Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Draganfly disclosed 50 risk factors in its most recent earnings report. Draganfly reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2021

Risk Distribution

32% Finance & Corporate

16% Legal & Regulatory

16% Production

14% Tech & Innovation

14% Macro & Political

8% Ability to Sell

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

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Draganfly Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2021

Main Risk Category

Finance & Corporate

With 16 Risks

Finance & Corporate

With 16 Risks

Number of Disclosed Risks

S&P 500 Average: 31

Recent Changes

0Risks added

0Risks removed

0Risks changed

Since Dec 2021

0Risks added

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0Risks changed

Since Dec 2021

Number of Risk Changed

S&P 500 Average: 3

See the risk highlights of Draganfly in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 50

Finance & Corporate

Total Risks: 16/50 (32%)Below Sector Average

Share Price & Shareholder Rights7 | 14.0%

Share Price & Shareholder Rights - Risk 1

We are an emerging growth company and intend to take advantage of reduced disclosure requirements ?applicable to emerging growth companies, which could make our Common Shares less attractive to ?investors.?

We are an "emerging growth company" as defined in the JOBS Act. We will remain an emerging growth ?company until the earliest to occur of (i) the last day of the fiscal year in which we have total annual gross ?revenue of $1.07 billion or more; (ii) December 31, 2026 (the last day of the fiscal year ending after the fifth ?anniversary of the date of the completion of the first sales of its common equity pursuant to an effective ?registration statement under the United States Securities Act of 1933, as amended (the "Securities Act")); (iii) ?the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-?year period; or (iv) the date we qualify as a "large accelerated filer" under the rules of the SEC, which means the ?market value of our Common Shares held by non-affiliates exceeds $700 million as of the last business day of ?its most recently completed second fiscal quarter after we have been a reporting company in the United States ?for at least 12 months. For so long as we remain an emerging growth company, we are permitted to and intend to ?rely upon exemptions from certain disclosure requirements that are applicable to other public companies that ?are not emerging growth companies. These exemptions include not being required to comply with the auditor ?attestation requirements of Section 404 ("Section 404") of the Sarbanes-Oxley Act (2002), as amended (the "Sarbanes-Oxley Act").? We may take advantage of some, but not all, of the available exemptions available to emerging growth ?companies. We cannot predict whether investors will find our Common Shares less attractive if we rely on these ?exemptions. If some investors find our Common Shares less attractive as a result, there may be a less active ?trading market for our Common Shares and the price of our Common Shares may be more volatile.

Share Price & Shareholder Rights - Risk 2

United States investors may not be able to obtain enforcement of civil liabilities against us.

? The Company is incorporated under the laws of British Columbia, Canada, and its principal executive offices are located in Canada. Most of the Company's directors and officers and most of the experts named in this Annual Report reside outside of the United States and all or a substantial portion of the Company's assets and the assets of these persons are located outside the United States. Consequently, it may not be possible for an investor to effect service of process within the United States on the Company or those persons. Furthermore, it may not be possible for an investor to enforce judgments obtained in United States courts based upon the civil liability provisions of United States federal securities laws or other laws of the United States against those persons or the Company. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities based upon United States federal securities laws and as to the enforceability in Canadian courts of judgments of United States courts obtained in actions based upon the civil liability provisions of the United States federal securities laws. Therefore, it may not be possible to enforce those actions against the Company, certain of the Company's directors and officers or the experts named in this Annual Report.

Share Price & Shareholder Rights - Risk 3

Future issuances of equity securities by us or sales by our existing shareholders may cause the price ?of our Common Shares to fall.?

The market price of our Common Shares could decline as a result of issuances of securities or sales by our ?existing shareholders in the market, including by our directors, executive officers and significant shareholders, or ?the perception that these sales could occur. Sales of our Common Shares by shareholders might also make it ?more difficult for us to sell Common Shares at a time and price that we deem appropriate. We also expect to ?issue Common Shares in the future. Future issuances of Common Shares, or the perception that such issuances ?are likely to occur, could affect the prevailing trading prices of the Common Shares.?

Share Price & Shareholder Rights - Risk 4

There is no guarantee that an active trading market for our Common Shares will be maintained on ?the CSE and/or the Nasdaq. Investors may not be able to sell their Common Shares quickly or at the ?latest market price if the trading in our Common Shares is not active.?

Our Common Shares are currently listed on the CSE, Nasdaq, and the Frankfurt Stock Exchange, however, our shareholders may be unable to sell significant quantities of Common Shares into the public ?trading markets without a significant reduction in the price of their Common Shares, or at all and there can be no guarantee that an active trading market for the Common Shares ?may be maintained. There can be no assurance that ?there will be sufficient liquidity of our Common Shares on the trading market, and that we will continue to meet ?the listing requirements of the CSE, the Nasdaq or any other public listing exchange.

Share Price & Shareholder Rights - Risk 5

The market price of the Common Shares may be highly volatile.?

The market price of the Common Shares may be highly volatile and could be subject to wide fluctuations ?in response to a number of factors that are beyond our control, including but not limited ?to?- revenue or results of operations in any quarter failing to meet the expectations, published or otherwise, of ?the investment community;? - actual or anticipated changes or fluctuations in our results of operations;? - announcements by us or our competitors of new products or new or terminated significant contracts, ?commercial relationships or capital commitments;? - rumors and market speculation involving us or other companies in our industry;? - changes in our executive management team or the composition of the board of directors of the Company (the "Board");? - fluctuations in the share prices of other companies in the technology and emerging growth sectors;? - general market conditions and macroeconomic trends driven by factors outside our control, such as the COVID-19 pandemic and/or geopolitical conflicts, including supply chain disruptions, market volatility, inflation, and labor challenges, among other factors; - actual or anticipated developments in our business or our competitors' businesses or the competitive ?landscape generally;? - litigation involving us, our industry or both, or investigations by regulators into our operations or those of ?competitors;? - announced or completed acquisitions of businesses or technologies by us or our competitors;? - new laws or regulations or new interpretations of existing laws or regulations applicable to our ?business;? - shareholder activism and related publicity;? - foreign exchange rates; and - other risk factors as set out in this Annual Report and in the documents incorporated by ?reference into this Annual Report.? If the market price of our Common Shares drops significantly, shareholders could institute securities class action ?lawsuits against us, regardless of the merits of such claims. Such a lawsuit could cause us to incur substantial ?costs and could divert the time and attention of our management and other resources from our business. This ?could harm our business, results of operations and financial condition.?

Share Price & Shareholder Rights - Risk 6

The Company's directors and officers may have conflicts of interest in conducting their duties.

Because directors and officers of the Company are or may become directors or officers of other ?reporting companies or have significant shareholdings in other technology companies, the directors and ?officers of the Company may have conflicts of interest in conducting their duties. The Company and its ?directors and officers will attempt to minimize such conflicts. In the event that such a conflict of interest ?arises at a meeting of the directors of the Company, a director who has such a conflict will abstain from ?voting for or against a particular matter in which the director has the conflict. In appropriate cases, the ?Company will establish a special committee of independent directors to review a particular matter in ?which several directors, or officers, may have a conflict. In determining whether or not the Company will ?participate in a particular program and the interest therein to be acquired by it, the directors will primarily ?consider the potential benefits to the Company, the degree of risk to which the Company may be ?exposed and its financial position at that time. Other than as indicated, the Company has no other ?procedures or mechanisms to deal with conflicts of interest.? Our Articles ?provide that the Company must indemnify a director or former director against all judgments, penalties ?or fines to which such person is or may be liable by reason of such person being or having been a director of the ?Company and the executive officers and directors may also have rights to indemnification from the Company, ?including ?pursuant to directors' and officers' liability insurance policies, that will survive termination of their ??agreements?.?

