Drone Market Update Drone Delivery: The Future in Our...

September 2009

Executive Summary Security Industry Monitor

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Drone Market Update Drone Delivery: The Future in Our Times October 2019

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Co-head, Investment Banking Group Head of Mergers and Acquisitions (310) 246-3705 [email protected] Koby L. Tanzer, CFA Head of Israel Office Imperial Capital Israel, Ltd. +972 (54) 720 0999 [email protected] Jonathan Richton Imperial Capital Israel, Ltd. +972 (58) 412 7215 [email protected]

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Security Industry Monitor

Table of Contents

Imperial Capital, founded in 1997, is a full-service investment bank offering a uniquely integrated platform of comprehensive services to institutional investors and middle market companies. We offer sophisticated sales and trading services to institutional investors and a wide range of investment banking advisory, capital markets and restructuring services to middle market corporate clients. We also provide proprietary research across an issuer’s capital structure, including bank debt, debt securities, hybrid securities, preferred and common equity and special situations claims. Our comprehensive and integrated service platform, expertise across the full capital structure, and deep industry sector knowledge enable us to provide clients with superior advisory services, capital markets insight, investment ideas and trade execution. We are quick to identify opportunities under any market conditions and we have a proven track record of offering creative, proprietary solutions to our clients.

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For additional information, please visit our Web site at www.imperialcapital.com.

About Imperial Capital, LLC

October 2019

Table of Contents Drone Market Update Drone Delivery: The Future in Our Times

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Table of Contents

Introduction ....................................................................................................................... 4

The Market ........................................................................................................................ 5

Industry Mapping .............................................................................................................. 7

Regulation ....................................................................................................................... 11

Public Perception ............................................................................................................ 14

Technology Ownership ................................................................................................... 16

Notable M&A Transactions ............................................................................................. 18

Registered Direct and Private Placement Snapshot ....................................................... 18

Watchlist ......................................................................................................................... 21

Bankruptcies and Wind-Downs ....................................................................................... 21

Drone Market UpdateDrone Delivery: The Future in Our Times

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Introduction Historically exclusive to the defense and homeland security industries, advancements in technology –

particularly propulsion systems, control systems, software and cameras – has led to significant growth in

commercially available Unmanned Aerial Systems (UAS) as well as the understanding of their value

proposition for many different non-military applications. Whereas the term “UAV” indicates the actual

aircraft (aka “Drone”), the term “UAS” refers to an Unmanned Aerial System where the system may

include the UAV itself as well as a ground-based controller, communications, etc.

Since Jeff Bezos revealed Prime Air in a December 2013 60 Minutes interview, commercial delivery via

drones has gained notoriety as a premier example of the future economy and last mile delivery. Getting

packages to consumers faster, transferring critical medical supplies more directly and providing life-saving

materials quickly to remote areas are all examples of a forthcoming drone delivery ecosystem.

While excitement is building, and clear strides have been made towards a fully functioning drone delivery

ecosystem, regulation remains a challenge and widespread adoption is slow. Notwithstanding, drone

delivery has commenced in various regions throughout the world including Iceland, parts of Africa, China,

and new testing has begun in the U.S. We believe this sub-sector of the drone market is beginning to

reach an inflection point where the challenges holding back progress are beginning to dissipate.

A Little History

The concept of drone-based deliveries began as early as the 1950s. In 1952, Kaman Corporation launched the first helicopter drone program, culminating in the first pilotless drone helicopter flight in July 1957 by the HTK-1 “Yellow Peril”. Testing continued with the drone dropping homing torpedoes and even assisting in rescuing an injured seaman from a ship in August 1960.

Although the helicopter as a pilotless vehicle never achieved full production or widespread use, proof of concept had been established setting a path for a future that includes rotary UAVs. Beginning in December 2011, Kaman’s K-MAX Unmanned Multi-Mission Helicopter (which can be controlled by a pilot onboard or remotely) began making large cargo deliveries to U.S. troops stationed in remote locations throughout Afghanistan. Slinging the cargo underneath the vehicle, within two years, the K-MAX had delivered 4.5 million pounds of supplies completing over 1,700 day and night resupply missions.

