AIRO Group Holdings, Inc. (AIRO) Business

Business
Combination Agreement means the Business Combination Agreement, as amended, between Kernel Group Holdings, Inc., a Cayman Islands
exempted company, AIRO Group, Inc., a Delaware corporation, Kernel Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary
of AIRO Group, Inc., AIRO Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of AIRO Group, Inc., VKSS Capital, LLC,
a Delaware limited liability company, in the capacity as the representative for the stockholders of Kernel Group Holdings, Inc. and AIRO
Group, Inc. and also in the capacity as Kernel Group Holdings, Inc.’s sponsor, and Dr. Chirinjeev Kathuria, in the capacity as
the representative for our stockholders.

BVLOS
means Beyond Visual Line of Sight, which refers to drone operations where the drone is not visible to the pilot.

CDI
means Coastal Defense Inc., a subsidiary entity we acquired on April 26, 2022, which makes up a portion of our Training reportable
segment.

Civil
Aviation Authorities means the TCCA, the FAA, and the EASA.

DaaS
means Drone as a Service, including but not limited to, surveillance services for businesses interested in monitoring, surveying,
and evaluating their properties.

DFARS
means the Defense Federal Acquisition Regulation Supplement.

DHS
means the U.S. Department of Homeland Security.

DoD
means the U.S. Department of Defense.

EASA
means the European Union Aviation Safety Agency.

ENAC
means the National Civil Aviation Agency of Brazil.

EU
means the European Union.

eVTOL
means electric vertical take-off and landing.

FAA
means the Federal Aviation Administration.

FAR
means the Federal Acquisition Regulation.

Follow-on
Offering means the public offering of 4.8 million shares of our common stock, which included an additional 0.6 million shares
of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares, that closed on September
12, 2025.

GNSS
means the Global Navigation Satellite System, a term that refers to the global satellite positioning systems.

GPS
means the Global Positioning System, a form of GNSS using DoD-developed satellites.

IDIQ
contract means a DoD Indefinite Delivery Indefinite Quantity Contract.

Investor
Notes means the unsecured promissory notes historically issued by the Company to certain investors, which have included various
interest features in the form of both stock and cash contingently payable upon the closing of an initial public offering or qualified
financing.

IPO
means the initial public offering of our common stock that closed on June 16, 2025.

ISR
means intelligence, surveillance and reconnaissance.

5

Jaunt
means Jaunt Air Mobility LLC, a subsidiary entity we acquired on March 10, 2022, which makes up our Electric Air Mobility reportable
segment.

JTAC
means Joint Terminal Attack Controller training.

mUAS
means mini unmanned aircraft systems.

NAS
means the U.S. National Airspace System.

NASA
means the National Aeronautics and Space Administration.

NATO
means the North Atlantic Treaty Organization.

OEM
means original equipment manufacturer.

Put-Together
Transaction means the acquisition of the Acquired Companies which are now organized into our four reportable segments, each with
a diverse set of partners and customers: (i) Drones, through our subsidiaries, AIRO Drone and Sky-Watch; (ii) Avionics, through our subsidiary,
Aspen Avionics; (iii) Training, through our subsidiaries, Agile Defense and CDI; and (iv) Electric Air Mobility, through our subsidiary,
Jaunt.

Repurchase
means our repurchase of an aggregate of 1,116,312 shares of common stock from certain existing stockholders, including certain
directors and executive officers and their affiliates, with the proceeds of the Follow-on Offering that closed on September 12, 2025.

SEAL
teams means the U.S. Navy Sea, Air, and Land teams.

Sky-Watch
means Sky-Watch A/S, a subsidiary entity we acquired on March 28, 2022, which makes up a portion of our Drones reportable segment.

sUAS
means small unmanned aircraft systems.

TCCA
means Transport Canada Civil Aviation.

UAM
means urban air mobility.

UAS
means unmanned aircraft systems.

USAF
means the U.S. Air Force.

MARKET,
INDUSTRY AND OTHER DATA

This
Annual Report on 10-K contains statistical data, estimates and forecasts that are based on independent industry publications or other
publicly available information, as well as other information based on our internal sources. While we believe the industry and market
data included in this Annual Report on 10-K are reliable and are based on reasonable assumptions, these data involve many assumptions
and limitations, and you are cautioned not to give undue weight to these estimates. We have not independently verified the accuracy or
completeness of the data contained in these industry publications and other publicly available information. The industry in which we
operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the sections titled
“Risk Factors” and “Note Regarding Forward-Looking Statements.”

TRADEMARKS

This
Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this Annual Report on Form 10-K, including logos, artwork and other visual displays, may appear
without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will
not assert, to the fullest extent under applicable law, their rights thereto. We do not intend our use or display of other companies’
trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

6

ITEM
1. BUSINESS

Company
Overview

We
are a technologically differentiated aerospace, autonomy, and air mobility platform targeting 21st century aerospace and defense
opportunities. We leverage decades of industry expertise and connections across the drone, aviation, and avionics markets to provide
leading solutions to the aerospace and defense market. We offer connected and diversified solutions providing operational synergies across
our segments and are powered by an international footprint as well as supplier and public sector relationships. Supported by complementary
and innovative technologies, we believe we bring a unique value proposition to the market and are well-positioned to become a differentiated
leader in the industry.

Our
business is organized into four operating segments, each of which represents a critical growth vector in the aerospace and defense market:
Drones, Avionics, Training, and Electric Air Mobility. These four segments collectively target a combined total addressable market estimated
to be over $315.4 billion by 2030.

Drones.
The Drones segment develops, manufactures, and sells drones and will provide drone services, such as DaaS, for military and commercial
end users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. A critical point
of differentiation lies in our drones’ ability to perform in a GPS-denied environment, which is a technology application relevant
for both military and commercial end markets.

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Avionics.
The Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our
avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy
military aircraft and general aviation platforms. We sell our avionics products through our Aspen Avionics brand, which is
well-recognized in the general aviation aftermarket sector with over 20 years of operating history and long-term customer loyalty
for our value proposition. We also serve as an avionics supplier for OEMs, including Robinson Helicopters, Pilatus, Honeywell, and Joby Aviation.
We believe our avionics solutions have a considerable market opportunity as general aviation fleets continue to age, with owners and
operators seeking to upgrade the avionics technology on their aircraft.

Training.
The Training segment currently provides military pilot training. We offer professional training and consulting services to the U.S.
military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include adversary air, close air
support, ISR, aircraft leasing, pilot training, ground liaison services, and JTAC, as well as full joint theatre ISR and simulated
ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air Warfare Center, and USAF
Air Combat Command, and are a mandated recipient on a $5.7 billion IDIQ contract and a $1.9 million IDIQ contract. Our
personnel’s top security clearances and established relationships at the Pentagon provide us with a differentiated ability to
bid on mandates. We also plan to offer commercial pilot training and plan to expand our non-military capabilities in response to the
global pilot shortage.

Electric
Air Mobility. The Electric Air Mobility segment, operated through our Jaunt brand, is developing dual-use electric and hybrid-electric
compound rotorcraft aircraft designed for cargo, government, and passenger applications. Our near-term focus is on a cargo-configured
platform intended to support middle-mile logistics, tactical resupply, emergency medical delivery, law enforcement, ISR, and other commercial and government missions. Over time, we intend to develop a multi-role variant
capable of supporting both cargo and passenger operations. We plan to pursue certification of our aircraft under existing CAR 529 Transport
Category Rotorcraft standards. Our aircraft integrate characteristics of both rotary- and fixed-wing platforms through our patented compound
rotorcraft configuration, which has accumulated over 300 piloted flight hours across multiple Jaunt demonstrator aircraft. We are evaluating
both fully electric and hybrid-electric propulsion architectures to support varying mission requirements, including extended range and
increased operational flexibility. We believe this compound rotorcraft architecture, combined with electric and hybrid-electric propulsion
strategies, provides favorable range, payload capacity, and mission adaptability relative to conventional rotorcraft and certain eVTOL
configurations. Upon certification, we expect our cargo-configured aircraft to serve as the initial foundation of our commercialization
efforts.

Our
Platform

Our
business is thoughtfully interconnected as we seek to leverage each segment’s full capabilities and drive synergies, creating a
significant competitive advantage. We are synergistically leveraging our field-proven product track record – particularly through
our Drones and Avionics brands – to drive opportunities across our platform. The manufacturing capabilities of our Avionics segment
enable us to supply most of our own components for our drone and aircraft systems, including our eVTOL aircraft, which enhances our product
quality and reduces production costs. Our deep, long-term relationships with the U.S. government and NATO countries that underpin our
Training and Drones segments provide us with access to key decisionmakers, which provides us with new business opportunities. Our Electric
Air Mobility platform represents a significant future growth opportunity to expand into eVTOLs while also providing
an original equipment (“OE”) platform for new products and services across our other segments.

In
addition, we are able to utilize our certification capabilities to improve time to market for the introduction of products and
services. These offerings leverage our U.S. and international sales and manufacturing capabilities to reduce costs and expand our
market footprint. This capability also helps us swiftly integrate new avionics, electronics, and artificial intelligence
(“AI”) into our products, all while sharing the intra-segment R&D insights that drive our high-quality,
interconnected products and services.