Share Price & Shareholder Rights - Risk 7

A shareholder's holding in the Company may be diluted if the Company issues additional Common ?Shares or other securities in the future.?

?The Company may issue additional Common Shares or other securities in the future, which may dilute a ?shareholder's holding in the Company. ?The Company's articles permit the issuance of an unlimited ?number of Common Shares, and shareholders have no pre-emptive rights in connection with further ?issuances of any securities. The directors of the Company have the discretion to ?determine if an ?issuance of Common Shares or other securities is warranted, the price at which any such securities are ?issued and the other ?terms of issue of Common Shares or securities. In addition, the Company may ?issue additional Common Shares upon the exercise of incentive stock options to ?acquire Common ?Shares under its share compensation plan or upon the exercise or conversion of other outstanding convertible securities of the Company, which will result in further dilution to shareholders. In addition, ?the issuance of Common Shares or other securities in any potential ?future acquisitions, if any, may also ?result in further dilution to shareholder interests.?

Accounting & Financial Operations5 | 10.0%

Accounting & Financial Operations - Risk 1

The Company has a history of losses.

The Company has incurred net losses since its inception. The Company cannot assure that it can become profitable or avoid net losses in the future or that there will be any earnings or revenues in any future quarterly or other periods. The Company expects that its operating expenses will increase as it grows its business, including expending substantial resources for research, development and marketing. As a result, any decrease or delay in generating revenues could result in material operating losses.

Accounting & Financial Operations - Risk 2

?If the Company is required to write down goodwill and other intangible assets, the Company's financial ?condition and results could be negatively affected. ?

?Goodwill impairment arises when there is deterioration in the capabilities of acquired assets to generate cash flows, ?and the fair value of the goodwill dips below its book value. The Company is required to review its goodwill for ?impairment at least annually. Events that may trigger goodwill impairment include deterioration in economic ?conditions, increased competition, loss of key personnel, and regulatory action. Should any of these occur, an impairment of ?goodwill relating to the acquisition of Dronelogics Systems Inc. could have a negative effect on the assets of the ?Company.?

Accounting & Financial Operations - Risk 3

We have limited operating experience as a publicly traded company in the U.S.

We have limited operating experience as a publicly traded company in the U.S. Although our management team have experience managing a publicly-traded company, there is no assurance that the past experience of our management team will be sufficient to operate the Company as a publicly traded company in the United States, including timely compliance with the disclosure requirements of the U.S. Securities and Exchange Commission (the "SEC"). We are required to develop and implement internal control systems and procedures in order to satisfy the periodic and current reporting requirements under applicable SEC regulations and comply with the listing standards of the Nasdaq. These requirements place significant strain on our management team, infrastructure and other resources. In addition, our management team may not be able to successfully or efficiently manage the Company as a U.S. public reporting company that is subject to significant regulatory oversight and reporting obligations.

Accounting & Financial Operations - Risk 4

?Failure to adhere to the Company's financial reporting obligations and other public company requirements could adversely ?affect the market price of the Common Shares.?

?The Company ?is subject to ?reporting and other obligations under applicable securities laws in Canada and the United States, and the rules ?of the CSE and the Nasdaq. These reporting and other obligations ?place significant demands on the Company's management, administrative, operational and ?accounting resources. If the Company is unable to meet such ?demands in a timely and effective manner, ?its ability to comply with its financial reporting obligations ?and other rules applicable to reporting issuers ?could be impaired. Moreover, any failure to maintain effective ?internal controls could cause the Company ?to fail to satisfy its reporting obligations or result in material misstatements in its ?financial statements. If ?the Company cannot provide reliable financial reports or prevent fraud, its reputation and operating ??results could be materially adversely affected which could also cause investors to lose confidence in its ?reported ?financial information, which could result in a reduction in the trading price of the Common ?Shares.? In addition, the Company does not expect that its disclosure controls and procedures and internal ?controls over financial reporting will ?prevent all errors or fraud. A control system, no matter how well ?designed and implemented, can provide only ?reasonable, not absolute, assurance that the control ?system's objectives will be met. Further, the design of a control ?system must reflect the fact that there ?are resource constraints, and the benefits of controls must be considered ?relative to their costs. Due to ?the inherent limitations in all control systems, no evaluation of controls can provide ?absolute assurance ?that all control issues within an organization are detected. The inherent limitations include the ?realities that ?judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors ?or ?mistakes. Controls can also be circumvented by individual acts of certain persons, by collusion of two ?or more ?people or by management override of the controls. Due to the inherent limitations in a control ?system, ?misstatements due to errors or fraud may occur and may not be detected in a timely manner or ?at all?.?

Accounting & Financial Operations - Risk 5

We may never pay dividends over the foreseeable future.?

Investors should not rely on an investment in our Common Shares to provide dividend ?income. The Company does not anticipate that it will pay any cash dividends to holders of its Common ?Shares in the foreseeable future. Instead, the Company plans to retain any earnings to maintain and expand ?its operations. In addition, any future debt financing arrangement may contain terms prohibiting or limiting ?the amount of dividends that may be declared or paid on its Common Shares. Accordingly, investors must ?rely on sales of their Common Shares after price appreciation, which may never occur, as the only way to ?realize any return on their investment. As a result, investors seeking cash dividends should not purchase the ?Company's Common Shares.?

Debt & Financing1 | 2.0%

Debt & Financing - Risk 1

Shortfalls in available external research and development funding could adversely affect the Company.?

?The Company depends on its research and development activities to develop the core technologies used in its UAV ?products and for the development of the Company's future products. A portion of the Company's research and ?development activities can depend on funding by commercial companies and the Canadian government. Canadian ?government and commercial spending levels can be impacted by a number of variables, including general ?economic conditions, specific companies' financial performance and competition for Canadian government ?funding with other Canadian government-sponsored programs in the budget formulation and appropriation ?processes. Moreover, the Canadian, federal and provincial governments provide energy rebates and incentives to ?commercial companies, which directly impact the amount of research and development that companies ?appropriate for energy systems. To the extent that these energy rebates and incentives are reduced or eliminated, ?company funding for research and development could be reduced. Any reductions in available research and ?development funding could harm the Company's business, financial condition and operating results.?

Corporate Activity and Growth3 | 6.0%

Corporate Activity and Growth - Risk 1

We will incur increased costs as a result of operating as a public company in the United States ?and our management will be required to devote substantial time to new compliance initiatives.?

