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Ascent AeroSystems

Setting the new global standard for mission-critical unmanned aerial systems
B2B Security & Defense
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Pitch Discussion 44 Updates 1 Reviews 16
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Problem Solution Product Traction Customers Biz. model Market Competition Vision and strategy Funding Founders
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Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by Ascent AeroSystems, Inc.. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
Ascent AeroSystems Crowd SAFE Ascent Aerosystems Form C.pdf
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Highlights


$1M+ revenue
Company had over $1M in revenue in the past 12 months
  • Unique drone platform designed for operations in real-world conditions
  • Hundreds delivered since 2015, now shipping 3rd generation
  • Proven product-market fit with delighted customers
  • Focused and hyper-lean, growth to date funded mostly by operations
  • Led by team of industry experts, raising CF for growth

Problem


Drones can't fly whenever or wherever they're needed

To support real-world commercial, public safety and defense operations, drones need to fly anytime, anywhere. 

Today, they can't.

Consumer models and upgraded "enterprise" versions are great to demonstrate how drones can do things faster, better, cheaper and safer. But when it's time to move beyond carefully controlled pilot programs and operate in the real world, things are different.

In the real world, operators don't have the luxury of choosing when and where to fly.  They need a reliable airborne platform compact enough to be easily carried to remote locations and rugged enough to get the job done regardless of wind, rain, sand or dust.

Solution


The Ascent AeroSystems Coaxial

Ascent AeroSystems' high performance coaxial UAVs are specifically designed for enterprise operations in harsh environments.

COMPACTEasier to transport where needed.  As much as 75% smaller & 50% lighter vs. comparable conventional multirotors.
RUGGEDWithstand harsh environments and weather.  Simpler structure is inherently stronger and easier to seal & protect.
EFFICIENTFly faster, farther, longer, and carry more.  Up to 2x faster, 4x farther, 40% longer, 2x more payload.
VERSATILEHighly modular design: Cylindrical form makes storage, launch, recovery and reconfiguration easier from stationary and moving platforms.

With a simple cylindrical configuration that reduces the airframe structure to an absolute minimum, Ascent's MADE IN THE USA coaxial drones are simply a better platform for mission-critical applications.

Product


Spirit: The ultimate aerial utility vehicle                 

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Ascent AeroSystems' third generation, multi-mission Spirit is an aerial utility vehicle with the rugged flexibility of a Humvee, the efficiency of a Prius, and the performance of a Ferrari.

  • Rugged airframe is protected against contamination so it can operate reliably in nearly any type of weather, even heavy rain, sleet, snow, dust and sand. 
  • With almost 10 pounds available for batteries and payloads, The Spirit sets the new standard for performance in its weight class.
  • The highly streamlined airframe has a top speed of over 60 MPH and can operate in winds that would ground other UAVs. 
  • Setup is quick and easy, allowing for operations from nearly any type of terrain.
  • Open-source autopilot allows for access to all critical systems and easy development of custom payloads, and Spirit can be adapted to use other, third-party ground control systems.
  • A highly modular design allows operators to use exactly the sensors and batteries needed for the mission.  Available development kit makes custom payloads easy.
  • All Spirits are assembled in the USA, and "US only" editions are available

Learn much more on our website here.

Traction


Focused, disciplined growth 

Ascent AeroSystems began as a successful Kickstarter campaign in 2015. After delivering the final campaign Sprite in 2018, the company exited the consumer segment to focus on mission-critical applications in the defense, public safety and industrial markets. Since its founding, Ascent AeroSystems has been laser-focused, highly disciplined, hyper-lean and capital efficient. Revenue was up to approximately $2.5M in 2020, and the company has shown a cumulative profit over the 2019-2020 period. With very little spent on marketing since 2015, brand awareness remains limited and represents significant untapped potential.

Now shipping its third generation Spirit system, the company has found solid product-market fit in the defense segment and is now beginning to expand into public safety and industrial markets. 

Customers


Enthusiastic support across defense, public safety and industrial markets

Ascent AeroSystems has two types of customers, drone operators and system integrators.  (Sometimes a customer is both).  While most prefer to remain confidential, current customers include the US Army, Navy and Air Force, advanced technology development agencies, public safety organizations, international defense organizations, as well as large and small businesses.

Customer Comments

Customer Type 1: Drone Operators

Compact and easily launched from the ground, air, and sea, Ascent AeroSystems’ coaxials can support a diverse range of operations, from frontline soldiers to first responders, public safety and other industrial professionals who don’t have the luxury of choosing when or where they fly.  To these customers we offer turn-key, ready-to-fly systems with a variety of camera and controller options.

INDUSTRIAL

  • Survey & metric data
  • Inspection & security
  • Research & environmental
  • Temporary network node
  • Urgent payload transport
PUBLIC SAFETY

  • First Responder
  • Search & Rescue
  • EMS/Disaster Response
  • Rural Firefighting

  • Law Enforcement
DEFENSE

  • Situational awareness (ISR)
  • Communication relay
  • Biological/Radiation detection

Customer Type 2: System Integrators

As adoption increases in defense, public safety and industrial markets, new applications for drone technology are being discovered.  New payloads and new services being introduced at an incredible rate. 

The companies that develop these new airborne sensor systems and the organizations that operate them both need a reliable UAV that will allow flights to continue regardless of the conditions or the weather.  Rather than using commercial-off-the-shelf multirotors with marginal performance or investing in the development of a custom design of their own, these organizations can use coaxials made by Ascent AeroSystems.

Putting Ascent's coaxials to work: Customer examples

  • Major US defense contractor & system integrator.  Click here for recent news

"Ascent’s strengths run deeper than their technologies.  Their commitment to product support is truly impressive.  The people on their team have proven that they have both the expertise and the personal commitment needed to make our projects successful."

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Simulated mission concept


Building the Future of Forestry

  • Treeswift is developing a next-generation forest monitoring system using state-of-the-art robotic and machine learning technology to provide forest stakeholders with precision data and analyses  for carbon capture estimation, timber value estimation, deforestation monitoring, advanced growth forecasting, and forest management
  • Selected Ascent AeroSystems' Spirit UAS as an airborne platform in an effort to improve data collection processes in remote locations and austere environments

High-resolution LiDAR generated point cloud of a forest


Exyn develops solutions to enable autonomous flight for aerial systems in complex, GPS-denied environments:

  • Generates precise 3D maps to quickly assess dangerous environments
  • Exyn's solution will enable flexible deployment of a Spirit UAV that can intelligently navigate and dynamically adapt to complex environments in real-time
  • Broad industry applications including Defense, Public Safety, and Industrial markets

Indoor point cloud generated by an Exyn-equipped Spirit 

Business model


Systems, services & more

Ascent AeroSystems has been generating revenue in three primary business areas:

Hardware: We offer complete, ready-to-fly systems like the Spirit for purchase to support mission-critical operators in the public safety, industrial and defense markets. Because our coaxials are inherently rugged, we offer a subscription service that includes a damage-exchange option.  As described in the Customer section above, we also sell airframes as a high performance, all-weather alternative platforms that manufacturers can use to replace existing fixed-wing and conventional multirotor systems.  We have previously delivered smaller and larger models, and our product roadmap includes a variety of vehicle sizes.

