We expect competition to increase in the future, which could have an adverse effect on our revenue and market share. 

The global market for personal aerial cameras in general is highly competitive. We compete in different target markets to various degrees on the basis of a number of competitive factors, including our current and planned products’ performance, features, functionality, battery life (affecting flight time) and recharge time, size, customer support, reliability and price, as well as on the basis of our reputation. We expect competition to increase and intensify as more and larger drone companies enter our markets and as existing competitors improve or expand their product offerings. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which could harm our business, revenue and operating results. 

Our competitors include companies offering a wide range of industrial and consumer unmanned aerial vehicles (UAVs) with cameras, such as SZ DJI Technology Co., Ltd., Parrot SA, Zerotech (Beijing) Intelligence Technology Co., Ltd., Ryze Tech, Holy Stone Toy, CheerWing, Autel Robotics and ZeroZero Robotics. 

Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Many of our competitors are substantially larger, have greater financial, technical, marketing, distribution, customer support and other resources, are more established than we are and have significantly better brand recognition and broader product offerings than us, which may enable them to develop and enable new technology into products better or faster than us and to better withstand adverse economic or market conditions in the future. Our ability to compete will depend on a number of factors, including: 

 our ability to anticipate market and technology trends and successfully develop solutions that meet market needs; 

 our success in identifying and penetrating new markets, applications and customers; 

 our ability to understand the price points and performance metrics of competing products in the marketplace; 

 our products’ performance and cost-effectiveness relative to that of competing products; 

 our ability to protect our intellectual property; 

 our ability to expand international operations in a timely and cost-efficient manner; and our ability to deliver products in volume on a timely basis at competitive prices. 

Our competitors may also establish cooperative relationships among themselves or with third parties or acquire companies that provide similar products to ours. As a result, new competitors or alliances may emerge that could acquire significant market share. Any of these factors, alone or in combination with others, could harm our business and result in a loss of market share and an increase in pricing pressure.

We do not have long-term supply contracts with our third-party manufacturing vendors, and they may not allocate sufficient capacity to us at reasonable prices to meet future demands for our products. 

The unmanned drone manufacturing industry is subject to intense competitive pricing pressure from customers and competitors. Accordingly, any increase in the cost of our products, whether by adverse purchase price variances or adverse manufacturing cost variances, will reduce our gross margins and operating profit. We currently do not have long-term supply contracts with our primary third-party vendor, and we negotiate pricing with our main vendor on a purchase order-by-purchase order basis. Therefore, they are not obligated to perform services or supply product to us for any specific period, in any specific quantities, or at any specific price, except as may be provided in a particular purchase order. Availability of drone manufacturing capacity has in the recent past been limited due to strong demand. The ability of our vendors to provide us with a product, which is typically sole-sourced at each manufacturing facility, is limited by their available capacity, existing obligations and technological capabilities. Drone manufacturing capacity may not be available when we need it or at reasonable prices. None of our third-party manufacturing vendors has provided contractual assurances to us that adequate capacity will be available to us to meet our anticipated future demand for our products. Our vendors may allocate capacity to the production of other companies’ products while reducing deliveries to us on short notice. In particular, other companies that are larger and better financed than we are or that have long-term agreements with our manufacturing vendors may cause our vendors to reallocate capacity to them, decreasing the capacity available to us. Converting or transferring manufacturing from a primary location or supplier to a backup provider could be expensive and time-consuming and might require development of new tools and dies for production. The unavailability of any of our vendors could significantly impact our ability to produce our products or delay production, which would negatively impact our business.

We are subject to warranty and product liability claims and to product recalls. 