As a U.S. public company, particularly if or when we are no longer an "emerging growth company" as defined ?under the JOBS Act, we will incur significant legal, accounting and other expenses, in addition to those we ?currently incur as a Canadian public company, that we did not incur prior to being listed in the United States. In ?addition, the Sarbanes-Oxley Act, and rules implemented by the SEC and Nasdaq impose various other ?requirements on public companies, and we will need to spend time and resources to ensure compliance with our ?reporting obligations in both Canada and the United States.? For example, pursuant to Section 404, we will be required to furnish a report by our management on our internal ?control over financial reporting ("ICFR"), which, if or when we are no longer an emerging growth company, must ?be accompanied by an attestation report on ICFR issued by our independent registered public accounting firm. ?To achieve compliance with Section 404 within the prescribed period, we will document and evaluate our ICFR, ?which is both costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the ?adequacy of our ICFR, continue steps to improve control processes as appropriate, validate through testing that ?controls are functioning as documented and implement a continuous reporting and improvement process for ?ICFR. Despite our efforts, there is a risk that neither we nor our independent registered public accounting firm will ?be able to conclude within the prescribed timeframe that our ICFR is effective as required by Section 404. This ?could result in a determination that there are one or more material weaknesses in our ICFR, which could cause an ?adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated ?financial statements.? In addition, becoming a public company in the United States will increase legal and financial compliance as well ?as regulatory costs, such as additional Nasdaq fees, and will make some of our public company obligations ?more time consuming. We intend to invest resources to comply with evolving laws, regulations and standards in ?both Canada and the United States, and this investment may result in increased general and administrative ?expenses and increased diversion of management's time and attention from revenue-generating activities to ?compliance activities. If our efforts to comply with public company laws, regulations and standards in the ?United States are insufficient, regulatory authorities may initiate legal proceedings against us and our business ?may be harmed.? We also expect that being a public company in the United States and complying with applicable rules and ?regulations will make it more expensive for us to obtain sufficient levels of director and officer liability insurance ?coverage. This factor could also make it more difficult for us to attract and retain qualified executive officers and ?members of our Board of Directors.?

Corporate Activity and Growth - Risk 2

The Company may be subject to the risks associated with future acquisitions.

As part of the Company's overall business strategy, the Company may pursue select strategic acquisitions that would provide additional product or service offerings, additional industry expertise, and a stronger industry presence in both existing and new jurisdictions. Any such future acquisitions, if completed, may expose the Company to additional potential risks, including risks associated with: (a) the integration of new operations, services and personnel; (b) unforeseen or hidden liabilities; (c) the diversion of resources from the Company's existing business and technology; (d) potential inability to generate sufficient revenue to offset new costs; (e) the expenses of acquisitions; or (f) the potential loss of or harm to relationships with both employees and existing users resulting from its integration of new businesses. In addition, any proposed acquisitions may be subject to regulatory approval.

Corporate Activity and Growth - Risk 3

The Company operates in evolving markets, which makes it difficult to evaluate the Company's business and ?future prospects.?

?The Company's unmanned aerial vehicles ("UAVs") are sold in rapidly evolving markets. The commercial UAV market is in early stages of ?customer adoption. Accordingly, the Company's business and future prospects may be difficult to evaluate. The ?Company cannot accurately predict the extent to which demand for its products and services will increase, if at all. ?The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could ?impact the Company's ability to do the following:? - generate sufficient revenue to reach and maintain profitability;? - acquire and maintain market share;? - achieve or manage growth in operations;? - develop and renew contracts;? - attract and retain additional engineers and other highly-qualified personnel;? - successfully develop and commercially market new products;? - adapt to new or changing policies and spending priorities of governments and government agencies; and - access additional capital when required and on reasonable terms.? If the Company fails to address these and other challenges, risks and uncertainties successfully, its business, results ?of operations and financial condition would be materially harmed.?

Legal & Regulatory

Total Risks: 8/50 (16%)Below Sector Average

Regulation4 | 8.0%

Regulation - Risk 1

The Company could be prohibited from shipping its products to certain countries if it is unable to obtain ?Canadian government authorization regarding the export of its products, or if current or future export laws limit ?or otherwise restrict the Company's business.?

The Company must comply with Canadian federal and provincial laws regulating the export of its products. In ?some cases, explicit authorization from the Canadian government is needed to export its products. The export ?regulations and the governing policies applicable to the Company's business are subject to change. The Company ?cannot provide assurance that such export authorizations will be available for its products in the future. ?Compliance with these laws has not significantly limited the Company's operations or sales in the recent past, but ?could significantly limit them in the future. Non-compliance with applicable export regulations could potentially ?expose the Company to fines, penalties and sanctions. If the Company cannot obtain required government ?approvals under applicable regulations, the Company may not be able to sell its products in certain international ?jurisdictions, which could adversely affect the Company's financial condition and results of operations.?

Regulation - Risk 2

As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S. ?issuer, which may limit the information publicly available to our U.S. shareholders.?

We currently qualify as a "foreign private issuer" under applicable U.S. federal securities laws and, therefore, are ?not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. As a result, we do ?not file the same reports that a U.S. domestic issuer would file with the SEC, although we will be required to file ?with or furnish to the SEC the continuous disclosure documents that we are required to file in Canada under ?Canadian securities laws. In addition, our officers, directors and principal shareholders are exempt from the ?reporting and "short swing" profit recovery provisions of Section 16 of the Exchange Act. Therefore, our ?shareholders may not know on as timely a basis when our officers, directors and principal shareholders purchase ?or sell our securities as the reporting periods under the corresponding Canadian insider reporting requirements are ?longer. In addition, as a foreign private issuer, we are exempt from the proxy rules under the Exchange Act. We ?are also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-?public information. While we expect to comply with the corresponding requirements relating to proxy statements ?and disclosure of material non-public information under Canadian securities laws, these requirements differ from ?those under the Exchange Act and Regulation FD and shareholders should not expect to receive in every case the ?same information at the same time as such information is provided by U.S. domestic issuers.? In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance ?practices, except to the extent that such laws would be contrary to U.S. federal securities laws and Nasdaq ?listing rules and provided that we disclose the requirements we are not following and describe the Canadian ?practices we follow instead. We plan to rely on this exemption in part. As a result, our shareholders may not have ?the same protections afforded to shareholders of U.S. domestic issuers that are subject to all U.S. corporate ?governance requirements.? At some point in the future, we may cease to qualify as a foreign private issuer. If we cease to ?qualify, we will be subject to the same reporting requirements and corporate governance requirements as a U.S. ?domestic issuer, which may increase our costs of being a public company in the ?United States.?

Regulation - Risk 3

There are risks associated with the regulatory regime and permitting requirements of the Company's business.?

?A significant portion of the Company's business is based on the operation of RPAS. The operation of ?RPAS poses a risk or hazard to airspace users as well as personnel on the ground. As ?the RPAS ?industry is rapidly developing, the regulatory environment for RPAS is constantly evolving to keep pace. ??As such, whenever a policy change with respect to operating regulations occurs, there is a risk that the ?Company ?could find itself to be in non-compliance with these new regulations. While the Company ?endeavours to take all ?necessary action to reduce the risks associated with the operations of RPAS and ?to remain well-informed and up-?to-date on any addendums and changes to the applicable regulations, ?there is no assurance that an incident ?involving an RPAS or the Company's non-compliance would not ?create a significant current or future liability for ?the company.? The regulation of RPAS operations within the Canadian Domestic Airspace ("CDA") is still evolving and is expected ?to continue to change ?with the proliferation of RPAS, advancements in technology, and standardization within the ?industry. ?Changes to the regulatory regime may be disruptive and result in the Company needing to adopt ??significant changes in its operations and policies, which may be costly and time-consuming, and may ?materially ?adversely affect the Company's ability to manufacture and make delivery of its products and ?services in a timely ?fashion.? The Company's business and research and development activities are subject to oversight by Transport ?Canada, the federal ?institution responsible for transportation policies and programs, including the rules in ?the CARs. Currently, Transport Canada requires that any non-recreational operators of RPAS have a ??SFOC. The Company's ability to develop, test, demonstrate, and sell products and ?services depends on ?its ability to acquire and maintain a valid SFOC.? ?In addition, there exists public concern regarding the privacy implications of Canadian commercial and ?law ?enforcement use of small UAV. This concern has included calls to develop explicit written policies ?and procedures ?establishing UAV usage limitations. There is no assurance that the response from ?regulatory agencies, customers and ?privacy advocates to these concerns will not delay or restrict the ?adoption of small UAV by prospective non-military customers?.?