Services: Ascent AeroSystems offers custom development and engineering support services to support customers who need to adapt our technology to meet the demands of their specific mission objectives. These services are usually through firm-fixed-price contracts or "time & material" arrangements.

Licensing: Certain uses of our technology are best suited for development by highly specialized system integrators. We are generating revenue from existing agreements, some of which are exclusive, that include provisions for Ascent AeroSystems to be paid license fees and royalties.

Market


With a $200B+ TAM, drones are more than just a market

Whether operated in defense, public safety or other industrial settings, drones are useful for two purposes:

MATERIAL TRANSPORT
DATA COLLECTION

For moving things from A to B,
bigger drones are better.
For collecting data,
smaller drones are better.

While some big names are focused on material transport, Ascent AeroSystems' coaxials are ideally suited for data collection. We believe that the need to observe, inspect, sample and document our world more often, more quickly, more economically and more safely will grow dramatically over the coming years, and that the market opportunity for data collection far exceeds that for material delivery. From a relatively small base today, the total addressable market globally for civil and military drone hardware has been estimated to be $108B and $95B respectively over the next decade. Narrowing the focus to small UAVs, our analysis of the FAA’s recent market forecast suggests that between 600,000 and 1.4 million units will be required over the next ten years to meet the growing demand for enterprise-grade systems in the United States alone.

The Future

To be economically viable at scale, future enterprise operations are likely to be highly automated, and we believe that coaxials are a better platform for automation.   The coaxial's simple cylindrical shape makes it easier to launch, recover and reset without human intervention.  Unlocking even more applications, Ascent's cylindrical coaxials have been successfully launched from stationary and moving platforms on the ground, on the water, and in the air.  Try that with a quadcopter!

Competition


Disrupting the drone disruption...

Coaxials have been used on full-scale rotorcraft for decades, and they're the standard for many basic helicopter toys.  But while designing one to maintain hovering flight is relatively straightforward, it takes an entirely new approach to achieve the kind of speed and agility possible with Ascent AeroSystems' coaxials.

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With more than seven years of development the company has a portfolio of intellectual property that includes an issued patent and pending applications in the United States and other jurisdictions, as well as trade secrets.  We are not aware of any other commercial source for multipurpose coaxial drones.

We currently compete against a wide range of other drone manufacturers, including DJI, a Chinese-based company that dominates most civil drone markets worldwide.  Here in the United States, cybersecurity concerns and trade politics strongly favor domestic manufacturers like us.  We expect this trend to continue.

The U.S. defense market for small UAVs is currently dominated by AeroVironment. Companies including Lockheed Martin, FLIR, Skydio, Teal, Vantage, Parrot and others are moving to take advantage of government efforts to upgrade existing operational capabilities and support American manufacturers.

But when operations move beyond “proof of concept” and must operate in a real-world environment, we believe only the coaxial can provide the combination of size, durability, performance and utility needed to dependably support operations at scale.

Vision and strategy


Delivering the most reliable and productive airborne platforms

We believe Ascent AeroSystems' coaxial technology is the key to unlocking the commercial and public safety drone markets. We intend to deliver the most reliable, most productive airborne platforms to drone operators and system integrators, regardless of their market focus. With your investment, Ascent AeroSystems will work to change the future of drone technology. 

Funding


Growth to date funded mostly by operations

Since its founding, Ascent AeroSystems has been highly disciplined, laser-focused, hyper-lean and capital efficient. After raising approximately $400K on Kickstarter in 2015 and successfully shipping commitments to backers, the company raised $600K in 2017 and otherwise has been funded by our business operations. 

Aside from the founders, major stakeholders on our cap table include CenterState CEO GeniusNY Accelerator ($600K for 5% warrant), DreamIt Ventures ($250K convertible note for in-kind services, no cash received), as well as stock options held by advisors and employees.  We're currently raising additional funds to support company growth, especially R&D, marketing and business development and other corporate operations.

Founders


Leading industry experts, demonstrated grit, ready to scale

What happens when a couple of rocket scientists, a tech genius, and brilliant, hardworking engineers work together? 

Our Values

As we look forward, we believe we're at the beginning of a new technology age in which drones will play a very important role. We plan to be right in the middle of that ecosystem, developing wide-reaching technologies and assembling them right here in the USA. We're grateful for all the support we've had along the way, and we're looking forward to all the positive impact we have yet to make.

Deal terms


Valuation cap

$50,000,000

The maximum valuation at which your investment converts into equity shares or cash.
Learn more

Discount

0%

If a trigger event for Ascent AeroSystems occurs, the discount provision gives investors equity shares (or equal value in cash) at a reduced price.
Learn more.

Minimum investment

$100

The smallest investment amount that Ascent AeroSystems is accepting.
Learn more

Funding goal

$1.07M

Ascent AeroSystems must achieve its minimum goal of $25K before the deadline. The maximum amount the offering can raise is $1.07M.
Learn more

Deadline
Ascent AeroSystems needs to reach their minimum funding goal before the deadline ( ). If they don’t, all investments will be refunded.
Learn more
Type of security

Crowd SAFE

A SAFE allows an investor to make a cash investment in a company, with rights to receive certain company stock at a later date, in connection with a specific event. · Learn more

How it works

Documents

Republic (OpenDeal Portal LLC, CRD #283874) is hosting this Reg CF securities offering by Ascent AeroSystems, Inc.. View the official SEC filing and all updates:
Official SEC Logo Form C SEC.gov
Company documents
Ascent AeroSystems Crowd SAFE Ascent Aerosystems Form C.pdf

Bonus perks

In addition to your Crowd SAFE, you'll receive perks for investing in Ascent AeroSystems.
Invest
$250
Receive
  • Your name will be listed on our website's "Thank you" page
Invest
$1,500
Receive
  • Honorary mention on our website's "Thank you" page with your name and social handle.
Invest
$10,000
Receive
  • Spotlight mention on our website with your name, social handle and a photo of your choice.
Invest
$25,000
Receive
  • Spotlight mention website's "Thank you" page with your name, social handle and a photo of your choice
  • 30-minute Zoom meeting with founders
  • Limited (10 left of 10)
Invest
$50,000
Receive
  • Spotlight mention website's "Thank you" page with your name, social handle and a photo of your choice
  • Tour of our Massachusetts HQ, meeting with founders and members of the senior team, flight demonstration including Spirit stick time! (COVID dependent, travel expenses not included)
  • Limited (5 left of 5)

About Ascent AeroSystems

Legal Name
Ascent AeroSystems, Inc.
Founded
Jan 2015
Form
Delaware Corporation
Employees
12
Website
ascentaerosystems.com
Social Media
Headquarters
Google Map location of of Ascent AeroSystems
100 Research Drive , Wilmington, MA
Headquarters
100 Research Drive, Wilmington, MA, United States 01887