8

Our
Competitive Strengths

We
are an integrated aerospace and defense platform with multiple solutions and services in the high-growth aerospace and defense
categories. Our competitive advantages include:

Cross-Platform
Strategy Generates Operational and Product Synergies

Our
business is thoughtfully interconnected to leverage each segment’s full capabilities, with synergies driving growth in new customer
categories, geographies, and product lines that would not be attainable as standalone entities. Each of our segments benefits from operational
synergies in certification, economies of scale, shared R&D insights and integration of products and services across a global platform
with operations in the United States, Canada and Denmark. Accordingly, our platform generates a considerable positive network effect,
with shared access to commercial, technological, and public sector relationship resources, including the United States, EU members, NATO
countries and other international allies of the United States, which drive growth and innovation to meet customer needs.

Fulsome
Product Assortment Targeting Actionable Market Opportunities

We
offer differentiated technologies and diversified product offerings across the Drones, Avionics, Training, and Electric Air Mobility
segments for both military and commercial end users. Our product lineup is competitively designed to take advantage of key opportunities
in the aerospace and defense sector, focusing on areas with potential for future growth. Additionally, the collaboration between our
R&D and commercial teams ensures that our products are both market-relevant and commercially available. With offerings ranging from
training to drones to services to avionics, we address the marketplace of tomorrow.

Talented
Management Team Possesses Robust Operational Experience and Deep Private and Public Sector Relationships

Our
robust leadership team possesses over 150 years of combined operating experience and industry success in the aerospace and defense market.
We maintain strong relationships with key contacts within the U.S. government and NATO, as well as regulatory agencies, such as the FAA,
DHS, and NASA, which has provided us with access to key decisionmakers to secure new business and enable us to build the trust necessary
to offer additional functions and features for our products and services. For example, certain members of our management team currently
serve on various boards for several government agencies and have held military leadership positions in the past. These relationships
are critical to this industry and have enabled us to initiate discussions with key government officials, which is a significant barrier
to entry. We believe our established relationships are a core point of differentiation that will support our future success.

Exceptional
Research and Development that Supports the Potential for Industry-Leading Products

We
have a history of developing and launching innovative products, with our product advantage rooted in our exceptional R&D capabilities.
From prototyping to certification to commercialization, our ability to launch solutions with strongly differentiated technology and direct
product market fit is core to our platform. Our innovative, technology-additive solutions are underpinned by a robust new product development
pipeline supported by our platform. Moreover, critical human capital interdependencies between our various segments have provided a positive
network effect, increasing the quality and efficiency of our development process. This has been proven out particularly in our Drones
and Avionics segments, where the RQ-35 Heidrun and Connected Panel solutions, respectively, have proven to be compelling value propositions
in their end markets.

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Market
Opportunity

The
defense industry is affected by geopolitical and security issues. Conflicts in Ukraine, the Middle East, and heightened geopolitical
tension in the Pacific region have elevated global security concerns. This has caused many governments to increase their focus on defense
and security, leading to a rise in defense spending and a growing willingness to adopt new technologies and solutions. Specifically,
beginning in 2014 in response to Russia’s illegal annexation of Crimea and amid broader instability in the Middle East, NATO countries
agreed to commit 2% of their national GDP to defense spending to help ensure the continued military readiness of NATO allies. According
to NATO, all NATO countries are expected to meet or exceed the target of investing at least 2% of GDP in defense in 2025, compared to
only three NATO countries in 2014. Over the past decade, European allies of the United States and Canada have steadily increased their
collective investment in defense by 110.2%, and are investing a combined total of more than $607 billion in defense spending in 2025. Moreover, at
the 2025 NATO Summit in The Hague, NATO members adopted a new long-term defense investment commitment: by 2035, member states aim to
allocate 5% of GDP annually on combined defense and security-related spending, with at least 3.5% of GDP dedicated to core defense requirements
and up to 1.5% of GDP directed to critical infrastructure protection, cyber defense, innovation, and strengthening the defense industrial
base. NATO has also reaffirmed its guideline that at least 20% of defense expenditures should go toward major equipment, including associated
research and development, to ensure modernization and interoperability. These commitments reflect NATO’s recognition that the “2%
guideline” alone is no longer sufficient to meet emerging threats and technological demands. NATO leaders have signaled that higher,
sustained investment levels are needed to close capability gaps, accelerate modernization, and support innovation across domains such
as artificial intelligence, autonomous systems, and advanced defense technologies. Current NATO Secretary General, Mark Rutte, has acknowledged
the “goal of 2%, set a decade ago, will not be enough to meet the challenges of tomorrow” and that NATO members will have
to increase spending by “considerably more than 3%.” These tailwinds support the development of a new market leader in the aerospace and defense market, with the emergence of new technologies
such as 5G, artificial intelligence, and advanced autonomous vehicles creating new commercial opportunities.

Drones.
Global conflicts, particularly the conflict between Russia and Ukraine, have led to an increase in military spending and investment in
new technologies solutions such as drones. The military drone market size is expected
to reach approximately $24.75 billion by 2030. Key demand drivers include the rise of asymmetrical warfare, new avionics, and the inherent
user safety advantages of drones over manned systems. We believe that our products will continue to play a role in the arsenals of the
future, including through NATO countries. In addition, we believe that the U.S. military’s transformation into a smaller, more
agile force that operates via a network of observation, communication, and precision targeting technologies will continue to accelerate
the acceptance and use of small drone military operations around the world.

In
addition, commercial drone use is gaining momentum as multiple industries are incorporating drones into their daily business functions,
given the wide range of applications, including monitoring, inspection and surveillance. It
is anticipated that worldwide commercial drone revenues will reach $163.5 billion by 2030. For example, farmers are using drones to inspect
and spray their crops, which improves yields, construction sites are adopting drones to survey and monitor land, which improves workplace
safety, and companies are using drones to inventory product in factories and warehouses, which improves efficiency. Additionally, drones
are being used increasingly to transport and deliver goods. For example, hospitals are deploying drones to deliver critical medicine
and other medical supplies to remote and underserved regions, while logistics companies are using drones to transport cargo between locations,
expediting deliveries. As the commercial drone industry matures, we believe that aircraft and their components subsystems will become
more commoditized, with additional pockets of growth expected in services and service-derivative revenues. The trajectory of commercial
drone applications is well-aligned with our business strategy, which includes a focus on commercializing multiple types of value-added
drone solutions to meet various end user and industry needs.

Avionics.
New aircraft production and upgrades to existing aircraft are driving demand for our avionics solutions. We believe the market places
a premium on avionics solutions like ours that have capabilities such as improved flight controls, communications and navigation capabilities,
and flight monitoring. Continued technological advances in avionics and aging general aviation fleets are expected to drive growth for
the general aviation avionics aftermarket.

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Training.
Overall demand for military flight training is expected to grow as countries around the world increase defense spending and outsource
flight training to the private sector. Key market drivers include outsourcing of military training, technological advancement, and the
ongoing pilot shortage. Additionally, the DoD has awarded over $13.7 billion in military aviation training contracts since 2015, representing
a new public-private sector market norm. In the commercial market, the same shortage of trained pilots serves as the main driver of demand.
The commercial training market is projected to grow from $1.8 billion in 2023 to
over $4.9 billion in 2030, representing a CAGR of 15.4%.

Electric
Air Mobility. It is estimated that the global electric air mobility market may grow to
approximately $55 billion by 2030 and to approximately $1 trillion by 2040. Within this broader market, we believe medium- to heavy-lift
autonomous aerial cargo represents one of the largest and most actionable segments. While the electric air mobility market remains in its nascent stage,
we believe that the growing prevalence of e-commerce, rising operating costs in traditional rotorcraft and ground transportation, geographic
isolation of certain regions, and increasing government demand for tactical resupply, border security, and ISR missions will support demand for electric and hybrid-electric vertical takeoff and landing aircraft.
In addition, the implementation of emissions standards and related incentives has increased interest in aircraft electrification. Ultimately,
we believe cargo and government mission profiles represent the most actionable near-term end markets owing to defined operational use
cases and comparatively lower infrastructure requirements.

Our
Growth Strategies

We
are a growing platform built off a successful M&A strategy, with a robust pipeline of future commercial opportunities. Our growth
strategies are rooted in a bold and focused vision for the future, with a mix of organic and inorganic growth initiatives. Within each
of our segments, there are several opportunities to increase market share and penetrate new business areas.

Organically
grow existing business line capabilities.

We
will continue to make substantial investments in our sales and marketing, analytics, and communications functions to support our
expansion within current markets and into future and specialized markets within each of our segments. We have identified specific
opportunities to invest in organic growth, including launching larger screen form factor avionics with increased functionality,
procuring additional aircraft to expand the capabilities of the Training segment, and iteratively developing our existing drone
technology to enter new commercial end markets. With strong customer relationships and a focus on loyalty and satisfaction, we will
continue to upsell and cross-sell across our portfolio, which in conjunction with investments in marketing and brand positioning
will bolster our brand awareness. Finally, we are planning on both measured geographic expansion and targeting new customer end
markets, which will further expand our addressable market.

Develop
and commercialize new products and services and expand certification of new and future products and services.

Our
segment specific initiatives are as follows:

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Leverage
Public Sector Relationships and Security Clearances to Drive Business.

Our
deep public sector relationships and security clearances enable us to bid on government requests for proposals and drive brand awareness of our drone,
eVTOL, avionics, and training solutions with key military decision makers. For example, members of our management team maintain close
relationships with the highest levels of government around the world, including military leaders, ambassadors, and defense attachés
from NATO and its allies. Our senior leadership team has also held and/or currently holds positions on various government committees
across the FAA, Pentagon, and White House. Key employees also possess extensive military leadership experience having served in U.S.
special forces units. This grants us enviable access to key growth end markets and unlocks commercial synergies between
our various segments.

Partnering
with other firms on commercial ventures to drive technology convergence.