Regulation - Risk 4

Failure to obtain necessary regulatory approvals from Transport Canada or other governmental agencies, or ?limitations put on the use of small UAV in response to public privacy concerns, may prevent the Company from ?expanding sales of its small UAV to non-military customers in Canada.?

?Transport Canada is responsible for establishing, managing, and developing safety and security ?standards and regulations for civil aviation in Canada, and includes unmanned civil aviation ??(drones). Civil operations include law enforcement, scientific research, or use by private sector ?companies for commercial purposes. The Canadian Aviation Regulations ("CARs") govern civil ?aviation safety and security in Canada, and by extension govern operation of drones in Canada ?to an acceptable level of safety.? While Transport Canada has been a leader in the development of regulations for the commercial ?use of remotely piloted aircraft systems ("RPAS") and continues to move forward rapidly with its regulatory development, it has ?acknowledged the challenge of regulations keeping pace with the rapid development in ?technology and the growing demand for commercial RPAS use, particularly in the beyond visual ?line-of-sight environment. In 2012, the Canadian Aviation Regulation Advisory Council UAS ?working group released its Phase 2 report which outlined a proposed set of revision to the CARs ?to permit beyond visual line of sight operations. This report was the basis for the recently released Notice of Proposed Amendment ("NPA") by Transport Canada on lower ?risk beyond visual line-of-sight.? Failure to obtain necessary regulatory approvals from Transport Canada or other governmental ?agencies, including the granting of certain Special Flight Operations Certificates ("SFOCs"), or limitations put on the use of RPAS in ?response to public safety concerns, may prevent the Company from testing or operating its ?aircraft and/or expanding its sales which could have an adverse impact on the Company's ?business, prospects, results of operations and financial condition.?

Litigation & Legal Liabilities1 | 2.0%

Litigation & Legal Liabilities - Risk 1

From time to time, the Company may become involved in legal proceedings, which could adversely affect the ?Company.?

?The Company may, from time to time in the future, become subject to legal proceedings, claims, litigation and ?government investigations or inquiries, which could be expensive, lengthy, and disruptive to normal business ?operations. In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be ?difficult to predict and could have a material adverse effect on the Company's business, operating results, or ?financial condition.?

Taxation & Government Incentives2 | 4.0%

Taxation & Government Incentives - Risk 1

The Company may be classified as a "passive foreign investment company" for U.S. federal income tax purposes, which would subject U.S. investors that hold the Company's Common Shares to potentially significant adverse U.S. federal income tax consequences.

If the Company is classified as a passive foreign investment company ("PFIC") for U.S. federal income tax purposes in any taxable year, U.S. investors holding Common Shares generally will be subject, in that taxable year and all subsequent taxable years (whether or not the Company continued to be a PFIC), to certain adverse US federal income tax consequences. The Company will be classified as a PFIC in respect of any taxable year in which, after taking into account its income and gross assets (including the income and assets of 25% or more owned subsidiaries), either (i) 75% or more of its gross income consists of certain types of? "passive income" or (ii) 50% or more of the average quarterly value of its assets is attributable to "passive assets" (assets that produce or are held for the production of passive income). Based upon the current and expected composition of the Company's income and assets, the Company believes that it was not a PFIC for the taxable year ended December 31, 2021 and expects that it will not be a PFIC for the current taxable year. Nevertheless, because the Company's PFIC status must be determined annually with respect to each taxable year and will depend on the composition and character of the Company's assets and income, and the value of the Company's assets (which may be determined, in part, by reference to the market value of Common Shares, which may be volatile) over the course of such taxable year, the Company may be a PFIC in any taxable year. The determination of whether the Company will be or become a PFIC may also depend, in part, on how, and how quickly, the Company uses its liquid assets and the cash raised in an offering. If the Company determines not to deploy significant amounts of cash for active purposes, the Company's risk of being a PFIC may substantially increase. Because there are uncertainties in the application of the relevant rules and PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that the Company will not be a PFIC for any future taxable year. In addition, it is possible that the U.S. Internal Revenue Service may challenge the Company's classification of certain income and assets as non-passive, which may result in the Company being or becoming a PFIC in the current or subsequent years. If the Company is a PFIC for any year during a U.S. holder's holding period, then such U.S. holder generally will be required to treat any gain realized upon a disposition of Common Shares, or any "excess distribution" received on its Common Shares, as ordinary income, and to pay an interest charge on a portion of such gain or distribution, unless the U.S. holder makes a timely and effective "qualified electing fund" election ("QEF Election") or a "mark-to-market" election with respect to its Common Shares. A U.S. holder who makes a QEF Election generally must report on a current basis its share of the Company's net capital gain and ordinary earnings for any year in which the Company is a PFIC, whether or not the Company distributes any amounts to its shareholders. However, U.S. holders should be aware that there can be no assurance that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply U.S. holders with information that such U.S. holders require to report under the QEF Election rules, in the event that the Company is a PFIC and a U.S. holder wishes to make a QEF Election. Thus, U.S. holders may not be able to make a QEF Election with respect to their Common Shares. A U.S. holder who makes a mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer's basis therein. Each U.S. holder should consult its own tax advisors regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.?

Taxation & Government Incentives - Risk 2

There are tax risks the Company may be subject to in carrying on business in Canada.

The Company is a resident of Canada for purposes of the Income ?Tax Act (Canada) (the "Tax Act"). Since the ?Company is operating in a new and developing industry there is a risk that ?foreign governments may look to ?increase their tax revenues or levy additional taxes to level the playing ?field for perceived disadvantages to ?traditional brick and mortar businesses. There is no guarantee that ?governments will not impose such additional ?adverse taxes in the future?.?

Environmental / Social1 | 2.0%

Environmental / Social - Risk 1

The Company's business could be adversely affected if its consumer protection and data privacy practices are not ?perceived as adequate or there are breaches of its security measures or unintended disclosures of its consumer data.?

?The rate of privacy law-making is accelerating globally and interpretation and application of consumer protection ?and data privacy laws in Canada, the United States, Europe and elsewhere are often uncertain, contradictory and in ?flux. As business practices are being challenged by regulators, private litigants, and consumer protection agencies ?around the world, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with ?the Company's data and/or consumer protection practices. If so, this could result in increased litigation government ?or court-imposed fines, judgments or orders requiring that the Company change its practices, which could have an ?adverse effect on its business and reputation. Complying with these various laws could cause the Company to incur ?substantial costs or require it to change its business practices in a manner adverse to its business.?

Production

Total Risks: 8/50 (16%)Below Sector Average

Manufacturing4 | 8.0%

Manufacturing - Risk 1

?The Company's products and services are complex and could have unknown defects or errors, which may give ?rise to legal claims against the Company, diminish its brand or divert its resources from other purposes.?

