Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

☒   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20192022

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:(316) 202-2076(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

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. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $4,732,318.$83,234,320.

As of April 13, 2020,4, 2023, there were 16,774,39491,071,375 shares of Common Stock, par value $0.001 per share, issued and outstanding.

AGEAGLE AERIAL SYSTEMS INC.

TABLE OF CONTENTS

PART I

This report may containAnnual Report on Form 10-K (“Annual Report”) contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management and involve risks and uncertainties. Forward-looking statements include statements regarding our plans, strategies, objectives, expectations and intentions, which are subject to change at any time at our discretion. Forward-looking statements include our assessment, from time to time of our competitive position, the industry environment, potential growth opportunities, the effects of regulation and events outside of our control, such as natural disasters, wars or health epidemics. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.

Forward-looking statements involve knownare merely predictions and unknown risks,therefore inherently subject to uncertainties and other factors which maycould cause ourthe actual results performance or achievements to bediffer materially different from any future results, performance or achievements expressed or implied by the forward-looking statement. These uncertainties and other factors include, among other things:

Set forth below in Item 1A, “Risk Factors,” are additional significant uncertainties and other factors affecting forward-looking statements. The reader should understand that the uncertainties and other factors identified in this Annual Report are not a comprehensive list of all the uncertainties and other factors that may affect forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you shoulddo not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume noundertake any obligation to update theseor revise any forward-looking statements publicly, or to update the reasons actual resultslist of uncertainties and other factors that could differ materially fromaffect those anticipated in these forward-looking statements, even if new information becomes available in the future.statements. 

Overview

AgEagle^™ Aerial Systems Inc. (“("AgEagle” or “the Company”the "Company”) designs, produces, through its wholly owned subsidiaries, is actively engaged in designing and supports technologically-advanced small, unmanned aerial vehicles (“UAVs” or “drones”). In addition, providing new utility to UAVs, the Company pioneersdelivering best-in-class drones, sensors and innovates advanced aerial imaging data collection and analytics technologies capable of addressing the impending food and environmental sustainability crises that threaten our planet. Historically, the Company’s daily efforts have focused on delivering the tools and strategies necessary to define and implement commercial drone construction and delivery, along with sustainability and precision farming solutionssoftware that solve important problems confronting the global agricultural industry. In fact,for our customers. Founded in 2010, AgEagle has spent eight years serving customers, covering more than two million acres in 50 countries monitoring 53 different crops. AgEagle remains intent on earning distinction as a trusted partnerwas originally formed to clients seeking to adoptpioneer proprietary, professional-grade, fixed-winged drones and support productive agricultural approaches to better farming practices which limit the impact on our natural resources, reduce reliance on inputs and materially increase crop yields and profits.

In early 2019, AgEagle further expanded its marketing efforts to provide for the introduction ofParkView, its proprietary aerial imagery and data analytics platform, designed to support municipal, state and federal agencies charged with assessing and supporting sustainability initiatives involving public parks and recreation areas, also referred to as urban green spaces.

In the first half of 2019, the Company introducedHempOverview, a scalable, responsive and cost-effective Software-as-a-Solution (“SaaS”) web- and map-based technology platform to support the operations of domestic industrial hemp programs for state and tribal nation departments of agriculture, growers and processors – a solution that provides users with what the Company believes is the gold standard for regulatory oversight, operational assistance and reporting capabilities for the fast emerging industrial hemp industry.

The Company also designs, produces, distributes and supports technologically advanced small UAVs or drones that AgEagle offers for commercial sale to the precision agriculture industry. In addition to UAV sales, in late 2018, the Company introduced a new drone-leasing program, alleviating farmers and agribusinesses from significant upfront costs associated with purchasing a drone, while also relieving them from ongoing drone maintenance and support requirements. Additionally, the new program provides the option of engaging a trained AgEagle pilot to operate the drone and manage the entire image collection process, creating a truly turnkey aerial imagery capture solution for its customers.

In the third quarter of 2019, AgEagle announced that it had begun to actively pursue expansion opportunities within the emerging Drone Logistics and Transportation market and revealed that it had received its first purchase orders from a major ecommerce company to manufacture and assemble UAVs designed to meet the critical specifications for drones that are meant to carry packaged goods in urban and suburban areas.

Central to the Company’s long-term growth strategy, AgEagle will continue to identify opportunities to leverage its proprietary technological platform and industry expertise to penetrate new, high growth market sectors that may benefit from the Company’s advanced aerial imagery-based data collection and analytics solutions.solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced, autonomous 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 (“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.

Research                AgEagle’s shift and development activities are integralexpansion from solely manufacturing fixed-wing farm drones in 2018, to our business and we follow a disciplined approach to investing our resources to create new technologies and solutions.

Our Unmanned Aerial Vehicles Business

Our first commercially available product was theAgEagle Classic, which was followed shortly thereafter by theRAPID System. As we improved and matured our product, we launched theRX-60 and subsequently our current UAV product, theRX-48. The success AgEagle has achieved with its legacy products, whichoffering what the Company believes has carriedis 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 into200 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 continued improvementfields of robotics, automation, manufacturing and data science. In 2022, theRX-60 andRX-48, stems from AgEagle’s ability Company successfully integrated all three acquired companies with AgEagle to invent and deliver advanced solutions utilizing its proprietary technologies and trade secrets that help farmers, agronomists and other precision agricultural professionals operate more effectively and efficiently. The Company’sform one global company focused on taking autonomous flight performance to a higher level.

Our core technological capabilities developed over five years of researchinclude robotics and innovation, include arobotics systems autonomy; advanced thermal and multispectral sensor design and development; embedded software and firmware; secure wireless digital communications and networks; lightweight laminated shell that allows the UAV platform to perform under challenging flying conditions, a camera with a Near Infrared (NIR) filter, a rugged foot launcher (RX-60airframes; small UAS (“sUAS”), design, integration and high-end software that automates drone flightsoperations; power electronics and provides geo-referenced data. All of AgEagle’s proprietary UAVs are electrically powered, weigh approximately six pounds fully loaded, are capable of flying over approximately 400 acres (roughly 60 minutes of airtime) perpropulsion systems; controls and systems integration; fixed wing flight; flight from their launch location,management software; data capture and are configured to carry a camera with an NIR filter that uses near infrared images to capture crop data. The Company’s leadership believes that these characteristics make its UAVs well suited for providing a complete aerial view of a farmer’s field to help precisely identify crop healthanalytics; human-machine interface development and field conditions faster than any other method available.integrated mission solutions.

The Company’s UAVs were initially specificallyCompany is currently headquartered in Wichita, Kansas, where we house our sensor manufacturing operations, and we operate our business and drone manufacturing in Raleigh, North Carolina and Lausanne, Switzerland which supports our international business activities.

Strategic Acquisitions in 2021(the “2021 Acquisitions”)

MicaSense^™, Inc.

In January 2021, AgEagle acquired MicaSense™, Inc. ("MicaSense”), a company that has been at the forefront of advanced drone sensor development since its founding in 2014. In early 2022, AgEagle completed development and brought to market the Altum-PT^™ and RedEdge-P^™ -- next generation thermal and multispectral sensors which offer critical advancements on MicaSense’s legacy sensor products to customers primarily in agriculture, plant research, land management and forestry management. Today, AgEagle’s multispectral sensors are distributed in over 75 countries worldwide and help customers use drone-based imagery to make better and more informed business decisions.

