UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number: 001-36492
AGEAGLE AERIAL SYSTEMS INC.
(Exact name of registrant as specified in its charter)
Registrant’s telephone number, including area code: (620) 325-6363
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of May 15, 2025, there were 13,925,727 shares of Common Stock, par value $0.001per share, issued and outstanding.
TABLE OF CONTENTS
PART I – FINANCIAL INFORMATION
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2025
(unaudited)
See accompanying notes to these condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended
March 31,
2025
2024
(restated)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
(UNAUDITED)
Par
$0.001 Preferred Stock, Series F Convertible Shares
$0.001
Common Stock
See accompanying notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Description of the Business and Basis of Presentation
Description of Business –AgEagle™ Aerial Systems Inc. and its wholly-owned subsidiaries (“AgEagle” or the “Company”, “we”, “our”), is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for its customers in a wide range of industry verticals, including energy/utilities, infrastructure, agriculture and government.
Founded in 2010, AgEagle was originally formed to pioneer proprietary, professional-grade, fixed-winged drones and aerial imagery-based data collection and analytics solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced unmanned aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include agriculture, military/defense, public safety, surveying/mapping and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (“BVLOS”) and/or Operations Over People in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of Defense.
The Company is currently headquartered in Wichita, Kansas, where we house our sensor manufacturing operations, and we operate drone distribution and coordinate global customer service operations out of Raleigh, North Carolina. In addition, the Company operates engineering and drone manufacturing operations in Lausanne, Switzerland in support of our international business activities.
Reverse Stock Splits - On February 8, 2024, the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended to date, effecting a 1-for-20 reverse stock split (the “February Reverse Stock Split”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Reverse Split Amendment”). The Reverse Split Amendment was approved by the Board of the Directors of the Company (the “Board”) and became effective on February 9, 2024. On October 3, 2024, the Board approved another reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock, par value $0.001 per share, at aratio of one (1) share of common stock for every fifty (50) shares of Common Stock (the “October Reverse Stock Split”). The Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effectuate the October Reverse Stock Split. The October Reverse Stock Split was effective on October 14, 2024. All share and per share amounts have been retrospectively adjusted for the effect of the February and October Reverse Stock Splits.
Basis of Presentation – The condensed consolidated financial statements of the Company are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair statement of the Company’s consolidated financial position and results of operations for the periods presented. Certain information and disclosures included in the annual consolidated financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 31, 2025. The results for the three months ended March 31, 2025 and 2024 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or periods.
The condensed consolidated financial statements include the accounts of AgEagle and its wholly-owned subsidiaries, AgEagle Aerial, Inc., Measure Global, Inc, currently inactive with no operations, and senseFly. All significant intercompany balances and transactions have been eliminated in consolidation.
Note 1 – Description of the Business and Basis of Presentation-Continued
Liquidity and Going Concern – In pursuit of the Company’s long-term growth strategy and acquisitions, the Company has sustained continued operating losses. During the three months ended March 31, 2025, the Company had net income of $7,060,039due to non-cash warrant valuation gain of $7,780,000 and used cash in operating activities of $1,294,556. As of March 31, 2025, the Company has a working capital of $5,383,426and an accumulated deficit of $212,377,511. While the Company has historically been successful in raising capital to meet its working capital needs and executed a funding agreement on February 7, 2025 with Alpha Capital Anstalt (“Alpha”), pursuant to the Funding Agreement, among other things, Alpha agreed to provide quarterly financing for the Company for the next twelve months pursuant to their Additional Investment Rights (AIR), with such amounts and timing of funding to be agreed to by the parties (see Note 7). However, the amount of funding to be provided may not be sufficient for our working capital needs and we have minimal recourse if Alpha choices not to exercise their AIR.
There is substantial doubt about the Company’s ability to continue as a going concern as the Company will require additional liquidity to continue its operations and meet its financial obligations for 12 months from the date these condensed consolidated financial statements are issued. The Company is evaluating strategies to obtain the required additional funding for future operations and the restructuring of operations to grow revenues and reduce expenses.
If the Company is unable to generate significant sales growth in the near term and raise additional capital, there is a risk that the Company could default on additional obligations; and could be required to discontinue or significantly reduce the scope of its operations if no other means of financing operations are available. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustment that might be necessary should the Company be unable to continue as a going concern.