On the commercial side, drone deliveries did not enter the consciousness of the wider public until the famous Bezos interview. While there were already companies working on drone delivery systems, the race to enter the market had begun, only to be slowed by technology (including safety systems), regulation and to a lesser extent, public perception.

Source: National Archives.

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Figure 1: Evolution of Drone Delivery Market

Sources: Imperial Capital, LLC.

In December 2013, soon after the Jeff Bezos interview, German postal carrier Deutsche Post DHL used its “parcelcopter” to conduct a two minute flight with a remote controlled drone to deliver a batch of medicine from a pharmacy in the city of Bonn to the company’s headquarters. In August 2017, Flytrex launched the first operational drone delivery service in Iceland. The service began delivering food and consumer products from shops and restaurants on one side of Reykjavik to a designated point across the city crossing the large bay that separates the two parts of the city. Currently, there are over 25 drone delivery programs (including testing) operating globally.

The Market Industry wide, analysts agree the potential size of the drone delivery market is massive. The overall drone and logistics market is projected to reach $29.1 billion by 2027 including both commercial and military. Looking to the commercial side, Frost and Sullivan projects there will be as many as 2.2 million delivery drones by 2025 in the eCommerce space, representing a CAGR of 87.5% from 2017. Once the market is open for business, daily drone deliveries may reach 1 million, and possibly as much as 8 million.

The economics are clear. Drones can take a more direct route by flying over forests or large water masses (e.g., Flytrex in Reykjavik) or simply avoid ground traffic. Restaurants could potentially eliminate the delivery person while completing more deliveries in the same time. In suburban areas it typically takes 30 minutes to make one delivery, while in more urban areas, about 3 deliveries can be made per hour. Training the same delivery person to operate a drone, a restaurant can get as many as 15 deliveries completed per hour as experienced by Flytrex in Iceland. Other areas of cost savings include insurance where the cost for a drone making deliveries is approximately half the cost of an Uber driver (UberEats). In addition to the savings, there are overall benefits including less pollution and less delivery cars stopping to make deliveries.


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Figure 2: Select Drone Delivery Use Cases

Sources: Frost and Sullivan.

The quintessential example of the sheer size of the market opportunity can be captured by simply looking at Amazon. More than 80% of Amazon orders are for packages that are 5 lbs. or less. With most of the U.S. population in range for one-day or same-day delivery, Amazon is pouring resources to develop a delivery drone than can carry up to 5 lbs. a distance of seven miles.

Using drones for delivery can also help reduce the environmental footprint of package delivery while also providing an attractive ROI to logistics companies. According to a study by the Rand Corporation in 2017, using drones to deliver just 20% of packages 5 lbs. or less that would normally be delivered by truck, within 10 miles, can save approximately 6.0% in energy usage.

While the market evolves, there have been a handful of companies that are achieving initial success beginning as pilot programs and transitioning to full-time drone delivery services. Beginning in May 2019, Flytrex began the transition from only delivering to designated points in Reykjavik to going directly to people’s backyards. The company’s longest route has been over 4 miles, flying beyond visual line of sight (BVLOS). Crossing into the U.S., Flytrex began trial deliveries in North Dakota and is a participant in the FAA’s UAS Integration Pilot Program (IPP) in North Carolina (Flytrex has not yet received a waiver from the FAA for BVLOS flight in the U.S.). In Switzerland, Swiss Post in partnership with Matternet began using drones in 2018 in Lugano and Berne and eventually in Zurich with routes over Lake Zurich and forestry areas. The program has since completed thousands of successful flights through April 2019.1

1 Following a second crash of a Matternet drone, the Swiss Post delivery program has been suspended pending the implementation of changes requested by Swiss Post following recommendations published in a report produced by the Swiss Transportation Safety Investigation Board (STSB).

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Figure 3: Drone vs “Traditional” Car Delivery

Sources: Flytrex.