Measure Global, Inc.

In April 2021, AgEagle acquired Measure Global, Inc. ("Measure”), a company founded in 2020. Serving a world class customer base, Measure enables its customers to realize the transformative benefits of drone technology through its Ground Control solution. Offered as Software-as-a-Service (“SaaS”), Ground Control is a cloud-based, plug-and-play operating system that empowers pilots and large enterprises with everything they need to operate drone fleets, fly autonomously, collaborate globally, visualize data, and integrate with existing business systems and processes. Ground Control serves a world class customer base, including many Fortune 500 companies. By adding Measure’s advanced software to the AgEagle platform, combined with its sensors and other data capture and analytics innovations, our customers can capitalize on the significant economic, safety and efficiency benefits made possible by drones used at scale.

senseFly^™, S.A.

 In October 2021, the Company acquired senseFly, S.A. and senseFly Inc. (collectively “senseFly”), a global leader in fixed-wing drones that simplify the collection and analysis of geospatial data, allowing professionals to make better and faster decisions. Founded in 2009, senseFly develops and produces a proprietary line of eBee™-branded, high performance, fixed-wing drones which have flown more than one million flights around the world. Safe, ultra-light and easy to use, these autonomous drones are utilized by thousands of customers around the world in agriculture, government/defense, engineering, and construction, among other industry verticals, to collect actionable aerial data intelligence.

2022 Integration Activities

                In 2022, the Company built an enterprise architecture designed to seamlessly integrate the acquisitions completed in 2021, thereby unifying four disparate brands under one global brand: AgEagle. As part of this process, AgEagle executed an action plan to create long-term sustainable value through the efficiencies derived from economies of scale, sharing and optimizing resources – in particular, human capital and knowledge – and combining assets. Critical to the success of the integration and integral to the Company’s ability to stay disciplined, structurally organized and rooted in its core values was:

Our Branded Line of Unmanned Aerial Vehicles

eBee^™ Line of Professional Drones

Sold worldwide through AgEagle’s direct sales team and global network of trusted resellers, the Company’s eBee line of commercial and government/military UAS have logged more than 500,000 flight hours on more than one million successful missions over the past decade. Moreover, according to AgEagle’s analysis of official FAA Part 107 commercial drone registration data supplied to the Company pursuant to a Freedom of Information Act Request submission, from 2016 through 2021, the eBee was the commercial sUAS of choice for U.S. commercial drone operators, outnumbering all other fixed wing drones registered, including Vertical Take-Off and Landing (“VTOL”) aircraft, accounting for 41% of all commercial fixed-wing drone registrations in the United States.

Market Opportunity for UAVs

                Drones have transformed from being freelance videographer toys to mission critical inspection tools for enterprise businesses like construction, energy and agriculture, and for military/defense applications worldwide. Moreover, the number of use cases for drones has also grown as drone hardware has become more advanced, safe and reliable. Advanced aerial mapping, crop monitoring, publicly safety uses, disaster response and consumer drone deliveries have all become available as the commercial drone industry has matured.

                According to DRONEII’s Drone Market Report, published in September 2022, the overall global drone market was worth an estimated $30.6 billion in 2022 and is expected to experience a compound annual growth rate (“CAGR”) of 8.3% through the year 2030, reaching $55.8 billion. Even more bullish on its industry outlook, Precedence Research reported in July 2022 that it believes the commercial drone market segment alone is poised to grow from $24.4 billion in 2022 to $504 billion by 2030, representing a 46.04% CAGR over the forecast period 2022 to 2030.

                In September 2022, the Drone Infrastructure Inspection Grant Act was passed by the U.S. House of Representatives. This bi-partisan bill establishes programs within the Department of Transportation (“DOT”) to support the use of drones and other sUAS when inspecting, repairing or constructing road infrastructure, electric grid infrastructure, water infrastructure or other critical infrastructure. Specifically, DOT must award grants in the aggregate of $100 million to state, tribal and local governments, metropolitan planning organizations, or groups of those entities to purchase or otherwise use drones to increase profitsefficiency, reduce costs, improve worker and community safety, reduce carbon emissions, or meet other priorities related to critical infrastructure projects. Grant recipients must use domestically manufactured drones that are made by pinpointingcompanies not subject to influence or control from certain foreign entities, including China and Russia. This legislation is supported by the U.S. Chamber of Commerce, National League of Cities, National Council of State Legislatures, American Association of State Highway and Transportation Officials, Commercial Drone Alliance and Association of Unmanned Vehicle Systems International among others. This bill is currently pending approval by the U.S. Senate.

                On the military/defense front, drone technologies are providing numerous tactical advantages to warfighters worldwide, including conducting surveillance and mapping missions; relaying crucial real-time information on enemy movements, locations and positions of strategic targets; and transporting valuable supplies and equipment to remote or far-forward areas, where nutrients or chemicalsamong other tactical capabilities. In its 2023 report titled “Global Military Drones Market,” The Business Research Company (“TBRC”) noted that the global military drones market size will grow from $14.54 billion 2022 to $15.88 billion in 2023 at a CAGR of 9.2%. Moreover, by 2027, the market size is forecast to climb to $20.64 by 2027, a 6.8% CAGR. TBRC’s report notes that increasing government funding for military drones to enhance efficiency in military operations is boosting the demand for production of military drones. The report further cites a May 2021 article published by the National Defense Industrial Association, a U.S.-based trade association for the United States’ government and defense industry, which revealed that in fiscal year 2021, the DoD allotted $7.5 billion for a range of robotic platforms and associated technologies. For the purchase of unmanned systems, the Navy and Air Force each received about $1.1 billion; the Army received $885 million; the Marine Corps received $70 million; and the U.S. Special Operations Command (“SOCOM”) received $90 million.

Sensor Solutions

Setting entirely new standards of excellence for high resolution aerial imaging solutions, our proprietary thermal and multispectral sensors are broadly recognized as the cameras of choice worldwide for advanced applications in agriculture, plant research, land management and forestry management.

Market Opportunity for Sensor Solutions

Sensors for drones are increasingly being used for surveying, mapping and inspections – particularly in the mining, construction, energy, environmental management, agriculture, infrastructure and waste management industries. Moreover, with every new innovation in sensor technologies, the functionality and the underpinning value proposition of commercial UAS continues to improve and allows for an even wider range of possible applications.

Due in large measure to increasing demand of drone sensors for mapping services, LiDAR and GPS, the outlook for the drone sensor market is forecasted to grow to $66.6 billion by 2030, according to a January 2022 research report released by Market Research Future. Verified Market Research (“VMR”) also published its industry research report in January 2022, stating that the global drone sensor market will climb to $60.67 billion by 2028 from $10.88 billion in 2020, representing a CAGR of 23.97% from 2021 to 2028. Key market drivers in VMR’s report cite adoption of drones across different industry verticals, including agriculture, landscaping and military and defense, as well as a rise in the need for collecting high quality and real-time data insight.