Note 2 – Summary of Significant Accounting Policies
Risks and Uncertainties – Global economic challenges, including the impact of the war in Ukraine, rising inflation supply-chain disruptions, and adverse labor market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the UAV industry and the Company’s operational and financial performance remain uncertain and outside of the Company’s control. Specifically, because of the aforementioned continuing risks, the Company’s ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either the Company or any of its third parties used in our manufacturing and assembly processes continue to be adversely impacted by these matters, the Company’s supply chain may be disrupted, limiting its ability to manufacture and assemble products. The Company expects inflation and supply-chain disruptions and its effects to continue to have a significant negative impact on its business for an extended period of time. The company continues to monitor developments in trade policy and is evaluating alternatives to mitigate the impact of these tariffs, including supplier diversification. However, additional or sustained tariff actions could materially and adversely affect our operations, financial condition, and results of operations.
Use of Estimates – The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the reserve for obsolete inventory, valuation of intangible assets, fair value of derivative liabilities, and deemed dividends resulting from the triggering of down round provisions and modifications to equity-linked instruments.
Note 2 – Summary of Significant Accounting Policies-Continued
Summary of Significant Accounting Policies - A description of the Company’s significant accounting policies and other financial information is included in the Company’s audited consolidated financial statements filed on March 31, 2025, with the SEC on Form 10-K for the year ended December 31, 2024. These policies have been applied consistently in these unaudited condensed interim consolidated financial statements.
Per Common Share and Potentially Dilutive Securities – Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus Common Stock, equivalents (if dilutive) related to warrants, options, and convertible instruments. For the three months ended March 31, 2024, the Company has excluded all common equivalent shares outstanding for restricted stock units (“RSUs”), warrants and options to purchase Common Stock and convertible instruments from the calculation of diluted net loss per share, because these securities are anti-dilutive for the periods presented. As of March 31, 2024, the Company had 176unvested RSUs, 67,406warrants and 1,302options outstanding to purchase shares of Common Stock, and 131,500of issuable shares upon the conversion of Series F preferred stock that have been excluded from diluted earnings per share as their inclusion would be anti-dilutive.
Net income (loss) per common share basic and dilutive is as follows for the three months ended March 31, 2025 and 2024:
Schedule of Net Income (Loss) Per Common Share Basic and Dilutive
Segment Reporting – In accordance with ASC Topic 280, Segment Reporting, the Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and performance assessment. The Company defines the term “chief operating decision maker” to be its chief executive officer.
The Company has determined that it operates in three segments:
●
Corporate, which comprises corporate costs only.
Recently Issued Accounting Pronouncements Not Yet Adopted – In March 2024, the Securities and Exchange Commission (“SEC”) released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies (“SRC”). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting (“ICFR”) and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.
In December 2023, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. For entities reconciling to the US statutory rate of 21%, this would generally require disclosing any reconciling items that impact the rate by 1.05% or more. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 (generally, calendar year 2025) and effective for all other business entities one year later. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. The adoption of ASU 2023-09 is expected to have a financial statement disclosure impact only and is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”) a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard and its impact on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present and future condensed consolidated financial statements.
Note 3 – Inventories, Net
Inventories, Net
As of March 31, 2025 and December 31, 2024, inventories, net consist of the following:
Schedule of Inventories
Note 4 – COVID Loans
The Company assumed the obligations for two COVID Loans originally made by the Small Business Administration to senseFly S.A. on July 27, 2020 (“senseFly COVID Loans”). As of senseFly Acquisition Date, the fair value of the COVID Loan was $1,440,046 (“senseFly COVID Loans”). For the three months ended March 31, 2025, senseFly S.A. made the required payments on the senseFly COVID Loans, including principal and accrued interest, aggregating approximately $100,930. As of March 31, 2025, the Company’s outstanding obligations under the senseFly COVID Loans are $420,369.
As of March 31, 2025, scheduled principal payments due under the senseFly COVID Loans are as follows:
Schedule of Maturity of SenseFly Covid Loans
Note 5 – Convertible Note
As of March 31, 2025, the Company has a Convertible Note outstanding with Alpha Capital Anstalt (“Alpha”) which was due January 8, 2025 (the “Note”) and is considered in default. The Note is a result of an exchange agreement executed on February 8, 2024 in which the parties agreed to exchange the then outstanding promissory note into a convertible note. The Note accrues interest at 12% per annum and will increase to the lesser of 18% or the maximum rate permitted under applicable law upon an Event of Default as defined under the Note. As of March 31, 2025, the Note is convertible into shares of Common Stock at a conversion ratio of $1.10, subject to adjustment pursuant to dilutive protection terms included in the Note.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024
During the three months ended March 31, 2025 and 2024, Alpha converted $770,000 and $100,000 of outstanding principal into 700,000 and 1,597 into shares of Common Stock at a conversion rate of $1.10 and $62.50, respectively.