The Company's UAVs rely on complex avionics, sensors, user-friendly interfaces and tightly integrated, ?electromechanical designs to accomplish their missions. Despite testing, the Company's products have contained ?defects and errors and may in the future contain defects, errors or performance problems when first introduced, ?when new versions or enhancements are released, or even after these products have been used by the Company's ?customers for a period of time. These problems could result in expensive and time-consuming design modifications ?or warranty charges, delays in the introduction of new products or enhancements, significant increases in the ?Company's service and maintenance costs, exposure to liability for damages, damaged customer relationships and ?harm to the Company's reputation, any of which could materially harm the Company's results of operations and ?ability to achieve market acceptance. In addition, increased development and warranty costs could be substantial ?and could significantly reduce the Company's operating margins.? ?The existence of any defects, errors, or failures in the Company's products or the misuse of the Company's ?products could also lead to product liability claims or lawsuits against it. A defect, error or failure in one of the ?Company's UAV could result in injury, death or property damage and significantly damage the Company's ?reputation and support for its UAV in general. The Company anticipates this risk will grow as its UAV begins to be ?used in Canadian domestic airspace and urban areas. The Company's UAV test systems also have the potential to ?cause injury, death or property damage in the event that they are misused, malfunction or fail to operate properly ?due to unknown defects or errors.? Although the Company maintains insurance policies, it cannot provide any assurance that this insurance will be ?adequate to protect the Company from all material judgments and expenses related to potential future claims or ?that these levels of insurance will be available in the future at economical prices or at all. A successful product ?liability claim could result in substantial cost to us. Even if the Company is fully insured as it relates to a particular claim, the ?claim could nevertheless diminish the Company's brand and divert management's attention and resources, which ?could have a negative impact on the Company's business, financial condition and results of operations.?

Manufacturing - Risk 2

??If the Company releases defective products or services, its operating results could suffer.?

?Products and services designed and released by the Company involve extremely complex software ?programs and ?are difficult to develop and distribute. While the Company has quality controls in place to ?detect and prevent defects in its ?products and services before they are released, these quality controls ?are subject to human error, ?overriding, and reasonable resource constraints. Therefore, these quality ?controls and preventative measures may ?not be effective in detecting and preventing defects in the ?Company's products and services before they have been released into ?the marketplace. In such an ?event, the Company could be required, or decide voluntarily, to suspend the availability of the product or ?services, which could significantly harm its business and operating results?.?

Manufacturing - Risk 3

The Company's products may be subject to the recall or return.

Manufacturers and distributors of products are sometimes subject to the recall or return of their products ??for a variety of reasons, including product defects, safety concerns, packaging issues and inadequate ?or inaccurate ?labeling disclosure. If any of the Company's equipment were to be recalled due to an ?alleged product ?defect, safety concern or for any other reason, the Company could be required to incur ?unexpected expenses of the recall ?and any legal proceedings that might arise in connection with the ?recall. The Company may lose a significant ?amount of sales and may not be able to replace those sales ?at an acceptable margin or at all. In ?addition, a product recall may require significant management time ?and attention. Additionally, product recalls may lead to ?increased scrutiny of the Company's operations ?by Transport Canada or other regulatory agencies, requiring ?further management time and attention and ?potential legal fees, costs and other expenses.??

Manufacturing - Risk 4

The Company will be affected by operational risks and may not be adequately insured for certain risks.?

?The Company will be affected by a number of operational risks and the Company may not be adequately insured ?for certain risks, including: labour disputes; catastrophic accidents; fires; blockades or other acts of social activism; ?changes in the regulatory environment; impact of non-compliance with laws and regulations; natural phenomena, ?such as inclement weather conditions, floods, earthquakes and ground movements. There is no assurance that the ?foregoing risks and hazards will not result in damage to, or destruction of, the Company's technologies, personal ?injury or death, environmental damage, adverse impacts on the Company's operation, costs, monetary losses, ?potential legal liability and adverse governmental action, any of which could have an adverse impact on the ?Company's future cash flows, earnings and financial condition. Also, the Company may be subject to or affected ?by liability or sustain loss for certain risks and hazards against which the Company cannot insure or which the ?Company may elect not to insure because of the cost. This lack of insurance coverage could have an adverse ?impact on the Company's future cash flows, earnings, results of operations and financial condition.?

Employment / Personnel2 | 4.0%

Employment / Personnel - Risk 1

A significant growth in the number of personnel would place a strain upon the Company's management and resources.

The Company may experience a period of significant growth in the number of personnel that could place a strain upon its management systems and resources. The Company's future will depend in part on the ability of its officers and other key employees to implement and improve financial and management controls, reporting systems and procedures on a timely basis and to expand, train, motivate and manage its workforce. The Company's current and planned personnel, systems, procedures and controls may be inadequate to support its future operations.

Employment / Personnel - Risk 2

?The Company's inability to retain management and key employees could impair the future success of the Company.

The Company's future success depends substantially on the continued services of its executive officers and its key development personnel. If one or more of its executive officers or key development personnel were unable or unwilling to continue in their present positions, the Company might not be able to replace them easily or at all. In addition, if any of its executive officers or key employees joins a competitor or forms a competing company, the Company may lose experience, know-how, key professionals and staff members as well as business partners. These executive officers and key employees could develop drone technologies that could compete with and take customers and market share away from the Company.

Supply Chain2 | 4.0%

Supply Chain - Risk 1

If critical components or raw materials used to manufacture the Company's products become scarce or ?unavailable, then the Company may incur delays in manufacturing and delivery of its products, which could ?damage its business.?

?The Company obtains hardware components, various subsystems and systems from a limited group of suppliers. ?The Company does not have long-term agreements with any of these suppliers that obligate it to continue to sell ?components, subsystems, systems or products to the Company. The Company's reliance on these suppliers ?involves significant risks and uncertainties, including whether its suppliers will provide an adequate supply of ?required components, subsystems, or systems of sufficient quality, will increase prices for the components, ?subsystems or systems and will perform their obligations on a timely basis.? ?Recently, the global supply chain has experienced significant disruptions caused by the COVID-19 pandemic and by geopolitical conflict, including the war in Ukraine. These disruptions have impacted a variety of products and goods and have had various downstream effects, making it more difficult to reliably and timely source and supply goods and has also resulted in shortages of labor and equipment. The macroeconomic impacts of the COVID-19 pandemic and global conflicts have contributed to inflationary pressure and increased market volatility, adding additional pricing uncertainty. These conditions, if not mitigated or remedied in a timely manner, could delay or preclude delivery of raw materials needed to manufacture our products or delivery of the Company's products to customers, particularly in international markets. If the ?Company is unable to obtain components from third-party suppliers in the quantities and of the quality that it ?requires, on a timely basis and at acceptable prices, then it may not be able to deliver its products on a timely or ?cost-effective basis to its customers, or at all, which could cause customers to terminate their contracts with the Company, ?increase the Company's costs and seriously harm its business, results of operations and financial condition. ?Moreover, if any of the Company's suppliers become financially unstable, then it may have to find new suppliers. ?It may take several months to locate alternative suppliers, if required, or to redesign the Company's products to ?accommodate components from different suppliers. The Company may experience significant delays in ?manufacturing and shipping its products to customers and incur additional development, manufacturing and other ?costs to establish alternative sources of supply if the Company loses any of these sources or is required to redesign ?its products. The Company cannot predict if it will be able to obtain replacement components within the time ?frames that it requires at an affordable cost, if at all.?

Supply Chain - Risk 2

?The Company relies on its business partners, and they may be given access to sensitive and proprietary ?information in order to provide services and support to the Company's teams.?