Our Branded Software Solutions

Ground Control

A cloud-based, plug-and-play operating system, Ground Control provides individual pilots and large enterprises with everything they need to completely automate and scale their drone operations workflows. Offered as Software-as-a-Service, Ground Control continues to earn the trust and fidelity of its blue chip, industry-diverse customers by providing a single platform to automate flight management systems safely and securely; easily manage drone programs of any scope and scale; and process, analyze and share drone-captured image data and visualization necessary for assessing risks, improving workflow processes and achieving time and cost efficiencies across enterprises of virtually any size. With the aim of empowering AgEagle’s customers to readily extend their reach and human capability through adoption of scalable autonomous drone programs, Ground Control users can:

Ground Control has been integrated with several other industry leading UAS technologies, including AgEagle’s own line of proprietary sensors and airframes. In addition, Ground Control’s industry partnerships include integrations with:

eMotion

AgEagle also offers eMotion, a drone flight and data management solution created specifically for aerial mapping use. With eMotion, flights are built using intuitive mission blocks and flight modes. Users simply need to choose a block (aerial mapping, corridor, etc.), highlight the region they want to map, define key settings, and eMotion auto-generates the drone’s flight plan. Multi-flight missions are supported, and the software’s full 3D environment adds a new dimension to drone flight management, helping users to plan, simulate and control the drone’s trajectory for safer flights, more consistent performance and improved data quality. Moreover, eMotion’s built-in Flight Data Manager automatically handles the georeferencing and preparation of images requires for post-processing in software such as Pix4Dmapper. Connecting wirelessly to a user’s drone, to industry cloud solutions, to survey-grade base stations and to airspace and live weather data, eMotion is advanced, scalable drone software that anyone can use.

HempOverview

As one of the agriculture industry’s leading pioneers of advanced aerial-image-based data collection and analytics solutions, AgEagle leveraged our expertise to champion the use of proven, advanced web- and map-based technologies as the means to streamline and ultimately standardize hemp cultivation in the United States. Growers need to be applied, as opposedregistered/permitted; crops need to traditional widespread land application processes, thus decreasing input costs, reducingbe monitored and inspected; and enforcement operations must be established to ensure compliance with state and federal mandates. Through HempOverview, we believe that AgEagle represents the amountfirst agriculture technology company to bring to market an advanced agtech solution that is designed to meet the unique complexities and vigorous oversight, compliance and enforcement demands of chemicals appliedthe emerging American hemp industry and potentially increasing yields. AgEagle’s products were designed for busy agriculture professionals who do not have the time to process images on their computers, which someunique needs and demands of its competitors require. Thekey stakeholders.

HempOverview comprises four modules:

In November 2019, the Florida Department of Agriculture and Consumer Services (FDACS) licensed the HempOverview solution to manage its online application submission and registration process for hemp growers and their farms and hemp fields in the State of Florida for the years 2020, 2021 and 2022. In June 2021, the State of Florida expanded its licensing of the HempOverview platform to provide for access to all four of the modules. FDACS also tasked AgEagle with developing a custom registration software can automatically take pictures from the camera, stitch the photos together through the cloud,platform to enhance communications, licensing and deliver a geo-referenced, high quality aerial mapgeneral compliance relating to the user’s desktop or tablet device using specialty precision agriculture software such as SST Software, SMS Software or most other agricultural software solutions. The resultoversight and protection of more than 500 endangered and commercially exploited wild plants native to Florida. For instance, in an effort to curb exploitation of saw palmetto, a plant whose extract is a prescription or zone map that can then be used in herbal supplements often marketed for its urinary tract and prostate health benefits, FDACS requires harvesters and sellers of saw palmetto berries to obtain a field computer thatNative Plant Harvesting Permit. According to a related FDACS notice, “Widespread gathering of these berries is typically found indepleting a sprayer or applicator designed to drive through fields to precisely applywildlife food source and threatening the amountstability of nutrients or chemicals required to continue or restore the production of healthy crops.some ecosystems.”

In additionJanuary 2021, the Iowa Department of Agriculture and Land Stewardship also licensed the HempOverview platform to UAV sales,manage the state’s online registration, payment processing, comprehensive data collection and compliance oversight for the 2021, 2022 and 2023 planting seasons.

Market Opportunity for Drone Software Solutions

                Rapid adoption of UAS for commercial and government/military purposes continues to fuel the growth of the global drone software market, with particularly robust demand expected for applications in late 2018, AgEagle introducedareas that include mapping and surveillance, agriculture 4.0 and precision farming, academic research, infrastructure inspection and maintenance, search and rescue and shipping and delivery. In a new drone-leasing program, alleviating farmersJuly 2022 report published by Allied Market Research, the firm’s market analysts reported that the global drone software market was valued at $5.96 billion in 2021, and agribusinessesis now projected to reach $21.93 billion by 2031, growing at a CAGR of 14.5% from significant upfront costs associated with purchasing2022 to 2031.

Market Opportunity for U.S. Industrial Hemp and Hemp-Derived CBD

According to the November 2022 report of the industry research firm Markets and Markets, the global industrial hemp market is estimated to be valued at $6.8 billion in 2033 and is projected to reach $18.1 billion by 2027, recording a drone, while21.6% CAGR. Following the legalization of industrial hemp production in the United States, the country’s industrial hemp industry has grown rapidly, as it is one of the largest consumers of hemp-derived products, including oilseeds and cannabidiol (“CBD”). CBD is a non-intoxicant cannabinoid that has become more popular as a food supplement and as an ingredient in pharmaceutical and cosmetic products. Hemp bioplastics made from hemp seeds and CBD oil is also relieving them from ongoing drone maintenancedriving growth of the industry. Growing consumer demand for sustainable goods, as well as corporate and government initiatives and support, requirements. Additionally,are expected to fuel the new program providesgrowth of hemp-based biofuel and bioplastics.

AgEagle’s Manufacturing Operations

For years, federal agencies have been using drones for a wide range of use cases, from mapping to surveillance, search and rescue, and scientific research. However, in recent years federal agencies’ use of and ability to procure UAS has evolved, largely stemming from security concerns about drones from Chinese manufacturers. In 2020, for example, the optionU.S. Department of engagingInterior grounded its entire fleet of drones over concerns “that Chinese parts in them might be used for spying, making exceptions only for emergency missions like fighting wildfires and search-and-rescue operations,” as The New York Times reported on January 29, 2020.

Former President Donald Trump issued an executive order just before leaving office that said the U.S. government would seek to prevent “the use of taxpayer dollars to procure UAS that present unacceptable risks and are manufactured by, or contain software or critical electronic components from, foreign adversaries, and to encourage the use of domestically produced UAS.” As a trained result, the General Services Administration works to ensure that only drones approved by the DoD’s Defense Innovation Unit are permitted under Multiple Award Schedule contracts.

AgEagle pilotbelieves that these measures to operate the droneban China-manufactured drones and manage the entire image collection process,components has fueled and will continue to fuel, demand for “Made in America” drones and components, creating a truly turnkey aerial imagery capture solutionsignificant opportunity for U.S.-based drone manufacturers, like AgEagle. Consequently, it is AgEagle’s intention to establish best industry practices and define quality standards for manufacturing, assembly, design/engineering and testing of drones, drone subcomponents and related drone equipment in the Company’s customers.U.S. facilities. The Company also has established manufacturing operations in its Lausanne, Switzerland facility, where it assembles its line of eBee-branded fixed wing drones for AgEagle’s international customer base.