Partnerships
allow us to expedite development of customer solutions by bringing together critical technologies across the aerospace and defense
marketplace. For example, our Sky-Watch brand has critical partnerships with companies such as Palantir and Helsing that have
boosted our drone’s capabilities. For our Electric Air Mobility segment, partnerships have been and will be at the forefront
of our eVTOL platform’s integrated and convergent technology advantage, not only for the end-product but also in the areas of
manufacturing, engineering and supply chain. New partnerships in AI and machine learning are also being explored in the Drones
segment as well as virtual training system partnerships in the Training segment.

In
addition to these technology partnerships, we selectively pursue strategic joint ventures with international developers of
combat-proven unmanned aerial systems to accelerate access to validated platforms and defense markets. In October 2025, we entered
into a non-binding letter of intent with Degree-Trans LLC dba Bullet, a Ukrainian developer of turbojet unmanned interceptor
systems, to explore the formation of a 50/50 joint venture focused on the production and deployment of Bullet’s fixed-wing unmanned aerial vehicle (“UAV”)
technology across NATO member countries, and Ukraine. The proposed transaction remains subject to further negotiation and
execution of definitive agreements, and there can be no assurance that the contemplated joint venture will be consummated. In
addition, in November 2025, our subsidiary, AIRO Drone, entered into a Joint Venture and Operating Agreement with Nord Drone Group,
LLC, a Ukrainian developer of unmanned aerial systems, to form a 50/50 joint venture focused on the development, manufacture, and
commercialization of unmanned aerial systems designed primarily for munitions delivery for customers in the United States, NATO
member countries, and Ukraine. The consummation of the AIRO Nord-Drone joint venture is subject to customary closing conditions,
including the execution of ancillary agreements and receipt of any required regulatory approvals, and may not be completed on the
terms described, or at all.

Strategically
acquire businesses and technologies to enhance our offerings.

We
were formed in August 2021 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry.
Since our founding, including the Put-Together Transaction, we have gained experience in successfully integrating businesses, and will
continue to focus on thoughtful strategic acquisitions as a key component of our business growth strategy. For example, the drone and
avionics markets are primed for consolidation due to the lack of scale, capital, and resources necessary for expansion by many drone
and avionics companies, and we have identified and are actively evaluating a wide range of strategic opportunities for expansion. We
believe our acquisition strategy will enable us to expand our footprint and opportunities in new and existing areas, strengthen our customer
base and market share and improve overall brand recognition.

Continual
investment in software, AI, and machine learning to expand solutions capabilities and increase operational efficiencies.

We
plan on building out our software, AI, and machine learning capabilities to help our customers solve more complex problems and bring
additional capabilities to the marketplace. In addition, we intend to offer new product and service lines to ensure our customers are
equipped with the proper tools for their evolving needs. These investments are expected to further bolster our cross-platform network
effort to help support future R&D and new product development. These initiatives will also help us streamline our internal processes
and optimize our supply chain, which will support further growth.

12

Segment
Summary

Drones

The
Drones segment develops, manufactures and sells drones and will provide drone services, such as DaaS, for military and commercial end
users. Our military drones are sold through our Sky-Watch brand, which is a key supplier to European NATO countries. Military applications
include reconnaissance, surveillance, and defense services, while commercial applications currently include inspection, survey, mapping,
and photography, with future potential expansion into agriculture, weather analysis, conservation, healthcare, search and rescue and
construction applications. A critical point of differentiation lies in our drones’ ability to perform in a GPS denied environment,
which has numerous military and commercial applications. Moreover, our close feedback loop with in-field operators supports a battlefield
relevant capability set. Key market tailwinds include heightened geopolitical instability, increased defense spending, and the evolving
realities of the 21st century battlefield. Our core future initiatives include military manufacturing in the United States
to sell our drones to the DoD and expansion of the DaaS business.

Our
primary military product, the RQ-35 Heidrun, offers significant advantages over existing micro-ISR drones, because of the combination
of its full-autonomy, demonstrated ability to operate in harsh electronic warfare and GPS-denied battlespaces, its long flight time,
ease of operation, and robust supply chain. Our RQ-35 Heidrun drones operate in EU and NATO countries, having been tested and deployed
in international markets in the EMEA region, including in the ongoing Ukraine conflict. These drones have hundreds of thousands of hours
operating successfully in these harsh environments, and via integrations with other battlespace partners, and have proven to be an essential
link between intelligence gathering and decision making for military customers around the world.

We
also have three cargo drone platforms, including the Sentinel 30 km short-distance drone, the Chaos 60 km medium distance drone, and
a downscaled cargo version of the Electric Air Mobility segment’s Jaunt Journey that can carry up to 250 pounds. All of these
platforms are currently in the prototype stage and we are working to obtain FAA certification, which has been granted to others by
the FAA for cargo oriented drones, for our cargo drones before going to market.

Our
drone assortment has critical points of parity with other drones along parameters such as wingspan, weight, payload, and endurance,
with our critical point of differentiation being our drone’s ability to autonomously operate in GPS-denied environments. This
core attribute reduces the need for human input and expands the solutions scope of our offerings. This technology has critical applications across military and commercial use cases, and we believe we are uniquely suited to
capitalize on this opportunity.

We
also plan to provide DaaS offerings, including surveillance services for businesses interested in monitoring, surveying, and
evaluating their properties. Our DaaS strategy is rooted in our GPS-denied technology, which has strong commercial potential in
agriculture, security, and industrials applications. We plan to offer an extensive suite of capabilities for a wide range of
commercial use cases, including mapping, surveying, inspecting, photographing and filming, dispensing and spraying, warehousing, and
monitoring. We plan to expand our commercial capabilities by offering drone maintenance, repair, and overhaul services.

Sales
of our drones to the DoD is a key future initiative. Our production facility in Phoenix is currently in the process
of obtaining Blue UAS certification, which will enable us to manufacture and sell our RQ-35 drone to the DoD. This certification process
involves sponsors in various U.S military branches supporting our product, with full certification contingent on U.S.-domiciled
production. A version of the RQ-35 intended for Blue UAS certification, the RQ-35 v.251, is currently in our development plan, along
with a follow-on certification program. We expect to achieve Blue UAS certification by June 2026.
We are leveraging the full breadth of our product development excellence, public sector relationships, and our platform to penetrate
the U.S. military drone market.

To
support future new product development, we are designing and engineering efficient, reliable, and low-carbon-emission unmanned aircraft
systems for both commercial and military markets. We are actively developing improvements for our existing RQ-35 Heidrun drone while
also designing the next generation of fully autonomous, fixed-wing mini drones.

Finally,
we are developing a global command, control and communications network for safe, efficient and seamless air platform interoperability
called “AIRO Link.” This network would be designed to enable ground operators to establish a data link to unmanned aircraft
systems, providing valuable flight analytics and support the development of drone flights performed in BVLOS. Currently, we are researching
the requirements and framework that will enable multiple BVLOS drone operations at low altitudes in airspace where FAA air traffic services
are not provided. We are also working to demonstrate the feasibility of using small radio or communication links on drone airframes.

Avionics

The
Avionics segment develops, manufactures, and sells avionics for military and general aviation aircraft, drones, and eVTOLs. Our avionics products include flight displays, Connected Panels, and GPS/GNSS sensors, all of which have been installed on legacy military
aircraft and general aviation platforms. With technology constantly advancing and general aviation fleets aging, we believe there is
considerable potential for military and general aviation aircraft to be upgraded with our solutions. Key market tailwinds include technological
advancements, robust general aviation delivery numbers, and an aging general aviation fleet.

Our
Aspen Avionics brand provides avionics solutions to the general aviation aftermarket, including Connected Panels and OEM displays and
integrations for select partners. Our Aspen Avionics brand is well-known in the avionics market, given its extensive presence on older
military, general aviation, and rotary wing platforms. In addition, our Aspen Avionics brand possesses over 20 years of experience and
strong, long-term customer acceptance of its value proposition. We also supply parts to OEMs, including displays to Robinson Helicopters,
our Connected Panels to Pilatus and Honeywell, and are developing solutions for our Jaunt eVTOL platforms and other eVTOL operators like
Joby Aviation.

13

Our
product assortment is built on our Connected Panels, Evolution Flight Display System, and NexNAV offerings depicted below:

The
Avionics segment uses a book and bill model, leveraging our strong relationships with more than 650 dealers worldwide. We primarily use
contract manufacturers based in the United States for our avionics products. Product-market fit has been robust with our flight
display system, our Connected Panels, and NexNav, which have been well received by consumers.

Our
solutions demonstrate strong points of parity with products manufactured by competitors Garmin Ltd., Dynon Avionics, Inc., and
Avidyne Corporation along many core product functionality attributes such as Primary Flight (“PFD”) and Multi-functional
Displays, PFD Backup, Vacuum System Removal, Small Form Factor, and GPS / GNSS Integration. Our key point of differentiation is our
products’ easy-use, low-cost installation, and unique upgradeability, with our avionics engineered ground-up to allow for
value-added features to be added seamlessly throughout the ownership lifecycle.

We
are developing new avionics systems with additional capabilities. These systems are being designed to improve detection and avoidance
with obstacles that could enable manned and unmanned BVLOS operations and enhance connectivity and health monitoring between ground-based
and flight-based systems. We are also developing sensor payloads for specific missions and researching the use of advanced light field
and near-eye optics for display systems.

We
are also developing larger screen displays which will allow us to serve as an OEM supplier for a variety of platforms. Additionally,
these larger screen displays will also be used on our Jaunt cargo and passenger aircraft, which we expect will significantly reduce total
eVTOL and Avionics production costs.

