AgEagle Aerial Systems Inc

Previous wording

AgEagle™Aerial Systems Inc. (“AgEagle”, “Company”, “We”, “Our”, “Us”), through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones, sensors and software 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. AgEagle’s shift and expansion from solely manufacturing fixed-wing farm drones in 2018, to offering what we believe is one of the industry’s best fixed-wing, full-stack drone solutions, culminated in 2021 when we 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, we succeeded in integrating all three acquired companies with AgEagle to form one global company focused on taking autonomous flight performance to a higher level for a wider variety of markets, including defense and security.

Current wording

AgEagle™Aerial Systems Inc. (“AgEagle”, “Company”, “We”, “Our”, “Us”), through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones, sensors and software 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. AgEagle’s shift and expansion from solely manufacturing fixed-wing farm drones in 2018, to offering what we believe is one of the industry’s best fixed-wing, full-stack drone solutions, culminated in 2021 when we 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, we succeeded in integrating all three acquired companies with AgEagle to form one global company focused on taking autonomous flight performance to a higher level for a wider variety of markets, including defense , public safety, and agriculture/commercial customers.

Previous wording

We intend to materially grow our business by leveraging our proprietary, best-in-class, full-stack drone solutions, multi-spectral sensors, 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 adding stability and discipline to our operations, and capturing larger market share of the agriculture, defense, security, and civil/commercial markets. 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:

Current wording

We intend to materially grow our business by leveraging our proprietary, best-in-class, full-stack drone solutions, multi-spectral sensors, 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 adding stability and discipline to our operations, and capturing larger market share of the agriculture, defense, public safety, and agriculture/commercial markets. We expect to accomplish this goal by first bringing one four re-defined 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:

Previous wording

Three and Six Months Ended June 30, 2024 as Compared to Three and Six Months Ended June 30, 2023

Current wording

Three and Nine Months Ended September 30, 2024 as Compared to Three and Nine Months Ended September 30, 2023

Previous wording

For the six months ended June 30, 2024, revenues were $7,286,985 as compared to $7,335,281 for the six months ended June 30, 2023, a decrease of $48,296 or 0.7%. The decline in revenues is mainly attributed to theeBee drone products of $736,057 and $43,261 of our SaaS subscription services related to ourHempOverview and Ground Controlplatforms. Offsetting these decreases was an increase in revenues of $731,022 attributable to the revenues derived from our sensor sales, specifically theRedEdge-PandAltum-PT panchromatic sensor series*.* Our continued innovation has demonstrated growth in our sales leading to strong demand of our products, specifically for our panchromatic sensor series, offsetting this growth are delays in our newly announced VISION drone product.

Current wording

For the nine months ended September 30, 2024, revenues were $10,571,969 as compared to $10,819,213 for the nine months ended September 30, 2023, a decrease of $247,244 or 2.3%. The decline in revenues is mainly attributed to theeBee drone products of $217,083 and $75,868 of our SaaS subscription services related to ourHempOverview and Ground Controlplatforms. Offsetting these decreases was an increase in revenues of $45,707 attributable to the revenues derived from our sensor sales, specifically theRedEdge-PandAltum-PT panchromatic sensor series*.* Our continued innovation has demonstrated growth in our sales leading to strong demand of our products, specifically for our panchromatic sensor series, and the VISION drone product.

Previous wording

For the three months ended June 30, 2024, cost of sales was $1,837,963 as compared to $2,246,678 for the three months ended June 30, 2023, a decrease of $408,715 or 18.2%. For the three months ended June 30, 2024, gross profit was $1,554,575 as compared to $1,031,534 for the three months ended June 30, 2023, an increase of $523,041, or 50.7%. The primary factors contributing to the decrease in our cost of sales and the increase gross profit margin were due to the historical inventory adjustments and new bill of material system implementation.

Current wording

For the three months ended September 30, 2024, cost of sales was $1,650,717 as compared to $2,269,858 for the three months ended September 30, 2023, a decrease of $619,141 or 27.3%. For the nine months ended September 30, 2024, gross profit was $1,634,267 as compared to $1,214,074 for the three months ended September 30, 2023, an increase of $420,193, or 34.6%. The primary factors contributing to the decrease in our cost of sales and the increase gross profit margin were due to the historical inventory adjustments and new bill of material system implementation.