AgEagle’s commitment to its discerning customers has driven its efforts to establish recognized centers of excellence in drone airframes, sensors and software, which, in turn, has resulted in the Company’s drone production operations receiving official ISO:9001 certification for its Quality Management System (“QMS”) in 2022. Meeting a wide variety of strict standards, AgEagle has demonstrated that it delivers consistently high-quality products and services in every aspect of its fixed-wing drone operations, including design, manufacturing, marketing, sales and after-sales. An international certification, ISO:9001 recognizes organizational excellence and good quality practices based on a strong customer focus, robust process approach and proof of continual improvement. The certification was achieved following an extensive audit across AgEagle’s drone operations, led by the Company’s dedicated in-house quality management team. The QMS was developed over a two-year period, outlining a framework of policies, processes and procedures to help achieve the Company’s high-performance objectives.

Acquisition of Agribotix

In August 2018, we acquired certain assets of Agribotix, LLC, a Colorado limited liability company (“Agribotix”), which included Agribotix’s primary product,FarmLens™.Agribotix was engaged in the business of providing integrated agricultural drone solutions and drone-enabled software technologies and services for precision agriculture.Key Growth Strategies

We believed that purchasing FarmLens,benefitted usintend 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 shareholders by developing important vertically integrated productsday-to-day operations and services.FarmLens is a subscription cloud analytics service that processes data, primarily collectedaligning them with a drone, such as those produced by AgEagle,our efforts to earn the trust and makes such data actionable by farmerscontinued business of our customers and agronomists.FarmLensis currently sold by AgEagle as a subscription service and offered either standalone or in a bundle with drone platforms manufactured by leading drone providers like AgEagle, DJI and senseFly.industry partners:

Competitive Strengths

AgEagle believes the following attributes and capabilities provide us with long-term competitive advantages:

Government Regulation

UAV Regulation

AgEagle is subject to industry-specific regulations due to the nature of the products we sell to our customers. For example, certain aspects of our U.S. business are subject to regulation by the Federal Aviation Administration (“FAA”), which regulates airspace for all air vehicles in the U.S. National Airspace System.

In August 2016, the FAA’s final rules for routine use of certain small UAS in the U.S. National Airspace System went into effect, providing safety rules for small UAS (under 55 pounds) conducting non-recreational operations. These rules limit flights to visual-line-of-sight daylight operation, unless the UAS has anti-collision lights in which case twilight operation is permitted. TheFarmLensplatform extends AgEagle’s reach as final rule also addresses height and speed restrictions, operator certification, optional use of a business through key partnerships. visual observer, aircraft registration and marking and operational limits, including prohibiting flights over unprotected people on the ground who are not directly participating in the operation of the UAS. Current FAA regulations require drone operators to register their systems with the FAA and secure operating licenses for their drones. These regulations continue to evolve to accommodate the integration of UAS into the National Airspace System for commercial applications.

In April 2021, the FAA’s final rule for remote identification of UAS went into effect. On the same day, the final rule for operation of small UAS over people also went into effect. This rule permits routine operations of small unmanned aircraft over people, moving vehicles and at night under certain conditions, provided that the operation meets the requirements of one of four operational categories.

On October 2018,27, 2022, AgEagle announced that it was expandingthe Company’s eBee X series of fixed wing UAS were the first and only drones on Agribotix’s existing partnershipthe market at that time to comply with The Climate Corporation’sFieldView™platform, enabling farmersCategory 3 (as defined below) of the Operations of Small Unmanned Aerial Systems Over People rules published by the FAA. Now that the eBee has proven compliant with Category 3 (as defined below) of the rules, eBee drone operators no longer need an FAA waiver for OOP or Operations Over Moving Vehicles. Category 3 eligible sUAS must not cause injury to share imagesa human being that is equivalent to or greater than the severity of injury caused by a transfer of 25 foot-pounds of kinetic energy upon impact fromFarmLens to theirFieldView accounts a rigid object, does not contain any exposed rotating parts that could lacerate human skin upon impact with a human being, and compare them alongside other valuable metrics, including plantingdoes not contain any safety defects. Category 3 aircraft also require FAA-accepted means of compliance and yield data. To date,FarmLenshas processed agricultural imagery for approximately two million acresFAA-accepted declaration of crops and analyzed data for over 53 different crop types from over 50 countries around the world. compliance.

In December 2018, AgEagle unveiled its plansOur non-U.S. operations are subject to develop aFarmLens Mobile app, extending the numerous benefitslaws and regulations of foreign jurisdictions, which may include regulations that are more stringent than those imposed by theFarmLensplatform to mobile devices. TheFarmLens Mobile app was commercially launched in 2019 and is now available for download U.S. government on any iPhone, iPad or Android device.our U.S. operations.

HempOverview Platform

Domestic Hemp Production and Prevailing Regulatory Changes

With the passing of the 2018 Farm Bill in December 2018, industrial hemp is now recognized as an agricultural commodity, such as corn, wheat, or soybeans.

More specifically, the 2018 Farm Bill authorizes state departments of agriculture, including agencies representing the District of Columbia, the Commonwealth of Puerto Rico and any other territory or possession of the United States, and Indian tribal governments, to submit plans to the USDA applying for primary regulatory authority over the production of hemp in their respective state or tribal territory. For more information on state and tribal nation plan submission,submissions, please visithttps://www.federalregister.gov/documents/2019/10/31/2019-23749/establishment-of-a-domestic-hemp-production-program.

Market Opportunity in U.S. Industrial Hemp and Hemp-Derived CBD

According to research firm Frontier Data’s Global State of Hemp: 2019 Industry Outlook, 2018 sales of hemp worldwide were driven by continued strength in Chinese textiles, European industrials, Canadian foods and the U.S. hemp-derived CBD market. However, continued demand in the CBD market “will be the main driving force behind the global hemp market’s continued growth,” which the firm estimates will reach $5.7 billion by 2020.

In theHemp & CBD Industry Factbook 2019, published byHemp Industry Daily, rising consumer enthusiasm for and awareness of CBD – combined with widespread, easy access to CBD products at traditional retail outlets – is expected to drive a surge in CBD sales over the coming years, increasing to $10.3 billion by 2024.

HempOverviewwww.ams.usda.gov/rules-regulations/hemp/state-and-tribal-plan-review.

As one of January 15, 2023, 42 states, two U.S. territories and 53 tribal nations have had their hemp production plans approved by the agriculture industry’s leading pioneers of advanced aerial-image-based data collectionUSDA; and analytics solutions, AgEagle is intent on leveraging our expertiseeight states and seven tribal nations require hemp growers to champion the use of proven, advanced web- and map-based technologies asseek a meansUSDA Hemp Producer License in order to streamline and ultimately standardize hemp cultivation in the United States. Growers need to be registered/permitted; crops need to be monitored and inspected; and enforcement operations must be established to ensure compliance with state and federal mandates. Through the introduction ofHempOverview, AgEagle represents the first agriculture technology company to its knowledge to bring to market an advanced agtech solution that is designed to meet the unique complexities and vigorous oversight, compliance and enforcement demands of the emerging American hemp industry and the unique needs and demands of its key stakeholders.operate.