Industry Mapping In contrast to other sub-segments of the drone industry like inspection, surveying and security, we believe drone delivery will have the largest direct impact to consumers. Delivering straight to someone’s home will have a significant impact on consumers’ ability to receive goods faster and more conveniently. We also believe delivery drones have the ability to influence public perception of the entire drone market. Ensuring safe operations, while minimizing nuisances like noise pollution will be important to garner widespread acceptance. We think it is notable that two of the largest technology driven companies in the world – Amazon and Alphabet – have invested significant resources into drone delivery programs.

The market, in our view, is dynamic. There are companies offering small package drone delivery to be carried under 10 miles, others focusing on large cargo to be carried tens of miles either by rotary winged / quadcopter or fixed winged.

Success to-date seems to be irrelevant of company size, but rather ability to be quick, nimble and early to market. While Amazon has grabbed the most attention, it remains in the earlier stages of drone delivery while companies like Flytrex, Zipline, and Matternet have moved beyond preliminary testing and have started operating drone delivery services in select regions for the last couple of years.


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Figure 4: Select Drone Delivery Providers and Market Participants

Sources: Imperial Capital, LLC.

We think the market will be able to sustain numerous companies and will be shared by the big technology companies as well as smaller, more specialized drone delivery solutions. While the large companies are mostly investing to support their specific delivery needs, we believe the smaller providers will be the enablers of delivery by drone for small businesses, restaurants, medical, etc. As illustrated by the UPS / Matternet partnership, we also see an opportunity for partnerships between drone delivery companies and traditional logistics providers. Since starting in March 2019, UPS / Matternet has flown over 1,000 revenue generating flights.

Two meaningful developments towards wider use of drone deliveries have occurred so far in 2019 with both Wing Aviation (in April 2019) and UPS Flight Forward (in October 2019) receiving Part 135 certification. While both are large organizations able to invest the resources necessary to receive the more stringent certificates, the fact the FAA is willing to give approval for UAS operations under Part 135 is a sign of the agency taking further steps to facilitate industry growth. While both companies received approvals to fly under Part 135, Wing received a Part 135 Single pilot air carrier certificate which allows for a single pilot to fly sUAS, but not the entire company. In contrast, UPS is the first company to receive full Part 135 Standard certification, allowing for it to operate an airline with an unlimited number of drones under an unlimited number of remote pilots. It also allows UPS to fly drones and cargo exceeding 55 pounds as well as fly at night and BVLOS.

Also important to note is the different needs and use cases for drone delivery. While at the forefront of the public’s mind are quadcopters with a fresh hamburger or new phone charging cord buzzing over homes in suburbs, companies such as Zipline in Africa are successfully answering the need for efficient delivery over long distances. To date, Zipline’s fixed winged UAVs have made over 16,000 lifesaving deliveries across Rwanda and Ghana. Kaman’s K-MAX could be used to deliver large cargo to remote areas across the globe as well as support search and rescue and forest firefighting efforts without the limitations presented by a human pilot.

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Although regulation remains a hurdle for full scale adoption, given the progress of certifications and waivers granted in 2019, we believe 2020 will see accelerating progress towards wider-scale drone deliveries across the globe. In the U.S., Flirtey, the company that completed the first FAA-approved drone delivery in the U.S. in 2015, expects to begin commercial deliveries in 2020. Flirtey is a UAS IPP participant operating in Reno, NV. In Canada, Drone Delivery Canada recently entered into a commercial agreement with Vision Profile Extrusions, a Canadian manufacturer to begin drone deliveries between Vision’s properties in Vaughan, Ontario. In Europe, Manna.aero recently signed an agreement with food-ordering platform Flipdish giving it access to over 1,000 restaurants in Ireland. Manna.aero expects to begin food delivery flights in Ireland in early 2020 with a country wide roll- by the end of the year.

Figure 5: Select Drone Delivery Programs - United States

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Sources: Imperial Capital.


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Figure 6: Select Drone Delivery Programs - Europe


Figure 7: Select Drone Delivery Programs - Africa, Asia & Oceania


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Regulation While the start of drone delivery flights around the world and in the U.S. are encouraging and more programs are appearing in 2019, widespread implementation remains plagued by the regulation obstacles – as does the entire drone industry. Safety remains the upmost concern to aviation authorities across the globe which are balancing the demand for drone deliveries and a reasonable timeframe for regular adoption with a clear regulatory framework.