As of March 31, 2025 and March 31, 2024, the outstanding principal and accrued interest on the Note was $563,333 and $4,749,491 and $65,926 and $69,659, respectively.
For the three months ended March 31, 2025 and 2024, we recognized interest expense on the Note of $18,802 and $106,000, respectively.
During the three months ended March 31, 2024, the conversion price of the Note was reduced from $62.50 to $30.00 pursuant to dilution protection provisions and due to the reduction in warrant exercise prices to $30.00 to induce exercise (see Note 7). The Company recognized in interest expense the amount of $3,488,851 for the incremental value of the conversion feature due to the reduced conversion price. The incremental value was determined using a Black-Scholes pricing model pre and post modification and the following inputs: expected term 0.92 years, risk free rate of 4.83%, volatility of 89.6%, and dividend rate of 0%.
During the three months ended March 31, 2025, there were no adjustments to the conversion price on the Note.
Note 6 – Fair Value Measurements
We closed on an offering of units consisting of Common Stock, Series A and B warrants in October 2024 (the “October 2024 Offering). In connection with the October 2024 Offering, we sold units comprised of Common Stock, Series A warrants and a Series B warrants (collectively referred to as the “Warrants”) (see Note 8). The Warrants were deemed to be derivative liabilities due to variability in the ultimate settlement of the Warrants caused by various settlement provisions embedded within the Warrants. Therefore, these Warrants meet the definition of a derivative liability requiring the Warrants to be reported at fair value upon issuance and subsequently at each reporting period.
The following tables present information about the Company’s derivative liabilities that are measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
Schedule of Fair Value Hierarchy on Valuation Techniques
Note 6 – Fair Value Measurements – Continued
The fair value of the warrants was determined by using a Black-Scholes pricing model and the following assumptions:
Schedule of Fair Value of Warrants
As of March 31, 2025 and December 31, 2024, the Company measured the Warrants using significant unobservable inputs that are based on little or no verifiable market data, which is Level 3 in the fair value hierarchy, resulting in a fair value estimate of approximately $8.6 and $16.4 million, respectively. Inherent in a option pricing models are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. The probability of a capital raise below the Warrants’ current exercise price is a significant unobservable input based on management’s estimate factoring in the Company’s capital needs and the Company’s stock price, which is volatile. Fluctuations to this estimate could significantly impact the fair value.
During the three months ended March 31, 2025, we recognized a gain on the change in the fair value of the warrant liabilities of $7,780,000. A reconciliation of the warrant liabilities is below:
Schedule of Reconciliation of Warrant Liabilities
Note 7 – Stockholders’ Equity (Deficit)
Preferred Series F Convertible Stock
Purchase History
On June 26, 2022, the Company entered into a Securities Purchase Agreement (the “Series F Agreement”) with Alpha. Pursuant to the terms of the Series F Agreement, the Board of Directors of the Company (the “Board”) designated a new series of Preferred Stock, the Series F 5% Preferred Convertible Stock (“Series F”), and authorized the sale and issuance of up to 35,000 shares of Series F with a stated value of $1,000 per share. Pursuant to the Series F Agreement, sales of Series F are accompanied by warrants equal to the number of issuable shares upon conversion of the Series F to Common Stock (the “Series F Warrants”).
Alpha Investment Right
The Series F Agreement provides Alpha the right to purchase up to an additional $25,000,000stated value of Series F, after their initial 10,000Series F purchased on June 26, 2022, and accompanying warrants (the “Additional Investment Right” or “AIR”). Under the AIR, the Series F and Series F warrants are initially convertible and exercisable at a conversion and exercise price equal to the volume-weighted average price of the Company’s Common Stock for three trading days prior to the date Alpha gives notice to the Company that it will exercise its AIR. Under the terms of the AIR, conversion and exercise prices are subject to downward adjustment for any equity instrument or equity-linked instrument sold or granted at an effective price per share that is lower than the initial conversion and exercise price (“Down Round Provision”). See Note 8 for warrant related disclosures.
