Drones performed optimally over three days at Fort Irwin in the Mojave Desert Bill Irby, CEO of AgEagle, commented, "The extreme heat of the Mojave Desert presents a very challenging environment for electronic platforms to operate successfully. As expected, our eBee VISION and eBee TAC units performed with no issues over three days and were able to conduct multiple Beyond Visual Line of Sight (BLVOS) flights on the standard antenna configuration." For more information on the eBee VISION and eBee TAC visit: ...

Core Insights - AgEagle Aerial Systems Inc. has secured a purchase order for 20 eBee VISION full-stack systems valued at approximately $2 million for fiscal year 2024, aimed at enhancing public safety and security in the UAE [1][2] Company Overview - AgEagle Aerial Systems Inc. specializes in providing full stack flight hardware, sensors, and software for commercial and government applications, originally focusing on the agriculture sector [2] - The company has evolved to serve various industries including energy, construction, agriculture, and government, establishing itself as a leading provider of drone solutions [2] Product Details - The eBee VISION system is designed for intelligence, surveillance, and reconnaissance missions, featuring extended range and increased flight time, making it suitable for the public safety and security sector [3]

PART I – FINANCIAL INFORMATION This section presents AgEagle's unaudited financial statements, management's analysis, market risk, and controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents AgEagle Aerial Systems Inc.'s unaudited condensed consolidated financial statements for the three months ended March 31, 2024 and 2023, including balance sheets, statements of operations and comprehensive loss, statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes explaining business operations, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of specific dates Balance Sheet Summary | ASSETS (as of) | March 31, 2024 | December 31, 2023 | | :----------------------- | :------------- | :---------------- | | Cash | $822,921 | $819,024 | | Accounts receivable, net | $1,351,355 | $2,057,546 | | Inventories, net | $6,438,206 | $6,936,980 | | Total current assets | $9,333,127 | $10,547,111 | | Total assets | $23,221,107 | $25,155,901 | | LIABILITIES (as of) | | | | Accounts payable | $2,647,583 | $3,062,794 | | Convertible note | $4,749,491 | $4,504,500 | | Total current liabilities | $11,299,123 | $11,031,432 | | Total liabilities | $14,168,187 | $14,458,345 | | STOCKHOLDERS' EQUITY (as of) | | | | Total stockholders' equity | $9,052,920 | $10,697,556 | - Total assets decreased by approximately **$1.93 million** from December 31, 2023, to March 31, 2024[10](index=10&type=chunk) - Total stockholders' equity decreased by approximately **$1.64 million** from December 31, 2023, to March 31, 2024[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details the company's revenues, expenses, and net loss for the reported periods Operations and Comprehensive Loss Summary | Metric (Three Months Ended March 31) | 2024 | 2023 | | :----------------------------------- | :----------- | :----------- | | Revenues | $3,894,447 | $4,057,069 | | Cost of sales | $1,940,025 | $2,078,437 | | Gross Profit | $1,954,422 | $1,978,632 | | Total operating expenses | $4,348,310 | $6,139,740 | | Loss from operations | $(2,393,888) | $(4,161,108) | | Total other expense, net | $(3,921,699) | $(438,391) | | Net loss attributable to common stockholders | $(6,315,587) | $(4,599,499) | | Net loss per common share - basic and diluted | $(0.77) | $(1.03) | | Total comprehensive loss, net of tax | $(6,479,240) | $(4,504,895) | - Revenues decreased by **4.0%** year-over-year, from **$4.06 million** in Q1 2023 to **$3.89 million** in Q1 2024[11](index=11&type=chunk) - Net loss increased by **37.3%** year-over-year, from **$(4.60 million)** in Q1 2023 to **$(6.32 million)** in Q1 2024, primarily due to a significant increase in other expenses, net[11](index=11&type=chunk) - Operating expenses decreased by **29.2%** year-over-year, from **$6.14 million** in Q1 2023 to **$4.35 million** in Q1 2024[11](index=11&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Outlines changes in the company's equity accounts over the reporting periods - As of March 31, 2024, total stockholders' equity was **$9.05 million**, down from **$10.70 million** as of December 31, 2023[14](index=14&type=chunk) - The Company effected a **1-for-20** reverse stock split on February 9, 2024, retroactively adjusting all share and per share data[13](index=13&type=chunk)[23](index=23&type=chunk) - A deemed dividend of **$5.25 million** was recognized in Q1 2024 due to anti-dilution provisions triggered by a reduced warrant exercise price, increasing net loss available to common stockholders[13](index=13&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary | Cash Flow Activity (Three Months Ended March 31) | 2024 | 2023 | | :----------------------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(1,553,093) | $(4,189,928) | | Net cash used in investing activities | $(43,081) | $(254,191) | | Net cash provided by financing activities | $1,641,894 | $2,955,402 | | Net change in cash | $3,897 | $(1,501,929) | | Cash at end of period | $822,921 | $2,847,908 | - Cash used in operating activities decreased by **62.9%** year-over-year, from **$4.19 million** in Q1 2023 to **$1.55 million** in Q1 2024, primarily due to lower operating expenses and inventory purchases[18](index=18&type=chunk)[190](index=190&type=chunk) - Cash provided by financing activities decreased by **44.4%** year-over-year, from **$2.96 million** in Q1 2023 to **$1.64 million** in Q1 2024, mainly due to less common stock sales and warrant exercises in the prior year, partially offset by preferred stock sales[18](index=18&type=chunk)[192](index=192&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies and specific financial statement line items [Note 1 – Description of the Business and Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Description%20of%20the%20Business%20and%20Basis%20of%20Presentation) Describes AgEagle's business, operations, and the basis for financial statement presentation - AgEagle designs and delivers drones, sensors, and software for various industries including energy/utilities, infrastructure, agriculture, and government[20](index=20&type=chunk) - The Company completed a **1-for-20** reverse stock split effective February 9, 2024[23](index=23&type=chunk) - The Company has an accumulated deficit of **$177.15 million** and a working capital deficit of **$1.97 million** as of March 31, 2024, raising substantial doubt about its ability to continue as a going concern[29](index=29&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements - The Company's revenue is primarily derived from sales of drones, sensors, and software subscriptions, recognized when performance obligations are satisfied[44](index=44&type=chunk)[45](index=45&type=chunk) - Goodwill balance remained at **$7.40 million** as of March 31, 2024, and December 31, 2023, with impairment tests performed annually or sooner if circumstances indicate[56](index=56&type=chunk) - The Company operates in four segments: Drones, Sensors, Software as a Service (SaaS), and Corporate[67](index=67&type=chunk) [Note 3 – Balance Sheets](index=15&type=section&id=Note%203%20%E2%80%93%20Balance%20Sheets) Provides detailed breakdowns and explanations for specific balance sheet accounts Balance Sheet Details | Account | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Accounts receivable, net | $1,351,355 | $2,057,546 | | Inventories, net | $6,438,206 | $6,936,980 | | Property and equipment, net | $666,152 | $799,892 | | Intangible assets, net | $2,456,592 | $2,615,281 | | Accrued liabilities | $1,690,640 | $1,944,352 | - Accounts receivable, net, decreased by **$706,191** (**34.3%**) from December 31, 2023, to March 31, 2024[71](index=71&type=chunk) - Amortization expense for intangible assets was **$179,372** for Q1 2024, significantly lower than **$900,641** for Q1 2023[77](index=77&type=chunk) [Note 4 – COVID Loans](index=17&type=section&id=Note%204%20%E2%80%93%20COVID%20Loans) Details the company's assumed COVID-related loans and their repayment status - The Company assumed senseFly COVID Loans totaling **$665,225** as of March 31, 2024[81](index=81&type=chunk) - Payments on senseFly COVID Loans aggregated **$160,514** for Q1 2024, compared to **$44,598** for Q1 2023[81](index=81&type=chunk) - One COVID loan repayment period was extended from December 2023 to June 2025[81](index=81&type=chunk) [Note 5 – Promissory Note and Exchange Agreement](index=18&type=section&id=Note%205%20%E2%80%93%20Promissory%20Note%20and%20Exchange%20Agreement) Explains the terms and accounting impact of the convertible note and related agreements - On February 8, 2024, the Company exchanged a Promissory Note for a Convertible Note of **$4.85 million** due January 8, 2025, with an initial conversion price of **$2.00** per share, adjusted to **$1.25** after the reverse stock split[90](index=90&type=chunk) - The Convertible Note accrues interest at **12%** per annum, increasing to **18%** upon an Event of Default[90](index=90&type=chunk) - On March 6, 2024, the conversion price was further reduced to **$0.60** due to dilution protection, resulting in **$3.49 million** in interest expense for the incremental value[95](index=95&type=chunk) [Note 6 – Other Short-Term Loan](index=20&type=section&id=Note%206%20%E2%80%93%20Other%20Short-Term%20Loan) Describes the terms and financial impact of a future receipts agreement - On January 24, 2024, the Company entered into a Future Receipts Agreement, selling **$1.51 million** in future receipts for **$1.05 million**, receiving net proceeds of **$1.00 million**[96](index=96&type=chunk) - The Company recorded a debt discount of **$512,000**, amortizing **$164,572** as interest expense in Q1 2024[96](index=96&type=chunk)[98](index=98&type=chunk) - As of March 31, 2024, the total outstanding balance under this loan is **$1.03 million**, with an unamortized debt discount of **$347,428**[98](index=98&type=chunk) [Note 7 – Stockholders' Equity](index=21&type=section&id=Note%207%20%E2%80%93%20Stockholders%27%20Equity) Details changes in stockholders' equity, including stock-based compensation and warrant exercises - On March 6, 2024, the Company received **$497,701** from the exercise of **829,500** warrants at a reduced exercise price of **$0.60** per share[101](index=101&type=chunk) - The reduced warrant exercise price triggered anti-dilution provisions, resulting in a **$5.25 million** deemed dividend reflected in stockholders' equity and increasing net loss available to common stockholders[110](index=110&type=chunk)[112](index=112&type=chunk) - Stock-based compensation expense decreased significantly from **$512,529** in Q1 2023 to **$18,580** in Q1 2024[115](index=115&type=chunk) [Note 8 – Leases](index=25&type=section&id=Note%208%20%E2%80%93%20Leases) Provides information on the company's lease arrangements, right-of-use assets, and lease liabilities Lease Metrics | Lease Metric | March 31, 2024 | December 31, 2023 | | :---------------------------------- | :------------- | :---------------- | | Right-of-use-assets | $3,112,824 | $3,525,406 | | Current portion of lease liabilities | $873,344 | $901,925 | | Long-term portion lease liabilities | $2,336,393 | $2,721,743 | | Weighted-average remaining lease terms (in years) | 3.7 | 3.9 | | Weighted-average discount rate | 6.1% | 6.1% | - Operating lease expense payments were **$245,050** for Q1 2024, a slight decrease from **$261,480** for Q1 2023[134](index=134&type=chunk) [Note 9 – Warrants](index=26&type=section&id=Note%209%20%E2%80%93%20Warrants) Details the outstanding warrants, their exercise prices, and the impact of anti-dilution provisions - As of March 31, 2024, **3,370,301** warrants were outstanding and exercisable, with a weighted average exercise price of **$2.13** and a remaining contractual term of **4.06** years[145](index=145&type=chunk) - The reduction in warrant exercise price to **$0.60** on March 6, 2024, triggered down round provisions, leading to a deemed dividend (as detailed in Note 7)[139](index=139&type=chunk)[144](index=144&type=chunk) [Note 10 – Commitments and Contingencies](index=28&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) Discloses the company's purchase commitments and other potential liabilities - As of March 31, 2024, the Company had purchase commitments of **$2.67 million**, expected to be realized during the year ending December 31, 2024[153](index=153&type=chunk) - The Company entered into an exclusive engagement letter with Dawson James Securities, Inc. on March 6, 2024, for equity and equity-linked securities offerings, including warrants to Dawson[151](index=151&type=chunk)[152](index=152&type=chunk) [Note 11 – Segment Information](index=28&type=section&id=Note%2011%20%E2%80%93%20Segment%20Information) Presents financial data broken down by the company's operating segments and geographic regions Segment Performance | Segment (Three Months Ended March 31, 2024) | Revenues | Net Income (Loss) | | :------------------------------------------ | :--------- | :---------------- | | Drones | $1,146,612 | $(1,925,563) | | Sensors | $2,633,540 | $878,507 | | SaaS | $114,295 | $(421,039) | | Corporate | $0 | $(4,847,492) | | Total | $3,894,447 | $(6,315,587) | - Sensor segment revenues increased from **$1.97 million** in Q1 2023 to **$2.63 million** in Q1 2024, while Drone revenues decreased from **$1.97 million** to **$1.15 million**[156](index=156&type=chunk) - Europe, Middle East and Africa (EMEA) was the largest geographic revenue contributor in Q1 2024 with **$1.69 million**, followed by North America with **$1.48 million**[156](index=156&type=chunk) [Note 12 – Subsequent Events](index=30&type=section&id=Note%2012%20%E2%80%93%20Subsequent%20Events) Reports significant events that occurred after the balance sheet date - From April 1 to May 15, 2024, Alpha converted **835** shares of Series F Preferred Stock into **1,391,667** shares of Common Stock[158](index=158&type=chunk) - Effective April 15, 2024, William Irby was appointed Chief Executive Officer and Director, with an annual base salary of **$375,000** and eligibility for RSU sign-on and performance bonuses[160](index=160&type=chunk)[161](index=161&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=31&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on AgEagle's financial condition, results of operations, liquidity, and capital resources for the three months ended March 31, 2024, compared to the same period in 2023. It highlights the Company's strategic focus on defense and security markets, product innovation, and challenges related to liquidity and global economic factors [Overview](index=31&type=section&id=Overview) Provides a general introduction to AgEagle's business, strategic focus, and market position - AgEagle, through its subsidiaries, designs and delivers drones, sensors, and software, expanding from agriculture to defense, security, and commercial markets[164](index=164&type=chunk) - The Company has achieved regulatory approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (BVLOS) and/or Operations Over People (OOP) in multiple regions[165](index=165&type=chunk) - AgEagle is focused on growing its business, generating cash, and preserving its leadership position through new product development and strategic acquisitions[167](index=167&type=chunk) [Key Growth Strategies](index=31&type=section&id=Key%20Growth%20Strategies) Outlines the company's strategic initiatives for business expansion and market penetration - The Company intends to shift priority to a laser-like focus on the higher volume defense & security market while continuing to grow in precision agriculture and other civil/commercial markets[170](index=170&type=chunk) - AgEagle plans to deliver new and innovative solutions through continued investment in R&D and foster an entrepreneurial culture[170](index=170&type=chunk) - Growth through acquisition of technologically advanced companies and intellectual property is a key component of the strategy[170](index=170&type=chunk) [Competitive Strengths](index=32&type=section&id=Competitive%20Strengths) Highlights AgEagle's core advantages, including technology, manufacturing, and regulatory achievements - AgEagle possesses proprietary technologies, in-house manufacturing capabilities, and a workforce primarily composed of experienced engineers and data scientists[169](index=169&type=chunk) - The eBee X series drones were the first commercial drones to receive C2 class identification label in accordance with EASA regulations, allowing flights closer to uninvolved people[171](index=171&type=chunk) - The eBee TAC UAS is available for purchase by all U.S. military