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

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

For the ~~quarterly~~transition period ~~ended September 30, 2017~~from _________ to _________

8863 E. 34th Street North
Wichita, Kansas 67226
(Address of principal executive offices, including zip code)

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~~

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§(section 232.405 of this chapter) during the preceding 12twelve months (or ~~for such~~ shorter period that the registrant was required to submit and post such files).

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,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

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.☐

~~The number of shares of Common Stock, $0.001 par value, outstanding on November 9, 2017 was 10,321,397 shares.~~

AgEagle Aerial Systems Inc. (“AgEagle” or “the Company”) designs, produces and supports technologically-advanced small, unmanned aerial vehicles (“UAVs” or “drones”). In addition, to providing new utility to UAVs, the Company pioneers 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 solutions that solve important problems confronting the global agricultural industry. In fact, AgEagle, has spent ten years serving customers covering more than two million acres in 50 countries and monitoring 53 different crops. AgEagle remains intent on earning distinction as a trusted partner to clients seeking to adopt 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 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 true turnkey aerial imagery capture solution for its customers.

In the first half of 2019, the Company introduced HempOverview, 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.

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.

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” AgEagle Aerial, Inc.

On August 28, 2018, we closed the transaction contemplated by the Asset Purchase Agreement dated July 25, 2018 with AgEagle Aerial, Inc., a wholly-owned subsidiary of the Company; Agribotix, LLC, a Colorado limited liability company (“Agribotix” or the “Seller”); and the other parties named therein. Pursuant to the Asset Purchase Agreement, we acquired all right, title and interest in and to all assets owned by Agribotix, which included Agribotix’s primary product, FarmLens™, utilized in their business for providing integrated agricultural drone solutions and drone-enabled software technologies and services for precision agriculture.

The Company believes that purchasing FarmLens benefitted us and our shareholders by developing important vertically integrated products and services. FarmLens is a subscription cloud analytics service that processes data, primarily collected with a drone such as those produced by AgEagle; and makes such data actionable by farmers and agronomists. FarmLens is 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.

To date, FarmLens has processed agricultural imagery for approximately two million acres of crops and analyzed data for over 53 different crop types from over 50 countries around the world.

In late September 2020, the Company began relocating its headquarters and drone manufacturing operations from Neodesha, Kansas to Wichita, Kansas.

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) and the risks to the international community as the virus spreads globally. On March 11, 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. In response to the pandemic, many states and jurisdictions in which we operate have issued stay-at-home orders and other measures aimed at slowing the spread of the coronavirus. We initially closed our offices only and had our executive and administrative staff work remotely. Our manufacturing operations continued operating however we experienced delays with some of our ongoing projects in terms of completion due to vendor delays. We continue to follow guidance from local authorities in determining the appropriate restrictions to put in place for our offices and manufacturing facility, such as social distancing and limited capacities, to ensure the health and safety of our employees. As of the date of this filing, our locations and primary suppliers continue to operate. We may experience constrained supply or other business disruptions that could materially impact our business, results of operations and overall financial performance in future periods.

The accompanying interim unaudited condensed consolidated financial statements ~~of EnerJex Resources, Inc. (“~~we~~”, “~~us~~”, “our”, “EnerJex” and “Company~~”) have been prepared ~~in accordance with United States generally accepted accounting principles~~under the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information, which includes condensed consolidated financial statements of the Company and its wholly owned subsidiaries as of September 30, 2020. Accordingly, the condensed consolidated financial statements do not include all the information and notes necessary for a comprehensive presentation of the financial position and results of operations and should be read in conjunction with the ~~instructions to Form 10-Q~~audited financial statements of the Company for the year ended December 31, 2019 and ~~reflect all adjustments which,~~included in the Form 10-K filed with the SEC on April 13, 2020. It is management’s opinion that all material adjustments (consisting of ~~management,~~normal recurring adjustments) have been made, which are necessary for a fair financial statement presentation. ~~All such adjustments are of a normal recurring nature.~~ The results ~~of operations~~ for the interim period are not necessarily indicative of the results to be expected for ~~a full year. Certain amounts in~~ the ~~prior~~ year statements have been reclassified to conform to the current year presentations. The statements should be read in conjunction with the financial statements and footnotes thereto included in our Annual Report Form 10-K for the fiscal year endedending December 31, ~~2016, filed with the Securities and Exchange Commission on March 31, 2017.~~

Our consolidated financial statements include the accounts of our wholly-owned subsidiaries, EnerJex Kansas, Inc., Black Sable Energy, LLC, Working Interest, LLC and Black Raven Energy, Inc., for the three and nine month periods ended September 30, 2017, and for the year ended December 31, 2016. All intercompany transactions and accounts have been eliminated in consolidation.