One of the biggest concerns regarding the use of drone delivery is what happens when there is an emergency incident including a malfunction. Without an operator, can the drone be relied upon to land safely without causing damage to property or people? In January 2019, a Matternet drone operating in Switzerland was forced to initiate a controlled emergency landing and landed on Lake Zurich. The cause was determined to be a short circuit. The drone initiated emergency procedures autonomously by stopping its rotors and deploying its parachute. While gliding downwards, the drone emitted a high-pitched whistling sound and had bright blinking lights. Subsequent to the incident, drone flights were suspended until April after which Matternet added in certain redundancies to increase safety. But in May 2019, again a Matternet drone crashed in a Zurich forest. In the second incident, shortly after takeoff, the drone initiated its automatic flight termination system. The parachute was deployed but a connecting line to the drone tore, causing the drone to crash. Additionally, it was found that the warning signal (high-pitched whistle) was not heard by people nearby.

While these two incidents highlight some of the well-known concerns, it is notable that these incidents occurred after thousands of successful flights conducted by Matternet and Swiss Post. In Australia, Wing has conducted over two thousands flights with only five flights forced to land early.

For drone delivery to reach its full potential, aviation authorities will need to allow drones to fly BVLOS, above people, as well as at night – all currently prohibited under current regulations in the U.S. without an FAA waiver. In order to ease the restrictions on drone use, the FAA believes the first steps are establishing a clear framework (and eventual standardization) for the industry around remote ID and Unmanned Traffic Management (UTM). As illustrated by the incidents above, parachutes and redundancies are important and will likely be required, but currently there is no government directed standardization across platforms. For remote ID and UTM to successfully integrate sUAS into the national airspace (NAS) there will need to be some sort of standardization that all drones and operators can use. What that will be still remains in the discussion phase, and recently the FAA announced standard remote ID is likely two years away. Without remote ID, there can be no truly safe UTM as even on a basic levels drones cannot be identified or differentiated between “good” and “bad.” For more information on this topic, see Imperial Capital’s Drone Market Update from December 2018.

With drone deliveries in the U.S. currently limited to the areas participating on the UAS IPP with a select number of companies actually carrying out the operations, keeping track of the drones and their operators is fairly easy (see Matternet incidents mentioned above). But, to enable widespread adoption where millions of drones will be making deliveries across the world, a universal method for knowing the identity of the drone and its operator is imperative for overall safety of operations. Remote ID will enable law enforcement officials to know if the drone is operating lawfully and if not and enable officers and special agents to track down the operators. If an incident occurs such as an accidental or purposefully breach of restricted airspace (less likely in the case of autonomous drone deliveries) or an accident, officials will then have the information required to identify the responsible party and will be able to take appropriate enforcement actions.


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It is possible remote ID could also be used by the customer to ensure the drone hovering over or landing on their property is supposed to be there, that it’s actually the one making the delivery and not a rogue drone. Recently, Wing partnered with Airmap and Kittyhawk (all three are UAS Service Suppliers (USS) providing UTM services under the FAA’s LAANC program) to demonstrate a network-based remote ID that aims to inform third parties about which drones are operating near their current location and why.

Looking towards implementation, the current status of remote ID adoption is less-encouraging given expected delays in the FAA making a final ruling. As recently as July, the FAA again delayed the publishing of a proposed regulation for remote ID (from July to September). It is expected that the finalization of any rule will take up to two years from the time the proposal is published.

Figure 8: Network Remote ID

Sources: dronelife.com.

Just as important as remote ID, a reliable and accessible UTM system is needed for safe operations of the hundreds of thousands or millions of drones that will be flying in the NAS. The FAA has already launched the LAANC program for drone operators to get authorization to fly in controlled airspace. Recognizing the importance of UTM, drone delivery provider Wing has developed its own UTM solution and is part of the approved UAS Service Suppliers (USS) for LAANC.