On February 7, 2025, Alpha and the Company executed a funding agreement in which Alpha agreed to exercise its AIR quarterly to provide financing the Company for the next twelve months, with such amounts and timing of funding to be agreed to by the parties.
As consideration for Alpha’s commitment to additional funding, the Company agreed to (i) extend the period in which Alpha can exercise its AIR by extending the termination date of December 31, 2025 to June 1, 2026 and (ii) granting Alpha certain registration rights related to the Series F Alpha currently holds and will receive upon further exercises of its AIR. The Company filed the required registration statement to register 6,500,000shares of Common Stock which became effective by the Securities and Exchange Commission on April 25, 2025.
During the three months ended March 31, 2025, we issued the following Series F pursuant to the exercise of the AIR by Alpha:
Note 7 – Stockholders’ Equity (Deficit) – Continued
During the three months ended March 31, 2024, we issued the following Series F pursuant to the exercise of the AIR by Alpha:
Since the execution of the Series F Agreement, the Company has sold and issued Series F and Series F Warrants to Alpha or investors that Alpha has assigned the AIR for cash proceeds through the exercise of the AIR.
A summary of the Series F activity for the three months ended March 31, 2025 is as follows:
Summary of Series F Activity
A summary of the Series F activity for the three months ended March 31, 2024, is as follows:
During the three months ended March 31, 2025 and 2024, a total of 2,410 and 3,130 Series F were converted into a total of 2,190,908 and 59,041shares of Common Stock, respectively, and dividends accrued to the Series F were $67,651 and $61,235, respectively. As of March 31, 2025 and December 31, 2024, accrued dividends on the Series F total $814,317 and $746,666 which are included in accrued expenses on the unaudited consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the purchase date.
Common Stock Issuances
Conversions
During the three months ended March 31, 2025 and 2024, the Company issued 700,000 and 1,597 shares of Common Stock for the conversion of $770,000 and $100,000 of principal outstanding on a convertible note at a conversion ratio of $1.10 and $62.50, respectively (see Note 5).
During the three months ended March 31, 2025 and 2024, the Company issued 2,190,908 and 59,041 shares of Common Stock for the conversion of 2,410 and 3,130 shares of Series F with a stated value of $1,000 per share, respectively.
Warrant Exercises
During the three months ended March 31, 2025, we issued 267,849 shares of Common Stock for the exercise of Series B warrants with an exercise price of $1.9445 and aggregate exercise price of $520,833. The Company agreed to credit $350,000 of the aggregate exercise price pursuant to a settlement reached with the Series B warrant holder over a dispute and received approximately $171,000 of cash proceeds.
On March 6, 2024, the Company entered into a warrant exercise agreement with several institutional investors holding warrants pursuant to a securities purchase agreement, dated as of June 5, 2023, in connection with a private placement. The warrant exercise agreement provided that for those investors who exercised their existing warrants they would receive a reduction in the exercise price to $30.00 per share of Common Stock. During the three months ended March 31, 2024, the Company received $497,701 from the exercise of 16,590 warrants converted to 16,590 shares of Common Stock.
Down Round Triggers and Deemed Dividend
Below is a summary of the deemed dividends resulting from the March 2025 and 2024 Down Round Triggers:
Schedule of Deemed Dividends From various Down Round Triggers
Series F and Series F Warrants issued prior to December 2024 have conversion and exercise prices equal to $1.10 and were not impacted by the March 2025 Down Round Trigger.
Deemed dividends are reflected as an increase to additional paid in capital and an increase to accumulated deficit and as an increase to total net loss or decrease to total net income attributable to Common Stockholders in computing earnings per share on the condensed consolidated statements of operations and comprehensive income (loss).
Stock-based Compensation
The Company determines the fair value of awards granted under the 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) based on the fair value of its Common Stock on the date of grant. Stock-based compensation expenses related to grants under the Equity Plan are included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income (loss). For the three months ended March 31, 2025 and 2024, the Company recorded stock-based compensation of $49,880and $18,580, respectively.
Restricted Stock Units (“RSUs”)
For the three months ended March 31, 2025, a summary of RSU activity is as follows:
Summary of Restricted Stock Units Activity
Weighted Average Grant Date Fair
Value
For the three months ended March 31, 2025, the aggregate fair value of RSU awards at the time of grant was $151,640 based the market price of our Common Stock on the date of grant.
For the three months ended March 31, 2025, the Company recognized $49,880 of stock-based compensation expense, and had approximately $137,886 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately fifteen months.