Ascent AeroSystems Team
Everyone helping build Ascent AeroSystems, not limited to employees

Profile picture of Paul Fermo
Paul Fermo
VP - Business Development
MBA (MIT Sloan), BCG, Navy F-18 pilot, Senior DoD staff positions, Presidential Leadership Scholar.
Profile picture of Vanessa Blakeley
Vanessa Blakeley
Director of Operations
Master’s in Executive Leadership & Administration (Boston College), Leadership Positions in UAM & GA, Private Pilot, Philanthropic Entrepreneur.
Profile picture of Mark Spadafora
Mark Spadafora
Director of Engineering
Bachelor’s in Mechanical (MIT), Master’s in Mechanical (Tufts), Engineering Management, MIT Lacrosse Coach
Profile picture of Caleb Kissel
Caleb Kissel
Engineer
Profile picture of AG Gregory
AG Gregory
Engineer
Profile picture of Matt Cohan
Matt Cohan
Senior Engineer
Profile picture of Ronnie Dewberry
Ronnie Dewberry
Engineer
Profile picture of Christie Bielmeier
Christie Bielmeier
Principal Engineer
Profile picture of Adilson Dos Anjos
Adilson Dos Anjos
UAV Technician
6 more team members
Paul Fermo
VP - Business Development
Caleb Kissel
Engineer
AG Gregory
Engineer
Vanessa Blakeley
Director of Operations
Mark Spadafora
Director of Engineering
Matt Cohan
Senior Engineer
Ronnie Dewberry
Engineer
Christie Bielmeier
Principal Engineer
Adilson Dos Anjos
UAV Technician

Press

Using CoAxial Drones for Mission Critical Operations - Dr...
Drone Radio Show Drone Radio Show
·
Dec 6, 2020

THis Week's Key Question This Week's Guests Peter Fuchs is CEO and co-founder of Ascent AeroSystems. Ascent AeroSystems d...

FAQ

How do I earn a return?

How do I earn a return?

We are using Republic's Crowd SAFE security. Learn how this translates into a return on investment here.

What must I do to receive my equity or cash in the event of the conversion of my Crowd SAFE?

What must I do to receive my equity or cash in the event of the conversion of my Crowd SAFE?

Suppose the Company converts the Crowd SAFE as a result of an equity financing. In that case, you must open a custodial account with the custodian and sign subscription documentation to receive the equity securities. The Company will notify you of the conversion trigger, and you must complete necessary documentation within 30 days of such notice. If you do not complete the required documentation with that time frame, you will only be able to receive an amount of cash equal to (or less in some circumstances) your investment amount. Unclaimed cash will be subject to relevant escheatment laws. For more information, see the Crowd SAFE for this offering.


If the conversion of the Crowd SAFE is triggered as a result of a Liquidity Event (e.g. M&A or an IPO), then you will be required to select between receiving a cash payment (equal to your investment amount or a lesser amount) or equity.  You are required to make your selection (and complete any relevant documentation) within 30 days of such receiving notice from the Company of the conversion trigger, otherwise you will receive the cash payment option, which will be subject to relevant escheatment laws. The equity consideration varies depending on whether the Liquidity Event occurs before or after an equity financing. For more information, see the Crowd SAFE for this offering.

How do you plan to use the funds?

How do you plan to use the funds?

Research and development, marketing and business development and other corporate operations.

Still have questions? Check the discussion section.

