AgEagle Aerial Systems Inc.

Previous wording

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.

Current wording

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 and sensors 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 ("DoD").

Previous wording

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.

Current wording

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 intellectual property protection in place, if applicable.

Previous wording

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.

Current wording

The condensed consolidated financial statements 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.

Previous wording

Three Months Ended Months Ended March 31, 2025 as Compared to Three Months Ended March 31, 2024

Current wording

Three and Six Months Ended June 30, 2025 as Compared to Three and Six Months Ended June 30, 2024

Previous wording

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.

Current wording

For the three months ended June 30, 2025, revenues were $4,197,561 as compared to $3,392,538 for the three months ended June 30, 2024, an increase of $805,023, or 23.7%. The increase of $805,023 was attributable to an increase of $1,386,084 in revenues from our drone product, offset by a decrease of $492,471 revenues due to decreased sensor sales primarily related to expected seasonality, $88,590 decrease on our SaaS revenue due to us not renewing software subscriptions and ceasing the operations of this segment.

Previous wording

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.

Current wording

For the three months ended June 30, 2025, cost of sales was $1,857,682 as compared to $1,837,963 for the three months ended June 30, 2024, an increase of $19,719 or 1.1%. For the three months ended June 30, 2025, gross profit was $2,339,879 as compared to $1,554,575 for the three months ended June 30, 2024, an increase of $$785,304, or 50.5%. 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 than the previous period.

Previous wording

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.

Current wording

For the three months ended June 30, 2025, general and administrative expenses were $2,534,170 as compared to $2,359,105 for the three months ended June 30, 2024, an increase of $175,065, or 7.4%. The increase was primarily related to, increased costs related to our annual shareholder meeting, legal fees, and accounting expenses, offset by decreases in compensation expense related to terminated employees, less amortization expense during 2025 due to impairment charges recorded during the year ended December 31, 2024

Previous wording

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.

Current wording

For the three months ended June 30, 2025, research and development expenses were $810,990 as compared to $1,082,007 for the three months ended June 30, 2024, a decrease of $271,017, or 25.0%. 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.

Previous wording

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.

Current wording

For the three months ended June 30, 2025, other income, net was $787,250 as compared to other expense, net of $389,240 for the three months ended June 30, 2024, a decrease of other expenses of $1,176,490. The decrease was primarily attributable to a gain on change in fair value of our outstanding warrant liabilities of $726,000 that were issued in October 2024 in an offering and a decrease in interest expense due to a reduction in our principal balance on our outstanding convertible note. Lastly, $236,351 for an employee retention tax credit refund we received, offset by a loss on debt extinguishment of $125,242 due to substantial modification to the conversion price on our outstanding convertible note during the period.

Previous wording

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.

Current wording

For the six months ended June 30, 2025, we generated net income of $5,779,663 as compared to a net loss of $9,245,295 for the six months ended June 30, 2024, an increase in net income of $15,024,958 or 162.5%. 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 changes in our cost of sales, general and administrative, research and development, and sales and marketing.

Previous wording

Three Months Ended March 31, 2025 as Compared to the Three Months Ended March 31, 2024

Current wording

Six Months Ended June 30, 2025 as Compared to the Six Months Ended June 30, 2024

Previous wording

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%.

Current wording

As of June 30, 2025, cash on hand was $5,502,584, as compared to $3,613,996 as of December 31, 2024, an increase of $1,888,588 or 52.3%.

Previous wording

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.

Current wording

For the six months ended June 30, 2025, cash used in operations was $4,039,685, an increase of $1,056,255 or 35.4%, as compared to cash used of $2,983,430 for the six months ended June 30, 2024. The increase in cash used in operating activities was principally driven by the reduction in our net loss, after adjusting for non-cash operating activities, due to reductions in operating expenses and increase gross profit margins, as discussed above, offset by an increase in operating cash flows from changes in operating assets and liabilities, primarily the reduction of outstanding accountings payable. All of which resulted in an increase in cash used in operating activities.

Previous wording

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.

Current wording

For the six months ended June 30, 2025, cash used in investing activities was $23,882, a decrease of $69,113, or 74.3%, as compared to cash used of $69,113 for the six months ended June 30, 2024. The decrease is related to fewer purchases of property and equipment and internal software and platform costs in 2025 compared to 2024.

Previous wording

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.

Current wording

For the six months ended June 30, 2025, cash provided by financing activities was $5,945,746, an increase of $2,656,488 or 80.8%, as compared to cash provided of $3,289,258 for the six months ended June 30, 2024. The increase in cash provided by our financing activities was due to an increase in net proceeds from the exercise of Series B warrants and issuance of Series F preferred stock and warrants, offset by less net proceeds from short-term loans s and other short-term loans during 2025 as compared to 2024.

Previous wording

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.

Current wording

As of June 30, 2025, we had a working capital of $9,105,278 and cash on hand of $5,502,584. For the six months ended June 30, 2025, we incurred a loss from operations of $3,070,172, a decrease of $ 1,864,184, or 37.8%, as compared to $4,934,356 for the six months ended June 30, 2024. During the three months ended June 30, 2025, we used cash in our operating activities of $4,039,685. As of June 30, 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.