HempOverview is comprised of four modules:

In November, 2019, AgEagle announced that the Florida Department of Agriculture and Consumer Services (“FDACS”) has chosen theHempOverview solution to manage its online application submission and registration process for hemp growers and their farms and hemp fields in the State of Florida for the years 2020, 2021 and 2022. In addition, the Company has entered discussions with several other states across the nation, as well as with certain growers and processors, and expects to announce additional newHempOverview clients in 2020.Environmental

HempOverview has also been created to support hemp processors who contract with growers, helping to ensure profitable production on existing contracted acres while maintaining governmental compliance in a changing regulatory landscape. More specifically,HempOverview supports full, cloud-based mobile- and desktop-based software application and enables users to:

HempOverview focuses on simultaneously collecting data, analyzing field-related problems and providing readily accessible analysis and reporting for achieving and sustaining end-to-end visibility and best management practices for the growing industrial and CBD hemp supply chain.

Commercial Drone Package Delivery

Over the past year, there has been a surge of prominent companies, including Alphabet (Google), FedEx, Intel, Qualcomm, Amazon, Target, Walmart, Alibaba, UPS, 7-Eleven, Uber and many others, actively developing commercial drone delivery service initiatives as part of their long-term strategic plans. These companies intend to leverage the latest in UAV technologies to deliver food, consumer products, medicines and other types of lightweight freight direct to consumers and businesses in the fastest, most cost efficient and environmentally responsible manner possible – a practical alternative to costly auto transport.

AgEagle’s proven expertise in manufacturing rugged, reliable and professional grade UAVs makes the Company a logical partner for designing, manufacturing and testing drone platforms in the fast growing package delivery market – a market forecasted by ResearchandMarkets will climb to $11.2 billion by 2022 and subsequently rise to $29.06 billion by 2027. The anticipated growth of the industry is expected to be largely fueled by the high usage of drones in the ecommerce industry for delivery of products in rural areas, where automotive transport vehicles cannot readily reach or where deliveries take longer time to arrive.

In September 2019, the Company announced that it was actively pursuing expansion opportunities within the Drone Logistics and Transportation market, and reported that it had received its first purchase order from a major unnamed ecommerce company to manufacture and assemble UAVs designed to meet the critical specifications for drones that are meant to carry goods in urban and suburban areas. AgEagle is currently working in close collaboration with this new customer on its tethered test flight operations and ongoing development. In association with the initial purchase order, AgEagle recorded its first revenues in the second half of 2019 and will recognize additional revenues from the project in the first quarter of 2020.

Sustainability Platform

The negative impact of agriculture on both the environment and society has been widely documented with unsustainable farming practices serving to confound land conversion and habitat loss, wasteful water consumption, soil erosion and degradation, pollution and climate change. It has been reported that agricultural production is believed to be responsible for 70% of river and stream pollution from chemicals, silt and animal waste (source: Food and Agriculture Organization of the United Nations). Moreover, agriculture is the largest consumer of the Earth’s available freshwater: 70% of withdrawals from watercourses and groundwater are for agricultural usage, three times more than 50 years ago. By 2050, the global water demand of agriculture is estimated to increase by a further 19% due to irrigational needs (source: GlobalAgriculture.org).

Left unchecked, many believe that farming practiced without care presents the greatest global threat to species and ecosystems, especially given that demand for more food - and healthier food - is rising exponentially. According to the World Resources Institute, our planet will need 70 percent more food to feed a global population of 9.6 billion by 2050. In view of looming environmental and social crises facing the planet, both consumer packaged goods companies and their supply chain partners recognize the need ​to accelerate their shift towards greater transparency in their sustainability practices and policies as they assume greater responsibility for mitigating the use of chemicals in crop production and preserving natural resources.

ParkView Platform

Leveraging the underlying imaging technology and robust analytics capabilities of AgEagle’sFarmLensplatform, AgEagle announced the formal market introduction of itsParkView solution in March 2019.ParkView is a proprietary aerial imagery and data analytics platform designed specifically for assessing and supporting sustainability initiatives involving municipal, state and federal public parks and recreation areas. The Company further announced that it won its firstParkViewcustomer with the signing of Denver Parks and Recreation (“DPR”) in Denver, Colorado. DPR will utilizeParkView to better inform vegetative maintenance and natural resource preservation for its green infrastructure, comprising more than 6,000 acres of public green space within the city limits. AgEagle’s staff was also contracted to provide DPR with in-depth training on best management practices for UAV operations in a municipal setting.

Research has shown that urban green infrastructure can materially improve water quality and conservation, attract investment, revive distressed neighborhoods, encourage redevelopment and provide outdoor recreational opportunities for cities of all scope and sizes worldwide, thus effectively helping to align social, economic, public health and environmental goals. 

Growth Strategy

We intend to grow our business by achieving greater market penetration of the growing precision agriculture marketplace; by promoting our new service targeting the sustainable agriculture marketplace for the 2020 growing season; and by creating new, easier to use and higher value products that position AgEagle as a leading innovator and trusted solutions provider in high growth markets where advanced aerial imaging and data capture and analytics technologies can be used to achieve specific business and sustainability objectives. Currently, our management is actively exploring new vertical expansion opportunities in other industries outside of agriculture and its related areas, including drone-enabled package delivery.

Key components of our growth strategy include the following:

Competitive Strengths

AgEagle believes the following attributes and capabilities provide us with long-term competitive advantages:

Government Regulation

UAV Regulation

AgEagle’s UAV products are subject to regulations of the FAA. On June 21, 2016, the FAA announced it had finalized the first operational rules for routine commercial use of small Unmanned Aerial Systems (UAS), which for purposes of the regulations are unmanned aircraft weighing less than 55 pounds that are conducting non-hobbyist operations. UAS operators-for-hire will have to pass a written test and be vetted by the TSA, but no longer need to be airplane pilots as current law requires. The rules went into effect on August 20, 2016. Among other things, the new regulations require:

The new regulations also establish a remote pilot in command position. A person operating a small unmanned aircraft must either hold a remote pilot airman certificate with a small unmanned aircraft system rating or be under the direct supervision of a person who does hold a remote pilot certificate (remote pilot in command). A pilot’s license is no longer required. To qualify for a remote pilot certificate, a person must: demonstrate aeronautical knowledge by either passing an initial aeronautical knowledge test at an FAA-approved knowledge testing center; or hold a part 61 pilot certificate other than student pilot, complete a flight review within the previous 24 months, and complete a small UAS online training course provided by the FAA. The person must also be vetted by the TSA and be at least 16 years old. Applicants will obtain a temporary remote pilot certificate upon successful completion of TSA security vetting. The FAA anticipates that it will be able to issue a temporary remote pilot certificate within 10 business days after receiving a completed remote pilot certificate application.

The regulations do not require the use of a visual observer. In addition, FAA airworthiness certification is not required. However, the remote pilot in command must conduct a preflight check of the small UAS to ensure that it is in a condition for safe operation.

Most of the restrictions can be waived by the FAA if the applicant demonstrates that his or her operation can safely be conducted under the terms of a certificate of waiver. The FAA maintains an online portal where a company or individual can apply for a certificate of waiver.