Risks

We have a limited operating history upon which you can evaluate our performance, and accordingly, our prospects must be considered in light of the risks that any new company encounters.
The Company is still in an early phase and we are just beginning to implement our business plan. There can be no assurance that we will operate profitably. The likelihood of our success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by early stage companies. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
The amount of capital the Company is attempting to raise in this Offering may not be enough to sustain the Company’s current business plan.
In order to achieve the Company’s near and long-term goals, the Company may need to procure funds in addition to the amount raised in the Offering. There is no guarantee the Company will be able to raise such funds on acceptable terms or at all. If we are not able to raise sufficient capital in the future, we may not be able to execute our business plan, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause an Investor to lose all or a portion of their investment.
We rely on various intellectual property rights in order to operate our business, which could be unenforceable or ineffective.
One of our most valuable assets is our intellectual property. We have one patent issued in the United States and intend to continue to pursue related applications in other jurisdictions. However, such patents may never be issued or certain claims may be rejected or may need to be narrowed, which may limit the protection we are attempting to obtain. In addition, companies, organizations, or individuals, including competitors, may hold or obtain patents, trademarks, or other proprietary rights that would prevent, limit, or interfere with our ability to make, use, develop, sell, or market our drones which would make it more difficult for us to operate our business. These third parties may have applied for, been granted, or obtained patents that relate to intellectual property that competes with our intellectual property or technology. This may require us to develop or obtain alternative technology, or obtain appropriate licenses under these patents, which may not be available on acceptable terms or at all. Such a circumstance may result in us having to significantly increase development efforts and resources to redesign our technology in order to safeguard our competitive edge against competitors. There is a risk that our means of protecting our intellectual property rights may not be adequate, and weaknesses or failures in this area could adversely affect our business or reputation, financial condition, and/or operating results. We also rely on nondisclosure and noncompetition agreements with employees, consultants and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights. As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management’s attention from other business concerns. If we are determined to have infringed upon a third party’s intellectual property rights, we may be required to cease marketing and selling our drones, pay substantial damages, seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all, and/or establish and maintain alternative branding for our business. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.
Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people.
We are dependent on certain key personnel in order to conduct our operations and execute our business plan, however, the Company has not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if any of these personnel die or become disabled, the Company will not receive any compensation to assist with such person’s absence. The loss of such person could negatively affect the Company and our operations. We have no way to guarantee key personnel will stay with the Company, as many states do not enforce non-competition agreements, and therefore acquiring key man insurance will not ameliorate all of the risk of relying on key personnel.
The Company is not subject to Sarbanes-Oxley regulations and may lack the financial controls and procedures of public companies.
The Company may not have the internal control infrastructure that would meet the standards of a public company, including the requirements of the Sarbanes Oxley Act of 2002. As a privately-held (non-public) Company, the Company is currently not subject to the Sarbanes Oxley Act of 2002, and its financial and disclosure controls and procedures reflect its status as a development stage, non-public company. There can be no guarantee that there are no significant deficiencies or material weaknesses in the quality of the Company’s financial and disclosure controls and procedures. If it were necessary to implement such financial and disclosure controls and procedures, the cost to the Company of such compliance could be substantial and could have a material adverse effect on the Company’s results of operations.
We face significant market competition.
We compete with larger, more established companies who currently have Unmanned Aircraft Systems (“UAS”) on the market and/or various product development programs. Many of our competitors have more access to capital and marketing/sales channels and human resources than we do. They may succeed in developing and marketing competing products earlier than us, or products that are superior to ours. There can be no assurance that our competitors will not render our technology or product obsolete or that the products developed by us will be preferred to any existing or newly developed technologies. It should further be assumed that competition will intensify.
We depend on technology and advanced information systems, which may fail or be subject to cyber security threats, attacks and other disruption.
There are no assurances that our software and website will be uninterrupted or fully secure, or that users will be willing to access, adopt, and use our website and software. Further, our software systems may be the target of malicious attacks seeking to identify and exploit weaknesses in our software. Cyber-attacks may target vendors, customers or other third parties, or the communication infrastructure on which they depend. Despite good faith efforts by us to mitigate the risks associated with cyber-attacks through various security protocols, an attack or a breach of security could result in a loss and theft of private data, violation of applicable privacy and other laws, significant legal and financial exposure, damage to reputation, and a loss of confidence in security measures, any of which could have a materially adverse effect on our business. The integrity, reliability, and operational performance of our information technology (“IT”) infrastructure is critical to our operations. We continue to face advanced and persistent attacks on our IT infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations. Our IT infrastructure may be damaged or interrupted by increases in usage, human error, unauthorized access, natural hazards or disasters, or similarly disruptive events. Furthermore, our systems may be unable to support a significant increase in traffic or increase in user numbers, whether as a result of organic or inorganic growth of the business. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of our customers or other third-parties, create system disruptions, or cause shutdowns. While we have taken several measures to safeguard against a failure of our IT infrastructure, and the telecommunications and/or other third-party infrastructure on which such infrastructure relies, such a failure could lead to significant costs and disruptions that could reduce revenue, damage our reputation, and have a materially adverse effect on our operations, financial performance, and prospects. We have instituted business continuity procedures and security measures to protect against network or IT failure or disruption. However, these procedures and measures may not be effective against all forms of disruptions and may not ensure that we are able to carry on our business. Should these measures and protections fail to operate as intended or at all, they may not prevent a material disruption to our operations, and the consequence of such would likely have a materially adverse effect on our financial performance and prospects. We do not guarantee that the use of applications and systems designed for system security will effectively counter evolving security risks or address the security concerns of existing and potential users. Any failures in our security measures could have a materially adverse effect on our business, financial condition, and results of operations. In addition, our controls may not be effective in detecting or preventing any intrusion or other security breaches, or safeguarding against sabotage, hackers, viruses, and other forms of cybercrime. Any failure in these protections could harm our reputation and have a materially adverse effect on our operations, financial performance, and prospects.
The use of individually identifiable data by our business, our business associates and third parties is regulated at the state, federal and international levels.
Existing and future privacy and data protection laws and increasing sensitivity of consumers to unauthorized disclosures and use of personal information may also negatively affect the public’s perception of our products and services. If our solutions are perceived to cause, or are otherwise unfavorably associated with, invasions of privacy, whether or not illegal, we or our customers may be subject to public criticism. Any failure on our part to comply with applicable privacy and data protection laws, regulations, policies and standards or any inability to adequately address privacy concerns associated with our solutions, even if unfounded, could subject us to liability, damage our reputation, impair our sales and harm our business. Furthermore, the costs of compliance with, and other burdens imposed by, such laws, regulations, policies and standards may result in a decrease in our profitability and/or limit adoption of and demand for our products.
Our revenue has been highly concentrated.
In 2019 and 2020, we derived the majority of our revenue from a single customer, and a significant portion of our current business plan relies on orders placed by this customer for our products and services. If this customer became unable or unwilling to pay us for existing orders, or if we were to default on our obligations to deliver products and services to this customer, it may have a material adverse effect on our business. We cannot assure you that we would be able to replace the revenue generated from this customer.
We may implement new lines of business or offer new products and services within existing lines of business.
As an early-stage company, we may implement new lines of business at any time. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.
Damage to our reputation could negatively impact our business, financial condition and results of operations.
Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.
The U.S. Securities and Exchange Commission does not pass upon the merits of the Securities or the terms of the Offering, nor does it pass upon the accuracy or completeness of any Offering document or literature.
You should not rely on the fact that our Form C is accessible through the U.S. Securities and Exchange Commission’s EDGAR filing system as an approval, endorsement or guarantee of compliance as it relates to this Offering. The U.S. Securities and Exchange Commission has not reviewed this Form C, nor any document or literature related to this Offering.
Neither the Offering nor the Securities have been registered under federal or state securities laws.
No governmental agency has reviewed or passed upon this Offering or the Securities. Neither the Offering nor the Securities have been registered under federal or state securities laws. Investors will not receive any of the benefits available in registered Offerings, which may include access to quarterly and annual financial statements that have been audited by an independent accounting firm. Investors must therefore assess the adequacy of disclosure and the fairness of the terms of this Offering based on the information provided in this Form C and the accompanying exhibits.
The Company’s management may have broad discretion in how the Company uses the net proceeds of the Offering.
Unless the Company has agreed to a specific use of the proceeds from the Offering, the Company’s management will have considerable discretion over the use of proceeds from the Offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The Company has the right to limit individual Investor commitment amounts based on the Company’s determination of an Investor’s sophistication.
The Company may prevent any Investor from committing more than a certain amount in this Offering based on the Company’s determination of the Investor’s sophistication and ability to assume the risk of the investment. This means that your desired investment amount may be limited or lowered based solely on the Company’s determination and not in line with relevant investment limits set forth by the Regulation CF rules. This also means that other Investors may receive larger allocations of the Offering based solely on the Company’s determination.
The Company has the right to extend the Offering deadline. The Company has the right to end the Offering early.
The Company may extend the Offering deadline beyond what is currently stated herein. This means that your investment may continue to be held in escrow while the Company attempts to raise the Minimum Amount even after the Offering deadline stated herein is reached. While you have the right to cancel your investment in the event the Company extends the Offering, if you choose to reconfirm your investment, your investment will not be accruing interest during this time and will simply be held until such time as the new Offering deadline is reached without the Company receiving the Minimum Amount, at which time it will be returned to you without interest or deduction, or the Company receives the Minimum Amount, at which time it will be released to the Company to be used as set forth herein. Upon or shortly after release of such funds to the Company, the Securities will be issued and distributed to you. The Company may also end the Offering early; if the Offering reaches its target Offering amount after 21-calendary days but before the deadline, the Company can end the Offering with 5 business day’s notice. This means your failure to participate in the Offering in a timely manner, may prevent you from being able to participate – it also means the Company may limit the amount of capital it can raise during the Offering by ending it early.
The Securities will not be freely tradable under the Securities Act until one year from the initial purchase date. Although the Securities may be tradable under federal securities law, state securities regulations may apply, and each Investor should consult with their attorney.
You should be aware of the long-term nature of this investment. There is not now and likely will not ever be a public market for the Securities. Because the Securities have not been registered under the Securities Act or under the securities laws of any state or foreign jurisdiction, the Securities have transfer restrictions and cannot be resold in the United States except pursuant to Rule 501 of Regulation CF. It is not currently contemplated that registration under the Securities Act or other securities laws will be affected. Limitations on the transfer of the Securities may also adversely affect the price that you might be able to obtain for the Securities in a private sale. Investors should be aware of the long-term nature of their investment in the Company. Each Investor in this Offering will be required to represent that they are purchasing the Securities for their own account, for investment purposes and not with a view to resale or distribution thereof.
Investors will not become equity holders until the Company decides to convert the Securities into “CF Shadow Securities” or other capital stock (the type of equity securities issuable upon conversion of the Securities) or until there is a change of control or sale of substantially all of the Company’s assets.
Investors will not have an ownership claim to the Company or to any of its assets or revenues for an indefinite amount of time and depending on when and how the Securities are converted, the Investors may never become equity holders of the Company. An Investor will not become an equity holder of the Company unless the Company receives a future round of financing great enough to trigger a conversion and the Company elects to convert the Securities into CF Shadow Securities, or a change of control or initial public offering of the Company triggers a conversion and the Investor elects and is permitted to convert the Securities into capital stock. The Company is under no obligation to convert the Securities into CF Shadow Securities. In certain instances, such as a sale of the Company or substantially all of its assets, an initial public offering or a dissolution or bankruptcy, the Investors may only have a right to receive cash, to the extent available, rather than equity in the Company.
We operate in a highly regulated environment, and if we are found to be in violation of any of the federal, state, or local laws or regulations applicable to us, our business could suffer.
We are subject to a wide range of federal, state, and local laws and regulations, such as local licensing requirements, and retail financing, debt collection, consumer protection, environmental, health and safety, creditor, wage-hour, anti-discrimination, whistleblower and other employment practices laws and regulations and we expect these costs to increase going forward. The violation of these or future requirements or laws and regulations could result in administrative, civil, or criminal sanctions against us, which may include fines, a cease and desist order against the subject operations or even revocation or suspension of our license to operate the subject business. As a result, we have incurred and will continue to incur capital and operating expenditures and other costs to comply with these requirements and laws and regulations.
Investors will not have voting rights upon purchase of the Securities or even conversion of the Securities into CF Shadow Securities. Upon the conversion of the Securities into CF Shadow Securities (which cannot be guaranteed), the holders of the CF Shadow Securities will be required to enter into a proxy with the Intermediary to ensure any statutory voting rights are voted in tandem with the majority holders of whichever series of securities the CF Shadow Securities follow.
Investors will not have the right to vote upon matters of the Company if and when their Securities are converted into CF Shadow Securities (the occurrence of which cannot be guaranteed). Upon such conversion, the CF Shadow Securities will have no voting rights and, in circumstances where a statutory right to vote is provided by state law, the CF Shadow Security holders are required to enter into a proxy agreement with the Intermediary to vote their CF Shadow Securities with the majority of the holder(s) of the securities issued in the round of equity financing that triggered the conversion right. For example, if the Securities are converted in connection with an offering of Series B Preferred Stock, Investors would receive CF Shadow Securities in the form of shares of Series B-CF Shadow Preferred Stock and would be required to enter into a proxy that allows the Intermediary to vote their shares of Series B-CF Shadow Preferred Stock consistent with the majority of the Series B Preferred Stockholders. Thus, Investors will essentially never be able to vote upon any matters of the Company, unless they receive certain other capital stock of the Company upon a conversion of the Securities in limited circumstances (the occurrence of which cannot be guaranteed).
Investors will not be entitled to any inspection or information rights other than those required by law.
Investors will not have the right to inspect the books and records of the Company or to receive financial or other information from the Company, other than as required by law. Other security holders of the Company may have such rights. Regulation CF requires only the provision of an annual report on Form C and no additional information. Additionally, there are numerous methods by which the Company can terminate annual report obligations, resulting in no information rights, contractual, statutory or otherwise, owed to Investors. This lack of information could put Investors at a disadvantage in general and with respect to other security holders, including certain security holders who have rights to periodic financial statements and updates from the Company such as quarterly unaudited financials, annual projections and budgets, and monthly progress reports, among other things.
Investors will be unable to declare the Security in “default” and demand repayment.
Unlike convertible notes and some other securities, the Securities do not have any “default” provisions upon which Investors will be able to demand repayment of their investment. The Company has ultimate discretion as to whether or not to convert the Securities upon a future equity financing and Investors have no right to demand such conversion. Only in limited circumstances, such as a liquidity event, may Investors demand payment and even then, such payments will be limited to the amount of cash available to the Company.
The Company may never elect to convert the Securities or undergo a liquidity event and Investors may have to hold the Securities indefinitely.