Previous wording

For the six months ended June 30, 2024, cost of sales was $3,777,988 as compared to $4,325,115 for the six months ended June 30, 2023, a decrease of $547,127, or 12.6%. For the six months ended June 30, 2024, gross profit was $3,508,997 or 48.2% as compared to $3,010,166 or 41% for the six months ended June 30, 2023, an increase of $498,831, or 16.6% in actual gross margin. The increase in gross profit margin was a result of our drone products along with significant price reduction in the second quarter of 2023 to stimulate market demand and bring us in line specifically with competitive products manufactured in China as our products become older while awaiting the new*ebee VISION.*In addition to drone sales our sensor sales continue to experience supply chain pressure related to our sensor sales specifically as a result of an increase in raw components and labor costs.

Current wording

For the nine months ended September 30, 2024, cost of sales was $5,428,705 as compared to $6,594,973 for the nine months ended September 30, 2023, a decrease of $1,166,268, or 17.7%. For the nine months ended September 30, 2024, gross profit was $5,143,264 or 49% as compared to $4,224,240 or 39% for the nine months ended September 30, 2023, an increase of $919,024, or 21.8% in actual gross margin. The increase in gross profit margin was a result of our drone products along with significant price reduction in the second and third quarter of 2023 to stimulate market demand and bring us in line specifically with competitive products manufactured in China as our products become older while awaiting the newebee VISION.

Previous wording

For the three months ended June 30, 2024, operating expenses were $4,095,043, as compared to $5,903,372 for the three months ended June 30, 2023, a decrease of $1,808,329, or 30.6%.

Current wording

For the three months ended September 30, 2024, operating expenses were $3,495,427, as compared to $7,204,187 for the three months ended September 30, 2023, a decrease of $3,708,760, or 51.5%.

Previous wording

For the six months ended June 30, 2024, operating expenses were $8,443,353, as compared to $12,043,112 for the six months ended June 30, 2023, a decrease of $3,599,759, or 29.9%.

Current wording

For the nine months ended September 30, 2024, operating expenses were $11,938,779, as compared to $19,247,300 for the nine months ended September 30, 2023, a decrease of $7,308,521, or 38.0%.

Previous wording

For the three months ended June 30, 2024, general and administrative expenses were $2,359,105 as compared to $3,498,761 for the three months ended June 30, 2023, a decrease of $1,139,656 or 32.6%. The decrease was primarily related to less stock compensation expense related to terminated employees, and the reduced stock price, less intangible amortization during 2024 due to the impairment recorded on December 31, 2023, less shareholders annual meeting cost, offset by legal fees, accounting and consulting expense.

Current wording

For the three months ended September 30, 2024, general and administrative expenses were $1,889,733 as compared to $3,357,550 for the three months ended September 30, 2023, a decrease of $1,467,817 or 43.7%. The decrease was primarily related to less stock compensation expense related to terminated employees, and the reduced stock price, less intangible amortization during 2024 due to the impairment recorded on December 31, 2023, less shareholders annual meeting cost, offset by legal fees, accounting and consulting expense.

Previous wording

For the six months ended June 30, 2024, general and administrative expenses were $5,041,763 as compared to $7,078,283 for the six months ended June 30, 2023, a decrease of $2,036,520, or 28.8%. The decrease was primarily a result of the reduction in employee payroll related costs due to integration of roles, ERP consulting integration costs, reduction in R&D consultants, less stock compensation costs, less intangible amortization during 2024 due to the impairment recorded on December 31, 2023, less shareholders annual meeting costs offset by an increase in legal, accounting, consulting, and recruitment costs during 2024.

Current wording

For the nine months ended September 30, 2024, general and administrative expenses were $6,931,496 as compared to $10,435,834 for the nine months ended September 30, 2023, a decrease of $3,504,338, or 33.6%. The decrease was primarily a result of the reduction in employee payroll related costs due to integration of roles, ERP consulting integration costs, reduction in R&D consultants, less stock compensation costs, less intangible amortization during 2024 due to the impairment recorded on December 31, 2023, less shareholders annual meeting costs offset by an increase in legal, accounting, consulting, and recruitment costs during 2024.

Previous wording

For the three months ended June 30, 2024, research and development expenses were $1,082,007 as compared to $1,369,479 for the three months ended June 30, 2023, a decrease of $287,472, or 21.0%. 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.