We are subject to potential warranty claims that may require us to make significant expenditures to defend these claims or pay damage awards. In the future, we may also be subject to product liability and other claims resulting from failure of our products or if products we design, have manufactured or sell, cause personal injury or property damage, even where the cause is unrelated to product defects. These risks will likely increase as our products are more widely adopted, particularly by consumers not familiar with flying devices. In the event of a warranty claim, we may also incur costs if we compensate the affected customer. We maintain product liability insurance, but this insurance is limited in amount and subject to significant deductibles. There is no guarantee that our insurance will be available or adequate to protect against all claims. We also may incur costs and expenses relating to a recall of one of our products. The process of identifying recalled consumer devices that have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs, contract damage claims from our customers and reputational harm. Costs or payments made in connection with warranty and product liability claims and product recalls could harm our financial condition and results of operations, as well as harm our reputation and cause the market value of our ordinary shares to decline. 

Global economic and political conditions, including possible trade tariffs and restrictions, may have an impact on our business and financial condition in ways that we currently cannot predict. 

Our products are manufactured to our specifications in China. Recently public policy changes and the imposition of trade tariffs and restrictions between the United States and China have, in our view, created and will continue to create an uncertain business environment. We currently import our products into the United States under a toy classification, which limits our tariff impact. However, as we begin to import more sophisticated devices as planned, our products may be reclassified into a higher tariff category. In particular, if additional tariffs or restrictions are imposed on our products or the products of our customers, there could be a negative impact on our operations and financial performance. Similarly, changes in export classification requirements could impact our ability to supply our products to certain countries. Even in the absence of new restrictions, tariffs or changes in export classifications, it is possible that foreign customers could take actions to reduce dependence on our products that could be subject to new export classifications, which could have a material adverse effect on our business and financial condition. 

Our products are subject to unclear governmental regulation, compliance with which may adversely affect our business and increase our costs and the uncertainty of applicability to us which may deter purchase and use of our products. 

As flying drone devices, our products are subject to regulation in the United States by the Federal Aviation Administration (the “FAA”) and are subject to the laws and regulations of other countries worldwide where we market and sell our products. The application of these laws and regulations to our products is not clear, which may adversely impact adoption of our products by consumers. For example, in the United States, we operate under our belief that our products and customers are currently exempt from FAA regulation because of the light weight and small size of our devices. However, in fall 2018, the FAA Modernization and Reform Act (the “FAARA”) repealed a then-existing exemption from FAA regulation of certain lightweight, recreational drones, similar to our type of products. Compliance with FAARA provisions, if they are ultimately determined to apply to our products, may deter purchase or use of our products by consumers. Section 349 of the FAARA creates a new framework for the operation of model aircraft, a category into which our aerial cameras may fit. To avoid the need for specific certification or operating authority from the FAA, model aircraft must now (1) be flown strictly for recreational purposes; (2) be operated in accordance with a community-based organization’s set of safety guidelines developed in coordination with the FAA; (3) be flown within the visual line of sight of the operator or a visual observer co-located and in direct communication with the operator; (4) be operated in a manner that does not interfere with manned aircraft; (5) not be flown in particular classes of airspace or within the lateral boundaries of the surface area of certain airspace designated for an airport without prior authorization; (6) be flown no higher than 400 feet above ground level; (7) be flown by an operator who has passed an aeronautical knowledge and safety test which is to be developed no later than 180 days after the FAARA’s passage; and (8) be registered and marked. In October 2018, the FAA released a statement acknowledging the inability to fully implement the FAARA provisions immediately and asking operators to follow then-current policies and guidance with respect to recreational use of drones until the FAA provides updated direction and guidance. In May 2019, the FAA issued a notice entitled “Exception for Limited Recreational Operations of Unmanned Aircraft” which is intended in part to implement the FAARA. In our view, the new guidance does not clarify the applicability of the FAARA to our products. This only may add to consumer confusion and adversely affect our business and the value of your investment in us. 

Our future results may also be affected by other various legal and regulatory proceedings and legal compliance risks worldwide, including those involving product liability, antitrust, intellectual property, environmental, foreign governmental regulations, the U.S. Foreign Corrupt Practices Act and other anti-bribery, anti-corruption or other matters. The outcome of these legal proceedings may differ from our expectations because the outcomes of litigation, including regulatory matters, are often difficult to reliably predict. Various factors or developments can lead us to change current estimates of liabilities and related insurance receivables where applicable or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on our business.