The importance of UTM can be illustrated by simply looking at the location of Amazon fulfillment centers in metropolitan areas across the U.S. As illustrated in Figure 9 below, Amazon has fulfillment centers close to airports and in controlled airspace. Within 10 miles of Los Angeles International Airport, Amazon has three fulfillment locations:

11800 W Olympic Blvd LA (also 1.5 miles to Santa Monica Airport)

900 W Florence Ave Inglewood

2815 W El Segundo Blvd, Hawthorne (also 1.2 miles to Hawthorne Municipal Airport)

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In Dallas, Amazon has three fulfillment locations within 10 miles of DFW International Airport and one location within 10 miles of Dallas Love Field. If Amazon were to begin drone delivery from any of these locations, the drones will be sharing airspace with commercial and general aviation aircraft, possibly police and firefighting helicopters, and likely other drones. Since performing economically beneficial drone delivery will require BVLOS operations, it is imperative that drones be able navigate autonomously via remote ID, collision avoidance systems and UTM.

Figure 9: Locations Select Amazon Fulfillment Centers

Sources: FAA, Freightos and Imperial Capital.


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Another factor that needs to be taken into consideration is the ability to fly over people as well as potential privacy issues. Currently, operators in the U.S. require a waiver from the FAA to fly over people (as of 6/30/19, the FAA has granted only 34 such waivers). To address these concerns, Flytrex is mostly flying over fields or forest areas in the U.S., avoiding as much time over people as possible. In fact, as of June 2019, over 90% of its flight paths in North Carolina were above trees. In addition to flight termination systems, delivery drones are being equipped with parachutes to ensure a safe landing of the drone, minimize damage to the package as well as diminish potential injury to bystanders.

Beyond the U.S., efforts are being made by countries across the world to implement safe and reliable drone delivery programs. It is notable that the first of such programs were started outside the U.S. In Australia, for example, the Civil Aviation Safety Authority (CASA) has given approval to Wing to carry out operations in North Canberra. As stated on its website, CASA approved Wing’s operations for the delivery of small items and is initially only available to 100 homes. Also on the website, CASA provides clear guidance on permitted operating days and times as well as address safety concerns and provide the public with guidance on where to file complaints (noise, privacy or other).

In the U.K. Amazon began testing drone deliveries in December 2016 but has not progressed much beyond those initial tests. Rules around drone operations in the U.K. remain stringent including limited approvals of BVLOS operations. With the recent drone incidents at Gatwick and Heathrow airports, the U.K. government has taken a more cautious approach to overall drone integration which has affected drone delivery Implementation.

In Europe, drone deliveries have begun in places like Switzerland and Iceland, as well as European Union (EU) countries such as Finland. As part of its own effort to facilitate safe drone operations (and drone deliveries) across its member states, the EU established the SAFIR (Safe and Flexible Integration of Initial U-space Services) project which includes a consortium of 13 private and public entities including like Amazon Prime Air and Unifly to carry out studies and demonstrations for drone operations that are viable, robust and ready to be implemented across Europe. The demonstrations and studies have included drone deliveries.

Public Perception The argument could be made that just as important as a clear regulatory framework for drone delivery operations is the buy-in from the greater public. Residents and businesses will likely have delivery drones flying over homes, businesses, and open spaces. The public can wield significant power and influence government officials to implement limitations or other enactments that could hinder drone delivery. In the U.S., there have been regulations enacted by state and local governments limiting drone operations. In Australia, where Wing has been conducting delivery drone trials, residents formed the Bonython Against Drones (BAD) Action Group. In a letter to local economic development and tourism committee, BAD claims “approximately 80% of Bonython residents, canvassed during the gather of signatures for a petition…expressed their strong objections and anger at the trial being conducted around their homes.”

In October 2016, the Office of the Inspector General of the United States Postal Service (USPS) published results of a study on the public perception of drones. While the drone market was very different when the study was conducted, and even though it is less than 3 years ago, the overall perception of drone deliveries was positive – more Americans liking the concept than disliking. Not surprisingly, generation matters. Millennial respondents that like the idea of drone delivery are 3x more than dislikes as compared to baby boomers where dislikes outpace likes 2-to-1. More importantly, the study found that the more information the public was exposed to about drone delivery, the greater the interest in the concept

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(see figures below). From our discussions with industry participants, we believe there will be a trend towards positive views on drone delivery as programs expand. Consumers want products faster (according to the study, the more interesting application to those surveyed was one-hour delivery) and as they see more drones with packages flying around neighborhoods delivering to neighbors, they will become more comfortable. Aware of the challenges, delivery service providers are actively seeking ways to reduce noise and other nuisances.