The Company may never conduct a future equity financing or elect to convert the Securities if such future equity financing does occur. In addition, the Company may never undergo a liquidity event such as a sale of the Company or an initial public offering. If neither the conversion of the Securities nor a liquidity event occurs, Investors could be left holding the Securities in perpetuity. The Securities have numerous transfer restrictions and will likely be highly illiquid, with no secondary market on which to sell them. The Securities are not equity interests, have no ownership rights, have no rights to the Company’s assets or profits and have no voting rights or ability to direct the Company or its actions.
Equity securities acquired upon conversion of the Securities may be significantly diluted as a consequence of subsequent equity financings.
The Company’s equity securities will be subject to dilution. The Company intends to issue additional equity to employees and third-party financing sources in amounts that are uncertain at this time, and as a consequence holders of equity securities resulting from the conversion of the Securities will be subject to dilution in an unpredictable amount. Such dilution may reduce the Investor’s control and economic interests in the Company. The amount of additional financing needed by the Company will depend upon several contingencies not foreseen at the time of this Offering. Generally, additional financing (whether in the form of loans or the issuance of other securities) will be intended to provide the Company with enough capital to reach the next major corporate milestone. If the funds received in any additional financing are not sufficient to meet the Company’s needs, the Company may have to raise additional capital at a price unfavorable to their existing investors, including the holders of the Securities. The availability of capital is at least partially a function of capital market conditions that are beyond the control of the Company. There can be no assurance that the Company will be able to accurately predict the future capital requirements necessary for success or that additional funds will be available from any source. Failure to obtain financing on favorable terms could dilute or otherwise severely impair the value of the Securities. In addition, the Company has certain equity grants and convertible securities outstanding. Should the Company enter into a financing that would trigger any conversion rights, the converting securities would further dilute the equity securities receivable by the holders of the Securities upon a qualifying financing.
Equity securities issued upon conversion of the Securities may be substantially different from other equity securities offered or issued by the Company at the time of conversion.
In the event the Company decides to exercise the conversion right, the Company will convert the Securities into equity securities that are materially different from the equity securities being issued to new investors at the time of conversion in many ways, including, but not limited to, liquidation preferences, dividend rights, or anti-dilution protection. Additionally, any equity securities issued at the First Equity Financing Price (as defined in the Crowd SAFE agreement) shall have only such preferences, rights, and protections in proportion to the First Equity Financing Price and not in proportion to the price per share paid by new investors receiving the equity securities. Upon conversion of the Securities, the Company may not provide the holders of such Securities with the same rights, preferences, protections, and other benefits or privileges provided to other investors of the Company. The forgoing paragraph is only a summary of a portion of the conversion feature of the Securities; it is not intended to be complete, and is qualified in its entirety by reference to the full text of the Crowd SAFE agreement, which is attached as Exhibit C.
There is no present market for the Securities and we have arbitrarily set the price.
The Offering price was not established in a competitive market. We have arbitrarily set the price of the Securities with reference to the general status of the securities market and other relevant factors. The Offering price for the Securities should not be considered an indication of the actual value of the Securities and is not based on our net worth or prior earnings. We cannot guarantee that the Securities can be resold at the Offering price or at any other price.
In the event of the dissolution or bankruptcy of the Company, Investors will not be treated as debt holders and therefore are unlikely to recover any proceeds.
In the event of the dissolution or bankruptcy of the Company, the holders of the Securities that have not been converted will be entitled to distributions as described in the Securities. This means that such holders will only receive distributions once all of the creditors and more senior security holders, including any holders of preferred stock, have been paid in full. Neither holders of the Securities nor holders of CF Shadow Securities can be guaranteed any proceeds in the event of the dissolution or bankruptcy of the Company.
While the Securities provide mechanisms whereby holders of the Securities would be entitled to a return of their purchase amount upon the occurrence of certain events, if the Company does not have sufficient cash on hand, this obligation may not be fulfilled.
Upon the occurrence of certain events, as provided in the Securities, holders of the Securities may be entitled to a return of the principal amount invested. Despite the contractual provisions in the Securities, this right cannot be guaranteed if the Company does not have sufficient liquid assets on hand. Therefore, potential Investors should not assume a guaranteed return of their investment amount.
The Company has the right to conduct multiple closings during the Offering.
If the Company meets certain terms and conditions, an intermediate close of the Offering can occur, which will allow the Company to draw down on half of the proceeds committed and captured in the Offering during the relevant period. The Company may choose to continue the Offering thereafter. Investors should be mindful that this means they can make multiple investment commitments in the Offering, which may be subject to different cancellation rights. For example, if an intermediate close occurs and later a material change occurs as the Offering continues, Investors whose investment commitments were previously closed upon will not have the right to re-confirm their investment as it will be deemed to have been completed prior to the material change.
We rely on other companies to provide components, services and raw materials for our products.
We depend on suppliers and contractors to meet our contractual obligations to our customers and conduct our operations. Our ability to meet our obligations to our customers may be adversely affected if suppliers or contractors do not provide the agreed-upon supplies or perform the agreed-upon services in compliance with customer requirements and in a timely and cost-effective manner. Likewise, the quality of our products may be adversely impacted if companies to whom we delegate manufacture of major components or subsystems for our products, or from whom we acquire items or raw materials, do not provide components or raw materials that meet required specifications and perform to our and our customers’ expectations. Our suppliers may be unable to quickly recover from natural disasters and other events beyond their control and may be subject to additional risks such as supply shortages or financial problems that limit their ability to conduct their operations. The risk of these adverse effects may be greater in circumstances where we rely on only one or two contractors or suppliers for a particular component or raw material. Our products may utilize custom components available from only one source. Continued availability of such components at acceptable prices, or at all, may be affected for any number of reasons, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet our requirements. The supply of components or raw materials for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products or raw materials to us adversely affecting our business and results of operations. Moreover, if any of our suppliers become financially unstable, or otherwise unable or unwilling to provide us with raw materials or components, then we may have to find new suppliers. It may take several months to locate alternative suppliers, if required, or to redesign our products to accommodate components from different suppliers. We may experience significant delays in manufacturing and shipping our products to customers and incur additional development, manufacturing and other costs to establish alternative sources of supply if we lose any of these sources or are required to redesign our products. We cannot predict if we will be able to obtain replacement components within the time frames that we require at an affordable cost, if at all.
Security breaches of confidential customer information or confidential employee information may adversely affect our business.
Our business requires the collection, transmission and retention of confidential information, including Controlled Unclassified Information (“CUI”) in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. We store investor, customer and vendor personal and other sensitive information/digital data. The integrity and protection of that data is critical to us. The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits, or cause the theft and criminal use of this data or our information. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation, fines and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our investor, customer or vendor data, our relationships with our investors, customers, vendors, and/or other third parties will be severely damaged, and we could incur significant liability. Since techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and any third-party hosting facility that we may use, may be unable to anticipate these techniques or to implement adequate preventative measures.
Our financial statements include a going concern note.
Our ability to continue as a going concern for the next twelve months is dependent upon our ability to generate sufficient cash flows from operations to meet our obligations, and/or to obtain additional capital financing from investors and/or third parties. No assurance can be given that we will be successful in these efforts. These factors, among others, raise substantial doubt about our ability to continue as a going concern for a reasonable period of time.
If our drones fail to perform as expected, we may have to recall our products and our ability to develop, market and sell our drones could be harmed.