Our products could have undetected defects, errors or bugs in hardware or software which could reduce the market adoption of our products, damage our reputation with current or prospective customers and adversely affect our operating costs. 

We have in the past and may in the future experience defects, errors and bugs in the hardware or software for our personal aerial camera products. If any of our products have reliability, quality or compatibility problems, we may not be able to successfully correct these problems in a timely manner or at all. In addition, if any of our proprietary features contain defects, errors or bugs when first introduced or as new versions of our products are released, we may be unable to timely correct these problems. Consequently, our reputation may be damaged and customers may be reluctant to buy our products, which could harm our ability to retain existing customers and attract new customers, and could adversely affect our financial results. In addition, these defects, errors or bugs could interrupt or delay sales to our customers. If any of these problems are not found until after we have commenced commercial production of a new product, we may incur significant additional development costs and product recall, repair or replacement costs. These problems may also result in claims against us by our customers or others.

If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. 

We operate in a dynamic environment characterized by rapidly changing technologies and technological obsolescence. To compete successfully, we must design, develop, arrange for manufacture, market and sell enhanced, easy-to-use, inexpensive personal aerial camera products that provide increasingly higher levels of performance and functionality and that meet the cost expectations of our customers. Our existing or future products could be rendered obsolete by the introduction of new products by our competitors; convergence of other markets with or into the personal aerial camera market; or the market adoption of products based on new or alternative technologies. In addition, the markets for our products are characterized by frequent introduction of next-generation and new products, short product life cycles, increasing demand for added functionality and significant price competition. If we or our distribution customers are unable to manage product transitions in a timely and cost-effective manner, our business and results of operations would suffer. 

Our failure to anticipate or timely develop new or enhanced products in response to technological shifts could result in decreased revenue and our competitors achieving wins that we sought. In particular, we may experience difficulties with product design, development of new software, manufacturing, marketing or qualification that could delay or prevent our development, introduction or marketing of new or enhanced products. In addition, we expect that we will need to establish relationships with third-party distributors in order to effectively market our products to end-customers. Failure to establish these relationships could harm our ability to achieve increasing product sales. Delays in product development could impair our relationships with our customers and negatively impact sales of our products under development. Moreover, it is possible that our distributors may develop their own product or adopt a competitor’s solution for products that they currently buyfrom us. If we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our operating results will be adversely affected.

Fluctuations in our operating results could negatively affect the value of our company. 

Our revenue and operating results have fluctuated significantly from period to period in the past and are likely to do so in the future. In particular, our business has tended to be seasonal with higher revenue in our third quarter as our distribution customers typically increase their inventories to meet holiday shopping season or year-end demand for our products. We also may experience seasonally lower demand in our first quarter in the Asia-based portion of our markets as a result of industry seasonality and the impact of factory closures associated with the Chinese New Year holiday. As a result, you should not rely on period-to-period comparisons of our operating results as an indication of our future performance. In future periods, our revenue and results of operations may be below expectations. Factors that may affect our operating results include: 

 fluctuations in demand, sales cycles, product mix, and prices for our products; 

 the forecasting, scheduling, rescheduling or cancellation of orders by our distribution customers; 

 shifts in consumer or manufacturer preferences and any resultant change in demand for personal, aerial camera devices; 

 changes in the competitive dynamics of our markets, including new entrants or pricing pressures; 

 delays in our manufacturer’s ability to manufacture and ship our products caused by internal and external factors beyond our control; 

 our ability to successfully define, design and release new products in a timely manner that meet our customers’ needs; 

 changes in manufacturing costs, including product quality and reliability; 

 timely availability of adequate manufacturing capacity from our manufacturing subcontractors; 

 the timing of product announcements by our competitors or by us; 

 incurrence of research and development and related new products expenditures; 

 write-downs of inventory for excess quantities and technological obsolescence; 

 future accounting pronouncements and changes in accounting policies; 

 volatility in our effective tax rate; 

 general socioeconomic and political conditions in the countries where we operate or where our products are sold or used; and 

 costs associated with litigation, especially related to intellectual property. 