Training

The
Training segment provides military and commercial pilot training for the military and commercial sectors. We offer professional training
and consulting services to the U.S. military, select NATO countries, and other U.S. allies under our CDI brand. These offerings include
adversary air, close air support, ISR, aircraft leasing, pilot training, ground liaison services, JTAC training, as well as full joint
theatre ISR and simulated ground strike training. We work closely with special military forces such as SEAL teams, the U.S. Naval Air
Warfare Center, and USAF Air Combat Command. Our top security clearances and established relationships at the Pentagon provide us a differentiated
ability to bid on mandates. We also offer commercial pilot training for individuals looking to satisfy their training requirements to
earn their commercial pilot license and are actively expanding our non-military capabilities. Our owned aircraft platforms include the Cessna 310, Cessna 206, and L-39 Albatros, and we lease the Marchetti S-211,
which together enable us to provide a wide range of training services.

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Coastal
Defense Incorporated. CDI provides a full suite of services including close air support, intelligence surveillance and
reconnaissance and simulated ground strike training. We are highly experienced in special forces and possess top secret clearance
for our facility, which enables us to bid on contracts with special clearance requirements. Our staff includes a large network of
Air Force, Navy, and Marine Corps pilots. CDI is an approved participant under certain multiple award IDIQ contracts issued by the
U.S. military. Approved IDIQ contract participants such as CDI bid on task orders as they are issued by the U.S. military pursuant
to such IDIQ contracts. The U.S. military chooses winning bids based on such factors as cost, certainty of fulfilling the
requirements of a specific task order, safety records, and other factors. Key market tailwinds include a persistent military pilot shortage and the DoD outsourcing pilot training to the private
sector.

CDI
is a current participant under three such IDIQ contracts. The first is for Combat Air Force CAS services, for which CDI is a
mandated participant as one of seven companies approved by U.S. Air Force Air Combat Command to bid for contract military training
contracts. This contract was awarded in September 2024 and is expected to be completed by September 2029, with a combined
not-to-exceed aggregate award of $5.7 billion across all task orders and participants. The Combat Air Force CAS contract is still
active and is expected to continue through 2029. We plan to compete for task orders under this contract that we qualify for based on
our fleet of aircraft. The second contract is for terminal air attack controller trainer services (“TAACTS”). The TAACTS
contract will be active through 2028, with a combined not-to-exceed aggregate award of $249 million across all task orders and
participants. We plan to compete for task orders under this contract as they are released. The third contract is a contract for the
Navy to provide joint terminal air controller training for customers within the Navy that will be active through the end of 2026
with an aggregate award of $1.95 million. In addition to the IDIQ contracts, CDI also bids quarterly on individual contracts and
purchase orders to provide ISR support services, including a current contract award until April 30, 2029.

Commercial
Flight School. In November 2023, we signed non-binding letters of intent to acquire two businesses for the Training segment, including
a flight school for training pilots. There can
be no assurance that we will acquire the pilot school on the terms described herein or at all.

Electric
Air Mobility

The
Electric Air Mobility segment is developing a rotorcraft eVTOL for cargo applications through our Jaunt brand. Use cases
include fixed route flights, on-demand trips, and cargo operations. Our R&D efforts are focused on developing the cargo eVTOL platform,
targeting the attractive middle mile delivery cargo market. We plan to certify our platforms through existing CAR 529 Rotorcraft standards,
with our eVTOL platform including the best attributes of both rotary and fixed wing aircraft. This certification process does not require
us to modify existing rules to get certified, which we believe is a distinct advantage versus our competitors who are certifying under
FAA Part 21.17(b) rules. Our patented compound rotorcraft technology is a core point of technological differentiation that will underpin
our cargo eVTOL’s commercial capability and it has over 300 piloted flight hours on multiple Jaunt demonstrator aircraft. We believe
the range and payload capabilities driven by this technology uniquely positions us to provide a compelling commercial solution for the
eVTOL cargo market. Once developed and certified, our cargo eVTOL will serve as the foundation of our commercialization efforts, with
passenger applications as a longer-term secondary initiative.

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Our
R&D efforts are focused on designing efficient energy management systems, flight control computers, and fly-by-wire systems capable
of delivering cargo and passengers. Additionally, we are collaborating with other technology companies to provide high-fidelity virtual-reality
flight simulators to eventually support eVTOL aircraft testing and pilot training. We are also researching robotic automation technologies
for thermoplastic airframe manufacturing to accelerate the mass production of electric air mobility aircraft and reduce overall production
costs. Key growth tailwinds include increasing demand for mid mile cargo, urban mobility access, and the inherent commercial efficiency
advantages of electric platforms vis-à-vis traditional propulsion systems. Our four big target markets include cargo, passenger,
emergency response, and the military, with cargo being our initial focus due to its readily addressable market potential.

We
believe we are well-positioned to penetrate the eVTOL cargo market due to our certification approach and funding support. We anticipate
that our certification strategy under CAR 529 Rules through the TCCA will significantly expedite the certification process. Once certified,
our cargo aircraft will immediately be recognized by U.S. and European aviation authorities via FAA/EASA reciprocity, allowing us to
bring our eVTOL aircraft to market in the United States, Europe, and Canada concurrently. We expect to receive significant funding
support from multiple sources, including the Canadian government, suppliers, and customer deposits. Additionally, we benefit from supplier
cost sharing, whereby our suppliers have agreed to defer the costs of non-recurring engineering expenses until commercialization, which
reduces our initial funding requirements prior to commercialization. As a result, we believe we have access to funding to cover most
of our aircraft development.

We
began conceptual design of our cargo-configured electric and hybrid-electric aircraft in 2024 and anticipate entering preliminary design
in early 2026. We are targeting first flight by the end of 2026 and initial aircraft deliveries beginning in the fourth quarter of 2027.
Our development program is focused on a runway-independent vertical takeoff and landing aircraft designed to support medium-lift cargo
operations and government mission profiles. Initial commercialization efforts are centered on middle-mile logistics, remote cargo delivery,
tactical resupply, emergency response, and ISR applications, where customers
value range, endurance, payload capacity, and operational flexibility.

The
aircraft architecture incorporates compound rotorcraft aerodynamics and electric or hybrid-electric propulsion to balance endurance,
payload capability, and operating economics. We believe hybrid-electric configurations may provide extended range and mission duration
relative to fully electric platforms, particularly for government and remote logistics use cases. Our phased development approach is
intended to retire technical and regulatory risk through staged design reviews, flight testing, and certification engagement prior to
scaled production.

In
parallel with the cargo program, we expect to continue development of multi-role configurations and enabling technologies, including
autonomy systems, advanced flight controls, mission payload integration, and ground control infrastructure, to expand the addressable
set of cargo and government applications over time. These efforts are intended to support increased operational flexibility, multi-mission
deployment, and potential future variants.

Customers

Our
customer relationships underpin the strength and growth potential of our business. We service a wide variety of end markets, with a diverse
mix of customers ranging from blue-chip OEMs to NATO. Our track record of success, innovative products, tight customer relationships,
and excellent service have driven strong customer retention.

Drones. We
sell our drones to military and defense entities worldwide, including NATO member countries such as the Netherlands, Denmark, and
Germany, which procure the drones through their sovereign funds at the country level, and then donate the majority of the drones to
Ukraine. European demand is robust, as NATO countries continue to procure RQ-35s for their own use with the majority of drones
subsequently donated to Ukraine for in-field use. We
believe that drones can be a key component of NATO countries’ defense spending plans to meet their 5% GDP contribution target
and that we have a unique opportunity for our products to take a share of these countries’ defense spending, particularly with
our mUAS. Expansion of the RQ-35 into the U.S. market is in process, and we believe we will obtain certification as we have already
demonstrated the RQ-35’s capabilities to U.S. forces overseas in Europe. We are now assembling the RQ-35 and will start fully
manufacturing it in the United States to certify for sales to the DoD. In the future, we aim to serve commercial end markets through
our drone services and AIRO Link offerings, targeting Fortune 500 companies. For the year ended December 31, 2025, two customers
accounted for 79% of our consolidated revenue, all of which related to Drone segment revenue. For the year ended December 31, 2024,
two customers accounted for 72% of our revenue, all of which related to Drone segment revenue. No other customer directly or
indirectly accounted for more than 10% of our revenue for either period.

Avionics.
We sell our avionics solutions through our network of more than 650 dealers to sell products to owner-operators of general aviation aircraft
and directly as an OEM solution to Robinson Helicopters, Pilatus, Honeywell, and Joby Aviation. In addition, the Drones and Electric Air Mobility segments
use our avionics and electronics components on their platforms.

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Training.
We have contracts with the U.S. government to provide military training and simulation services.

Electric
Air Mobility. We intend to market and sell our electric and hybrid-electric aircraft to commercial cargo operators, middle-mile
and remote logistics providers, and government customers, including defense, border security, emergency response, and ISR operators. Target customers may include regional and remote cargo carriers, energy and industrial
logistics operators, humanitarian and disaster relief organizations, and public-sector agencies seeking runway-independent vertical lift
solutions. Passenger applications may represent a longer-term opportunity subject to additional development and certification.

Drones
Segment Backlog

Drones
segment backlog represents unfilled orders for which we have purchase orders or other definitive agreements with customers, as well
as orders for which NATO countries have allocated funds but for which no definitive agreement has been executed, in each case
against which we expect to perform and recognize revenue in the next 12 months. As of March 31, 2026, we had approximately
$150 million in Drones segment backlog. This backlog amount was translated to U.S. dollars using applicable exchange rates as of
market close on March 27, 2026, and may increase or decrease based on fluctuations in foreign exchange rates. We may experience
reductions to Drones segment backlog and/or significant order cancellations due to various factors, including delivery delays and
production disruptions.