branches and government agencies, including through the Company's GSA Schedule Contract[174](index=174&type=chunk) - In March 2024, AgEagle was selected to provide **50** RedEdge-P cameras to Greece's Hellenic Republic Ministry of Rural Development for agricultural monitoring[178](index=178&type=chunk) [Impact of the Risks and Uncertainties On Our Business Operations](index=35&type=section&id=Impact%20of%20the%20Risks%20and%20Uncertainties%20On%20Our%20Business%20Operations) Discusses how global economic factors and supply chain issues affect the company's operations - Global economic challenges, including war, pandemics, rising inflation, and supply-chain disruptions, continue to impact the UAV industry and AgEagle's operations[179](index=179&type=chunk) - The Company's ability to access components, parts, and labor for manufacturing proprietary drones and sensors has been, and continues to be, impacted[179](index=179&type=chunk) [Three Months Ended March 31, 2024 as Compared to Three Months Ended March 31, 2023](index=36&type=section&id=Three%20Months%20Ended%20March%2031%2C%202024%20as%20Compared%20to%20Three%20Months%20Ended%20March%2031%2C%202023) Provides a comparative analysis of financial performance for the specified periods [Revenues](index=36&type=section&id=Revenues) Analyzes the changes in revenue streams and their underlying drivers - Revenues decreased by **$162,622** (**4.0%**) to **$3.89 million** in Q1 2024, compared to **$4.06 million** in Q1 2023[181](index=181&type=chunk) - Sensor sales increased by **$663,345**, offset by an **$819,830** decline in eBee drone product revenues and a **$6,137** decrease in SaaS subscription services[181](index=181&type=chunk) - Drone declines are attributed to customers postponing purchases until the eBee VISION release in September 2023, and longer purchase cycles for VARs and military contracts[181](index=181&type=chunk) [Cost of Sales and Gross Profit](index=36&type=section&id=Cost%20of%20Sales%20and%20Gross%20Profit) Examines the trends in cost of sales and their impact on gross profit margins - Cost of sales decreased by **$138,412** (**6.7%**) to **$1.94 million** in Q1 2024[182](index=182&type=chunk) - Gross profit decreased by **$24,210** (**1.2%**) to **$1.95 million** in Q1 2024[182](index=182&type=chunk) - The decrease in gross profit was due to declining revenues from sensor and drone products, significant price reductions to stimulate demand, and supply chain pressures on sensor sales[182](index=182&type=chunk) [Operating Expenses](index=36&type=section&id=Operating%20Expenses) Discusses the changes and drivers of the company's total operating expenses - Total operating expenses decreased by **$1.79 million** (**29.2%**) to **$4.35 million** in Q1 2024[183](index=183&type=chunk) [General and Administrative Expenses](index=36&type=section&id=General%20and%20Administrative%20Expenses) Details the factors influencing general and administrative costs - General and administrative expenses decreased by **$896,864** (**25.1%**) to **$2.68 million** in Q1 2024, primarily due to less stock compensation expense and reduced stock price, partially offset by legal fees[184](index=184&type=chunk) [Research and Development](index=36&type=section&id=Research%20and%20Development) Explains the changes in research and development expenditures - Research and development expenses decreased by **$452,114** (**28.6%**) to **$1.13 million** in Q1 2024, due to the integration of R&D teams and a reduction in consultants and internal headcounts[185](index=185&type=chunk) [Sales and Marketing](index=36&type=section&id=Sales%20and%20Marketing) Analyzes the trends and drivers of sales and marketing expenses - Sales and marketing expenses decreased by **$442,452** (**45.2%**) to **$535,423** in Q1 2024, driven by reduced travel, integration of sales and marketing teams, and decreased digital advertising spend[186](index=186&type=chunk) [Other Expense, net](index=37&type=section&id=Other%20Expense%2C%20net) Explains the significant changes in other non-operating expenses - Other expense, net, significantly increased to **$3.92 million** in Q1 2024 from **$438,391** in Q1 2023[187](index=187&type=chunk) - This increase was primarily due to **$3.79 million** in interest expense recognized from the anti-dilution price protection embedded in the convertible note, which reduced its conversion price from **$1.25** to **$0.60**[187](index=187&type=chunk) [Net Loss](index=37&type=section&id=Net%20Loss) Discusses the factors contributing to the company's net loss - Net loss increased by **$1.72 million** (**37.3%**) to **$6.32 million** in Q1 2024, compared to **$4.60 million** in Q1 2023[188](index=188&type=chunk) - The increased loss was due to reduced sales and higher other expenses related to the convertible note, partially offset by lower operating expenses[188](index=188&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) Analyzes the cash generated or used in operating, investing, and financing activities - Cash on hand increased slightly by **$3,897** (**0.5%**) to **$822,921** as of March 31, 2024, from **$819,024** as of December 31, 2023[189](index=189&type=chunk) - Net cash used in operating activities decreased by **$2.64 million** (**62.9%**) to **$1.55 million** in Q1 2024, driven by lower operating expenses, inventory purchases, and prepayments[190](index=190&type=chunk) - Net cash provided by financing activities decreased by **$1.31 million** (**44.4%**) to **$1.64 million** in Q1 2024, due to less common stock sales and warrant exercises in the prior year, partially offset by Series F Preferred stock sales[192](index=192&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet its short-term and long-term financial obligations - As of March 31, 2024, the Company had a working capital deficit of **$1.97 million** and incurred an operating loss of **$2.39 million**[193](index=193&type=chunk) - There is substantial doubt about the Company's ability to continue as a going concern, requiring additional liquidity to meet financial obligations over the next twelve months[193](index=193&type=chunk) - Management is evaluating strategies to obtain additional funding and restructure operations to grow revenues and reduce expenses[193](index=193&type=chunk) [Off-Balance Sheet Arrangements](index=38&type=section&id=Off-Balance%20Sheet%20Arrangements) Discloses any material off-balance sheet financial commitments - As of March 31, 2024, the Company did not have any material off-balance sheet arrangements, other than standard operating leases[194](index=194&type=chunk) [Inflation](index=38&type=section&id=Inflation) Discusses the impact of inflationary pressures on the company's business operations - Inflation has negatively impacted the UAV systems industry and AgEagle's business globally, affecting access to components, parts, and labor for manufacturing[195](index=195&type=chunk) - The Company expects inflation and its effects to continue to have a significant negative impact on its business[195](index=195&type=chunk) [Climate Change](index=38&type=section&id=Climate%20Change) States management's assessment of climate change's impact on the company - Management believes that neither climate change nor related governmental regulations have had, or are expected to have, any material effect on the Company's operations[196](index=196&type=chunk) [New Accounting Pronouncements](index=38&type=section&id=New%20Accounting%20Pronouncements) Summarizes recently issued accounting standards and their expected impact - ASU 2023-09 (Income Taxes) and ASU 2023-07 (Segment Reporting) are effective for public business entities for annual periods beginning after December 15, 2024, and fiscal years beginning after December 15, 2023, respectively[197](index=197&type=chunk)[198](index=198&type=chunk) - The adoption of these ASUs is expected to have a financial statement disclosure impact only and is not expected to materially impact the Company's consolidated financial statements[197](index=197&type=chunk)[198](index=198&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=38&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, AgEagle Aerial Systems Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing market risk disclosures as it qualifies as a "smaller reporting company"[199](index=199&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of AgEagle's disclosure controls and procedures, noting their ineffectiveness