?The Company relies on various business partners, including third-party service providers, vendors, licensing partners, ?development partners, and licensees, among others, in some areas of the Company's business. In some cases, these ?third parties are given access to sensitive and proprietary information in order to provide services and support to the ?Company's teams. These third parties may misappropriate the Company's information and engage in ?unauthorized use of it. The failure of these third parties to provide adequate services and technologies, or the failure ?of the third parties to adequately maintain or update their services and technologies, could result in a disruption to ?the Company's business operations. Further, disruptions in the financial markets and economic downturns may ?adversely affect the Company's business partners and they may not be able to continue honoring their obligations ?to the Company. Alternative arrangements and services may not be available to the Company on commercially ?reasonable terms or the Company may experience business interruptions upon a transition to an alternative partner ?or vendor. If the Company loses one or more significant business partners, the Company's business could be ?harmed.?

Tech & Innovation

Total Risks: 7/50 (14%)Above Sector Average

Innovation / R&D2 | 4.0%

Innovation / R&D - Risk 1

The Company's adoption of new business models could fail to produce any financial returns.?

?Forecasting the Company's revenues and profitability for new business models is inherently uncertain and ?volatile. The Company's actual revenues and profits for its business models may be significantly less ?than the Company's forecasts. Additionally, the new business models could fail for one or more of the ?Company's products and/or services, resulting in the loss of Company's investment in the development and ?infrastructure needed to support the new business models, and the opportunity cost of diverting management and ?financial resources away from more successful businesses.?

Innovation / R&D - Risk 2

The Company expects to incur substantial research and development costs and devote significant resources to ?identifying and commercializing new products and services, which could significantly reduce its profitability and ?may never result in revenue to the Company.?

?The Company's future growth depends on penetrating new markets, adapting existing products to new applications, ?and introducing new products and services that achieve market acceptance. The Company plans to incur ?substantial research and development costs as part of its efforts to design, develop and commercialize new ?products and services and enhance its existing products. The Company believes that there are significant opportunities in a number of business areas. Because the Company accounts for research and development costs as ?operating expenses, these expenditures will adversely affect its earnings in the future. Further, the Company's ?research and development programs may not produce successful results, and its new products and services may not ?achieve market acceptance, create any additional revenue or become profitable, which could materially harm the ?Company's business, prospects, financial results and liquidity.?

Trade Secrets4 | 8.0%

Trade Secrets - Risk 1

?The Company may not be able to protect its intellectual property rights throughout the world.?

?Filing, prosecuting, and defending patents on all of the Company's product candidates throughout the world would be ?prohibitively expensive. Therefore, the Company has filed applications and/or obtained patents only in key markets ?including the United States and Canada. Competitors may use the Company's technologies in jurisdictions where it has not ?obtained patent protection to develop their own products and their products may compete with products of the Company.??

Trade Secrets - Risk 2

The Company may be sued by third parties for alleged infringement of their proprietary rights, which could be ?costly, time-consuming and limit the Company's ability to use certain technologies in the future.?

?The Company may become subject to claims that its technologies infringe upon the intellectual property or other ?proprietary rights of third parties. Any claims, with or without merit, could be time-consuming and expensive, and ?could divert the Company's management's attention away from the execution of its business plan. Moreover, any ?settlement or adverse judgment resulting from these claims could require the Company to pay substantial amounts ?or obtain a license to continue to use the disputed technology, or otherwise restrict or prohibit the Company's use of ?the technology. The Company cannot assure that it would be able to obtain a license from the third party asserting ?the claim on commercially reasonable terms, if at all, that the Company would be able to develop alternative ?technology on a timely basis, if at all, or that the Company would be able to obtain a license to use a suitable ?alternative technology to permit the Company to continue offering, and the Company's customers to continue ?using, the Company's affected product. An adverse determination also could prevent the Company from offering ?its products to others. Infringement claims asserted against the Company may have a material adverse effect on its ?business, results of operations or financial condition.?

Trade Secrets - Risk 3

Obtaining and maintaining the Company's patent protection depends on compliance with various procedural, document ?submission, fee payment, and other requirements imposed by governmental patent agencies, and its patent ?protection could be reduced or eliminated for non-compliance with these requirements.?

?The Canadian Intellectual ?Property Office ("CIPO"), the United States Patent and ?Trademark Office ("USPTO") and various foreign national or international patent agencies ?require compliance with a number of procedural, documentary, fee payment, and other similar provisions during ?the patent application process. Periodic maintenance fees on any issued patent are due to be paid to the CIPO, the USPTO and ?various foreign national or international patent agencies in several stages over the lifetime of the patent. While an ?inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the ?applicable rules, there are situations in which non-compliance can result in abandonment or lapse of the patent or ?patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Non-compliance ?events that could result in abandonment or lapse of patent rights include, but are not limited to, failure to timely file ?national and regional stage patent applications based on the Company's international patent application, failure to respond to ?official actions within prescribed time limits, non-payment of fees, and failure to properly legalize and submit ?formal documents. If the Company fails to maintain the patents and patent applications covering its product candidates, its ?competitors might be able to enter the market, which would have a material adverse effect on the Company's business. ? While a patent may be granted by a national patent office, there is no guarantee that the granted patent is valid. ?Options exist to challenge the validity of a patent which, depending upon the jurisdiction, may include re-?examination, opposition proceedings before the patent office, and/or invalidation proceedings before the relevant ?court. Patent validity may also be the subject of a counterclaim to an allegation of patent infringement.? Pending patent applications may be challenged by third parties in protest or similar proceedings. Third parties can ?typically submit prior art material to patentability for review by the patent examiner. Regarding Patent Cooperation ?Treaty applications, a positive opinion regarding patentability issued by the International Searching Authority does ?not guarantee allowance of a national application derived from the Patent Cooperation Treaty application. The ?coverage claimed in a patent application can be significantly reduced before the patent is issued, and the patent's ?scope can be modified after issuance. It is also possible that the scope of claims granted may vary from jurisdiction ?to jurisdiction.? The grant of a patent does not have any bearing on whether the invention described in the patent application would ?infringe the rights of earlier filed patents. It is possible to both obtain patent protection for an invention and yet still ?infringe the rights of an earlier granted patent.?

Trade Secrets - Risk 4

If the Company fails to protect, or incurs significant costs in defending, its intellectual property and other ?proprietary rights, the Company's business, financial condition, and results of operations could be materially ?harmed.?

?The Company's success depends, in large part, on its ability to protect its intellectual property and other proprietary ?rights. The Company relies primarily on patents, trademarks, copyrights, trade secrets and unfair competition laws, ?as well as license agreements and other contractual provisions, to protect the Company's intellectual property and ?other proprietary rights. However, a portion of the Company's technology is not patented, and the Company may ?be unable or may not seek to obtain patent protection for this technology. Moreover, existing Canadian legal ?standards relating to the validity, enforceability and scope of protection of intellectual property rights offer only ?limited protection, may not provide the Company with any competitive advantages, and may be challenged by ?third parties. The laws of countries other than Canada may be even less protective of intellectual property rights. ?Accordingly, despite its efforts, the Company may be unable to prevent third parties from infringing upon or ?misappropriating its intellectual property or otherwise gaining access to the Company's technology. Unauthorized ?third parties may try to copy or reverse engineer the Company's products or portions of its products or otherwise ?obtain and use the Company's intellectual property. Moreover, many of the Company's employees have access to ?the Company's trade secrets and other intellectual property. If one or more of these employees leave to work for ?one of the Company's competitors, then they may disseminate this proprietary information, which may as a result ?damage the Company's competitive position. If the Company fails to protect its intellectual property and other ?proprietary rights, then the Company's business, results of operations or financial condition could be materially ?harmed. From time to time, the Company may have to initiate lawsuits to protect its intellectual property and other ?proprietary rights. Pursuing these claims is time consuming and expensive and could adversely impact the ?Company's results of operations.? ?In addition, affirmatively defending the Company's intellectual property rights and investigating whether the ?Company is pursuing a product or service development that may violate the rights of others may entail significant ?expense. Any of the Company's intellectual property rights may be challenged by others or invalidated through ?administrative processes or litigation. If the Company resorts to legal proceedings to enforce its intellectual property ?rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, then the ?proceedings could result in significant expense to the Company and divert the attention and efforts of the ?Company's management and technical employees, even if the Company prevails.?