Figure 10: Perception of Drone Deliveries – Summary

Sources: USPS.

Figure 11: Drone Delivery Concept Liking – By Age Group

Sources: USPS.

Figure 12: Knowledge Drives Enthusiasm

Sources: USPS.


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Technology Ownership While one cannot draw a line between patents and success, we were intrigued by the apparent “race” to grab patents related to delivery. Looking at WIPO filings, we found numerous patents on a range of ideas and technologies that providers believe will help them in successfully implementing a drone delivery program. Though the patent filings can be viewed as anecdotal to the overall drone delivery picture, the number of patent filings as well as the range of filers stands out as another indicator of how important this market will be across industries. Additionally, many patents address capabilities are important for non-delivery drones as well.

Figure 13: Select Drone Delivery Patent Filings by Company

Sources: WIPO and Imperial Capital.

Company # of Patents Summary of Patents

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Figure 14: Select Drone Delivery Patent Filings by Company (cont.)

Sources: WIPO and Imperial Capital.

Company # of Patents Summary of Patents


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Notable M&A Transactions

The volume of M&A transactions continued to remain low through 2Q and 3Q 2019, given the UAS market is still in the early growth stage and many companies are still relatively small.

FLIR Systems, Inc. announced it acquired tethered drone assets and technology from Aria Insights, Inc. (f.k.a. CyPhy Works, Inc.)

On October 2, 2019, FLIR Systems, Inc. announced it acquired the IP and certain operating assets of Aria Insights, Inc. The terms of the transaction were not disclosed. Founded in 2008 and previously known as CyPhy Works, Inc., Aria which had ceased operations in March, developed the Persistent Aerial Reconnaissance and Communication (PARCTM), a patented tethered drone system. Aria will be integrated into FLIR’s Unmanned Systems and Integrated Solutions Division.

Airmap, Inc. acquired Hanger Technology, Inc. for an undisclosed amount

On September 23, 2019, Airmap, Inc. announced it had acquired Hanger Technology, Inc. a provider of a drone workflow automation platform for enterprises in the construction and tower inspection industries. According to a press release, Airmap will be able to augment its offering for enterprises while also exposing Hanger to its extended international network of developers and enterprises.

DroneBase acquired Betterview’s drone roof inspection software and services business

On July 16, 2019, DroneBase, a leading global drone services provider, announced it had acquired Betterview’s drone roof inspection software and services business. The acquisition represents DroneBase’s first acquisition as its first foray into analytics. Betterview’s drone inspection solution aims to help insurers and property managers in assessing damage and mitigating risk for commercial properties.

AeroVironment, Inc. acquired Pulse Aerospace, LLC for $25.7 million

On June 11, 2019, AeroVironment, Inc. announced it had acquired Pulse Aerospace, Inc. for $25.7 million in cash, including $5.0 million of milestone-based earn-outs. Pulse Aerospace is a leading developer of VTOL UAS technology in the U.S. Its HeliSynthTM technology provides flight control, payload, and endurance capabilities at attractive prices to the commercial and defense markets. AeroVironment expects the acquisition to be accretive by the third year of fill operations.

Registered Direct and Private Placement Snapshot

Since 2008, $3.2 billion has been invested into drone companies, and deal pace recorded yet another uptick through year-end 2018 following a slowdown in 2017. During 2018, disclosed global investment in the commercial drone industry totaled $702 million, a 12.3% increase year-over-year. Anticipated regulatory changes in 2020, should provide further tailwinds for the industry and drive continued investment in the industry.