Current wording

For the three months ended September 30, 2024, research and development expenses were $969,402 as compared to $1,368,394 for the three months ended September 30, 2023, a decrease of $398,992, or 29.2%. 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 six months ended June 30, 2024, research and development expenses were $2,212,236, as compared to $2,951,822 for the six months ended June 30, 2023, a decrease of $739,586, or 25.1%. 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 nine months ended September 30, 2024, research and development expenses were $3,181,638, as compared to $4,320,216 for the nine months ended September 30, 2023, a decrease of $1,138,578, or 26.4%. 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 June 30, 2024, sales and marketing expenses were $653,931 as compared to $955,845 for the three months ended June 30, 2023, a decrease of $301,914, or 31.6%. The decrease was primarily due to the decrease in travel, integration of sales and marketing teams that lead to a reduction of consulting expenses along with decrease in digital advertising spend as we look to attend in-person trade shows.

Current wording

For the three months ended September 30, 2024, sales and marketing expenses were $636,292 as compared to $978,243 for the three months ended September 30, 2023, a decrease of $341,951, or 35%. The decrease was primarily due to the decrease in travel, integration of sales and marketing teams that lead to a reduction of consulting expenses along with decrease in digital advertising spend as we look to attend in-person trade shows.

Previous wording

For the six months ended June 30, 2024, sales and marketing expenses were $1,189,354 as compared to $1,933,720 for the six months ended June 30, 2023, a decrease of $744,366, or 38.5%. The decrease was primarily due to the integration of sales and marketing teams, along with a decrease in consulting expenses due to branding and website integration done in prior year along with less trade-shows offset by more in-person demos with our sales and marketing team for the newebee VISON.

Current wording

For the nine months ended September 30, 2024, sales and marketing expenses were $1,825,645 as compared to $2,911,963 for the nine months ended September 30, 2023, a decrease of $1,086,318, or 37.3%. The decrease was primarily due to the integration of sales and marketing teams, along with a decrease in consulting expenses due to branding and website integration done in prior year along with less trade-shows offset by more in-person demos with our sales and marketing team for the newebee VISON.

Previous wording

For the three months ended June 30, 2024, other expense, net was $389,240 as compared to $418,745 for the three months ended June 30, 2023, a decrease of $29,505.

Current wording

For the three months ended September 30, 2024, other expense, net was $1,598,594 as compared to $2,030,015 for the three months ended September 30, 2023, an increase of $431,421.

Previous wording

For the six months ended June 30, 2024, other expense, net was $4,310,939 as compared to other income, net of $857,136 for the six months ended June 30, 2023, an increase of $3,453,803. The increase is primarily attributable to the promissory note’s original issue discount of 4% and interest at 8% per annum issued in December 2022 along with the anti-dilution price protections embedded in the convertible note that were triggered during the six months ended June 30, 2024, we recognized interest expense of $3,488,851 for the incremental value of the convertible note conversion feature being reduced from its original conversion price of $1.25 to $0.60 which is the gross amount recorded in the prior quarter of 2024.

Current wording

For the nine months ended September 30, 2024, other expense, net was $5,909,534 as compared to other expense, net of $2,887,150 for the nine months ended September 30, 2023, an increase of $3,022,384. The increase is primarily attributable to the promissory note’s original issue discount of 4% and interest at 8% per annum issued in December 2022 along with the anti-dilution price protections embedded in the convertible note that were triggered during the nine months ended September 30, 2024, we recognized interest expense of $4,098,388 for the incremental fair value of the convertible note conversion feature being reduced from its original conversion price of $0.60 to $0.4038.

Previous wording

For the three months ended June 30, 2024, we incurred a net loss of $2,929,708 as compared to a net loss of $5,290,583 for the three months ended June 30, 2023, a decrease of $2,360,875, or 44.6%., the decrease of the losses are related to the above mentioned reductions of costs related to general and administrative, research and development, and sales and marketing.

Current wording

For the three months ended September 30, 2024, we incurred a net loss of $3,459,754 as compared to a net loss of $8,020,128 for the three months ended September 30, 2023, a decrease of $4,560,374 or 56.9%., the decrease of the losses are related to the above mentioned reductions of costs related to general and administrative, research and development, and sales and marketing.