Drone Package Delivery Regulation

The FAA is encouraging innovation through the Unmanned Aircraft Systems (UAS) Integration Pilot Program (IPP) by working with industry,various federal, state, local and tribal governmentsnon-U.S. laws and regulations relating to realizeenvironmental protection, including the benefitsdischarge, treatment, storage, disposal and remediation of drones, while informinghazardous substances and wastes. We could also be affected by future ruleslaws and regulations relating to climate change, including laws related to greenhouse gas emissions and regulating energy efficiency. These laws and regulations could lead to increased environmental compliance expenditures, increased energy and raw materials costs and new and/or additional investment in designs and technologies. We continually assess our compliance status and management of environmental matters to ensure our operations are in compliance with all applicable environmental laws and regulations. ParticipantsInvestigation, remediation and operation and maintenance costs associated with environmental compliance and management of sites are a normal, recurring part of our operations. These costs often are allowable costs under our contracts with the U.S. government. While environmental protection regulations have not had a significant adverse effect on our overall operations historically, it is reasonably possible that costs incurred to ensure continued environmental compliance in these programsthe future could have a material impact on our results of operations, financial condition or cash flows if additional work requirements or more stringent clean-up standards are amongimposed by regulators, or if new areas of soil, air and groundwater contamination are discovered and/or expansions of work scope are prompted by the first to prove their concepts, including package delivery by drone, through part 135 air carrier certification. Part 135 certification is the only path for small drones to carry the propertyresults of another for compensation beyond visual line of sight.investigations.

As participants in these programs move to prove their concepts, they must use FAA’s existing Part 135 certification process, some of which FAA has adapted for drone operations by granting exemptions for rules that don’t apply to drones, such as the requirement to carry the flight manuals on board the aircraft. All Part 135 applicants must go through the full five phases of the certification process.

The FAA issues air carrier certificates to U.S. applicants based on the type of services they plan to provide and where they want to conduct their operations. Operators must obtain airspace authorizations and air carrier or operating certificates before they can begin operations.

Certificates are available for four types of Part 135 operations:

UPS Flight Forward, Inc., a participant in the Integration Pilot Program (IPP), became the first company to receive a Standard Part 135 air carrier certificate to operate a drone aircraft. On September 27, 2019, UPS Flight Forward conducted its first package delivery by drone with its part 135 certification when it flew medical supplies at WakeMed’s hospital campus in Raleigh, North Carolina. The FAA issued a Part 135 Single pilot air carrier certificate for drone operations to Wing Aviation, LLC in April 2019. Wing Aviation is also part of the IPP.

The FAA is currently working on six additional Part 135 air carrier certificate applications that have been submitted by IPP operators and one 135 applications that were submitted by an FAA Partnership for Safety Plan (PSP) participant.Suppliers

In early February 2020, the FAA issued proposed safety standards for specific drones for package deliveries. This represents a big step toward allowing routine package delivery by drones. This proposal marks the first time the FAA has presented a formal policy that addresses certain safety and airworthiness requirements for drones making package deliveries. The proposal is meant to certify specific drones for parcel delivery as a special class of aircraft in ways similar to how other manned aircraft, such as airliners, helicopters and small private planes are treated. The FAA’s goal is to allow for full integration in the national airspace, but its focus appears to be on drones used for package delivery. The FAA had requested public comments be submitted by March 4, 2020. Tens of thousands of comments were received by the FAA prior to the deadline opining on the proposed rules. The FAA will review the comments submitted and may or may not make changes to the proposed rules before publishing a final rule.

Domestic Hemp Cultivation Regulation

The 2018 Farm Bill directed the United States Department of Agriculture (“USDA”) to establish a national regulatory framework for hemp production in the United States. The USDA established the U.S. Domestic Hemp Production Program through an interim final rule outlining provisions for the USDA to approve plans submitted by States and Indian Tribes for the domestic production of hemp. It also established a Federal plan for producers in States or territories of Indian tribes that do not have their own USDA-approved plan. The program includes provisions for maintaining information on the land where hemp is produced, testing the levels of delta-9 tetrahydrocannabinol, disposing of plants not meeting necessary requirements, licensing requirements and ensuring compliance with the requirements of the Rule. For more information relating to the Establishment of a Domestic Hemp Production Program, please visithttps://www.federalregister.gov/documents/2019/10/31/2019-23749/establishment-of-a-domestic-hemp-production-program.

AgEagle has developedHempOverview to provide users with a gold industry standard for fully complying with federal, state and tribal regulations associated with hemp cultivation.

Manufacturing

As of today,2022, we manufacture and assemble all of our products at our manufacturing facility in Neodesha, Kansas.

Suppliers

Currently, we havemaintained strong relationships established with companies that provide many of the parts and services necessary to construct our advanced fixed wingfixed-wing drones and newly introduced UAVS drones, such as Botlink, MicaSense and 3DR.sensors. As our Company grows, we expect to pursue additional supplier relationships from which we can source cheaperless costly and better supplies to stay ahead of the needs of the market. In addition, we have forged strong relationships with key suppliers in the U.S. and in U.S.-allied countries based on their ability to meet our needs and delivery timelines. We will continue to expand upon our suppliers’ expertise to improve our existing products and develop new solutions. In 2022, we experienced some supply chain delays due primarily to logistical issues relating to COVID-19 shutdown mandates. We may continue to experience potential supply chain disruptions in 2023 for the same reason.

Revenue MixOperating Segment Revenues

The table below reflects our revenue by operating segment for the periodsyears indicated by product mix:below:

Research and Development

Research and development activities are partcore components of our business, and we follow a disciplined approach to investing our resources to create new drone technologies and solutions. A fundamental part of this approach is a well-defined screening process that helps us identify commercial opportunities that support current desired technological capabilities in the markets we serve. Our research includes the expansion of our fixed wing products, providing for developing a portfolio of UAVs, sensors and ongoing software platform development costs, as well as other technological solutions to problems to which our existing and prospective customers must confront. We cannot predict when, if ever, we will successfully commercialize these projects, or the exact level of capital expenditures they could require, which could be substantial.

Risks Relating to Our Business

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” found in Item 1A within this Annual Report on Form 10-K. Some of these risks include, but are not limited to, risks associated with:

Recent Developments

On April 7, 2020, we entered into a Securities Purchase Agreement (the “Agreement”) with an institutional investor (the “Purchaser”). Pursuant to the terms of the Agreement, the Board authorized 1,050 shares of a newly designated series of preferred stock, the Series E Convertible Preferred Stock (the “Preferred Stock”). The Preferred Stock is convertible at $0.25 per share into an aggregate of 4,200,000 shares of the common stock, par value $0.001 per share (the “Conversion Shares”). The purchase price for the Preferred Stock was $1,050,000 (the “Purchase Price”). The Company also entered into a Registration Rights Agreement, granting registration rights to the Purchaser with respect to the Conversion Shares and common stock underlying warrants currently owned by the Purchaser (the “Warrant Shares”).

Pursuant to the terms of the Registration Rights Agreement, we shall file an initial registration statement registering the Conversion Shares and the Warrant Shares (the “Registrable Securities”), no later than the 15^th calendar day following the date the this Annual Report on Form 10-K is filed (the “Filing Date”) and, with respect to any additional registration statements the earliest practical date on which we are permitted by SEC Guidance to file such additional registration statement related to the Registrable Securities. We shall have the registration statement declared effective with the Securities and Exchange Commission (the “Commission”), no later than the 90^th calendar day following the Filing Date, or, in the event of a “full review” by the Commission, the 120^th calendar day following the Filing Date.