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D-Fend Solutions A.D. Ltd. raised $28.0 million in funding2

On September 24, 2019, D-Fend Solutions A.D. Ltd., a provider of autonomous end-to-end CUAS solutions raised $28.0 in funding led by Claridge Israel, the Israel-affiliate of Canada-based Claridge Investment Ltd. Current shareholder Vertex Ventures Israel also participated in the round. D-Fend has raised a total of $34.6 million to date.

AutoModality Inc. raised $3.8 million in funding

On September 19, 2019, AutoModality Inc., a provider of drone flight control software for infrastructure inspections raised $3.8 Million from LiteCap and Autonomous Control Systems Laboratory. The company has raised $4.2 million to date.

WhiteFox Defense Technologies, Inc. raised $12 million via Series A funding

On September 18, 2019, WhiteFox Defense Technologies, Inc., a leading provider of CUAS solutions raised $12 million via a Series A funding round from a group of institutional investors including JAM Capital Partners, Moore Venture Partners, Okapi Venture Capital, SaaS Ventures and Serra Ventures. The company has now raised $26 million to date.

Anduril Industries, Inc. raised an undisclosed amount via Series B funding

On September 11, 2019, CNBC reported that Anduril Industries, Inc., a provider of sUAS detection and mitigation technologies raised an undisclosed amount via a Series B funding round at a reported $1 billion valuation. Andreessen Horowitz participated in the round. Previously, Anduril had raised $41 million via Series A led by Founders Fund.

vHive Ltd. raised $5.5 million via Series A funding

On September 11, 2019, vHive Ltd. announced, a provider of drone fleet management solutions raised $5.5 million via a Series A funding round led by Octopus Ventures with participation from existing investor StageOne Ventures. The company has now raised $7.5 million to date.

Daedalean raised $12 million via Venture Round

On July 29, 2019, Daedalean, a provider of the first certifiable DAL-A level autopilot system for autonomous aircraft operations announced it raised $12 million via a Venture Round led by Carthona Capital, with participation from Redalpine, and Amino Capital. The company has raised $12 million in capital to date.

RoNik Inspectioneering raised an undisclosed amount from Terra Drone

On July 3, 2019, Terra Drone announced its investment in RoNik Inspectioneering, a leading Dutch provider of visual and ultrasonic inspections using wireless robotics. With this investment, RoNik becomes part of the Terra Drone group and was renamed Terra Inspectioneering. Leading up to the investment, RoNik has made more than 200 inspections to-date with large oil & gas companies among its clients.

2 See Imperial Capital’s April 2019 Drone Market Update for further information on the counter-UAS sector.


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Unifly NV raised $19.3 million via Series B Funding

On July 2, 2019, Unifly NV, a provider of UTM solutions, raised $19.3 million via Series B, with participation from new investors Deutsche Flugsicherung (DFS – national air traffic authority of Germany) and FPIM (sovereign wealth fund of Belgium) as well as current investors Terra Drone, QBIC and PMV (Belgian early stage investors). The company has raised approximately $27.5 million to date.

XTED Ltd. raised capital from i3 Equity Partners

On June 6, 2019, XTEND Ltd., a company that enables people to interact with drones and other unmanned technologies raised an undisclosed amount from i3 Equity Partners.

Workhorse Group (NASDAQ: WKHS) raised $25.0 million via Series B funding

On June 10, 2019, Workhorse Group, a company focused on ground and air electric mobility solutions raised $25.0 million via Series B funding. Workhorse completed the capital raise via private offering of securities to a group of institutional investors. As of 9/20/2019, WKHS had a total enterprise value of $225.8 million on revenues of $0.4 million and cash of $23.5 million.

Robotics Skies raised an undisclosed amount via Series A funding

On June 4, 2019, Robotic Skies, a services provider that connects manufacturers and operators of commercial UASs with a global network of civil aviation authority-certified repair statins raised an undisclosed amount via Series A funding led by Boeing HorizonX Ventures with participation form Thayer Ventures, Sun Mountain Capital and KickStart See Fund. Total capital raised to date remains undisclosed.

Wingtra Ltd. raised $10 million via Series A funding

ON May 23, 2019, Wingtra Ltd., a manufacturer of the fixed-wing VTOL WingtraOne drone used for the collection of high precision aerial data for surveying and mapping applications raised $10 million via Series A funding from Credit Suisse Entrepreneur Capital, investiere (Verve Capital Partners AG), and Zürcher Kantonal Bank. The company has raised $19.0 million to date.