Cyber Security1 | 2.0%

Cyber Security - Risk 1

The Company may be subject to electronic communication security risks.

A significant potential vulnerability of electronic communications is the security of transmission of confidential information over public networks. Cyberattacks could result in unauthorized access to the Company's computer systems or its third-party IT service provider's systems and, if successful, misappropriate personal or confidential information. Anyone who is able to circumvent the Company's security measures could misappropriate proprietary information or cause interruptions in its operations. The Company may be required to expend capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Since the outset of the COVID-19 pandemic, there has been an increase in the volume and sophistication of targeted cyber-attacks. Pandemic-adjusted operations, such as work ?from home arrangements and remote access to the Company's systems, may pose heightened risk of ?cyber security and privacy breaches and may put additional stress on the Company's IT infrastructure. A failure of such infrastructure could severely limit the Company's ability ?to conduct ordinary operations or expose the Company to liability. To date, the Company's systems have functioned capably, and it has not experienced a material impact to its ?operations as a result of an IT infrastructure issue.? In addition, the outbreak of hostilities between Russia and Ukraine and the response of the global community to such aggression is widely seen as increasing the risk of state-sponsored cyberattacks. Even the most well-protected IT networks, systems and facilities remain potentially vulnerable because the techniques used in attempted security breaches are continually evolving and generally are not recognized until launched against a target or, in some cases, are designed not to be detected and, in fact, may not be detected. Any such compromise of the Company's or its third party's IT service providers' data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims and proceedings, liability under laws to protect privacy of personal information, and regulatory penalties, and could disrupt our operations, require significant management attention and resources to remedy any damages that result, and damage our reputation and customers willingness to transact business with us, any of which could adversely affect our business.

Macro & Political

Total Risks: 7/50 (14%)Below Sector Average

Economy & Political Environment3 | 6.0%

Economy & Political Environment - Risk 1

Negative macroeconomic and geopolitical trends could affect the Company's ability to access sources of ?capital.?

The COVID-19 pandemic and the Russian invasion of Ukraine could negatively impact the Company's ability to obtain financing and access sources of capital. Both events have led to significant market volatility as governments undertake measures to prevent the spread of COVID-19 and discourage political conflict. These events have contributed to significant uncertainty in global markets, increased inflationary pressures, and could lead to a tightening of credit markets and a decline in economic activity. These impacts could have a material adverse effect on the Company's ?liquidity and ability to obtain financing in the future.? As the Company has a history of losses and present revenues do not allow it to sustain its operations, an inability to access credit or capital markets could undermine the Company's ability to continue as a going concern.

Economy & Political Environment - Risk 2

The conflict between Russia and Ukraine could destabilize global markets and threatens global peace.

On February 24, 2022, Russian military forces launched a full-scale military invasion of Ukraine. In response, Ukrainian military personal and civilians are actively resisting the invasion. Many countries throughout the world have provided aid to the Ukraine in the form of financial aid and in some cases military equipment and weapons to assist in their resistance to the Russian invasion. The North Atlantic Treaty Organization ("NATO") has also mobilized forces to NATO member countries that are close to the conflict as deterrence to further Russian aggression in the region. The outcome of the conflict is uncertain and is likely to have wide ranging consequences on the peace and stability of the region and the world economy. Certain countries including Canada and the United States, have imposed strict financial and trade sanctions against Russia and such sanctions may have far reaching effects on the global economy. The long-term impacts of the conflict and the sanctions imposed on Russia remain uncertain.

Economy & Political Environment - Risk 3

The Company faces uncertainty and adverse changes in the economy.?

? Adverse changes in the economy could negatively impact the Company's business. Future economic distress may ?result in a decrease in demand for the Company's products, which could have a material adverse impact on the ?Company's operating results and financial condition. Uncertainty and adverse changes in the economy could also ?increase costs associated with developing and publishing products, increase the cost and decrease the availability of ?sources of financing, and increase the Company's exposure to material losses from bad debts, any of which could ?have a material adverse impact on the financial condition and operating results of the Company.

International Operations1 | 2.0%

International Operations - Risk 1

??The Company may be subject to the risks associated with foreign operations in other countries.

The Company's primary revenues are expected to be achieved in Canada and the US. However, the Company may expand to markets outside of North America and become subject to risks normally associated with conducting business in other countries. As a result of such expansion, the Company may be subject to the legal, political, social and regulatory requirements and economic conditions of foreign jurisdictions. The Company cannot predict government positions on such matters as foreign investment, intellectual property rights or taxation. A change in government positions on these issues could adversely affect the Company's business. If the Company expands its business to foreign markets, it will need to respond to rapid changes in market conditions, including differing legal, regulatory, economic, social and political conditions in these countries. If the Company is not able to develop and implement policies and strategies that are effective in each location in which it does business, then the Company's business, prospects, results of operations and financial condition could be materially and adversely affected.

Natural and Human Disruptions2 | 4.0%

Natural and Human Disruptions - Risk 1

The COVID-19? pandemic could negatively affect our business, operations and future financial performance.