Corporate
History

We
were formed on August 30, 2021 for the purpose of acquiring and integrating various companies engaged in the aerospace and defense industry.
During the year ended December 31, 2022, we completed our “Put-Together Transaction” to acquire six companies which are now
organized into our four reportable segments: (i) Drones, through our subsidiaries, AIRO Drone and Sky-Watch; (ii) Avionics, through our
subsidiary, Aspen Avionics; (iii) Training, through our subsidiaries, Agile Defense and CDI; and (iv) Electric Air Mobility, through
our subsidiary, Jaunt.

Competition

We
operate in highly competitive markets that are sensitive to technological advances. In each of our market segments, many of our
competitors are larger and can maintain higher levels of expenditures for R&D. In each of our markets, we concentrate on the
opportunities that we believe suit our resources, overall technological capabilities, and objectives. Principal competitive factors
in these markets are product quality and reliability; technological capabilities, including reliable, resilient, and innovative
cyber capabilities; service; past performance; ability to develop and implement complex, integrated solutions; ability to meet
delivery schedules; the effectiveness of third-party sales channels in international markets; and cost-effectiveness. We frequently
“partner” or are involved in subcontracting and teaming relationships with companies that are, from time to time,
competitors on other programs.

Drones. We anticipate the defense market for
sUAS continues to evolve in response to changing technologies, shifting customer needs and expectations, and the potential introduction
of new products. We believe that a number of established domestic and international defense contractors have developed or are developing
sUAS that continue to compete, or will compete, directly with our products. Some of these contractors have significantly greater financial
and other resources than we possess. Our current principal sUAS competitors include Elbit Systems Ltd., Teledyne Technologies, Inc., L3
Technologies, Inc., and Lockheed Martin Corporation. The U.S. defense market for mUAS has been addressed primarily by Boeing’s ScanEagle
and Textron Inc.’s Shadow UAS. Our current principal mUAS competitors include those competing with us for the U.S. Army’s
Future Tactical UAS Program: Martin UAV, LLC and Northrop Grumman Corporation’s V-Bat, Textron Inc.’s Aerosonde, and L3Harris
Technologies, Inc.’s FVR-90. International mUAS competitors include Elbit Systems Ltd. and Israel Aircraft Industries International,
Inc. We do not view large UAS, such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and
its derivatives, as direct competitors to the sUAS because they perform different missions, do not typically deliver their information
directly to front-line ground forces, and are not hand launched and controlled. However, we cannot be certain that these platforms will
not become direct competitors in the future. Potential competition from consumer-focused drone manufacturers is emerging as their capabilities
increase and their prices remain low relative to existing defense solutions, which is resulting in some level of military consideration
even if such drones do not meet traditional military performance or security specifications. Such potential competitors include Skydio
Inc. and Shield AI, Inc.

The market for commercial UAS products and services is in an early stage of development, but is evolving rapidly,
generating a great deal of interest as government regulations evolve to accommodate commercial UAS operations in the NAS and in the airspace
systems of other countries. Given the breadth of applications and the diversity of industries that could benefit from UAS technology,
a growing number of potential competitors in this market include consumer drone manufacturers such as Da Jiang Innovations (although regulation
is trending toward further restrictions against Chinese made drones, Da Jiang Innovations remains a global industry leader and continues
to serve markets on which we are focused), who seek to enhance their systems’ capabilities over time; other sUAS manufacturers,
including large aerospace companies such as Lockheed Martin Corporation, and drone and aerial surveying and mapping service providers
such as PrecisionHawk, Inc., Sentera LLC, and SlantRange, Inc.; ground-based surveying and mapping service providers; satellite imagery
providers; and specialty system manufacturers, software as a service and other service providers aiming to address specific market segments.
The emerging non-military market is attracting numerous additional competitors and significant venture capital funding given perceived
lower barriers to entry and a much more fragmented marketplace as compared to the military market. Potential additional competitors include
start-up companies providing low-cost solutions.

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Avionics.
We have several competitors in the avionics market. Those major competitors include companies such as Honeywell International Inc.
(HON), Avidyne Corporation, Collins Aerospace, Dynon Avionics, Inc., uAvionix Corporation, L3Harris Technologies, Inc., and Garmin Ltd.
(“Garmin”). In the display and integrated avionics segment, the primary competitor is Garmin, which has the largest market
share in the aftermarket segment. Garmin, Honeywell, and Collins Aerospace are the leaders in the OEM segment. As the eVTOL market emerges,
we expect new market competitors as well as the existing competitors in the avionics segment. Our primary competitors in the Connected
Panel market include Honeywell, Garmin, and Teledyne. In the GPS market space, the NexNav system has few direct competitors. NexNav products
include licensing, Circuit Card Assemblies (“CCA”), and Line Replaceable Units or boxes (“LRU”). Competitors
include Honeywell’s wholly owned division, Bendix/King, CMC Electronics Inc./Esterline Technologies Corp., FreeFlight Systems Inc.
(“FreeFlight”) Trig Avionics Ltd. (“Trig Avionics”), and uAvionix Corporation. FreeFlight and Trig Avionics also
license our design. Other manufacturers of GPS components such as Garmin, Honeywell, and Collins Aerospace do not sell standalone GPS
devices in our markets and typically provide that functionality embedded in an integrated product.

Training.
Our Training segment is part of an industry that is highly concentrated with several well capitalized competitors including, without
limitation, Draken International, Inc. (“Draken”), Top Aces Inc. (“Top Aces”), Airborne Tactical Advantage Company,
LLC (“ATAC”), and Tactical Air Defense Services Inc. (“TacAir”). Draken has a large inventory of domestic and
foreign-built aircraft including A4 Skyhawk, L-159G Alca, Aermacchi MB 339, MiG 21, L-39 Albatros, F1 Mirage, and Atlas Cheetah. A current
contractor with the U.S. Air Force (“USAF”) and the U.S. Navy (“Navy”), Top Aces, is a Canadian-based company
with an inventory of domestic and foreign-built aircraft, including A4 Skyhawk and Dornier Alpha Jet, and is set to acquire F-16 Falcons
through its acquisition of Advanced Training Systems International in Mesa, Arizona. ATAC is a current contractor with the USAF and Navy,
and has a large inventory of foreign-built fighter jets, including F21 Kfir, MK-58 Hawker, L-39 Albatros, and F1 Mirage, of which the
newest aircraft was operational in 1968. TacAir has a medium inventory of domestic built F-5 Freedom Fighters and also operates customer-owned
domestic and foreign-built aircraft, including F-16 Falcon and SU-27. We also compete with simulation training.

Electric
Air Mobility.

The
electric air mobility market is highly competitive and includes companies developing aircraft for passenger transportation, cargo logistics,
and government applications. Certain publicly traded competitors, including Archer Aviation Inc., Eve Holding, Inc., Joby Aviation, Inc.,
and Vertical Aerospace Ltd., are primarily focused on passenger eVTOL aircraft and urban air mobility services. In the cargo segment,
companies such as Elroy Air and MightyFly are developing autonomous or hybrid-electric cargo aircraft targeting middle-mile logistics
markets similar to those we intend to address. We also compete indirectly with incumbent aircraft charter services that have long served
comparable markets using hydrocarbon-based rotorcraft and fixed-wing aircraft, as well as ground-based transportation providers, including
Uber Technologies, Inc. and Lyft, Inc., to the extent our offerings overlap with certain passenger or logistics use cases.

We
anticipate utilizing existing rotorcraft certification standards for certain of our aircraft configurations, which we believe may provide
a defined regulatory pathway to commercial service relative to certain competitors pursuing alternative certification approaches. Our
electric and hybrid-electric compound rotorcraft architecture is designed to support medium- to heavy-lift cargo and government mission
profiles, including tactical resupply and ISR applications, where endurance,
payload capacity, and runway-independent operations are critical. We believe the principal competitive factors in this market include
certification approach and timeline, cost, manufacturing efficiency, product performance, reliability and safety, service capabilities,
supplier partnerships, and technological innovation. Many of our competitors, however, have substantially greater financial resources,
manufacturing scale, operational experience, or regulatory track records, and competition is expected to intensify as the market evolves.

Research
and Development

We
benefit from the intellectual experience and capacity of visionary leadership and a robust R&D culture linked directly to our operating
business model. We leverage this to continue our thought and innovation leadership among industries, government, military, academic,
aviation, and other market segments.

Business
survival and evolution of best systems demand comprehensive self-assessment and disruption analysis to be a true leader in the industry.
Accordingly, we characterize our company and our people as an “innovation and invention machine.”

To
this end, we promote company-wide experimentation, partnering and client/customer collaboration to assimilate and harness the best ideas.
We plan to induce R&D through big data collection, an internal architecture for participation and an enablement process to absorb
external innovation resources extensively and assimilate them into our indigenous business. Our R&D process is matrixed internally
with operating segments and engineering efforts. It involves management and oversight from idea conception to prototyping, to commercialization
and sales; then cycles to improve products and services continuously.

Additionally,
we partner with appropriate industry leaders, scientific and technology communities, academia, government entities and others to foster
simultaneous research, design, development, and maintenance of both new and existing products.

Our
R&D focuses in five areas that correspond to government and industry needs: (1) Advanced Avionics and Sensors, Displays and Integrations;
(2) Electric Air Mobility System; (3) UAS and sUAS Critical Systems; (4) Drone Command, Control, and Communication Systems; and (5) U.S.
and Global Standards.