Our drones and related accessories may contain defects in design and manufacture that may cause them not to perform as expected or that may require repair. While we perform extensive internal testing, we will have a limited frame of reference by which to evaluate the performance of our drones. There can be no assurances that we will not be required to recall products in the future. There can be no assurance that we will be able to detect and fix any defects in the drones prior to their sale to consumers. In the future, we may at various times, voluntarily or involuntarily, initiate a recall if any of our drones or their components prove to be defective. In addition, our drones may not perform consistent with customers’ expectations or consistent with other drones currently available. Any product defects or any other failure of our drones to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims, harm to our brand and reputation, and significant warranty and other expenses, and could have a material adverse impact on our business, financial condition, operating results and prospects.
We may face technological and design challenges.
We may discover that the optimal retail price points for our drones are below where we can sustainably price our current low-cost architecture, which could necessitate the development of new product architecture that could take years to go from concept to product. It is possible that during our development of a future product, one or more issues may arise that could cause us to abandon it. This could happen at any point in the development cycle and could result in a significant delay in achieving the lower-priced product line. If we need to develop a completely new product line, that could create significant delays and adversely impact the value of your investment. Further, we may encounter unforeseen technical challenges as we move from a prototype to a commercial product.
Manufacturing and selling our products internationally may cause problems and present risks.
Certain components of our drones are manufactured internationally. There are many risks associated with international business. These risks include, but are not limited to, language barriers, fluctuations in currency exchange rates, political and economic instability, regulatory compliance difficulties, problems enforcing agreements, and greater exposure of our intellectual property to markets where a high probability of unlawful misappropriation may occur. Failure to successfully mitigate any of these potential risks could damage our business. In addition, there is currently a risk that the COVID-19 outbreak may disrupt the supply of parts. We intend to mitigate this risk through inventory and supply chain management practices. In addition, we are required to comply with all applicable domestic and foreign export control laws, which may include the International Traffic in Arms Regulations and the Export Administration Regulations. In addition, we may be subject to the Foreign Corrupt Practices Act and international counterparts that generally bar bribes or unreasonable gifts for foreign governments and officials. Violation of any of these laws or regulations could result in significant sanctions, which could reduce our future revenue and net income.
Failure to obtain necessary regulatory approvals from the Federal Aviation Administration or other governmental agencies, or limitations put on the use of small UAS in response to public privacy or other concerns, may prevent us from expanding the sales of our drones in the United States.
The regulation of small UAS for commercial use in the United States is undergoing substantial change and the ultimate treatment is uncertain. In 2006, the Federal Aviation Administration (the “FAA”) issued a clarification of its existing policies stating that, in order to engage in commercial use of small UAS in the U.S. National Airspace System, a public operator must obtain a Certificate of Authorization (a “COA”) from the FAA, to fly in restricted airspace. The FAA’s COA approval process requires that the public operator certify the airworthiness of the aircraft for its intended purpose, that a collision with another aircraft or other airspace user is extremely improbable, that the small unmanned aircraft system complies with appropriate cloud and terrain clearances and that the operator or spotter of the small unmanned aircraft system is generally within one half-mile laterally and 400 feet vertically of the small unmanned aircraft system while in operation. Furthermore, the FAA’s clarification of existing policy stated that the rules for radio-controlled hobby aircraft do not apply to public or commercial use of small UAS. On February 14, 2012, the FAA Modernization and Reform Act of 2012 was enacted, establishing various deadlines for the FAA to allow expanded use of small UAS for both public and commercial applications. On June 21, 2016, the FAA released its final rules regarding the routine use of certain small UAS (under 55 pounds) in the U.S. National Airspace System pursuant to the act. The rules, which became effective in August 2016, provide safety regulations for small UAS conducting non-recreational operations and contain various limitations and restrictions for such operations, including a requirement that operators keep UAS within visual-line-of-sight and prohibiting flights over unprotected people on the ground who are not directly participating in the operation of the UAS. We cannot assure you that these rules will not impede our ability to sell our drones. Pursuant to federal law, FAA exemptions are needed for certain commercial uses of our UAS. If we or our customers are unable to obtain such exemptions, we may be unable to sell our UAS for such purposes, which would have an adverse effect on our business, financial condition, and/or operating results. In addition, there exists public concern regarding the privacy implications of U.S. commercial and law enforcement use of small UAS. This concern has included calls to develop explicit written policies and procedures establishing usage limitations. We cannot assure you that the response from regulatory agencies, customers and privacy advocates to these concerns will not delay or restrict the adoption of small UAS by non-military customers.
If we are unable to adequately control the costs associated with operating our business, including our costs of manufacturing, marketing and sales, our business, financial condition, operating results and prospects will suffer.
If we are unable to maintain a sufficiently low level of costs for designing, manufacturing, marketing, selling and distributing our drones relative to their selling prices, our operating results, gross margins, business and prospects could be materially and adversely impacted. We have made, and will be required to continue to make, significant investments in the design, manufacture, marketing and sale of our drones. There can be no assurances that our costs of producing and delivering our drones will be less than the revenue we generate from sales. We will incur significant costs related to contracting for the manufacture of our drones, procuring the materials required to manufacture our drones, assembling drones and compensating our personnel and consultants. Many of the factors that impact our operating costs are beyond our control. For example, the costs of our raw materials and components could increase due to shortages if global demand for these materials and components increases. In addition, we may experience increases in the cost of materials or a sustained interruption in the supply, or a shortage, of materials. Any such cost increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. If we are unable to keep our operating costs aligned with the level of revenues we generate, our operating results, business and prospects will be harmed.
Natural disasters and other events beyond our control could materially adversely affect us.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Such events could make it difficult or impossible for us to deliver our services to our customers and could decrease demand for our services. In 2019, a novel strain of coronavirus, COVID-19, was reported and the World Health Organization has since declared the outbreak to constitute a pandemic. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers and our sales cycles and industry events, and the effect on our vendors, all of which are uncertain and cannot be predicted. The ongoing COVID-19 pandemic and any preventative or protective actions that governmental authorities or we may take in response to the pandemic may have a material adverse effect on our business or the business of our customers, suppliers, or distribution channels. In addition, preparing for and responding to the ongoing pandemic could divert management’s attention from our key strategic priorities, increase costs as we prioritize the health and safety of our employees, cause us to reduce, delay, alter, or abandon strategic initiatives that may otherwise increase our long-term value, and otherwise disrupt our business operations. Further, the employee-safety measures we have implemented or others we may take in the future could amplify existing risks or introduce new risks that could adversely affect our business. These safety measures may not be successful in preventing the spread of the virus among our employees and we could face litigation or other claims related to unsafe working conditions, inadequate protection of our employees, or other similar or related claims. Any of these claims, even if without merit, could result in costly litigation or further divert management’s attention and resources. At this point, the extent to which COVID-19 may impact our financial condition or results of operations is uncertain. The effect of COVID-19 may not be fully reflected in our results of operations until future periods, if at all. If the COVID-19 outbreak continues to spread, we may need to limit operations or implement limitations.
We may face potential difficulties in obtaining capital.
We may have difficulty raising needed capital in the future as a result of, among other factors, our lack of revenues from sales, as well as the inherent business risks associated with our Company and present and future market conditions. We will require additional funds to execute our business strategy and conduct our operations. If adequate funds are unavailable, we may be required to delay, reduce the scope of or eliminate one or more of our research, development or commercialization programs, product launches or marketing efforts, any of which may materially harm our business, financial condition and results of operations.
We may not have enough authorized capital stock to issue shares of common stock to investors upon the conversion of any security convertible into shares of our common stock, including the Securities.
