AgEagle Aerial Systems Inc

EXPLANATARY NOTE

AgEagle Aerial Systems Inc. (the “Company”, “we”, “us”, and “our”) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2023 with the U.S. Securities and Exchange Commission (“SEC”) on April 1, 2024 (the “Original Form 10-K”) and filed quarterly reports on Form 10-Q for the three, six, and nine months ended March 31, 2023, June 30, 2023, and September 30, 2023 on May 15, 2023, August 14, 2023, and November 13, 2023, respectively, (collectively referred to has the “Original 2023 Form 10-Qs”) and filed quarterly reports for the three and six months ended March 31, 2024 and June 30, 2024 on May 15, 2024 and August 14, 2024, respectively, (collectively referred to has the “Original 2024 Form 10-Qs”). Subsequent to the filing of the Original Form 10-K and the Original 2023 and 2024 Form 10-Qs for the year end and interim periods during our fiscal year 2023 and fiscal year 2024, we identified an error that was present in all aforementioned filings.

On November 7, 2024, the audit committee of the Company’s board of directors concluded, after discussion with the Company’s management, that the previously issued consolidated financial statements as of and for the years ended December 31, 2023 and 2022 and the Form 10-Qs for the quarterly periods March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024 and June 30, 2024 should no longer be relied upon due to the errors discussed below and require restatement.

We plan to file an amendment to the Original Form 10-K, correcting the error present at December 31, 2023 and 2022 and restate all of the quarterly financial information in the Original 2023 Form 10-Qs in the amendment to the Original Form 10-K.

This Form 10-Q restates the quarterly financial statements periods in the Original 2024 Form 10-Qs and their comparative prior periods. See Note 12 included in this Form 10-Q to the accompanying quarterly consolidated financial statements for further details of the correction of the errors and a summary of the impact on the quarterly consolidated financial statements for all periods impacted by the error, which was isolated to the consolidated statements of operations and comprehensive loss.

Background of Restatement

Subsequent to the filing of our Original Form 10-K and Original Form 2024 and 2023 10-Qs, management identified an error in the computation of net loss attributable to common stockholders and total comprehensive loss as presented on our consolidated statements of operations and comprehensive loss included in the Original Form 10-K and Original Form 2024 and 2023 10-Qs. The error in the computation of net loss attributable to common stockholders resulted in an understatement of net loss per common share basic and diluted as presented on our consolidated statements of operations and an overstatement of comprehensive loss for the quarterly periods included in the Original 2024 and Original 2023 Form 10-Qs and the fiscal year ends included in the Original Form 10-K.

The net loss attributable to common stockholders erroneously excluded accrued cumulative dividends on outstanding Series F preferred stock and deemed dividends resulting from the triggering of down round features embedded within outstanding equity-linked financial instruments. Pursuant to ASC 260Earnings Per Share, income (loss) available to common stockholders shall be computed by deducting dividends accumulated for the period on cumulative preferred stock. Also, the value of the effect of a down round feature shall be recognized in an equity-classified freestanding financial instrument when the down round feature is triggered. That effect shall be treated as a dividend and as an increase to net loss available to common stockholders in computation of earnings per share.

Further, the accrued cumulative dividends and deemed dividends were included as a component of other comprehensive loss. However, pursuant toASC 220 – Income Statement – Reporting Comprehensive Income items required to be reported as direct adjustments to additional paid-in capital and retained earnings are not considered to be components of other comprehensive income (loss).