Advanced
Avionics and Sensors, Displays and Integration. We design and engineer advanced systems that include, but are not limited to:

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Electric
Air Mobility Systems. We design and engineer electric and hybrid-electric compound rotorcraft platforms and associated systems intended
to support cargo and government mission profiles, including middle-mile logistics, tactical resupply, and ISR applications. Our research and development activities include, but are not limited to, the following:

UAS
and sUAS Critical Systems. We design and engineer safe, efficient, low-carbon-emission, reliable and functional platforms and systems
for multi-mission roles through stringent flight testing and evaluation. This includes, but is not limited to the research, development
or analysis of:

Drone
Command, Control and Communications Systems. We develop a global Command, Control and Communications network for safe, efficient
and seamless air platform interoperability termed, “AIRO-NET;” through which we will:

U.S.
and Global Standards. Our goal is to be a leader of standard setting in the new aerosphere, such that it will support the development
of regulations, policies, procedures, guidance, and standards for manned and unmanned aircraft operations, including but not limited
to function allocation, control station requirements, pilot training and certification requirements. To accomplish that goal, we:

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Intellectual
Property and Brand Protection

Our
success depends in part upon our ability to protect our core technology and intellectual property. To establish and protect our proprietary
rights, we rely on a combination of intellectual-property rights (e.g., patents, trademarks, copyrights, and trade secrets including
know-how and expertise) and contracts (e.g., license agreements, confidentiality and non-disclosure agreements with third parties, and
employee and contractor disclosure and invention assignment agreements).

We
own or have exclusive rights to patents, trademarks, copyrights, trade secrets, and/or other intellectual property rights in the United
States and abroad that support us and the respective brands, products and services of each of our four segments. We have 34 issued patents
worldwide (of which 27 are U.S. patents and 7 of which are British, French, German, and Italian validations of European patents). Without
accounting for any potential patent term adjustments or extensions or other forms of exclusivity with respect to our U.S. issued patents,
4 expire before 2026, 13 expire between the beginning of 2026 and the end of 2030, and 10 expire between the beginning of 2031 and the
end of 2039. The European patents are expected to expire between the beginning of 2027 and the end of 2032.

Of
the above referenced patents and applications, approximately 20 of the issued U.S. patents are related to electronic flight display technologies.
Approximately 7 of the issued U.S. patents are related to vertical take-off and landing aircraft technologies. We also have 5 U.S. trademark
registrations and 1 pending U.S. trademark application. Our various portfolio companies regularly file for patent and trademark protection,
and we have also acquired intellectual property by way of corporate acquisition.

We
believe that our differentiated and balanced portfolio of intellectual property rights in the aerospace, defense and drone technologies
spaces, our diversified product portfolio, ranging from established and mature product offerings to innovative drone and eVTOL solutions,
and the brand reputation of our companies, provide us with a competitive advantage.

In
the future, we intend to continue to seek intellectual property protection for our new products, technologies and designs, and exercise
our rights to exclusively use these valuable assets.

Employees
and Human Capital Management

As of December 31, 2025, we had 223
employees across our platform, all of which were full-time, including 153 in the Drones segment, 36 in the Avionics segment, 10 in
the Training segment, 6 in the Electric Air Mobility segment, and 18 supporting corporate functions. Our human capital resources objectives include, as applicable,
identifying, recruiting, retaining, incentivizing and integrating existing and new employees, advisors and consultants. We
anticipate additional hiring activity across our four segments as we continue to scale our operations.

As of December 31, 2025, 45
employees based in Denmark in the Drones segment are covered by a collective bargaining agreement with the Danish Industry union.
Apart from such employees, no other employees are currently covered by collective bargaining agreements or represented by labor
unions.

20

We
anticipate increased hiring activity as we continue to scale operations. In particular, our Electric Air Mobility segment anticipates
substantial hiring activity, although it will also augment staffing using third-party service providers. We intend to hire operational
management and engineering staff for R&D.

Government
Regulation

We
are subject to various local, state, federal and international laws and regulations relating to the development, manufacturing, sale
and distribution of our products, systems and services, and it is our policy to comply with the applicable laws in each jurisdiction
in which we conduct business. Regulations include but are not limited to those related to import and export controls, corruption, bribery,
environment, government procurement, wireless communications, competition, product safety, workplace health and safety, employment, labor
and data privacy.

Drones

Because
it contracts with the Department of Defense/Department of War and other agencies of the U.S. government—and, for certain of
those contracts, requires access to classified information—our Drones segment is subject to extensive federal statutes and
regulations, including the Federal Acquisition Regulation (“FAR”), the Defense Federal Acquisition Regulation Supplement (“DFARS”), the
Truthful Cost and Pricing statute, the Foreign Corrupt Practices Act, the False Claims Act, and the regulations implementing the
National Industrial Security Program Operating Manual (“NISPOM”). The NISPOM regulations establish the security
requirements applicable to classified contracts and programs, facility security clearances, and personnel security clearances. The
federal government audits and reviews contractors’ performance on contracts, pricing practices, cost accounting systems and
practices, and compliance with applicable laws, regulations and standards. Like most government contractors, the Drones
segment’s contracts are audited and reviewed regularly by federal agencies, including the Defense Contract Management Agency
and the Defense Contract Audit Agency.

Certain
of these statutes and regulations impose or subject the Drones segment to risk of substantial penalties for violations, including
significant financial liability and suspension or debarment from government contracting or subcontracting for a period of time. Our
management monitors its government business to reduce the risk of such violations occurring.

In
addition, the Drones segment is subject to industry-specific regulations due to the nature of the products and services it provides.
For example, certain aspects of its business are subject to further regulation by additional U.S. government authorities, including:
(i) the FAA, which regulates airspace for all air vehicles in the NAS; (ii) the National Telecommunications and Information
Administration and the Federal Communications Commission (“FCC”), which regulate the wireless communications upon which its UAS depend in
the U.S. and also regulate any device that emits radiofrequency regulation as a result of its operations; (iii) the Directorate of Defense Trade Controls of the U.S. Department of State, which administers the International
Traffic in Arms Regulations that regulate the export of controlled technical data, defense articles and defense services and (iv)
the Bureau of Industry and Security of the U.S. Department of Commerce, which regulates export of dual-use items and
technology.

On
June 21, 2016, the FAA released its final rules that allow routine use of certain sUAS in the NAS. The FAA rules, which went into effect
in August 2016, provide safety rules for sUAS (under 55 pounds) conducting non-recreational operations. The rules limit flights to visual-line-of-sight
daylight operation, unless the UAS has anti-collision lights in which case twilight operation is permitted. The final rule also addresses
height and speed restrictions, operator certification, optional use of a visual observer, aircraft registration and marking and operational
limits, including prohibiting flights over unprotected people on the ground who are not directly participating in the operation of the
UAS. Current FAA regulations require drone operators to register their systems with the FAA and secure operating licenses for their drones
as per the Part 107 specifications. These regulations continue to evolve to accommodate the integration of UAS into the NAS for commercial
applications, including High-Altitude Pseudo-Satellite UAS.

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In
December 2019, the FAA proposed rules requiring the remote identification of UAS. Remote identification, which provides for a UAS in
flight to provide identification that can be received by other parties, is designed to enhance safety and security by allowing the FAA
and other agencies to identify a UAS that appears to be flying unsafely or in an area in which flight is not permitted. The public comment
period for the proposed rules expired on March 2, 2020. On April 21, 2021, the final rule for remote identification of UAS went into
effect. On the same day, the final rule for operation of sUAS over people also went into effect. This rule permits routine operations
of sUAS over people, moving vehicles, and at night under certain conditions. The final rule also makes changes to the recurrent testing
framework and expands the list of persons who may request the presentation of a remote pilot certificate. Additionally, in February 2020,
the FAA issued a public request for comment on its proposed policy for the creation of a new type certification of certain UAS as a special
class of aircraft under FAA regulations. Currently the Part 107 Rules allow for the operation of sUAS without the need for FAA airworthiness
certification as long as the UAS meets certain specified criteria and certain flight rules are followed; larger UAS and operations of
sUAS outside the scope of the Part 107 Rules require a waiver from the FAA. The FAA’s proposed policy proposes a new special class
of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type
certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate.
Further rulemaking by the FAA is anticipated regarding the particular criteria for the airworthiness certification standards under the
new special class proposed by the new policy. The comment period for the FAA’s proposed policy expired on March 4, 2020.

As a result of Executive Order 14307 entitled “Unleashing American
Drone Dominance” issued by the President on June 6, 2025 (“EO 14307”), a number of policies are slated to change in
2026. Final rules are expected in mid-2026 to comply with the 240-day deadline established in EO 14307 for finalizing the BVLOS rule.
The NPRM issued at the direction of EO 14307 in August 2025 contemplates changes to Part 108 that will enable BVLOS operations without
the requirement of filing individual waivers for each operation, which will expand commercial drone capabilities. Also noteworthy is that
drones must meet compliance standards through manufacturer declarations. Finally existing Part 107 rules for visual line of sight operations
remain unchanged. However, Part 146 establishes a framework for Automated Data Service Providers to manage drone traffic and safety services.