For the three months ended March 31, 2024, a summary of RSU activity is as follows:
For the three months ended March 31, 2024, no RSUs were awarded. The Company recognized $18,580 of stock compensation expense, and had $25,000 of unrecognized stock-based compensation expense related to RSUs.
Issuance of RSUs to Current Officers and Directors of the Company
For the three months ended March 31, 2025, the Company granted 5,000 RSUs to officers, equal to $11,200 as compensation, which vested immediately. For the three months ended March 31, 2024, no RSUs were granted to officers.
For the three months ended March 31, 2025, the Company granted 56,000 RSUs equal to $125,440 to the four non-executive directors as quarterly board compensation, which vest in 330 days. For the three months ended March 31, 2024, the Company assigned 2,000 RSUs equal to $74,000 to the four non-executive directors as quarterly board compensation, which were granted on April 1, 2024, and vested immediately
Stock Options
For the three months ended March 31, 2025 a summary of the options activity is as follows:
Summary of Options Activity
Weighted Average Remaining Contractual Term
(Years)
Aggregate Intrinsic
As of March 31, 2025, the Company had no unrecognized compensation cost related to stock options.
Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or as of March 31, 2025 (for outstanding options), less the applicable exercise price.
For the three months ended March 31, 2025, there was no stock compensation expense related to the stock options.
For the three months ended March 31, 2024, a summary of the options activity is as follows:
As of March 31, 2024, the Company had approximately $21,000 of total unrecognized compensation cost related to stock options, which will be amortized through June 30, 2025.
Cancellations of Options
For the three months ended March 31, 2025 and 2024, as a result of employee terminations and options expirations, stock options aggregating 5 and 1,203 with fair market values of $1,235 and $1,292,459 were canceled, respectively.
Note 8 – Warrants
Equity Classified Warrants
As previously disclosed in Note 7, we issued Series F Warrants in connection with the issuance of Series F Preferred Stock upon Alpha exercising their AIR on February 7, 2025 and March 17, 2025.
During the three months ended March 31, 2025, we issued the following Series F Warrants in connection with the issuance of Series F Preferred Stock pursuant to the exercise of the AIR by Alpha:
A summary of activity related to warrants, classified within stockholders’ equity (deficit) for the years presented is as follows:
Summary of Activity Related to Warrants Classified Within Stockholders’ Equity (Deficit)
Weighted Average
Exercise Price
Remaining Contractual Term
As of March 31, 2025, the intrinsic value of the warrants was nil based on the market price of our stock and the warrant exercise price.
Liability Classified Warrants
The Series A and B warrants issued in October 2024 pursuant to an offering have the following contractual terms.
Each Series A Warrant and B Warrant is immediately exercisable on the date of issuance and expires five years from the closing date of the offering.
Under the alternate cashless exercise option of the Series A Warrants, a holder of the Series A Warrant, has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise of the Series A Warrant and (y) 2.0. In addition, the Series A Warrants and Series B Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) the lowest volume weighted average price for the five trading days immediately preceding and immediately following the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants so that the aggregate exercise price remains constant in such an event (the “Share Combination Event”). Finally, with certain exceptions, the Series B Warrants provide for a down round adjustment to the exercise price and number of shares underlying the Series B Warrants upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the exercise price of the Series B Warrant. As of December 31, 2024, the exercise price of the Series A and B Warrants was $1.9445. This was adjusted down to $1.20 with the March 2025 Down Round Trigger and an additional 2,582,234 warrants were issued.
A summary of activity related to the Series A and B warrants, classified as liabilities, for the three months ended March 31, 2025 is as follows:
Summary of Activity Related to Series A and B Warrants
Note 9 – Commitments and Contingencies
Legal Matters
We note that in the ordinary course of business that we may be the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damage may not be estimable. We do not believe any legal action would have a significant impact on the financials other than the matter disclosed above. However, there is inherent uncertainty regarding such matters.
Purchase Commitments
The Company routinely places orders for manufacturing services and materials. As of March 31, 2025, the Company had purchase commitments of $1,647,407.
Note 10 – Segment Information
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented by operating segment in making operating decisions, allocating resources, and evaluating financial performance.
During the three months ended March 31, 2025, the Company conducted the business through two primary operating segments: Drones and Sensors. During the year ended December 31, 2024, our SaaS segment ceased operations and did not renew any of its software subscription. Transactions in this segment during 2025 will consist of run off related expenses until this segment is fully shut down.