as of March 31, 2024, due to a material weakness identified in accounting for a complex debt transaction [Evaluation of Disclosure and Control Procedures](index=38&type=section&id=Evaluation%20of%20Disclosure%20and%20Control%20Procedures) Assesses the effectiveness of the company's disclosure controls and procedures - The Company's CEO and CFO concluded that disclosure controls and procedures were not effective as of March 31, 2024[202](index=202&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports on any changes in internal control over financial reporting during the period - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during Q1 2024[203](index=203&type=chunk) [Material Weakness over a Complex Debt Transaction](index=39&type=section&id=Material%20Weakness%20over%20a%20Complex%20Debt%20Transaction) Identifies a material weakness in internal controls related to a complex debt transaction - A material weakness was identified in internal controls related to accounting for the modification of a complex convertible debt agreement[204](index=204&type=chunk) PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) AgEagle Aerial Systems Inc. reported no legal proceedings during the period - There were no legal proceedings to report[206](index=206&type=chunk) [ITEM 1A. RISK FACTORS](index=39&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a smaller reporting company, AgEagle Aerial Systems Inc. is not required to provide specific risk factor disclosures under this item - The Company is exempt from providing risk factor information as it qualifies as a "smaller reporting company"[207](index=207&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=39&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) AgEagle Aerial Systems Inc. reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds to report[208](index=208&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=39&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) AgEagle Aerial Systems Inc. reported no defaults upon senior securities during the period - There were no defaults upon senior securities to report[209](index=209&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=39&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) Mine safety disclosures are not applicable to AgEagle Aerial Systems Inc.'s operations - Mine safety disclosures are not applicable[210](index=210&type=chunk) [ITEM 5. OTHER INFORMATION](index=39&type=section&id=ITEM%205.%20OTHER%20INFORMATION) AgEagle Aerial Systems Inc. reported no other information required under this item - There was no other information to report[211](index=211&type=chunk) [ITEM 6. EXHIBITS](index=39&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL taxonomy extensions Exhibits List | Exhibit No. | Description | | :------------ | :---------------------------------------------------------------- | | 31.1 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer | | 31.2 | Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer | | 32.1 | Section 1350 Certification of principal executive officer | | 32.2 | Section 1350 Certification of principal financial officer and principal accounting officer | | 101.INS | XBRL INSTANCE DOCUMENT | | 101.SCH | XBRL TAXONOMY EXTENSION SCHEMA | | 101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | | 101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | | 101.LAB | XBRL TAXONOMY EXTENSION LABEL LINKBASE | | 101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE | SIGNATURES This section contains the official signatures of the company's executive officers - The report was signed by William Irby, Chief Executive Officer and Director, and Mark DiSiena, Chief Financial Officer, on May 15, 2024[215](index=215&type=chunk)[216](index=216&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR | Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | | --- | --- | --- | | Common Stock, par value $0.001 per share | UAVS | NYSE American LLC | Securities registered pursuant to Section 12(g) of the Act: None. ☐ TRANSITION REPORT PURSUANT TO SECTION ...

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) [Filing Details](index=1&type=section&id=Filing%20Details) This section identifies the Form 10-Q for AgEagle Aerial Systems Inc. for the quarterly period ended September 30, 2023, noting its filer status and shares outstanding - The filing is a Quarterly Report on Form 10-Q for the period ended September 30, 2023[1](index=1&type=chunk) - AgEagle Aerial Systems Inc. is a Nevada corporation[2](index=2&type=chunk) Filer Status and Shares Outstanding | Metric | Value | | :-------------------------- | :-------------------- | | Filer Status | Non-accelerated filer, Smaller reporting company | | Common Stock Outstanding (as of Nov 13, 2023) | 117,878,831 shares | [PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This item presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with accompanying notes for the three and nine months ended September 30, 2023 and 2022 - The financial statements are condensed, consolidated, and unaudited, covering the three and nine months ended September 30, 2023 and 2022[7](index=7&type=chunk)[24](index=24&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, including assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheet Highlights | Metric | Sep 30, 2023 (unaudited) | Dec 31, 2022 | | :-------------------------- | :----------------------- | :------------------- | | Total Assets | $46,050,487 | $54,184,874 | | Total Liabilities | $12,613,331 | $10,960,399 | | Total Stockholders' Equity | $33,437,156 | $43,224,475 | | Cash | $1,600,143 | $4,349,837 | | Goodwill | $21,679,411 | $23,179,411 | - Total assets decreased by **$8.13 million**, while total liabilities increased by **$1.65 million**, leading to a **$9.79 million** decrease in total stockholders' equity from December 31, 2022, to September 30, 2023[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) This section details the company's revenues, expenses, and net income or loss for the reporting periods Statements of Operations Highlights (Three Months Ended Sep 30) | Metric | 2023 | 2022 | YoY Change | | :---------------------------------- | :----------- | :----------- | :----------- | | Revenues | $3,483,932 | $5,490,714 | -36.5% | | Gross Profit | $1,214,074 | $2,083,141 | -41.7% | | Loss from Operations | $(5,990,113) | $(5,147,330) | +16.4% (loss increase) | | Net Income (Loss) | $(8,020,128) | $1,664,952 | -581.7% (loss increase) | | Net Income (Loss) Per Common Share – Basic | $(0.07) | $0.02 | - | | Total Other Income (Expense), net | $(2,030,015) | $6,812,282 | - | | Total comprehensive income (loss), net of tax | $(8,027,897) | $1,390,430 | - | | Total comprehensive income (loss) available to common stockholders | $(8,077,019) | $1,295,736 | - | Statements of Operations Highlights (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | YoY Change | | :---------------------------------- | :------------ | :------------ | :----------- | | Revenues | $10,819,213 | $14,620,565 | -26.0% | | Gross Profit | $4,224,240 | $5,998,129 | -29.6% | | Loss from Operations | $(15,023,060) | $(18,017,851) | -16.6% (loss decrease) | | Net Income (Loss) | $(17,910,210) | $(11,533,356) | +55.3% (loss increase) | | Net Income (Loss) Per Common Share – Basic | $(0.18) | $(0.14) | - | | Total Other Income (Expense), net | $(2,887,150) | $6,484,495 | - | | Total comprehensive income (loss), net of tax | $(17,750,151) | $(11,652,929) | - | | Total comprehensive income (loss) available to common stockholders | $(22,831,322) | $(11,747,623) | - | - The shift from other income to other expense was primarily due to promissory note interest and debt extinguishment costs in 2023, contrasting with a non-cash gain on debt extinguishment in 2022[188](index=188&type=chunk)[189](index=189&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This section outlines the changes in the company's equity accounts over the reporting period Stockholders' Equity Changes (Nine Months Ended Sep 30, 2023) | Metric | Amount | | :------------------------------------------ | :------------- | | Balance as of December 31, 2022 | $43,224,475 | | Net loss | $(17,910,210) | | Sales of common stock, net of issuance costs | $3,817,400 | | Issuance of Preferred Stock, Series F Convertible, net of issuance cost | $3,000,000 | | Deemed dividend on Series F Preferred Stock and warrant | $(4,910,894) | | Stock-based compensation expense | $1,125,209 | | Balance as of September 30, 2023 | $33,437,156 | - Total stockholders' equity decreased by **$9.79 million** from December 31, 2022, to September 30, 2023, primarily due to the net loss and deemed dividends, partially offset by equity issuances[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section reports the cash inflows and outflows from operating, investing, and financing activities Cash Flow Highlights (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | YoY Change | | :---------------------------------- | :----------- | :----------- | :----------- | | Net cash used in operating activities | $(8,829,669) | $(15,168,736) | -41.8% | | Net cash used in investing activities | $(564,116) | $(8,062,741) | -93.0% | | Net cash provided by financing activities | $6,730,348 | $14,404,378 | -53.2% | | Net decrease in cash | $(2,749,694) | $(9,288,079) | -70.4% | | Cash at end of period | $1,600,143 | $5,302,487 | -69.8% | - The decrease in cash used in operating activities was driven by lower sales and operating expenses, including reduced inventory purchases and changes in working capital[193](index=193&type=chunk) - A significant non-cash financing activity was the **$4,910,894** deemed dividend on Series F Preferred stock and warrants[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 – Description of the Business and Basis of Presentation](index=14&type=section&id=Note%201%20%E2%80%93%20Description%20of%20the%20Business%20and%20Basis%20of%20Presentation) This note describes AgEagle's business, its drone, sensor, and software offerings, and the basis of financial statement presentation - AgEagle designs and delivers drones, sensors, and software for industries including energy/utilities, infrastructure, agriculture, and government[20](index=20&type=chunk) - The company expanded its offerings from fixed-wing farm drones to a full-stack drone solution provider through acquisitions of MicaSense, Measure, and senseFly in 2021[22](index=22&type=chunk)[23](index=23&type=chunk) - AgEagle has achieved regulatory approvals for Beyond Visual Line of Sight (BVLOS) and Operations Over People (OOP) in the US, Canada, Brazil, and the EU[21](index=21&type=chunk) - The company incurred a net loss of **$17,910,210** and used **$8,829,669** in operating cash for the nine months ended September 30, 2023, leading to substantial doubt about its ability to continue as a going concern without additional funding[28](index=28&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=15&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note details the key accounting principles and policies applied in preparing the financial statements - Global economic challenges, including war, pandemics, rising inflation, and supply-chain disruptions, continue to impact the UAV industry and the Company's operational and financial performance, particularly access to components and parts[31](index=31&type=chunk) - Revenue is primarily recognized from sales of drones, sensors, and accessories upon transfer of control, and from software subscriptions (HempOverview and Ground Control) recognized equally over the membership period[37](index=37&type=chunk)[39](index=39&type=chunk) - A goodwill impairment charge of **$1,500,000** was recognized for the SaaS reporting unit in the third quarter of 2023, due to its carrying value exceeding its estimated fair value[47](index=47&type=chunk) Goodwill Allocation (Post-Impairment) as of Sep 30, 2023 | Reporting Unit | Goodwill Balance | | :------------- | :--------------- | | Sensors | $19,000,000 | | SaaS | $2,700,000 | - The Company operates in four segments: Drones, Sensors, SaaS, and Corporate[61](index=61&type=chunk) [Note 3 – Balance Sheets](index=21&type=section&id=Note%203%20%E2%80%93%20Balance%20Sheets) This note provides detailed breakdowns of specific balance sheet accounts Accounts Receivable, Net | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Accounts receivable | $2,110,725 | $2,229,840 | | Less: Provision for doubtful accounts | $(95,680) | $(16,800) | | Accounts receivable, net | $2,015,045 | $2,213,040 | Inventories, Net | Metric | Sep 30, 2023 | Dec 31, 2022 | | :---------------------------------- | :----------- | :----------- | | Gross inventories | $6,462,071 | $7,008,662 | | Less: Provision for excess and obsolescence reserve | $(398,136) | $(322,815) | | Inventories, net | $6,063,935 | $6,685,847 | Intangible Assets, Net (excluding goodwill) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Intangible assets, net | $9,242,659 | $11,507,653 | Accrued Liabilities | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------- | :----------- | :----------- | | Total accrued liabilities | $1,650,609 | $1,680,706 | | Accrued interest | $236,172 | $0 | | Accrued dividends | $342,873 | $172,596 | [Note 4 – Notes Receivable](index=24&type=section&id=Note%204%20%E2%80%93%20Notes%20Receivable) This note discusses the company's outstanding notes receivable, including a convertible promissory note with Valqari - The Company has an outstanding convertible promissory note with Valqari, originally for **$500,000**, which matured in April 2021, with a partial payment of **$315,000** made in November 2021[69](index=69&type=chunk)[72](index=72&type=chunk) - Valqari alleges breaches by AgEagle, which AgEagle disputes, and the parties are negotiating a resolution, with AgEagle reserving the right to take legal action[72](index=72&type=chunk) [Note 5 – COVID Loans](index=25&type=section&id=Note%205%20%E2%80%93%20COVID%20Loans) This note details the COVID loans assumed from senseFly S.A. and their repayment schedule - AgEagle assumed two COVID Loans from senseFly S.A., with outstanding obligations of **$815,906** as of September 30, 2023[73](index=73&type=chunk) - One COVID loan's repayment period was extended from December 2023 to June 2025[73](index=73&type=chunk) Scheduled Principal Payments for COVID Loans | Year ending December 31, | Amount | | :----------------------- | :------- | | 2023 (rest of year) | $58,487 | | 2024 | $306,722 | | 2025 | $180,064 | | 2026 | $90,213 | | 2027 | $180,420 | | Total | $815,906 | [Note 6 – Promissory Note and Warrant](index=25&type=section&id=Note%206%20%E2%80%93%20Promissory%20Note%20and%20Warrant) This note describes the promissory note and common stock purchase warrant issued, including subsequent amendments and exchanges - In December 2022, the Company issued an 8% original issue discount promissory note for **$3,500,000** and a common stock purchase warrant for up to **5,000,000** shares[75](index=75&type=chunk) - An August 2023 amendment increased the note's principal by **$595,000** to **$4,095,000** due to missed monthly amortization payments, resulting in a **$1,523,867** loss on debt extinguishment[78](index=78&type=chunk)[79](index=79&type=chunk) - A September 2023 Warrant Exchange Agreement led to the issuance of **5,000,000** shares of common stock in exchange for the original warrant, with an incremental value modification of **$190,500**[80](index=80&type=chunk) Scheduled Principal Payments for Second Amended Note (as of Sep 30, 2023) | Year ending December 31, | Amount | | :----------------------- | :----------- | | 2023 (rest of year) | $525,000 | | 2024 | $3,570,000 | | Total | $4,095,000 | [Note 7 – Stockholders' Equity](index=27&type=section&id=Note%207%20%E2%80%93%20Stockholders%27%20Equity) This note provides details on changes in common stock, preferred stock, warrants, and stock-based compensation - In June 2023, the Company issued **16,720,000** shares of Common Stock and warrants to purchase **25,080,000** shares, raising **$3,817,400** net of issuance costs[85](index=85&type=chunk) - The Series F Convertible Preferred Stock and associated warrants experienced multiple 'down round' anti-dilution triggers in December 2022, March 2023, and June 2023, reducing their conversion/exercise prices[96](index=96&type=chunk)[99](index=99&type=chunk)[101](index=101&type=chunk) - Total deemed dividends on Series F Preferred Stock and warrants for the nine months ended September 30, 2023, amounted to **$4,910,894** due to these down round triggers[103](index=103&type=chunk) Stock-based Compensation Expense (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | | :-------------------------- | :----------- | :----------- | | Stock-based compensation expense | $1,125,209 | $3,058,741 | Restricted Stock Unit (RSU) Activity (Nine Months Ended Sep 30, 2023) | Metric | Shares | | :-------------------------------- | :------- | | Outstanding as of Dec 31, 2022 | 1,028,960 | | Granted | 2,000,645 | | Vested and released | (387,456) | | Unvested as of Sep 30, 2023 | 419,722 | Stock Option Activity (Nine Months Ended Sep 30, 2023) | Metric | Shares | | :-------------------------------- | :------- | | Outstanding as of Dec 31, 2022 | 2,561,231 | | Granted | 325,000 | | Expired/Forfeited | (108,499) | | Outstanding as of Sep 30, 2023 | 2,777,732 | [Note 8 – Leases](index=34&type=section&id=Note%208%20%E2%80%93%20Leases) This note outlines the company's lease obligations and related expenses - A lease impairment charge of **$79,287** was recognized in Q3 2023 due to a sublease agreement for the Seattle facility, where anticipated sublease income is less than the primary lease obligations[130](index=130&type=chunk) Operating Lease Expense (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | | :-------------------------- | :----------- | :----------- | | Operating lease expense payments | $791,558 | $1,254,893 | Operating Lease Liabilities (as of Sep 30, 2023) | Metric | Amount | | :------------------------------------------ | :----------- | | Right of use assets | $3,498,051 | | Total future minimum lease payments, undiscounted | $4,112,273 | [Note 9 – Warrants](index=36&type=section&id=Note%209%20%E2%80%93%20Warrants) This note provides information on outstanding warrants, their exercise prices, and contractual terms Warrant Activity (as of Sep 30, 2023) | Metric | Value | | :-------------------------------- | :----------- | | Warrants Outstanding | 48,351,747 shares | | Weighted Average Exercise Price | $0.32 | | Weighted Average Remaining Contractual Term | 3.81 years | - Multiple 'down round' trigger events in December 2022, March 2023, and June 2023 reduced the exercise prices of previously issued warrants[137](index=137&type=chunk) [Note 10 – Commitments and Contingencies](index=37&type=section&id=Note%2010%20%E2%80%93%20Commitments%20and%20Contingencies) This note details the company's purchase commitments and legal contingencies, including an SEC cease and desist order - As of September 30, 2023, the Company had purchase commitments of **$2,126,081** expected to be realized during the remainder of 2023[141](index=141&type=chunk) - The SEC issued a cease and desist order against AgEagle and its former CFO for failing to timely report Section 16(a) information[142](index=142&type=chunk) - AgEagle agreed to pay **$190,000** in civil penalties, and its former CFO personally paid **$125,000**[143](index=143&type=chunk) [Note 11 – Segment Information](index=37&type=section&id=Note%2011%20%E2%80%93%20Segment%20Information) This note presents financial data broken down by the company's operating segments and geographic areas Goodwill and Assets by Segment (as of Sep 30, 2023) | Segment | Goodwill | Assets | | :-------- | :--------- | :--------- | | Sensors | $18,972,896 | $25,495,556 | | SaaS | $2,706,515 | $5,510,659 | | Corporate | $0 | $2,660,979 | | Drones | $0 | $12,383,293 | Revenues by Segment (Three Months Ended Sep 30) | Segment | 2023 Revenue | 2022 Revenue | YoY Change | | :------ | :----------- | :----------- | :--------- | | Drones | $1,627,177 | $2,081,410 | -21.9% | | Sensors | $1,755,712 | $3,256,797 | -46.1% | | SaaS | $101,043 | $152,507 | -33.8% | | Total | $3,483,932 | $5,490,714 | -36.5% | Revenues by Segment (Nine Months Ended Sep 30) | Segment | 2023 Revenue | 2022 Revenue | YoY Change | | :------ | :----------- | :----------- | :--------- | | Drones | $4,861,260 | $7,856,573 | -38.1% | | Sensors | $5,610,764 | $6,283,907 | -10.7% | | SaaS | $347,189 | $480,085 | -27.7% | | Total | $10,819,213 | $14,620,565 | -26.0% | Revenues by Geographic Area (Three Months Ended Sep 30, 2023) | Region | Revenue | | :-------------------------- | :---------- | | Europe, Middle East and Africa | $1,382,012 | | North America | $1,174,629 | | Latin America | $502,301 | | Asia Pacific | $415,406 | [Note 12 – Subsequent Events](index=39&type=section&id=Note%2012%20%E2%80%93%20Subsequent%20Events) This note reports significant events that occurred after the balance sheet date - A Second Note Amendment Agreement was executed on October 5, 2023, further deferring amortization payments on the promissory note and linking prepayment to equity financing[148](index=148&type=chunk) - A Special Meeting of Stockholders is scheduled for November 14, 2023, to vote on a reverse stock split (1-for-10 to 1-for-20) to maintain NYSE American listing, and to increase shares authorized under the 2017 Omnibus Equity Incentive Plan from **10 million** to **15 million**[149](index=149&type=chunk)[151](index=151&type=chunk) - Ms. Nicole Fernandez-McGovern resigned as Chief Financial Officer effective October 13, 2023, and Mr. Mark DiSiena was appointed Interim Chief Financial Officer[153](index=153&type=chunk)[154](index=154&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=41&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses AgEagle's financial performance, strategic direction, and operational highlights, addressing market challenges - AgEagle's core business involves designing and delivering best-in-class drones, sensors, and software solutions[160](index=160&type=chunk) - Key growth strategies include leveraging proprietary full-stack drone solutions, capturing larger market share in agriculture, energy/utilities, infrastructure, and government/military verticals, and growth through strategic acquisitions[163](index=163&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) - Competitive strengths include proprietary technologies, in-house manufacturing, ISO:9001 international certification, customer-centric innovation, and a global reseller network of over 200 partners in 75+ countries[166](index=166&type=chunk)[172](index=172&type=chunk) - Recent product innovations include the eBee™ VISION for intelligence/surveillance/reconnaissance, the RedEdge-P™ dual sensor for vegetation analysis, and Field Check for Measure Ground Control mobile app for on-site imagery validation[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - The company was awarded a five-year GSA Multiple Award Schedule (MAS) Contract in April 2023 and achieved C2 and C6 class identification labels for its eBee X series drones under EASA/EU regulations, enhancing operational capabilities[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Global economic challenges, inflation, and supply-chain disruptions continue to negatively impact the company's ability to access components and manufacture products, with these effects expected to persist[173](index=173&type=chunk)[199](index=199&type=chunk) [Three and Nine Months Ended September 30, 2023 as Compared to Three and Nine Months Ended September 30, 2022](index=45&type=section&id=Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202023%20as%20Compared%20to%20Three%20and%20Nine%20Months%20Ended%20September%2030%2C%202022) This section compares the company's financial results for the three and nine months ended September 30, 2023, against the same periods in 2022 Revenue Performance (Q3 and 9M Ended Sep 30) | Metric | Q3 2023 | Q3 2022 | Q3 YoY Change | 9M 2023 | 9M 2022 | 9M YoY Change | | :-------------------------- | :----------- | :----------- | :------------ | :------------ | :------------ | :------------ | | Total Revenues | $3,483,932 | $5,490,714 | -36.5% | $10,819,213 | $14,620,565 | -26.0% | | Decline from Sensors | $1,501,085 | - | - | $673,143 | - | - | | Decline from Drones | $454,233 | - | - | $2,995,313 | - | - | | Decline from SaaS | $51,464 | - | - | $132,896 | - | - | Gross Profit Performance (Q3 and 9M Ended Sep 30) | Metric | Q3 2023 | Q3 2022 | Q3 YoY Change | 9M 2023 | 9M 2022 | 9M YoY Change | | :-------------------------- | :----------- | :----------- | :------------ | :------------ | :------------ | :------------ | | Gross Profit | $1,214,074 | $2,083,141 | -41.7% | $4,224,240 | $5,998,129 | -29.6% | | Gross Margin | 34.8% | 37.9% | -3.1 pp | 39.0% | 41.0% | -2.0 pp | - Gross profit decline was attributed to reduced sensor and drone revenues, significant price reductions for eBee products to compete with Chinese manufacturers, and increased raw component and labor costs for sensors[176](index=176&type=chunk)[177](index=177&type=chunk) Operating Expenses (Q3 and 9M Ended Sep 30) | Metric | Q3 2023 | Q3 2022 | Q3 YoY Change | 9M 2023 | 9M 2022 | 9M YoY Change | | :-------------------------- | :----------- | :----------- | :------------ | :------------ | :------------ | :------------ | | Total Operating Expenses | $7,204,187 | $7,230,471 | -0.4% | $19,247,300 | $24,015,980 | -19.9% | | General and administrative | $3,357,550 | $4,175,090 | -19.6% | $10,435,834 | $14,093,655 | -26.0% | | Research and development | $1,368,394 | $1,818,540 | -24.8% | $4,320,216 | $6,185,777 | -30.2% | | Sales and marketing | $978,243 | $1,236,841 | -20.9% | $2,911,963 | $3,736,548 | -22.1% | | Impairment | $1,500,000 | $0 | - | $1,579,287 | $0 | - | - Operating expenses decreased primarily due to integration efficiencies from 2021 acquisitions, leading to reductions in professional fees, payroll, and consulting costs[181](index=181&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk) - Other income (expense), net, shifted from a **$6.81 million** income in Q3 2022 to a **$2.03 million** expense in Q3 2023, largely due to a **$1.52 million** debt extinguishment loss and foreign currency transaction losses in 2023, compared to a non-cash gain on debt extinguishment in 2022[188](index=188&type=chunk)[189](index=189&type=chunk) Net Income (Loss) (Q3 and 9M Ended Sep 30) | Metric | Q3 2023 | Q3 2022 | Q3 YoY Change | 9M 2023 | 9M 2022 | 9M YoY Change | | :-------------------------- | :----------- | :----------- | :------------ | :------------ | :------------ | :------------ | | Net Income (Loss) | $(8,020,128) | $1,664,952 | +581.7% (loss increase) | $(17,910,210) | $(11,533,356) | +55.3% (loss increase) | [Cash Flows](index=47&type=section&id=Cash%20Flows) This section analyzes the changes in cash flows from operating, investing, and financing activities Cash Flow Summary (Nine Months Ended Sep 30) | Metric | 2023 | 2022 | YoY Change | | :---------------------------------- | :----------- | :----------- | :----------- | | Net cash used in operating activities | $(8,829,669) | $(15,168,736) | -41.8% | | Net cash used in investing activities | $(564,116) | $(8,062,741) | -93.0% | | Net cash provided by financing activities | $6,730,348 | $14,404,378 | -53.2% | - The decrease in cash used in investing activities was mainly due to lower acquisition-related liabilities and reduced capitalized platform and internal use software costs[194](index=194&type=chunk) - The decrease in cash provided by financing activities was due to less sales of common stock through an at-the-market offering and warrant exercises in the prior year, partially offset by Series F Preferred stock issuance[195](index=195&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations Liquidity Metrics (as of Sep 30, 2023) | Metric | Amount | | :-------------------------- | :----------- | | Working Capital | $2,818,220 | | Loss from Operations (9M 2023) | $15,023,060 | - The company faces substantial doubt about its ability to continue as a going concern and is evaluating strategies to obtain additional funding and restructure operations to grow revenues and reduce expenses[196](index=196&type=chunk) - During the nine months ended September 30, 2023, the company raised **$6,817,400** in equity from the additional sale of Series F Preferred Stock and Common Stock[197](index=197&type=chunk) [Off-Balance Sheet Arrangements](index=48&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses any material off-balance sheet arrangements - As of September 30, 2023, the company had no material off-balance sheet arrangements other than standard operating leases[198](index=198&type=chunk) [Inflation](index=48&type=section&id=Inflation) This section discusses the impact of inflation on the company's business - Inflation negatively impacted the UAV industry and the company's business during the nine months ended September 30, 2023, affecting access to components, parts, and labor, and causing supply chain disruptions, with these negative impacts expected to continue[199](index=199&type=chunk) [Climate Change](index=48&type=section&id=Climate%20Change) This section states management's assessment of climate change's impact on operations - Management believes climate change and related governmental regulations have not had, nor are expected to have, any material effect on the company's operations[200](index=200&type=chunk) [New Accounting Pronouncements](index=48&type=section&id=New%20Accounting%20Pronouncements) This section addresses the expected impact of recently issued accounting pronouncements - Recently issued FASB accounting pronouncements are not expected to have a material impact on the company's consolidated financial position, results of operations, or cash flows[201](index=201&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=48&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, AgEagle is exempt from providing detailed quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it is a 'smaller reporting company'[202](index=202&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=48&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's Chief Executive Officer and Interim Chief Financial Officer concluded that AgEagle's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting - The CEO and Interim CFO evaluated and concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[203](index=203&type=chunk) - There were no material changes in internal control over financial reporting during the nine months ended September 30, 2023[204](index=204&type=chunk) [PART II – OTHER INFORMATION](index=50&type=section&id=PART%20II%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=50&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This item refers to Note 10 – Commitments and Contingencies for a discussion of current legal proceedings - Current legal proceedings are discussed in Note 10 – Commitments and Contingencies[207](index=207&type=chunk) [ITEM 1A. RISK FACTORS](index=50&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a smaller reporting company, AgEagle is not required to provide risk factor information under this item - The company is not required to provide risk factor information as it is a 'smaller reporting company'[208](index=208&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=50&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%2C%20USE%20OF%20PROCEEDS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company reported no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities for the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities were reported[209](index=209&type=chunk) [ITEM 3. DEFAULT UPON SENIOR SECURITIES](index=50&type=section&id=ITEM%203.%20DEFAULT%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities for the period - No defaults upon senior securities were reported[210](index=210&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=50&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Mine safety disclosures are not applicable to the company[211](index=211&type=chunk) [ITEM 5. OTHER INFORMATION](index=50&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reported no other information for the period - No other information was reported[212](index=212&type=chunk) [ITEM 6. EXHIBITS](index=50&type=section&id=ITEM%206.%20EXHIBITS) This item lists the exhibits filed with the Form 10-Q, including various certifications and XBRL documents - Exhibits include Rule 13(a)-14(a)/15(d)-14(a) Certifications, Section 1350 Certifications, and Inline XBRL documents[213](index=213&type=chunk) [SIGNATURES](index=51&type=section&id=SIGNATURES) [Report Signatories](index=51&type=section&id=Report%20Signatories) The report was signed by Barrett Mooney, Chief Executive Officer, and Mark DiSiena, Interim Chief Financial Officer, on November 13, 2023 - The report was signed by Barrett Mooney, Chief Executive Officer, and Mark DiSiena, Interim Chief Financial Officer[216](index=216&type=chunk)[217](index=217&type=chunk) - The signing date for the report was November 13, 2023[216](index=216&type=chunk)[217](index=217&type=chunk)

AgEagle Aerial Systems, Inc. (NYSE:UAVS) Q2 2023 Earnings Conference Call August 15, 2023 4:30 PM ET Company Participants Barrett Mooney - CEO Nicole Fernandez-McGovern - EVP, Operations & CFO Conference Call Participants Operator Good afternoon, everyone, and welcome to AgEagle Aerial Systems 2023 Second Quarter Results Webcast. Presenting on today's webcast are AgEagle's Chairman and CEO, Barrett Mooney; and Nicole Fernandez-McGovern, the company's Chief Financial Officer and Executive Vice President of O ...