While
it is currently anticipated that the enactment of remote identification, operation of sUAS over people, and a new airworthiness certification
process for a newly created special class of UAS will help formalize the process for manufacturing and obtaining airworthiness certification
for UAS within the newly created class and accelerate the development of commercial UAS in the U.S., it is uncertain whether the FAA’s
actions, if any, will have such effects. Additionally, it is unclear when, if ever, the FAA will implement final rules regarding remote
UAS identification and whether they will differ from the proposed rules. It is also unclear when, if at all, the FAA will create a new
class of UAS and what the final rules regarding the certification of such UAS will look like. We cannot be certain as to how its business
will be affected by the FAA’s proposals until the final rules for such matters are issued by the FAA.

Furthermore,
our non-U.S. operations are subject to the laws and regulations of foreign jurisdictions, which may include regulations that are more
stringent than those imposed by the U.S. government on our U.S. operations.

The
defense and security mUAS segment, most often represented by government clients, has, in our opinion, the best possibility to utilize
mUAS systems, as both armed forces and security agencies often times have access to restricted airspace in which to train, build capabilities,
and operate. Nevertheless, the extent to which the mUAS market—defense, security and civilian professional—can be accessed,
expanded, and commercially exploited is tied to clients’ ability to fly in non-restricted airspace and, moreover, the ability to
fly BVLOS. National and international regulation, such as the Unmanned Aircraft System Traffic Management initiative implemented by the
FAA and NASA in the U.S. or the “U-Space” initiative implemented by the EASA to address UAS traffic management in the EU,
is still underway, as is standardization of operator certification and platform (airworthiness) certification. Until these standards,
certifications, and traffic management are effectively clarified and ratified systematically and internationally, certain clients of
the targeted customer segment may be hesitant, or even prevented, in acquiring and utilizing our mUAS solutions. Accordingly, the nature
of and the speed with these regulations are completed and implemented pose a risk for both our financial performance and condition, timing
of growth and (short-term) growth potential.

Government
Contracting Process

Our
Drones segment sells the significant majority of its small and medium UAS and traffic management system products and services as the
prime contractor under contracts with the U.S. government. Certain important aspects of its government contracts are described below.

Proposal
Process

Most
of the Drones segment’s current government contracts were awarded through a competitive proposal process. The U.S. government
awards competitive contracts based on solicitations that describe the procuring agency’s needs and establish proposal criteria
for evaluation and source selection. Each interested supplier prepares a proposal in response to the agency’s
solicitation. Proposals usually must be prepared in a short time period in response to a deadline identified in the solicitation,
and the proposal effort requires extensive involvement of numerous technical and administrative personnel. Following award
announcements, unsuccessful offerors may challenge the agency’s award decision in a proceeding known as a “bid
protest.”

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Funding

The
funding of U.S. government programs is subject to congressional appropriations. Although multi-year contracts may be authorized in connection
with major procurements, Congress generally appropriates funds on a fiscal year basis, even though a program may continue for many years.
Consequently, programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations.

The
U.S. military funds its contracts for full-rate production UAS either through operational need statements or as programs of record.
Operational need statements require allocations of discretionary spending or reallocations of funding from other government
programs. We define a program of record as a program that, after undergoing extensive Department of Defense/Department of War review and product testing, is
included in the five-year government budget cycle, meaning that funding is allocated for purchases under these contracts during the
five-year cycle, absent affirmative action by the customer or Congress to change the budgeted amount. Despite being included in the
five-year budget cycle, funding for these programs is subject to annual approval.

Material
Government Contract Clauses

All
contracts with the U.S. government contain clauses, and are subject to laws and regulations, that give the government rights and remedies
not typically found in commercial contracts, including rights that allow the government to:

Generally,
government contracts are subject to oversight audits by government representatives. Compensation, if any, in the event of a termination
for default is limited to payment for work completed at the time of termination. In the event of a termination for convenience, the contractor
may receive the contract price for completed work, as well as its costs of performance of terminated work including an allowance for
profit and reasonable termination settlement costs.

NATO
Foreign Drone Contracting Process

While
similar to U.S. government processing, the NATO acquisition process for defense products and services differs in a few key ways, as discussed
below. NATO coordinates capability development and engagement with the defense industry through the Conference of National Armaments
Directors (“CNAD”), the principal committee that brings together the top national officials responsible for defense procurement
in NATO member and partner countries. The CNAD is the senior NATO committee responsible for promoting cooperation between countries in
the armaments field. The CNAD implements decisions taken by member countries as part of the NATO Defense Planning Process (“NDPP”).
Through the NDPP, NATO identifies the capabilities that it requires and promotes their development and acquisition by member countries.
It facilitates the timely identification, development and delivery of the necessary range of forces that are interoperable and adequately
prepared, equipped, trained and supported, as well as the associated military and non-military capabilities, to undertake NATO’s
full spectrum of missions.

The
Defense Industrial Production Board (“DIPB”), created as a result of the Defense Production Action Plan in 2023, brings together
experts from NATO member countries on defense industrial planning and procurement, to share best practices on defense planning and other
relevant issues such as procurement and supply chains. The DIPB meets regularly and reports to the CNAD. The DIPB addresses challenges
related to defense industrial capacity, integration of industry into defense planning, as well as broader obstacles related to enhancing
defense industrial cooperation. The DIPB also serves as a forum for identifying measures to step up defense production and increase national
capabilities for deterrence and defense, replenish depleted stockpiles and operationalize NATO’s support for Ukraine.

The
NATO Industrial Advisory Group is a high-level consultative body comprised of senior industrialists from NATO member countries and partner
countries. It advises the CNAD on how to foster government-to-industry and industry-to-industry armaments co-operation within NATO. Furthermore,
it provides advice to the CNAD on how to foster government-to-industry and industry-to-industry armaments co-operation within NATO.

The
NATO Support and Procurement Agency (“NSPA”) also plays a role in NATO’s logistics and procurement activities. It acquires,
operates and maintains a wide range of capabilities that support NATO, its member countries, partners and other international organizations.
The NSPA brings together NATO’s logistics support and procurement activities, providing effective and cost-efficient multinational
support solutions. The NSPA is a sponsoring country customer-funded agency, operating on a “no profit - no loss” basis.

Government
Contract Categories

There
are three primary types of government contracts in the commercial drones industry, each of which involves a different payment methodology
and level of risk related to the cost of performance. These basic types of contracts are typically referred to as fixed-price contracts,
cost reimbursable contracts (including cost-plus-fixed fee, cost-plus-award fee, and cost-plus-incentive fee), and time-and-materials
contracts.

In
some cases, depending on the urgency of the project and the complexity of the contract negotiation, one of our Drones segment subsidiaries
will enter into a Letter Contract prior to finalizing the terms of a definitive fixed-price, cost reimbursable or time-and-materials
contract. A Letter Contract is a written preliminary contractual instrument that provides limited initial funding and authorizes the
contractor to begin immediately performing while negotiating the definitive terms of the definitive contract.

Fixed-Price.
These contracts are not subject to adjustment by reason of costs incurred in the performance of the contract. With this type of contract,
the contractor assumes the risk that it will not be able to perform at a cost below the fixed price, except for costs incurred because
of contract changes ordered by the customer. Upon the U.S. government’s termination of a fixed-price contract, generally the contractor
would be entitled to payment for items delivered to and accepted by the U.S. government and, if the termination is at the U.S. government’s
convenience, for payment of fair compensation for work performed plus the costs of settling and paying claims by any terminated subcontractors,
other settlement expenses and a reasonable allowance for profit on the costs incurred.

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Cost
Reimbursable. Cost reimbursable contracts include cost-plus-fixed fee contracts, cost-plus-award fee contracts and cost-plus-incentive
fee contracts, each of which is described below. Under each type of cost reimbursable contract, the contractor may recover allowable
and allocable costs incurred in performing the contract, but it assumes the risk that it may not be able to recover costs if they are
not allowable or allocable under the contract terms or applicable regulations, or if the costs exceed the contract funding.

Time-and-Materials.
Under a time-and-materials contract, compensation is based on a fixed hourly rate established for specified labor or skill categories.
Contractors are paid at the established hourly rates for the hours it expends performing the work specified in the contract. Labor costs,
overhead, general and administrative costs and profit are included in the fixed hourly rate. Materials, subcontractors, travel and other
direct costs are reimbursed at actual costs plus an amount for material handling. Contractors make critical pricing assumptions and decisions
when developing and proposing time-and-materials labor rates, risking reduced profitability if actual costs exceed the costs incorporated
into the fixed hourly labor rate. One variation of a standard time-and-materials contract is a time-and-materials, award fee contract.
Under this type of contract, a positive or negative incentive can be earned based on achievement against specific performance metrics.

Electric
Air Mobility

A
transport category type certification is the highest level in safety provided by the Civil Aviation Authorities. Jaunt intends to certify
under CAR 529, single pilot IFR (instrument flight rules) and comply with Category Enhanced of EASA SC-VTOL-01 by:

We
believe that this approach puts the design of the Jaunt Journey air taxi in line with the commercial transport category aircraft and
rotorcraft in terms of safety and robustness. We also believe it provides Jaunt with a clear, low risk path to certification by using
existing eVTOL regulations, thereby removing any guesswork from the certification approach.

Government
Regulations and Compliance

In
the near-term, the efforts of the Electric Air Mobility segment will focus on obtaining FAA certification of its aircraft and engaging
with key decision makers in the cities in the United States in which it anticipates its aircraft and UAM service will initially operate.
Its aircraft will be required to comply with regulations governing aircraft design, production and airworthiness. In the United States,
this primarily includes regulations put forth by the FAA and the Department of Transportation (“DOT”). Outside the United
States, similar requirements are generally administered by the national civil aviation and transportation authorities of each country.