The accounting policies of the operating segments are the same as those described in Note 2. Non-allocated administrative and other expenses are reflected in Corporate. Corporate assets include cash, prepaid expenses, right-of-use asset and other assets.
As of March 31, 2025 and December 31, 2024 and for the years then ended, operating information about the Company’s reportable segments consisted of the following:
Goodwill and Assets
Schedule of Goodwill and Assets
Net Income (Loss)
Schedule of Net (Loss) Income
Note 10 – Segment Information– Continued
Revenues by Geographic Area
Schedule of Geographical Revenues
Note 11 – Subsequent Events
Management has evaluated subsequent events through the date that the Company’s unaudited condensed consolidated financial statements were issued. Based on this evaluation, the Company has determined that no additional subsequent events have occurred, other than those noted below, which require disclosure through the date that these unaudited condensed consolidated financial statements were issued.
On April 2, 2025, the Company and Alpha, the holder of a majority interest of the Series B Warrants (see Note 8), entered into an Amendment to the Series B Common Stock Purchase Warrant and Exchange Agreement (the “Warrant Amendment”), pursuant to which the contractual terms of the Series B Warrant was amended to (x) remove the Floor Price limitation that was no longer applicable and (y) remove the anti-dilution provision applicable in a Share Combination Event (as defined in the Series B Warrant), and (ii) Alpha exchanged 125,361 previously issued Series F Warrants with an exercise price of $1.10 for 88,908 shares of Common Stock for no consideration. The Warrant Amendment amends all outstanding Series B Warrants. The Warrant Amendment resulted in the reassessment of the Series B classification. Due to the contractual terms of the Series B Warrants being amended and the Share Combination Event being removed these Warrants will no longer be precluded from being classified as equity.
On April 14, 2025 (the “CFO Commencement Date”), the Board of Directors of the Company appointed Ms. Alison Burgett, age 47, to the position of Chief Financial Officer of the Company. As the Company’s Chief Financial Officer, she assumes the Company’s principal accounting officer duties from the Company’s Interim Chief Financial Officer, Adrienne Anderson. Ms. Anderson resigned from her position with the Company upon Ms. Burgett’s appointment to the position of Chief Financial Officer.
On the CFO Commencement Date, the Company entered into an executive employment agreement with Ms. Burgett (the “Employment Agreement”). Pursuant to the Employment Agreement, Ms. Burgett is entitled to receive (i) compensation of $225,000 per year, (ii) an award of restricted stock units (“RSUs”) with a value rounded to the equivalent of $25,000 at the time of the award within 120 days of the CFO Commencement Date, (iii) an award of RSUs with a value rounded to the equivalent of $25,000 at the time of the award within 30 days of each anniversary of the CFO Commencement Date, so long as Ms. Burgett continues to serve in the role of Chief Financial Officer, and (iv) an annual performance bonus, which will be determined each year by the Compensation Committee of the Board and approved by the Board.
We have issued a total of 1,016,398of shares of Common Stock for the conversion of 966 shares of Series F Preferred Stock with a stated value of $1,000 per share and conversion prices ranging from $0.82 - $1.10.
On May 5, 2025, Alpha exercised its Additional Investment Right for the aggregate purchase of 500 shares of Series F Convertible Preferred initially convertible into 602,846 shares of Common Stock, in the aggregate, at a conversion price of $0.8294 and warrants to purchase up to 602,846 shares of Common Stock at an initial exercise price of $0.8294 per share for an aggregate purchase price of $500,000. The warrants will be immediately exercisable upon issuance and have a three-year term.
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included in Item 8 of this Form 10-K. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of the Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not materially affected by inflation.
Overview
AgEagle™ Aerial Systems Inc. (“AgEagle” or the “Company”, “we”, “our” or “us”), through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones, sensors and that solve important problems for our customers. Founded in 2010, AgEagle was originally formed to pioneer proprietary, professional-grade, fixed-winged drones and aerial imagery-based data collection and analytics solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced, autonomous uncrewed aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include military/defense, public safety, surveying/mapping, agriculture, and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (“BVLOS”) and/or Operations Over People (“OOP”) in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of Defense.