Moreover, the consumer electronics industry in general has historically been cyclical in nature, reflecting overall economic conditions as well as budgeting and buying patterns of consumers. We expect these cyclical conditions to continue. As a result, our quarterly operating results are difficult to predict, even in the near term. Our expense levels are relatively fixed in the short term and are based, in part, on our expectations of future revenue. If revenue levels are below our expectations, we may experience material impacts on our business, including declines in margins and profitability, or incur losses. Reduced revenues may result in a substantial decline in cash flows from operating activities, which would harm our business.

If we are unable to manage any future growth, we may not be able to execute our business plan and our operating results could suffer. 

Our future operating results depend to a large extent on our ability to successfully manage any expansion and growth, including the challenges of managing a company with an executive management team split between the United States and Italy and manufacturing occurring in Asia. With proceeds from this placement we plan to increase our investment in research and development and other functions to grow our business and address new markets, such as the military markets. To manage our growth successfully, we believe we must effectively, among other things: 

 recruit, hire, train and manage additional qualified engineers for our research and development activities; 

 add additional sales and business development personnel; 

 add additional finance and accounting personnel; 

 maintain and improve our administrative, financial and operational systems, procedures and controls; and 

 enhance our information technology support for enterprise resource planning and design engineering, and properly training new hires as to their use. 

We are likely to incur the costs associated with these increased investments earlier than some of the anticipated benefits, and the return on these investments, if any, may be lower, may develop more slowly than we expect or may not materialize. In addition, development of products to address emerging markets, such as the military markets, could negatively impact our ability to develop new products for our current consumer markets, which may harm our financial condition, particularly in the near term. 

If we are unable to manage growth effectively, we may not be able to take advantage of market opportunities or develop new products, and we may fail to satisfy customer product or support requirements, maintain product quality, execute our business plan or respond to competitive pressures.

The average selling prices of drone camera products has historically decreased over time and will likely do so in the future, which could reduce our gross margins and make it easier for new competitors to enter our markets. 

Average selling prices of drone camera devices in the consumer markets we principally serve have historically decreased over time, and we expect such declines to continue to occur for our products over time. Our gross margins and financial results will suffer if we are unable to offset reductions in our average selling prices by reducing our costs, developing new or enhanced products on a timely basis with higher selling prices or gross margins, or increasing our sales volumes. Additionally, because we do not operate our own manufacturing, assembly or testing facilities, we may not be able to reduce our costs as rapidly as companies that operate their own facilities, and our costs may even increase, which could also reduce our gross margins.

Camera manufacturers incorporate components supplied by multiple third parties, and a supply shortage or delay in delivery of these components could delay delivery of our products. 

Our Chinese manufacturer purchases camera components used in the manufacture of our personal aerial cameras from various sources of supply, often involving several specialized components, including lenses, sensors and memory chips. Any supply shortage or delay in delivery by third-party component suppliers, or a third-party supplier’s cessation or shut down of its business, may prevent or delay our manufacturer’s production of our products. In addition, replacement or substitute components may not be available on commercially reasonable terms, or at all. As a result of delays in delivery or supply shortages of third-party components, orders for our products could be delayed or canceled and our business may be harmed. Errors or defects within a personal aerial camera system or in the manner in which the various components interact could prevent or delay our manufacturer’s production of our products, which could harm our business.

The Company may never receive a future equity financing or elect to convert the Securities upon such future financing. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an IPO. If neither the conversion of the Securities nor a liquidity event occurs, the Purchasers could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.

Mike Kasner is a part-time officer. As such, it is likely that the company will not make the same progress as it would if that were not the case.