On April 7, 2020, as a condition to the consummation of the Agreement, we entered into a Leak-Out Agreement, with Mr. Bret Chilcott, our President and director, and the Purchaser, with respect to the shares Mr. Chilcott beneficially owns. The restriction on the disposition of the shares is for a period of seven months from the date of the closing of the Agreement. Thereafter, for a period of an additional six months, Mr. Chilcott may sell no more than $25,000 per calendar month of shares of common stock.

Organizational History

On March 26, 2018, our predecessor company, EnerJex Resources, Inc. (“EnerJex”), a Nevada company, consummated the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of EnerJex, merged with and into AgEagle Aerial Systems Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as a wholly-owned subsidiary of EnerJex (the “Merger”). In connection with the Merger, EnerJex changed its name to AgEagle Aerial Systems Inc. (the “Company, “we,” “our,” or “us”) and AgEagle Sub changed its name initially to “Eagle Aerial, Inc.” and then to” AgEagleto “AgEagle Aerial, Inc.

” Prior to the Merger, EnerJex was formerly known as Millennium Plastics Corporation (“Millennium) and was incorporated in the State of Nevada on March 31, 1999. In August 2006, Millennium acquired Midwest Energy, Inc., a Nevada corporation pursuant to a reverse merger. After such merger, Midwest Energy became a wholly-owned subsidiary, and as a result of such merger, the former Midwest Energy stockholders controlled approximately 98% of our outstanding shares of common stock. Midwest then changed its name to EnerJex Resources, Inc., (“EnerJex”) in connection with this merger, and in November 2007, it changed the name of Midwest Energy (one of our wholly-owned subsidiaries) to EnerJex Kansas, Inc. (“EnerJex Kansas”). All of its operations conducted prior to this merger, all of the EnerJex operations were conducted through EnerJex Kansas, Inc., Black Sable Energy, LLC, a Texas limited liability company (“Black Sable”) and Black Raven Energy, Inc. a Nevada corporation (“Black Raven”). Its leasehold interests were held in ourits wholly-owned subsidiaries Black Sable, Working Interest, LLC, EnerJex Kansas and Black Raven. As of December 31, 2021, the Company continued with the wholly-owned subsidiaries, AgEagle Aerial, Inc. and EnerJex Kansas, Inc.

On August 28, 2018,January 27, 2021 (“MicaSense Acquisition Date”), we closedentered into a stock purchase agreement (the "MicaSense Purchase Agreement”) with Parrot Drones S.A.S. and Justin B. McAllister (the "MicaSense Sellers”) pursuant to which the transactions contemplated byCompany acquired 100% of the Asset Purchase Agreementissued and outstanding capital stock of MicaSense, Inc. from the MicaSense Sellers (the “Purchase Agreement”“MicaSense Acquisition”) dated July 25, 2018 with AgEagle Aerial, Inc.,. The aggregate purchase price for the shares of MicaSense was $23,000,000, less any debt, and subject to a customary working capital adjustment. MicaSense became a wholly-owned subsidiary of the Company; Agribotix, LLC,Company as a Colorado limited liability companyresult of the MicaSense Acquisition.

On April 19, 2021 (the “Measure Acquisition Date”), the Company entered into a stock purchase agreement (the "Measure Purchase Agreement”) with Brandon Torres Declet (“Agribotix” orMr. Torres Declet”), in his capacity as representative of the “Seller”);sellers, and the other partiessellers named therein. Pursuant toin the Measure Purchase Agreement we acquired all right, title and interest in and to all assets owned by Agribotix and utilized in their business for providing integrated agricultural drone solutions and drone-enabled software technologies and services for precision agriculture, except for certain excluded assets as set forth in the Purchase Agreement. At closing, we also assumed certain commitments under various third-party contracts(the "Measure Sellers”) pursuant to which the termsCompany acquired 100% of the issued and outstanding capital stock of Measure Global, Inc. (“Measure”) from the Measure Sellers (the “Measure Acquisition”). The aggregate purchase price for the shares of Measure is $45,000,000, less the amount of Measure’s debt and transaction expenses, and subject to a customary working capital adjustment. Measure became a wholly-owned subsidiary of the Company as a result of the Measure Acquisition.

On October 18, 2021 (the “senseFly S.A. Acquisition Date”), the Company entered into a stock purchase agreement with Parrot Drones S.A.S. pursuant to which the Company acquired 100% of the issued and outstanding capital stock of senseFly S.A. from Parrot Drones S.A.S. (the “senseFly S.A. Purchase Agreement.Agreement”) The aggregate purchase price for the shares of senseFly S.A. is $21,000,000, less the amount of senseFly S.A.’s debt and subject to a customary working capital adjustment. senseFly S.A. became a wholly-owned subsidiary of the Company as a result.

Our Headquarters

Our principal executive offices are located at 117 S. 48863 E. 34^th Street Neodesha,North, Wichita, Kansas 6675767226 and our telephone number is 316-202-2076.620-325-6363. Our website address is www.ageagle.com. The information contained on, or that can be accessed through, our website is not a part of this Annual Report. We have included our website address in this Annual Report solely as an inactive textual reference.

EmployeesHuman Capital Resources

As of December 31, 2019,March 15, 2023, we employed 692 full-time employees and 4one part-time employees.employee. We acknowledge that our employees are the Company’s most valued asset and the driving force behind our success. For this reason, we aspire to be an employer that is known for cultivating a positive and welcoming work environment and one that fosters growth, provides a safe place to work, supports diversity and embraces inclusion. To support these objectives, our human resources programs are designed to develop talent to prepare them for critical roles and leadership positions for the future; reward and support employees through competitive pay, benefit and perquisite programs; enhance the Company’s culture through efforts aimed at making the workplace more engaging and inclusive; acquire talent and facilitate internal talent mobility to create a high performing, diverse workforce; engage employees as brand ambassadors of the Company’s products; and evolve and invest in technology, tools and resources to enable employees at work.

Intellectual Property

WeAs reflected in the table below, we currently have a registered trademarks, several patents or pending patents for our proprietary drone, sensor and software technologies filed in the United States and certain jurisdictions abroad. As of March 15, 2023, our trademark onportfolio includes 63 registered and/or pending in various countries and 21 patents in various stages of the AgEagle andFarmLens name and logo. In 2020, we also plan to apply for registered trademark protection on theParkView andHempOverview names and logos.patent granting process. We also plan to file provisional patents on certain aspects of our current and future technology. We consider our UAV and sensor manufacturing processprocesses to be a trade secretsecrets and have non-disclosure agreements with current employees and business partners to protect those and other trade secrets held by the Company. Risks related to the protection and exploitation of IP rights are set forth in “Item 1A—Risk Factors”.

Where You Can Find Additional Information

The Company is subject to the reporting requirements under the Exchange Act. The Company files with, or furnishes to, the SEC quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports and will furnish its proxy statement. These filings are available free of charge on the Company’s website, wwwageagle.com, shortly after they are filed with, or furnished to, the SEC. The SEC maintains an Internet website, www.sec.gov, which contains reports and information statements and other information regarding issuers.