AgEagle’s shift and expansion from solely manufacturing fixed-wing farm drones in 2018, to offering what the Company believes is one of the industry’s best fixed-wing, full-stack drone solutions, culminated in 2021 when the Company acquired three market-leading companies engaged in producing UAS airframes, sensors and software for commercial and government use. In addition to a robust portfolio of proprietary, connected hardware and software products; an established global network of over 200 UAS resellers; and enterprise customers worldwide; these acquisitions also brought AgEagle a highly valuable workforce comprised largely of experienced engineers and technologists with deep expertise in the fields of robotics, automation, manufacturing and data science. In 2022, the Company successfully integrated all three acquired companies with AgEagle to form one global company focused on taking autonomous flight performance to a higher level.
Our core technological capabilities include robotics and robotics systems autonomy; advanced thermal and multispectral sensor design and development; embedded software and firmware; secure wireless digital communications and networks; lightweight airframes; small UAS (“UAS”) design, integration and operations; power electronics and propulsion systems; controls and systems integration; fixed wing flight; flight management software; data capture and analytics; human-machine interface development and integrated mission solutions.
The Company is currently headquartered in Wichita, Kansas, where we house our sensor manufacturing operations, and we manufacture drones in Lausanne, Switzerland. We also operate a distribution and service center for our drone products in Raleigh, North Carolina. which supports our international business activities.
We intend to grow our business and preserve our leadership position by developing new drones, sensors and software and capturing a significant share of the global drone market. In addition, we expect to accelerate our growth and expansion through strategic acquisitions of companies offering distinct technological and competitive advantages and have defensible IP protection in place, if applicable.
Key Growth Strategies
We intend to materially grow our business by leveraging our proprietary, best-in-class, full-stack drone solutions, industry influence and deep pool of talent with specialized expertise in robotics, automation, custom manufacturing and data science to achieve greater penetration of the global UAS industry – with near-term emphasis on capturing larger market share of the agriculture, energy/utilities, infrastructure and government/military verticals. We expect to accomplish this goal by first bringing three core values to life in our day-to-day operations and aligning them with our efforts to earn the trust and continued business of our customers and industry partners:
Competitive Strengths
Impact of the Risks and Uncertainties On Our Business Operations
Global economic challenges, including the impact of the war, pandemics, rising inflation and supply-chain disruptions, regulatory investigations adverse labor and capital market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the UAV industry and our operational and financial performance remain uncertain and outside of our control. Specifically, because of the aforementioned continuing risks, our ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either we or any of our third parties in the supply chain for materials used in our manufacturing and assembly processes continue to be adversely impacted, our supply chain may be further disrupted, limiting its ability to manufacture and assemble products.
Critical Accounting Estimates
The condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include the reserve for obsolete inventory, stock options and consideration, valuation of intangible assets, fair value of derivative liabilities, and deemed dividends resulting from the triggering of down round provisions and modifications to equity-linked instruments.
We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting estimates affect the more significant judgments and estimates used in preparing our consolidated financial statements. Please see Note 2 to our consolidated financial statements, which are included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report, for our Summary of Significant Accounting Policies. There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements.
Three Months Ended Months Ended March 31, 2025 as Compared to Three Months Ended March 31, 2024
Revenues
For the three months ended March 31, 2025, revenues were $3,649,410 as compared to $3,894,447 for the three months ended March 31, 2024, a decrease of $245,037, or 6.3%. The decrease of $245,037 was attributable to a decrease of approximately $1,217,539 revenues due to decreased sensor sales primarily related to expected seasonality, $114,295 decrease on our SaaS revenue due to us not renewing software subscriptions and ceasing the operations of this segment off set by an increase of approximately $1,086,797 in revenues of the drone products.
Cost of Sales and Gross Profit
For the three months ended March 31, 2025, cost of sales was $1,515,592 as compared to $1,940,025 for the three months ended March 31, 2024, a decrease of $424,433 or 21.9%. For the three months ended March 31, 2025, gross profit was $2,133,818 as compared to $1,954,422 for the three months ended March 31, 2024, an increase of $179,396, or 9.2%. The primary factors contributing to the decrease in our cost of sales and the increase in gross profit margin was due to the total mix of our product sales during the current period which had higher margin drone sales then the previous period.
Operating Expenses
For the three months ended March 31, 2025, operating expenses were $3,136,363, as compared to $4,348,310 for the three months ended March 31, 2024, a decrease of $1,211,947, or 27.9%. The primary driver for reduced operating expense related to staff attrition, reduced consulting, and professional fees.
Operating expenses comprise general and administrative, sales and marketing, and research and development.