Producing
the Aircraft

Production
certification is the FAA’s approval for aircraft manufacturers to be able to manufacture aircraft under an FAA approved type design.
To obtain production certification from the FAA, the manufacturer must demonstrate that its organization and its personnel, facilities,
and quality system can produce the aircraft such that they conform to the approved design. Jaunt is working to develop the systems and
processes it will need to obtain FAA production certification with the goal of obtaining such certification shortly following completion
of the aircraft type certificate.

Operating
the Aircraft

Airworthiness
certification from the FAA signifies that an aircraft meets its approved type design and is in a condition for safe operation in the
NAS. As is the industry standard, each of the aircraft manufactured by Jaunt will need to be issued an airworthiness certificate. We
expect that the airworthiness certificates issued to Jaunt’s aircraft will be a Standard Airworthiness certificate in the Normal
Category, as such terms are defined by the FAA.

Operating
the UAM Service

The DOT and the FAA have regulatory authority over air transportation operations
in the United States. To operate its UAM in air taxi service, Jaunt will be required to hold an FAA Air Carrier Certificate and operate
under Part 135 of the Federal Aviation Regulations and register as an air taxi operator at the DOT. Jaunt will also be required to comply
with the requirement that an air carrier be a “citizen of the United States” as that term is defined in U.S.C. Section 40102(a)(15)
and interpreted by the DOT. In addition, takeoff and landing locations (e.g., airports and heliports) typically require state and local
approval for zoning and land use and their ongoing use are subject to regulations by local authorities. We expect that as Jaunt builds
out its UAM service there will be additional local, state and federal laws, regulations and other requirements that will cover its operations.
Therefore, Jaunt has already begun and will continue to grow its engagement and collaboration with the cities in which it intends to operate
its service in an effort to ensure that it operates in a safe and sustainable manner.

Regulatory
Approvals Relating to Passenger-grade AAVs

Jaunt
operates in a new and rapidly evolving industry, which is subject to extensive legal and regulatory requirements. While regulations governing
this industry are evolving, currently in the jurisdictions where Jaunt plans to sell its products, the commercial use of its passenger-grade
AAVs, if approved, and in some cases its non-passenger-grade AAVs, is subject to an uncertain or lengthy approval process. In order for
customers to use Jaunt’s passenger-grade AAVs, Jaunt is working on obtaining, or working closely with customers to obtain, relevant
approvals and permits in the jurisdictions where it sells and plans to sell its products. We are unable to estimate the average length
of time required to obtain the applicable regulatory approvals due to the nascent nature of AAV-related regulations and the lack of relevant
precedents. For example, we are not aware of any operator having been granted all required approvals for the commercial operations of
passenger-grade AAVs in China or the United States. See the section titled “Risk Factors—Risks Related to Our Business.”
In the jurisdictions where Jaunt plans to sell its products, the commercial use of its passenger-grade AAVs, and in some cases of its
non-passenger-grade AAVs, is subject to an uncertain or lengthy approval process. We cannot predict when regulations will change, and
any new regulations may impose onerous requirements and restrictions with which Jaunt, its AAVs and its potential customers may be unable
to comply. As a result, Jaunt may be limited in, or completely restricted from, growing its business in the foreseeable future.

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Avionics

Aspen
Avionics designs and manufactures equipment under worldwide aviation regulatory agency approvals. These include but are not limited to
FAA, EASA, TCCA, and ENAC (Brazil) regulations. These govern the design test, certification, installation, and manufacturing of Aspen’s
equipment.

The
FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations
are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation
of the aircraft. Similar rules apply in other countries. All aircraft must be maintained under a continuous condition monitoring program
and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repair procedures for the various
types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing
certified technicians. Certification and conformance is required prior to installation of a part on an aircraft. Aircraft operators must
maintain logs concerning the utilization and condition of aircraft engines, life-limited engine parts and airframes. In addition, the
FAA requires that various maintenance routines be performed on aircraft engines, some engine parts, and airframes at regular intervals
based on cycles or flight time. Engine maintenance must also be performed upon the occurrence of certain events, such as foreign object
damage in an aircraft engine or the replacement of life-limited engine parts. Such maintenance usually requires that an aircraft engine
be taken out of service. Aspen Avionics’ operations may in the future be subject to new and more stringent regulatory requirements.
In that regard, Aspen Avionics closely monitors the FAA and industry trade groups in an attempt to understand how possible future regulations
might impact it. Our businesses that sell defense products directly to the U.S. government or for use in systems delivered to the U.S.
government can be subject to various laws and regulations that govern pricing and other factors.

Import/Export
Regulations. Aspen Avionics sells products and solutions to customers all over the world and is required to comply with U.S.
export control regulations, including the U.S. Export Administration Regulations and U.S., EU and other economic and trade sanctions
programs limiting or banning sales into certain countries and territories and to certain designated parties. Countries outside of the
United States have implemented similar controls and sanction regulations. Together these controls and regulations may impose licensing
requirements on exports of certain technology and software from the United States and the EU and may impact Aspen Avionics’ ability
to transact business in certain countries or with certain customers. Aspen Avionics has developed compliance programs and training to
prevent violations of these programs and regulations, and regularly monitors changes in the law and regulations and creates strategies
to deal with changes. In December 2025, the FCC issued a public notice announcing that it no
longer would authorize most new drones and critical drone components that were not manufactured in the United States on national security
grounds. Changes in the law may restrict or further restrict Aspen’s ability to sell products and solutions.

Anti-Corruption
Regulations. Because Aspen Avionics has significant international operations, it must comply with complex regulations, including
the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other local laws prohibiting corrupt payments to governmental officials,
and anticompetition regulations. Aspen Avionics has compliance policies, programs and training to prevent non-compliance with such anti-corruption
regulations in the United States and outside the United States. Aspen Avionics monitors pending and proposed legislation and regulatory
changes that may impact its business and develops strategies to address the changes and incorporate them into existing compliance programs.

Environmental
Regulations. Aspen Avionics’ facilities and operations are subject to numerous domestic and international laws and regulations
designed to protect the environment, particularly with regard to waste and emissions. The applicable environmental laws and regulations
are common within the industries and markets in which Aspen Avionics operates and serves. Aspen Avionics believes that it has complied
with these requirements and that such compliance has not had a material adverse effect on its financial condition, results of operations,
cash flows or equity. Aspen Avionics has installed waste treatment facilities and pollution control equipment to satisfy legal requirements
and to achieve its waste minimization and prevention goals.

Electronic
products are subject to governmental environmental regulation in a number of jurisdictions, such as domestic and international requirements
requiring end-of-life management and/or restricting materials in products delivered to customers, including the European Union’s
Directive 2012/19/EU on Waste Electrical and Electronic Equipment and Directive 2011/65/EU on the Restriction of the use of certain Hazardous
Substances in Electrical and Electronic Equipment, as amended. Other jurisdictions have adopted similar legislation. Such requirements
typically are not applicable to most equipment produced by Aspen Avionics. Aspen Avionics believes that it has complied with such rules
and regulations, where applicable, with respect to its existing products sold into such jurisdictions. Aspen Avionics intends to comply
with such rules and regulations with respect to its future products.

Wireless
Communications Regulations. Wireless communications of all types are also subject to governmental
regulation. Equipment produced in Aspen Avionics’ Communication Systems and Space and Airborne Systems segments, in particular,
is subject to domestic and international requirements to avoid interference among users of radiofrequency spectrum and to limit human exposure to radiofrequency radiation. Aspen Avionics is also required to comply with technical operating and licensing requirements
that pertain to its wireless licenses and operations. Aspen Avionics believes that it has complied with such rules and regulations and
licenses with respect to its existing products and services, and it intends to comply with such rules and regulations and licenses with
respect to its future products and services. Governmental reallocation of the frequency spectrum could impact Aspen Avionics’ business,
financial condition, and results of operations.

Environmental
Regulation

Operations
in all of our segments are subject to extensive, and frequently changing, federal, state and local environmental laws and substantial
related regulation by government agencies, including the Environmental Protection Agency. Among other matters, these regulatory authorities
impose requirements that regulate the operation, handling, transportation and disposal of hazardous materials; protect the health and
safety of workers; and require us to obtain and maintain licenses and permits in connection with our operations. This extensive regulatory
framework imposes significant compliance burdens and risks on us. Notwithstanding these burdens, we believe that we are in material compliance
with all federal, state and local environmental laws and regulations governing our operations. To date, there have been no material adverse
effect to our consolidated financial statements nor competitive positions as a result of these environmental regulations.

Other
Regulation

We
are also subject to a variety of other regulations including work-related and community safety laws. The Occupational Safety and Health
Act of 1970 mandates general requirements for safe workplaces for all employees and established the Occupational Safety and Health Administration
(“OSHA”) in the Department of Labor. In particular, OSHA provides special procedures and measures for the handling of certain
hazardous and toxic substances. In addition, specific safety standards have been promulgated for workplaces engaged in the treatment,
disposal or storage of hazardous waste. Requirements under state law, in some circumstances, may mandate additional measures for facilities
handling materials specified as extremely dangerous. We believe that our operations are in material compliance with OSHA’s health
and safety requirements.

Available
Information

We
maintain an internet website at https://theairogroup.com. We make available on our website, free of charge, our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, including any exhibits attached to such filings, and
amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as soon as reasonably practicable after such forms are electronically filed with, or furnished to, the Securities and Exchange
Commission (the “SEC”). Information contained in or accessible through our website does not constitute a part of this
Annual Report on Form 10-K and is not incorporated by reference into this Annual Report on Form 10-K. We have included our website
address as an inactive textual reference only.