AgEagle(UAVS) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements AgEagle Aerial Systems Inc. presents unaudited condensed consolidated financial statements for Q3 2022, highlighting acquisition-driven revenue growth, a Q3 net income from debt extinguishment, and ongoing liquidity challenges Condensed Consolidated Balance Sheets As of September 30, 2022, total assets decreased to $95.3 million from $104.7 million, total liabilities decreased to $7.1 million from $28.1 million, and stockholders' equity increased to $88.3 million from $76.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2022 (unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $5,302 | $14,591 | | Total current assets | $15,993 | $22,996 | | Goodwill | $64,867 | $64,867 | | Total assets | $95,344 | $104,683 | | Liabilities & Equity | | | | Total current liabilities | $5,772 | $17,149 | | Total liabilities | $7,066 | $28,106 | | Total stockholders' equity | $88,278 | $76,577 | | Total liabilities and stockholders' equity | $95,344 | $104,683 | Condensed Consolidated Statements of Operations Q3 2022 saw a net income of $1.7 million (vs. $3.8 million net loss in Q3 2021) driven by a $6.5 million debt extinguishment gain, with revenues growing 172% to $5.5 million Statement of Operations Highlights (in thousands) | Metric | Q3 2022 | Q3 2021 | YoY Change | Nine Months 2022 | Nine Months 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $5,491 | $2,022 | +172% | $14,621 | $5,661 | +158% | | Gross Profit | $2,083 | $795 | +162% | $5,998 | $2,776 | +116% | | Loss from Operations | ($5,147) | ($3,800) | +35% | ($18,018) | ($11,581) | +56% | | Net Income (Loss) | $1,665 | ($3,771) | N/A | ($11,533) | ($11,380) | +1% | | EPS (Basic) | $0.02 | ($0.05) | N/A | ($0.14) | ($0.17) | N/A | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $88.3 million by September 30, 2022, from $76.6 million at year-end 2021, driven by $9.9 million from Series F Preferred Stock and $4.6 million from common stock sales, partially offset by a $11.5 million net loss - Key changes in stockholders' equity for the nine months ended September 30, 2022, include $9.9 million from Series F Preferred Stock issuance, $4.6 million from Common Stock sales, and $2.8 million from Measure acquisition contingent liability settlement, offset by a $11.5 million net loss[15] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, cash decreased by $9.3 million, with $15.3 million used in operations and $8.1 million in investing, partially offset by $14.6 million provided by financing activities Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($15,342) | ($6,678) | | Net cash used in investing activities | ($8,063) | ($30,642) | | Net cash provided by financing activities | $14,578 | $45,601 | | Net (decrease) increase in cash | ($9,288) | $8,281 | Notes to Condensed Consolidated Financial Statements The notes provide critical context to the financial statements, detailing business, accounting policies, and financial items, including a going concern warning, acquisition liability settlements, segment data, and equity financing - The company designs and delivers autonomous unmanned aerial systems, sensors, and software for industries including energy, infrastructure, agriculture, and government[22] - Due to sustained operating losses and the need for additional liquidity, management has concluded there is substantial doubt about the Company's ability to continue as a going concern[24] - In Q3 2022, the company settled outstanding holdback liabilities from MicaSense, senseFly, and Measure acquisitions, resulting in a $6.5 million debt extinguishment gain[86][87][90] - In June 2022, the company issued 10,000 shares of Series F Convertible Preferred Stock for gross proceeds of $10 million[97] Management's Discussion and Analysis (MD&A) Management discusses Q3 2022 financial performance, attributing 172% revenue growth to acquisitions and sensor demand, while addressing increased operating expenses, growth strategies, and significant liquidity challenges with a going concern warning - The company's growth strategy focuses on leveraging its three centers of excellence (software, sensors, airframes), delivering new solutions, and pursuing complementary acquisitions[148] - Q3 2022 revenue increased 172% to $5.5 million, driven by sales of eBee drone products from the senseFly acquisition and a 71% increase in sensor sales[152] - Q3 2022 net income of $1.7 million was primarily due to a non-cash gain on debt extinguishment of $6.5 million related to acquisition holdback settlements[166][168] - The company acknowledges substantial doubt about its ability to continue as a going concern due to its net losses and working capital needs, and is evaluating strategies to raise additional capital[178] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, AgEagle is exempt from providing quantitative and qualitative disclosures about market risk - The company is a "smaller reporting company" and is not required to provide information regarding market risk[183] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[184] - No changes in internal control over financial reporting occurred during the third quarter of 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[186] PART II - OTHER INFORMATION Legal Proceedings The company reported no legal proceedings during the period - There are no legal proceedings to report[187] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities to report[189] Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities to report[190] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - Exhibits filed include certifications by the principal executive officer and principal financial officer, as well as XBRL instance documents[194] Signatures