General and Administrative Expenses
For the three months ended March 31, 2025, general and administrative expenses were $1,972,811 as compared to $2,682,658 for the three months ended March 31, 2024, a decrease of $709,847, or 26.5%. The decrease was primarily related to less compensation expense related to terminated employees, less intangible amortization during 2025 due to impairment charges recorded during the year ended December 31, 2024, less costs related to our annual shareholder meeting, legal fees, and accounting expenses.
Research and Development
For the three months ended March 31, 2025, research and development expenses were $736,411 as compared to $1,130,229 for the three months ended March 30, 2024, a decrease of $393,818, or 34.8%. The decrease was primarily due to the integration of research and development teams that provide development of our new airframe, sensor and software technologies resulting in a reduction in our consultants and internal headcounts.
Sales and Marketing
For the three months ended March 31, 2025, sales and marketing expenses were $427,141 as compared to $535,423 for the three months ended March 30, 2024, a decrease of $108,282, or 20.2%. The decrease was primarily due to the decrease in travel, and integration of sales and marketing teams that lead to a reduction of consulting expenses.
Other Income (Expense), net
For the three months ended March 31, 2025, other income, net was $8,062,584 as compared to other expense, net of $3,921,699 for the three months ended March 31, 2024, an increase of $11,984,283. The increase is primarily attributable to a gain on change in fair value of our outstanding warrant liabilities of $7,780,000 that were issued in October 2024 in an offering and a decrease in interest expense due to reduction in our principal balance on our outstanding convertible note as well as an approximate $3.7 million interest expense charge during the three months ended March 31, 2024 due to a reduction in the convertible notes’ conversion price.
For the three months ended March 31, 2025, we generated net income of $7,060,039 as compared to a net loss of $6,315,587 for the three months ended March 31, 2024, an increase of $13,375,626 or 211.8%. The increase in our net income is primarily attributable to the gain on change in fair value of our outstanding warrant liabilities and the above mentioned reductions of costs related to general and administrative, research and development, and sales and marketing.
Cash Flows
Three Months Ended March 31, 2025 as Compared to the Three Months Ended March 31, 2024
As of March 31, 2025, cash on hand was $3,784,659, as compared to $3,613,996 as of December 31, 2024, an increase of $170,663, or 4.7%.
For the three months ended March 31, 2025, cash used in operations was $1,294,556, a decrease of $258,537 or 16.6%, as compared to cash used of $1,553,093 for the three months ended March 31, 2024. The decrease in cash used in operating activities was principally driven by the reduction in our operating loss due to reduced expenses resulting in less cash used in operating activities.
For the three months ended March 31, 2025, cash used in investing activities was $10,424, a decrease of $32,657, or 75.8%, as compared to cash used of $43,081 for the three months ended March 31, 2025. The decrease is related to less purchases of property and equipment and internal software and platform costs in 2025 compared to 2024.
For the three months ended March 31, 2025, cash provided by financing activities was $1,434,903, a decrease of $206,991 or 12.6%, as compared to cash provided of $1,641,894 for the three months ended March 31, 2024. The decrease in cash provided by our financing activities was due to less proceeds from the exercise of warrants and other short-term loans, offset by an increase in proceeds from the sale of Series F Preferred Stock during 2025 as compared to 2024.
Liquidity, Capital Resources and Going Concern
As of March 31, 2025, we had a working capital of $5,383,426 and cash on hand of $3,784,659. For the three months ended March 31, 2025, we incurred a loss from operations of $1,002,545, a decrease of $1,391,343, or 58.1%, as compared to $2,393,888 for the three months ended March 31, 2024. During the three months ended March 31, 2025, we used cash in our operating activities of $1,294,556. As of March 31, 2025, we do not have sufficient cash on hand to meet our financial obligations for the next twelve months and will require additional working capital.
While we have historically been successful in raising capital to meet our working capital needs, the ability to continue raising such capital to enable us to continue our growth is not guaranteed. We will require additional liquidity to continue our operations and meet our financial obligations over the next twelve months, therefore is substantial doubt about our ability to continue as a going concern. We are evaluating strategies to obtain the required additional funding for future operations and the restructuring of operations to grow revenues and reduce expenses.
Off-Balance Sheet Arrangements
On March 31, 2025, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
Evaluation of Disclosure and Control Procedures
The Company’s Chief Executive Officer and the Company’s Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2025 and concluded that the Company’s disclosure controls and procedures are effective. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated, recorded, processed, summarized and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure to be reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, and are not required to provide the information under this item.
Not applicable.
3.1
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.