Previous wording

For the six months ended June 30, 2024, the Company incurred a net loss of $9,245,295 as compared to a net loss of $9,890,082 for the six months ended June 30, 2023, a decrease of $644,787, or 6.5%. The overall decrease in net loss was primarily attributable to a decrease in operating costs.

Current wording

For the nine months ended September 30, 2024, the Company incurred a net loss of $12,705,049 as compared to a net loss of $17,910,210 for the nine months ended September 30, 2023, a decrease of $5,205,161, or 29.1%. The overall decrease in net loss was primarily attributable to a decrease in operating costs.

Previous wording

Six Months Ended June 30, 2024 as Compared to the Six Months Ended June 30, 2023

Current wording

Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023

Previous wording

As of June 30, 2024, cash on hand was $977,208, as compared to $819,024 as of December 31, 2023, a increase of $158,184, or 19.3%.

Current wording

As of September 30, 2024, cash on hand was $265,126, as compared to $819,024 as of December 31, 2023, a decrease of $553,898, or 67.6%.

Previous wording

For the six months ended June 30, 2024, cash used in operations was $2,983,430, a decrease of $3,799,889 or 56.0%, as compared to cash used of $6,783,320 for the six months ended June 30, 2023. The decrease in cash used in operating activities was principally driven by the lower operating expenses which included significantly lower inventory purchases and prepayments offset by higher accounts receivables, account payables and accrued expenses.

Current wording

For the nine months ended September 30, 2024, cash used in operations was $4,056,700 a decrease of $4,772,969 or 54.1%, as compared to cash used of $8,829,669 for the nine months ended September 30, 2023. The decrease in cash used in operating activities was principally driven by the lower operating expenses which included significantly lower inventory purchases and prepayments offset by higher accounts receivables, account payables and accrued expenses.

Previous wording

For the six months ended June 30, 2024, cash used in investing activities was $92,995, a decrease of $331,349, or 78.1%, as compared to cash used of $424,344 for the six months ended June 30, 2023. The decrease is related to the capitalization of the internal software during 2023 which did not continued in 2024.

Current wording

For the nine months ended September 30, 2024, cash used in investing activities was $96,087, a decrease of $468,029, or 83%, as compared to cash used of $564,116 for the nine months ended September 30, 2023. The decrease is related to the capitalization of the internal software and platform costs incurred during 2023 which did not continue at the same rate in 2024.

Previous wording

For the six months ended June 30, 2024, cash provided by financing activities was $3,289,258 a decrease of $3,487,215 or 51.5%, as compared to cash provided of $6,776,473 for the six months ended June 30, 2023. The decrease in cash provided by our financing activities was due to less sales of our Common stock through an at-the-market offering and exercise of warrants in the prior year offset by the sale of Series F Preferred stock.

Current wording

For the nine months ended September 30, 2024, cash provided by financing activities was $3,607,482 a decrease of $3,122,866 or 46.4%, as compared to cash provided of $6,730,348 for the nine months ended September 30, 2023. The decrease in cash provided by our financing activities was due to less sales of our Common stock through an at-the-market offering and exercise of warrants in the prior year offset by the sale of Series F Preferred stock.

Previous wording

As of June 30, 2024, we had a working capital deficit of $2,809,813. For the six months ended June 30, 2024, we incurred a loss from operations of $4,934,356, a decrease of $4,098,590, or 45.4%, as compared to $9,032,946 for the six months ended June 30, 2023. While we have historically been successful in raising capital to meet its 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 its operations and meet its financial obligations over the next twelve months, there 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.

Current wording

As of September 30, 2024, we had a working capital deficit of $4,541,048. For the nine months ended September 30, 2024, we incurred a loss from operations of $6,795,515, a decrease of $8,227,545, or 54.8%, as compared to $15,023,060 for the nine months ended September 30, 2023. While we have historically been successful in raising capital to meet its 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 its operations and meet its financial obligations over the next twelve months, there 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.

Previous wording

During the six months ended June 30, 2024, inflation has had a negative impact on the unmanned aerial vehicle systems industry, our customers, and our business globally. Specifically, our ability to access components, parts and labor needed 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 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. We expect inflation and its effects to continue to have a significant negative impact on our business.

Current wording

During the nine months ended September 30, 2024, inflation has had a negative impact on the unmanned aerial vehicle systems industry, our customers, and our business globally. Specifically, our ability to access components, parts and labor needed 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 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. We expect inflation and its effects to continue to have a significant negative impact on our business.