Currently, our authorized capital stock consists of 10,000,000 shares of common stock, of which 900,000 shares of common stock are issued and outstanding. Unless we increase our authorized capital stock, we may not have enough authorized common stock to be able to obtain funding by issuing shares of our common stock or securities convertible into shares of our common stock. We may also not have enough authorized capital stock to issue shares of common stock to investors upon the conversion of any security convertible into shares of our common stock, including the Securities.
The Company’s success depends on the experience and skill of the board of directors, its executive officers and key employees, and we must attract and retain additional talent.
Our future success depends on the efforts of key personnel and consultants. In particular, we are dependent on Peter Fuchs, our cofounder and President, Chief Executive Officer and Treasurer, Jonathan Meringer, our cofounder and Chief Technology Officer, Nathaniel Meringer our cofounder and Chief Engineer and Gur Kimchi, a key member of our Board of Directors. The Company has or intends to enter into employment agreements with each of them, however there can be no assurance that it will do so or that they will continue to be employed by the Company for a particular period of time. The loss of Peter Fuchs, Jonathan Meringer, Nathaniel Meringer, Gur Kimchi, or any other member of the board of directors or executive officer could harm the Company’s business, financial condition, cash flow and results of operations. As we grow, we will need to attract and hire additional employees in sales, marketing, design, development, operations, finance, legal, human resources and other areas. Depending on the economic environment and our performance, we may not be able to locate or attract qualified individuals for such positions when we need them. We may also make hiring mistakes, which can be costly in terms of resources spent in recruiting, hiring and investing in the incorrect individual and in the time delay in locating the right employee fit. If we are unable to attract, hire and retain the right talent or make too many hiring mistakes, it is likely that our business will suffer from not having the right employees in the right positions at the right time. This would likely adversely impact the value of your investment.
The Company has potentially significant Common Stock repurchase options upon any departure of a founder.
The Company entered into a shareholder agreement effective as of May 20, 2016 with the holders of all of the issued and outstanding shares of Common Stock as of the date of this Form C and amended the shareholder agreement effective as of March 25, 2021 (as amended, the “Shareholders Agreement”). Under the Shareholders Agreement the Company has the option to repurchase the Common Stock of any of the parties to the Shareholders Agreement if any such party dies, becomes disabled or departs from the Company. This repurchase option applies only to the holders of Common Stock who are holding issued and outstanding Common Stock as of the date of the Shareholders Agreement and does not apply to any other holders who first acquire Common Stock after the date of the Shareholders Agreement. The repurchase price for any repurchase under the Shareholders Agreement would be the fair market value of the Common Stock being repurchased, payable in cash, or if the Company does not have sufficient funds available, by promissory note with interest equal to the Bank of America Prime Rate and maturing within 36 months. If any event triggering such a repurchase option occurs and the Company elects to exercise such option, the Company’s business, prospects and cash flow could be materially adversely impacted.
The operation of “UAS” in urban environments may be subject to risks, such as accidental collisions and transmission interference, which may limit demand for our drones in such environments and harm our business and operating results.
Urban environments may present certain challenges to the operators of UAS. UAS may accidentally collide with other aircraft, persons or property, which could result in injury, death or property damage and significantly damage the reputation of and support for UAS in general. As the usage of UAS has increased, the danger of such collisions has increased. In addition, obstructions to effective transmissions in urban environments, such as large buildings, may limit the ability of the operator to utilize the aircraft for its intended purpose. The risks or limitations of operating UAS in urban environments may limit their value in such environments, which may limit demand for our drones and consequently materially harm our business and operating results.
We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.
The risk of product liability claims, product recalls, and associated adverse publicity is inherent in the manufacturing, marketing, and sale of drones. We may become subject to product liability claims, which could harm our business, prospects, operating results and financial condition. We face the risk of exposure to claims in the event our drones do not perform as expected or malfunction resulting in personal injury or death. A successful product liability claim against us could require us to pay a substantial monetary award. In addition, a product liability claim could generate substantial negative publicity about our drones and business and inhibit or prevent commercialization of other future products which may have a material adverse effect on our brand, business, prospects and operating results. Any lawsuit or claim, regardless of its merit, may have a material adverse effect on our reputation, business and financial condition.
Risks of borrowing.
In November 2020 we entered into a loan with Balboa Capital in an aggregate principal amount of $93,900, which is secured by the equipment purchased with the proceeds of the loan. In accordance with the terms of the loan, we used the proceeds to purchase equipment to aid the development and manufacture of our products. In the future, we may have to seek other loans from financial institutions. Typical loan agreements might contain restrictive covenants which may impair our operating flexibility. A default under any loan agreement could result in a charging order that would have a material adverse effect on our business, results of operations or financial condition.
We do business with the United States government.
We do business with the U.S. government, and we intend to continue to seek more business opportunities with them in the future. Government contracting is complex and highly regulated. We may not be able to establish or maintain the compliance expertise, processes and systems necessary to manage government contracts. If we violate government contracting rules we may face fines or other sanctions, we may be precluded from competing for future government awards, and contracts we have been awarded may be cancelled. Government-funded programs are also subject to significant risks of revision, delay and cancellation. Investments we make in anticipation of contract awards may be lost. We also serve as a subcontractor to other companies that rely on government contracts, and any negative impact on these customers as a result of government sanctions, contract revisions, delays or cancellations may negatively impact our business. Any of these outcomes may have a material adverse effect on our business.
We are subject to changes in foreign currency exchange rates.
Some of our products or components of our products may be manufactured internationally and may be sold in other countries throughout the world. As a result, the price we pay for our products and what they may be sold for depend on the exchange rates between the U.S. dollar and other currencies. Over the past several years, these exchange rates have had material fluctuations and we expect they will continue to fluctuate. If the U.S. dollar becomes significantly weaker, our products will likely cost us more to manufacture and we may receive less than expected when they are sold, which could adversely impact the economics of our business and your investment.
State and federal securities laws are complex, and the Company could potentially be found to have not complied with all relevant state and federal securities law in prior offerings of securities.
The Company has conducted previous offerings of securities and may not have complied with all relevant state and federal securities laws. If a court or regulatory body with the required jurisdiction ever concluded that the Company may have violated state or federal securities laws, any such violation could result in the Company being required to offer rescission rights to investors in such offering. If such investors exercised their rescission rights, the Company would have to pay to such investors an amount of funds equal to the purchase price paid by such investors plus interest from the date of any such purchase. No assurances can be given the Company will, if it is required to offer such investors a rescission right, have sufficient funds to pay the prior investors the amounts required or that proceeds from this Offering would not be used to pay such amounts. In addition, if the Company violated federal or state securities laws in connection with a prior offering and/or sale of its securities, federal or state regulators could bring an enforcement, regulatory and/or other legal action against the Company which, among other things, could result in the Company having to pay substantial fines and be prohibited from selling securities in the future.
There is no guarantee of a return on an Investor’s investment.
There is no assurance that an Investor will realize a return on their investment or that they will not lose their entire investment. For this reason, each Investor should read this Form C and all exhibits carefully and should consult with their attorney and business advisor prior to making any investment decision.
A Crowd SAFE holder may lose their right to any appreciation or return on investment due to defaulting on certain notice and required action requirements in such Crowd SAFE agreement; failure to claim cash set aside in this case may result in a total loss of principal.
The Crowd SAFE agreement offered requires a holder to complete, execute and deliver any reasonable or necessary information and documentation requested by the Company or the Intermediary in order to effect the conversion or termination of the Crowd SAFE, in connection with an Equity Financing or Liquidity Event (each as defined below), within thirty (30) calendar days of receipt of notice (whether actual or constructive) from the Company. Failure to make a timely action may result in the Company declaring that the Investor is only eligible to receive a cash payment equal to their Purchase Amount (or a lesser amount in certain events). While the Company will set aside such payment for the investor, such payment may be subject to escheatment laws, resulting in a total loss of principal if the Investor never claims their payment.
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