The risk factors discussed below could cause our actual results to differ materially from those expressed in any forward-looking statements. Although we have attempted to list comprehensively these important factors, we caution you that other factors may in the future prove to be important in affecting our results of operations. New factors emerge from time to time, and it is not possible for us to predict all of these factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

The risks described below set forth what we believe to be the most material risks associated with the purchase of our common stock.Common Stock. Before you invest in our common stock,Common Stock, you should carefully consider these risk factors, as well as the other information contained in this prospectus.

Risks Related to Our Business and the Industries We Serve

We have a history of operating losses and expect to incur significant additional operating expenses.

Through our wholly-owned subsidiary, AgEagle Aerial, Inc. (“AgEagle Sub”), we have been operating for over ten years. It was not until 2021 that we acquired the latest go-to-market airframes, sensors and software technologies of our products. As of December 31, 2022, we had an accumulated deficit of approximately eight years. However, AgEagle Sub has only been in$111,553,444 which included net losses of approximately $58,253,723 and $30,108,680 for the UAV business for half of that timeyears ended December 31, 2022 and just begun to operate in the hemp industry.2021, respectively. We are currently still incurring significant net losses as we continue to invest in theour business development stagestrategy and have limited commercial sales ofgrow our products and, accordingly,business. As a result we cannot guarantee thatwhen we will become profitable.can expect to generate sufficient cash flows from operations to be adequate to cover our operating business. Moreover, even if we achieve profitability, given the competitive and evolving nature of the industries in which we operate, we may be unable to sustain or increase profitability and failure to do so would adversely affect itsour business, including our ability to raise additional funds.

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, curtail or eliminate one or more of our research and development programs or commercialization efforts.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts on product and software development. We will require additional funds to support our continued research and development activities, as well as the costs of commercializing, marketing and selling any existing and new products and/or services resulting from those activities.

Until such time, if ever, that we can generate sufficient revenue and achieve profitability, we expectwill need to seek to financemeet our future cash needs through equity or debt financings or corporate collaborations and/or strategic arrangements. We currently havefinancings. There can be no other commitments or agreements relating to any of these types of transactions and cannot be certainassurance that additional fundingwe will be available on acceptablesuccessful in our capital raising efforts.

On May 25, 2021, the Company entered into an at-the-market Sales Agreement (the "ATM Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated and Raymond James & Associates, Inc. as sales agents (the "Agents”), in connection with the offer and sale from time to time of shares of the Company’s Common stock, having an aggregate offering price of up to $100,000,000 (the "ATM Shares”), through an at-the-market equity offering program (the "ATM Offering”). During 2022, we raised total gross proceeds of $17.8 million in debt and equity transactions, including $4.6 million through the ATM Offering.

On June 26 2022, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Investor”) which is an existing shareholder of the Company. Pursuant to the terms orof that agreement, the Company issued and sold to the Investor 10,000 shares of the Series F 5% Preferred Convertible Stock (“Series F”) and warrants to purchase up to 16,129,032 shares of the Company’s Common Stock at all.$0.96 per share in a registered direct offering and raised a total of $10,000,000 in gross proceeds.

On December 6, 2022, the Company and the Investor entered into a Securities Purchase Agreement pursuant to which the Company issued and sold to the Investor (i) a 8% original issue discount promissory note (the “Note”) in the aggregate principal amount of $3,500,000, and (ii) a common stock purchase warrant (the “Warrant”) to purchase up to 5,000,000 shares of the Company’s Common Stock (the “Shares”) at an exercise price of $0.44 per share, subject to standard anti-dilution adjustments. The Note is an unsecured obligation of the Company. It has an original issue discount of 4% and bears interest at 8% per annum. The Company received net proceeds of $3,285,000 net of the original issue discount of $140,000 and $75,000 of issuance costs. The Warrant is not exercisable for the first six months after issuance and has a five-year term from the initial exercise date of June 6, 2023.

On March 10, 2023, the Company issued and sold to the Investor an additional 3,000 shares of Series F convertible into 2,381 shares of the Company’s common stock, per $1,000 Stated Value per share of Preferred Stock, at a conversion price of $0.42 per share and associated common stock warrant to purchase up to 7,142,715 shares of common stock at the exercise price of $0.42 per share warrant (the “Additional Warrant”) in a private placement and raised $3,000,000 in gross proceeds. The Additional Warrant is exercisable upon issuance and has a three-year term.

Despite the foregoing, we will require additional financing in the future. If we are unable to raise additional capital, we may have to delay, curtail or eliminate commercializing, marketing and selling one or more of our solutions. Should the financing we require be unavailable to us, or on terms unacceptable to us when we require it, the consequences could have a material adverse effect on our business, operating results, financial condition and prospects.

In addition, if additional funds are obtained through arrangements with collaborative partners or other non-dilutive sources, we may have to relinquish economic and/or proprietary rights to some of our technologies or products under development that we would otherwise seek to develop or commercialize by ourselves. Such events may have a material adverse effect on our business, operating results, financial condition and prospects.

Our independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”

As of December 31, 2022, the Company had $4,349,837 of cash on hand and working capital of $9,079,091. During the year ended December 31, 2022, the Company incurred a net loss of $58,253,723, and used cash in operating activities of $20,107,670. While the Company has historically been successful in raising capital to meet its working capital needs, the ability to continue raising such capital to enable the Company to continue its growth is not guaranteed. As the Company will require additional liquidity to continue its operations and meet its financial obligations over the next twelve months, there is substantial doubt about the Company’s ability to continue as a going concern. The Company is evaluating strategies to obtain the required additional funding for future operation 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 obligations; and could be required to discontinue or significantly reduce the scope of its operations if no other means of financing options are available. The consolidated financial statements contained in this Annual Report 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.

Risks Related to Our Business and the Industries We Serve

We operate in evolving markets, which makes it difficult to evaluate our business and future prospects.

AgEagle’s drone, sensor and software technologies are and will be sold in new and rapidly evolving markets. The commercial UAV industry is in the early stages of customer adoption and the FAA’s definition of regulations relating to the integration of commercial drones into the U.S. National Airspace System is rapidly evolving. Accordingly, our business and future prospects may be difficult to evaluate. We cannot accurately predict the extent to which demand for our drone systems and solutions will increase, if at all. The challenges, risks and uncertainties frequently encountered by companies in rapidly evolving markets could impact our ability to do the following:

If we fail to address these and other challenges, risks and uncertainties successfully, our business, results of operations and financial condition would be materially harmed.

Product development is a long, expensive, and uncertain process.

The development of both UAV software and hardwaresystems is a costly, complex and time-consuming process, and investments in product development often involve a long wait until a return, if any, can be achieved on such investment. We might face difficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market, which might allow competing products to emerge during the development and certification process. We anticipateplan to continue making significant investments in research and development relating to our products and technology services, but such investments are inherently speculative and require substantial capital expenditures. Any unforeseen technical obstacles and challenges that we encounter in the research and development process could result in delays in or the abandonment of product commercialization, may substantially increase development costs, and maywill likely negatively affect our results of operations.

Successful technical development of our products does not guarantee successful commercialization.

Although we have successfully completed the technical development ofacquired our two originalfully developed go-to-market UAV systems, as well as theRX-60sensors, andRX-48 systems, and have developed or acquired several software platforms which we offertechnology solutions ready for sale or subscription, we may still fail to achieve commercial success for a number ofseveral reasons, including, among others, the following: