makes it difficult to evaluate the Company’s business and future prospects. |
| ● | Failure to manage our planned growth could place a significant strain on our resources. |
| ● | If we fail to retain our existing customers or do not acquire new customers in a cost-effective manner, our revenue may decrease and our business, financial condition or results of operations may be harmed. |
| ● | Our contractors may fail to satisfy their obligations to us or other parties, or we may be unable to maintain these relationships, either of which may have a material adverse effect on our business, financial condition and results of operations. |
| ● | Material delays or defaults in customer payments could leave us unable to cover expenditures related to such customer’s projects, including the payment of our subcontractors. |
| ● | Warranty claims resulting from our services could have a material adverse effect on our business, financial condition or results of operations. |
| ● | Our marketing efforts depend significantly on our ability to receive positive references from our existing customers. |
| ● | Our technology, products and services have only been developed in the last several years and we have had only limited opportunities to deploy and assess their performance in the field at full scale. |
| ● | 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. |
| ● | If our products do not interoperate with our customers’ other systems, the purchase or deployment of our products and services may be delayed or cancelled. |
| ● | Cyberattacks through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive position. |
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| ● | If the Company is required to write down goodwill and other intangible assets, the Company’s financial condition and results could be negatively affected. |
| ● | War, terrorism, and other acts of violence may affect the markets in which we operate, our clients and our product and service delivery. |
| ● | We may not be able to secure adequate insurance policies, or secure insurance policies at reasonable prices. |
| ● | Litigation may adversely affect our business, financial condition, and results of operations. |
| ● | Our products have inherent safety risks, as they often operate in hazardous industrial environments and are relied on by our customers to operate in a safe manner. If the reliability of our products fails to meet expected levels during commercial operation, this could result property damage, injury, death, financial harm to the business, and/or brand harm to the business. |
Risks Related to Regulatory Requirements
| ● | We and our customers operate in a highly regulated business environment and changes in regulation could impose costs on us or make our products less economical. |
| ● | Failure to obtain necessary regulatory approvals from the Federal Aviation Administration (“FAA”) or other governmental agencies, or limitations put on the use of small UAS in response to public privacy and other concerns, may prevent us from expanding the sales of our drone solutions to industrial and government customers in the United States. |
| ● | Substantially all our current products depend on the availability and are subject to the use of licensed radio frequencies regulated by the Federal Communications Committee (“FCC”) in the United States. |
| ● | As a manufacturer of commercial UAS, we are subject to various government regulations, restrictions and requirements, and may be subject to additional regulations in the future, violation of which could subject us to sanctions or otherwise harm, restrict or add costs to our business. |
Risks Related to our Intellectual Property
| ● | Our ability to protect our intellectual property and proprietary technology is uncertain. |
| ● | Our business may suffer if it is alleged or found that our products infringe the intellectual property rights of others. |
| ● | Intellectual property rights do not necessarily address all potential threats to our competitive advantage. |
Risks Related to our Financial Results
| ● | We will need to generate significant sales to achieve profitable operations. |
| ● | Our future profitability may be dependent upon achieving cost reductions and projected economies of scale from increasing manufacturing quantities of our products. Failing to achieve such reductions in manufacturing costs and projected economies of scale could materially adversely affect our business. |
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| ● | If our internal controls over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price. |
| ● | Following the completion of the acquisition of Airobotics, our exposure to fluctuations in foreign currency exchange rates has increased. |
Risks Related to our Common Stock
| ● | Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions. |
| ● | We may issue more shares to raise additional capital, which may result in substantial dilution. |
Risks Related to the Notes
| ● | We may not have the ability to pay interest on the certain (i) 3% Senior Convertible Notes Due 2024 (the “2022 Convertible Exchange Notes”) and (ii) 3% Series B-2 Senior Convertible Notes (the “2023 Additional Notes,” together with the 2022 Convertible Exchange Notes, the “Notes”) or to redeem the Notes. |
| ● | Provisions in the Notes may deter or prevent a business combination that may be favorable to you. |
| ● | Future sales of a significant number of our shares of Common Stock in the public markets, or the perception that such sales could occur, could depress the market price of our shares of Common Stock or cause it to be highly volatile. |
| ● | Our financing arrangements contain, and we expect that other future loan agreements and financing arrangements will contain, customary covenants that may limit our liquidity and corporate activities, which could limit our operational flexibility and have an adverse effect on our financial condition and results of operations. |
| ● | Provisions in the Notes may deter or prevent a business combination that may be favorable to you. |
| ● | Future sales of a significant number of our shares of Common Stock in the public markets, or the perception that such sales could occur, could depress the market price of our shares of Common Stock or cause it to be highly volatile. |
| ● | Our financing arrangements contain, and we expect that other future loan agreements and financing arrangements will contain, customary covenants that may limit our liquidity and corporate activities, which could limit our operational flexibility and have an adverse effect on our financial condition and results of operations. |
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