Company Growth and Acquisitions - AgEagle achieved significant growth by acquiring three market-leading companies in 2021, enhancing its capabilities in UAS airframes, sensors, and software for commercial and government use[162] - The company has successfully integrated its acquisitions, forming a unified global entity focused on advancing autonomous flight performance[162] - AgEagle's global reseller network includes over 200 providers in 75+ countries, enhancing brand reach and revenue growth opportunities[174] Product Development and Technological Advancements - The launch of the RedEdge-P™ dual sensor in May 2023 represents a technological advancement, doubling analytical capabilities with a single camera workflow[170] - AgEagle's eBee™ VISION drones were delivered to three branches of European military forces in 2023, showcasing the company's commitment to enhancing situational awareness for critical missions[169] - AgEagle's eBee TAC UAS is positioned as a mission-critical tool for the U.S. military, expected to drive significant growth in 2023[174] - The company has achieved regulatory approvals for its drones to operate Beyond Visual Line of Sight (BVLOS) and Operations Over People (OOP) in multiple regions, including the U.S. and EU[163] - AgEagle's commitment to research and development is aimed at delivering innovative autonomous robotics systems, addressing market needs beyond current target markets[168] Financial Performance - For the three months ended June 30, 2023, revenues decreased to $3,278,212, down 38.0% from $5,287,873 in the same period of 2022, primarily due to declines in eBee drone products and SaaS subscription services[175] - For the six months ended June 30, 2023, revenues were $7,335,281, a decrease of 19.7% compared to $9,129,851 for the same period in 2022, with significant declines in eBee drone products offset by an increase in sensor sales[176] - Gross profit for the three months ended June 30, 2023, was $1,031,534, representing a gross margin of 31%, down from 48% in the same period of 2022, due to revenue declines and price reductions[177] - Operating expenses for the three months ended June 30, 2023, were $5,903,372, a decrease of 25.6% from $7,938,675 in the same period of 2022, driven by integration of business acquisitions[179] - The net loss for the three months ended June 30, 2023, was $5,290,583, a slight improvement of 5.6% compared to a net loss of $5,601,736 in the same period of 2022[190] - Cash used in operations for the six months ended June 30, 2023, was $6,783,320, a decrease of 41.3% from $11,628,089 in the same period of 2022, primarily due to lower sales and operating expenses[193] - Cash provided by financing activities for the six months ended June 30, 2023, was $6,776,473, a decrease of 53.2% compared to $14,564,841 in the same period of 2022, due to reduced sales of common stock[195] - As of June 30, 2023, the company had working capital of $7,537,254 and incurred a loss from operations of $9,032,946, a decrease of 29.8% from the previous year[196] - The company raised $6,817,400 in equity during the six months ended June 30, 2023, from the sale of Series F Preferred Stock and common stock offerings[197] Operational Challenges - The company continues to face challenges from inflation impacting supply chain and manufacturing processes, which may further disrupt operations[200]

AgEagle Aerial Systems, Inc. (NYSE:UAVS) Q1 2023 Earnings Conference Call May 16, 2023 4:30 PM ET Company Participants Barrett Mooney - Chief Executive Officer Conference Call Participants Operator Good day everyone, and thank you for logging into AgEagle's Corporate Update Webcast. Joining us from AgEagle is Chief Executive Officer and Chairman of the Board, Barrett Mooney. Before I turn it over to Barrett, I would like to remind you that during today's call, including the question-and-answer session, stat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OR (Mark One) (State or other jurisdiction of incorporation or organization) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to ________ Form 10-Q Commission file number: 001-36492 AGEAGLE AERIAL SYSTEMS INC. (Exact name o ...

Financial Data and Key Metrics Changes - Total revenues for 2022 reached a record $19.1 million, up 96% from $9.8 million in the previous year [19] - Total sensor sales increased by 27% to $8.7 million compared to $6.8 million in the prior year [12] - Revenues from software subscriptions rose by 11% to nearly $600,000, compared to approximately $538,000 in the prior year [13] - The net loss for 2022 was $58.3 million, compared to $30.1 million for 2021, impacted by higher operating costs due to acquisitions [48] Business Line Data and Key Metrics Changes - Revenue from eBee fixed-wing drones was $9.8 million in 2022, significantly up from $2.4 million in 2021 [20] - The sensor segment was the strongest performer in 2022, with significant demand growth noted in the third and fourth quarters [30] - The company is actively expanding its government sales team to pursue military and government opportunities, particularly with the eBee VISION drone [5][6] Market Data and Key Metrics Changes - The company is focusing on the global defense markets, leveraging existing products to serve military customers [6] - There is a growing interest in the eBee VISION drone among military forces in the US and globally, indicating potential for future sales growth [28] Company Strategy and Development Direction - The company aims to unify its operations and provide a full stack solution of drones, sensors, and software, which is expected to enhance cost structure and profitability [22] - The strategy includes expanding the reseller network to increase geographical coverage and sales consistency [52] - The company is evaluating M&A opportunities to enhance its offerings while maintaining strict financial discipline [65][66] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving stronger financial growth in 2023, emphasizing a well-defined growth plan [51][38] - The company acknowledges macroeconomic challenges but believes that autonomous solutions will drive efficiency and reduce labor costs for organizations [37] - Management is optimistic about the potential for improved profitability and cash flow in the coming quarters [71][78] Other Important Information - The company raised $3 million through a private placement of Series F convertible preferred shares [21] - The company has successfully relocated operations to reduce costs and support profitability efforts [35] Q&A Session Summary Question: Is a reverse stock split being considered? - Management indicated that a reverse stock split is not currently being pursued, but it may be considered in the future if it aligns with strategic goals [40][69] Question: What are the intentions regarding the drone delivery market? - The company is focusing on regulatory and safety advancements to enable drone delivery but is currently seeking appropriate partners for this market [76][77] Question: What are the capital allocation priorities for 2023? - Management highlighted the focus on M&A opportunities and emphasized the importance of maintaining a disciplined approach to capital allocation [79]