In March 2020 the World Health Organization designated the outbreak of a novel strain of coronavirus, specifically identified ?as COVID-19, as a global pandemic. This resulted in governments, companies, and individuals worldwide enacting emergency measures to combat the spread of ?the virus, including the implementation of travel bans, mandated and self-imposed quarantine ?periods and physical distancing, that have caused a material disruption to businesses globally. Throughout the course of the pandemic, the impact of COVID-19 has varied significantly due to both global and localized infection rates, notwithstanding widespread vaccine availability within Canada and the United States beginning in spring 2020. As a result of the pandemic, global equity markets have experienced significant volatility and weakness. ?Governments and central banks have reacted with significant monetary and fiscal interventions designed ?to stabilize economic conditions. Such volatility has let to significant challenges to the global supply chain, disrupted labor markets and has recently contributed to rising levels of inflation. The Company has experienced material pandemic related impacts, including the loss of its primary customer engineering customer in 2020 due to mandated stay-at-home orders. The duration and impact of the COVID-19 outbreak is unknown at this ?time, as is the efficacy of the government and central bank interventions. ? As such, the Company cannot predict with any certainty what the future impacts the pandemic may have on its business. Management of the Company has and continues to closely monitor the impact of the COVID-19 global pandemic, with a focus on the health and safety of the Company's employees, customers, and business continuity. Since the outbreak of the pandemic, the Company has taken various ?steps to mitigate the impact of COVID-19, including following government or health authority guidelines and restrictions at its facilities to ?ensure the safety of its staff and product consumers. The Company will continue to follow government or health authority guidelines and restrictions and has experienced minimal disruption to its operations and supply chain. However, there is no guarantee that the company's mitigation efforts will prove successful in combating the spread of the virus or that supply chain disruptions will not occur in the future. As the ?Company reintegrates its personnel to its workplace, it may incur additional costs to adapt the workplace to ?meet applicable health and safety requirements. The occurrence of additional waves of the virus or its variants, or insufficient vaccination levels may require the Company to revise or delay such plans. ?To the extent that it is unable to effectively protect its workforce against the transmission of the virus, the ?Company may be forced to slow or reverse its reintegration efforts and could face allegations of liability.? Given the uncertainties associated with the ongoing COVID-19 pandemic, including ?the uncertainty surrounding the remaining duration and outcome, COVID-19 variants and vaccine efficacy, the Company is unable to estimate the full impact of the COVID-19 pandemic on its business, financial condition, results of operations, and/or cash flows; however, the impact could be material. The Company cannot accurately predict ?the future impact COVID-19 may have on, among others, the: (i) demand for drone ?delivery services, (ii) severity and the length of potential measures taken by governments to manage the ?spread of the virus and their effect on labour availability and supply lines, (iii) availability of essential ?supplies, (iv) purchasing power of the Canadian dollar, or (v) ability of the Company to obtain necessary ?financing. Despite global vaccination efforts, it is not possible to reliably estimate the length and ?severity of these developments and the impact on the financial results and condition of the Company in ?the future.?

Natural and Human Disruptions - Risk 2

Natural outdoor elements such as wind and precipitation may have a material adverse effect on the ?use and effectiveness of the Company's products.

The Company's business will involve the operation and flying of UAVs, a technology-based product ?used outside. As such, the business is subject to various risks inherent in a technology-based ?businesses operated in outdoor conditions, including faulty parts, breakdowns and crashes. Although ?the Company anticipates the use of its UAVs in good climactic conditions and that adequate flying ?conditions will be monitored by trained personnel, there can be no assurance that unpredictable natural ?outdoor elements will not have a material adverse effect on the use and effectiveness of its products.?

Capital Markets1 | 2.0%

Capital Markets - Risk 1

The Company is subject to certain market-based financial risks associated with its operations.

The Company could be subject to interest rate risks, which is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities, however market fluctuations could increase the costs at which the Company can access capital and its ability to obtain financing and the Company's cash balances carry a floating rate of interest. In addition, the Company engages in transactions in currencies other than its functional currency. Depending on the timing of these transactions and the applicable currency exchange rates, conversions to the Company's functional currency may positively or negatively impact the Company.

Ability to Sell

Total Risks: 4/50 (8%)Below Sector Average

Competition2 | 4.0%

Competition - Risk 1

The markets in which the Company competes are characterized by rapid technological change, which requires ?the Company to develop new products and product enhancements and could render the Company's existing ?products obsolete. ?

?Continuing technological changes in the market for the Company's products could make its products less ?competitive or obsolete, either generally or for particular applications. The Company's future success will depend ?upon its ability to develop and introduce a variety of new capabilities and enhancements to its existing product and ?service offerings, as well as introduce a variety of new product offerings, to address the changing needs of the ?markets in which it offers products. Delays in introducing new products and enhancements, the failure to choose ?correctly among technical alternatives or the failure to offer innovative products or enhancements at competitive ?prices may cause existing and potential customers to purchase the Company's competitors' products.? If the Company is unable to devote adequate resources to develop new products or cannot otherwise successfully ?develop new products or enhancements that meet customer requirements on a timely basis, its products could lose ?market share, its revenue and profits could decline, and the Company could experience operating losses.?

Competition - Risk 2

The Company operates in a competitive market.

The Company faces competition and new competitors will continue to emerge throughout the world. Services offered by the Company's competitors may take a larger share of consumer spending than anticipated, which could cause revenue generated from the Company's products and services to fall below expectations. It is expected that competition in these markets will intensify. Some of the other publicly traded companies we may compete with include Alpine 4 Tech, Inc., Aerovironment Inc., EHang Holdings Limited, AgEagle, Drone Delivery Canada, Inc., and Red Cat Holdings, Inc. If competitors of the Company develop and market more successful products or services, offer competitive products or services at lower price points, or if the Company does not produce consistently high-quality and well-received products and services, revenues, margins, and profitability of the Company will decline. The Company's ability to compete effectively will depend on, among other things, the Company's pricing of services and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distribution channels and capital resources. Competition could lead to a reduction in the rate at which the Company adds new customers, a decrease in the size of the Company's market share and a decline in its customers. Examples include but are not limited to competition from other companies in the UAV industry. In addition, the Company could face increased competition should there be an award of additional licenses in jurisdictions in which the Company operates in.

Brand / Reputation2 | 4.0%

Brand / Reputation - Risk 1

If the Company fails ??to successfully promote its product brand, this could have a material adverse ?effect on the Company's business, prospects, ??financial condition and results of operations?.

The Company believes that brand recognition is an important factor to its success. If the Company fails ??to promote its brands successfully, or if the expenses of doing so are disproportionate to any increased ??net sales it achieves, it would have a material adverse effect on the Company's business, prospects, ??financial condition and results of operations. This will depend largely on the Company's ability to ??maintain trust, be a technology leader, and continue to provide high-quality and secure technologies, ??products and services. Any negative publicity about the Company or its industry, the quality and reliability of the Company's technologies, products and services, the Company's risk management ??processes, changes to the Company's technologies, products and services, its ability to effectively ??manage and resolve customer complaints, its privacy and security practices, litigation, regulatory activity, and the experience of sellers and buyers with the Company's products or services, could adversely affect the Company's reputation and the confidence in and use of the ??Company's technologies, products and services. Harm to the Company's brand can arise from ??many sources, including; failure by the Company or its partners to satisfy expectations of service and quality; inadequate protection of sensitive information; compliance failures and claims; litigation and ??other claims; employee misconduct; and misconduct by the Company's partners, service ??providers, or other counterparties. If the Company does not successfully maintain a strong and trusted brand, its business could be materially and adversely affected.? ?

Brand / Reputation - Risk 2

Negative consumer perception regarding the Company's products? could have a material adverse effect on the demand for the Company's ?products and the business, results of operations, financial condition and cash flows of the Company.

The Company believes the UAV industry is highly dependent upon consumer perception regarding the ?safety, efficacy, and quality of the UAV used. Consumer perception of these products can be ?significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention, ?and other publicity regarding the use of UAV. There can be no assurance that future scientific research, ?findings, regulatory proceedings, litigation, media attention, or other research findings or publicity will be ?favourable to the UAV market. Future research reports, findings, regulatory proceedings, litigation, media ?attention or other publicity that are perceived as less favourable than, or that question, earlier research ?reports, findings or publicity could have a material adverse effect on the demand for the Company's ?products and the business, results of operations, financial condition and cash flows of the Company. The ?dependence upon consumer perceptions means that adverse scientific research reports, findings, ?regulatory proceedings, litigation, media attention or other publicity, whether or not accurate or with merit, ?could have a material adverse effect on the Company, the demand for the Company's products, and the ?business, results of operations, financial condition and cash flows of the Company. Further, adverse ?publicity reports or other media attention regarding the safety, the efficacy, and quality of UAV based surveys in general, or the Company's products specifically, ?could have a material adverse effect.?

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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