Percepto raised $15 million via Series A funding

On May 22, 2019, Percepto, a leading provider of industrial autonomous drone-in-a-box solutions raised $15 million via Series A funding led by U.S. Venture Partners with participation from Emerge, Hyundai Motor Company, NHN Investment, R&R Ventures and Spider Capital. The company has raised $27.5 million to data.

Volans-i, Inc. raised $20 million via Series A funding

On May 13, 2019, Volans-i, Inc., a leading provider of drone-based on-demand aerial deliveries raised $20 million via series A funding led by Lightspeed Venture Partners with participation from Y Combinator. Volans-I has raised $25.1 million to date.

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DroneBase, Inc. received a strategic investment from FLIR System, Inc.

On April 10, 2019, FLIR Systems, Inc. and DroneBase, Inc. announced FLIR had made a strategic investment in DroneBase, a global drone operations company providing business access to one of the largest UAS pilot networks. The investment established FLIR as the exclusive provider of thermal product solutions and as the official sUAS thermal imaging training provider for the DroneBase enterprise pilot network through the FLIR Infrared Training Center (ITC). DroneBase has raised $1 million to date.

Zipline Inc. raised $190 million via Series C funding

On April 9, 2019, Zipline Inc. an operator of fixed-wing drone delivery services providing medical supplies in Africa, raised $190 million via Series C funding led by Katalyst Ventures with participation from Baillie Gifford, Bright Success Capital, Goldman Sachs, GV, Oakhouse Partners, The Rise Fund (global impact fund managed by TPG), Temasek and Toyota Tsusho Corp. The company has raised $233.0 million to date.

Watchlist

As the drone market continues to evolve, we are seeing companies going through restructuring and rationalization of operations. Below we provide some information on companies going through such processes.

Airobotics Ltd. is reported to have terminated as many as 200 employees

On September 27, 2019, sUAS News reported that Airobotics Ltd. may have let go as many as 200 employees. Airobotics has raised a total of $108.1 million to date through five rounds of funding.

Bankruptcies and Wind-Downs

There have been no notable bankruptcies or wind-downs through Q3-19.


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Additional Drone Reports and White Papers by Imperial Capital

October 2019

Smart Services and the Security Industry

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Glossary of Terms SeSecurityndustry Monitor

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Important Disclosures

The information contained herein represents a summary of public

information. Imperial Capital, LLC neither makes any projections with

regard to outcome nor makes any recommendation with respect to

investment in or transferability of the securities discussed herein. The

information contained herein does not necessarily reflect the independent

views of the research department of Imperial Capital, LLC, or any research

analyst, which may have contrary views or opinions.

This summary is for information purposes only. Under no circumstances is

it to be used or considered as an offer to sell, or a solicitation of an offer to

buy any security. While the information contained in this report has been

obtained from sources believed to be reliable, we do not represent or

guarantee that the summary is accurate or complete, and it should not be

relied upon as such. Any references or citations to, or excerpts from, third‐

party information or data sources (including, but not limited to,

Bloomberg, Capital IQ and IBISWorld) do not and are not intended to

provide financial or investment advice and are not to be relied upon by

anyone as providing financial or investment advice. Based on information

available to us, prices and opinions expressed in this report reflect

judgments as of the date hereof and are subject to change without notice.

The securities covered by or mentioned in this report involve substantial

risk and should generally be purchased only by investors able to accept

such risk. Any opinions expressed assume that this type of investment is

suitable for the investor. While this is in circulation, Imperial Capital, LLC or

its affiliates may, from time to time, make or quote a market in or make

purchases or sales for their own accounts of securities of the issuers

described herein. Imperial Capital, LLC or its affiliates may from time to

time perform investment banking or other services for, or solicit

investment banking or other business from, any company mentioned in

this report, and therefore Imperial Capital, LLC may have a conflict of

interest that could affect the objectivity of this monitor report.

© 2019 Imperial Capital, LLC

1

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