Our future success depends on the efforts of a small management team. The loss of services of the members of the management team may have an adverse effect on the company. There can be no assurance that we will be successful in attracting and retaining other personnel we require to successfully grow our business.

COVID-19 may have impacts on our business.  In-person events where customers may use our products could be postponed or canceled.  Manufacturing could be delayed due to forces outside of our control.

The ongoing COVID-19 pandemic and responses thereto have adversely affected and we expect will continue to adversely affect our supply chain, workforce, approval process, and business operations.
In December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China. Since then, SARS-CoV-2, and the resulting disease COVID-19 has spread to multiple countries, including the United States and all of the primary markets where we conduct business. On March 10, 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S. government imposed travel restrictions on travel between the United States and Europe for a 30-day period. Further, on March 13, 2020, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. Almost all U.S. states and many local jurisdictions have issued, and others in the future may issue, "shelter-in-place" orders, quarantines, executive orders and similar government orders, restrictions and recommendations for their residents to control the spread of COVID-19. Such orders, restrictions and recommendations, and the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,” work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, as well as record declines in stock prices, among other effects. We continue to monitor our operations and government mandates and may elect or be required to temporarily close our offices to protect our employees, and limit our access to customers and limit customer use of our products as they are required to prioritize resources to address the public healthcare needs arising from the COVID-19 pandemic. The disruptions to our activities and operations will negatively impact our business, operating results and financial condition. There is a risk that government actions will not be effective at containing COVID-19, and that government actions, including the orders and restrictions described above, that are intended to contain the spread of COVID-19 will have a devastating negative impact on the world economy at large, in which case the risks to our sales, operating results and financial condition described herein would be elevated significantly.
The duration of COVID-19's impact on our business may be difficult to assess or predict. The widespread pandemic has resulted, and may continue to result for an extended period, in significant disruption of global financial markets, reducing our ability to access capital, which would negatively affect our liquidity. Further, quarantines or government reaction or shutdowns for COVID-19 could disrupt our supply chain. Travel and import restrictions may also disrupt our ability to manufacture or distribute our devices. Any import or export or other cargo restrictions related to our products or the raw materials used to manufacture our products would restrict our ability to manufacture and ship products and harm our business, financial condition and results of operations. Our key personnel and other employees could also be affected by COVID-19, potentially reducing their availability, and an outbreak such as COVID-19 or the procedures we take to mitigate its effect on our workforce could reduce the efficiency of our operations or prove insufficient. We may delay or reduce certain capital spending and related projects until the travel and logistical impacts of COVID-19 are lifted, which will delay the completion of such projects.
In addition, the conduct of clinical trials and studies required to obtain certain regulatory approvals for additional indications and additional efficacy data for certain of our products that have previously received clearance from the FDA, such as the INSIGHT and IMAGE-BTK clinical studies, have been and we expect may continue to be affected by the COVID-19 pandemic. Site initiation and patient enrollment have been delayed for the IMAGE-BTK clinical study, and we have also experienced delays in completing the INSIGHT clinical study. As hospital resources are prioritized for the COVID-19 outbreak and quarantines impede patient movement or interrupt healthcare services, these and other clinical studies may continue to be disrupted. If we are unable to successfully complete these or other clinical studies, and obtain regulatory approvals and efficacy data sought, our business and operating results may be harmed.
The global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole. However, these effects have harmed our business, financial condition and results of operations in the near term and could have a continuing material impact on our operations, sales and ability to continue as a going concern.
Customer demand for and our ability to sell and market our products have been and we expect will continue to be adversely affected by the COVID-19 pandemic and responses thereto.
Restrictions on the ability to travel, social distancing policies, orders and restriction, including those described above, and recommendations and fears of COVID-19 spreading within medical centers has caused both patients and providers to delay or cancel procedures that use our devices. We are unable to accurately predict when these policies, orders and restrictions will be relaxed or lifted, and there can be no assurances that patients or providers will restart procedures that use our devices upon termination of these policies, orders and restrictions, particularly if there remains any continued community outbreak of COVID-19.