~~The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.~~2020.

~~On October 19, 2017, EnerJex entered into an Agreement~~Basis of Presentation and ~~Plan of Merger (the “Merger Agreement”) with AgEagle Aerial Systems, Inc., a Nevada corporation (“AgEagle”), which designs, develops, produces,~~Consolidation– These interim condensed consolidated statements are presented in United States dollars and distributes technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry, and AgEagle Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“~~Merger Sub~~”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into AgEagle, Merger Sub will cease to exist and AgEagle will survive as a wholly-owned subsidiary of the Company (the “~~Merger”). The respective boards of directors of EnerJex and AgEagle have approved the Merger Agreement and the transactions contemplated thereby.~~

~~At the effective time of the Merger (the “Effective Time~~”), the shares of AgEagle capital stock will be automatically converted into the right to receive equal to 85% of the then issued and outstanding capital stock of the Company on a fully diluted basis. In addition, at the Effective Time all outstanding options and warrants to purchase shares of AgEagle common stock will be assumed by the Company and converted into options and warrants to purchase shares of Company common stock. No fractional shares of Company common stock will be issued in the Merger but will be rounded to the nearest whole share. Following the consummation of the Merger, former stockholders of AgEagle with respect to the Merger are expected to own 85% of the Company’s outstanding common stock (inclusive of the AgEagle assumed stock options and warrants), and current common and Series A Preferred stockholders of the Company are expected to own 15% of the Company, excluding shares of common stock that may be issued in connection with the conversion of the Company’s Series B Preferred Stock and Series C Preferred Stock, and not including any additional shares which may be issued in connection with the Company’s closing obligation to provide up to $4 million in new working capital and the elimination of all liabilities currently on the Company’s balance sheet.

In connection with the Merger, the Company will also file a proxy statement seeking stockholder approval to: (a) amend the terms of its Series A Preferred Stock (as discussed below); (b) approve the issuance of the Company’s shares in connection with the Merger to the AgEagle shareholders and new investors, in excess of 19.9% of the Company’s total issued and outstanding shares of common stock; (c) approve the issuance of shares to current Company management and directors in lieu of deferred salary and fees, a majority of which will be held in escrow to secure the Company’s indemnity obligations under the Merger Agreement; and (d) change the name of the Company to “~~AgEagle Aerial Resources, Inc.~~”

The Merger Agreement provides that, immediately following the Effective Time, the existing board of directors and officers of the Company will resign and new directors and officers will be appointed by AgEagle.

The Company intends to dispose of its principal assets, consisting primarily of its Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated, the Company does not have a present intention to dispose of the above described assets.

The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the stockholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the stockholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle stockholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) that all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement.

The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating each of the Company and AgEagle to continue to conduct its respective business in the ordinary course, to provide reasonable access to each other’s information and to use reasonable best efforts to cooperate and coordinate to make any filings or submissions that are required to be made under any applicable laws or requested to be made by any government authority in connection with the Merger. The Merger Agreement also contains a customary “~~no solicitation~~” provision pursuant to which, prior to the earlier of January 31, 2018, or the completion or termination of the Merger, neither the Company nor AgEagle may solicit or engage in discussions with any third party regarding another acquisition proposal unless, in the Company’s case, it has received an unsolicited, bona fide written proposal that the recipient’s board of directors determines is or would reasonably be expected to result in a superior proposal. The Company has paid AgEagle a $50,000 non-refundable fee at the signing of the Merger Agreement. The Merger Agreement contains certain termination rights in favor of each of the Company and AgEagle.

In addition, the Merger Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of breaches of representations and warranties contained therein. The aggregate maximum indemnification obligation of any indemnifying party for damages with respect to breaches of representations and warranties set forth in the Merger Agreement shall not exceed, in the aggregate, $350,000, other than fraud, intentional misrepresentation or willful breach. An indemnifying party shall satisfy its indemnification obligations with shares of Company common stock equal to the aggregate amount of losses of the indemnified party, calculated based upon the greater of (i) the value of the Company common stock as of the closing of the Merger; and (ii) the average closing price of the Company common stock on the NYSE American for the five trading days immediately prior to the date such a claim is made. The Company has agreed to deposit an aggregate of 1,215,278 shares of common stock to be issued to current officers and directors of the Company in lieu of deferred salary and fees into escrow to secure its indemnification obligations, the issuance of such shares requiring the approval of the Company’s common stockholders.

~~In connection with, and as a condition to the closing of the Merger, the Company is seeking the consent of the holder of its Series A Preferred Stock (“Series A Preferred Stock~~”) to amend the terms thereof to: (i) allow the Company to pay all accrued but unpaid dividends up to September 30, 2017 in additional shares of Series A Preferred Stock based on the value of the liquidation preference thereof, (ii) eliminate the right of the Series A Preferred Stock holders to receive any dividends accruing after September 30, 2017, and (iii) convert each share of Series A Preferred Stock into 10 shares of Company common stock. An affirmative vote of 66.7% of all shares of Series A Preferred Stock voting as a class as of the record date of the proxy statement is required to amend the terms of the Certificate of Designation to provide for these changes, as required under the Merger Agreement.

As of September 30, 2017, the Series A Preferred Stock had accrued a total of $6,039,972 in accrued but unpaid dividends, which would result in an additional 241,599 shares of Series A Preferred Stock being issued by the Company to satisfy these accrued dividends.

The Merger Agreement provides either party the right to terminate the Merger if it has not been consummated by January 31, 2018, provided that if all of the conditions to closing shall have been satisfied or shall be capable of being satisfied at such time, the required closing date may be extended until March 31, 2018.

On October 3, 2011, the Company entered into an Amended and Restated Credit Agreement with Texas Capital Bank, and other financial institutions and banks that may become a party to the Credit Agreement from time to time (“~~TCB” or “Bank~~”). The facilities provided under the Amended and Restated Credit Agreement were to be used to refinance a prior outstanding revolving loan facility with TCB dated July 3, 2008, and for working capital and general corporate purposes. On August 15, 2014, the Company entered into an Eighth Amendment to the Amended and Restated Credit Agreement. Among other things the Eighth Amendment extended the maturity of the Agreement by three years to October 3, 2018. On August 12, 2015, the Company entered into a Tenth Amendment to the Amended and Restated Credit Agreement. Among other things, the Tenth Amendment established the requirement of monthly borrowing base reductions commencing September 1, 2015 and continuing on the first of each month thereafter. On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflects the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended certain other items of the Credit Agreement.

On April 1, 2016, the Company informed the Bank that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016, entered into a Forbearance Agreement whereby the Bank agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Bank amended the Forbearance Agreement to extend the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a Fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Bank.

Throughout 2016, the Company evaluated plans to restructure, amend or refinance existing debt through private options. On February 14, 2017, the Company announced that a group of investors unrelated to the Company had purchased from EnerJex’s secured bank lender all rights to the Company’s secured indebtedness, and that EnerJex had executed a definitive written agreement for the discharge of the Company’s secured indebtedness with the purchasing investor group. Final closing on this agreement occurred on May 10, 2017.

~~On February 10, 2017, the Company, TCB and IberiaBank (collectively, “Sellers”), and PWCM Investment Company IC LLC, and certain financial institutions (collectively, “Buyers”) entered into a Loan Sale Agreement (“LSA~~”), pursuant to which Sellers sold to Buyers, and Buyers purchased from Sellers, all of Sellers’ right, title and interest in, to and under the Credit Agreement and Loan Documents, in exchange for (i) a cash payment of $5,000,000 (the “~~Cash Purchase Price~~”), (ii) a Synthetic Equity Interest equal to 10% of the proceeds, after Buyer’s realization of a 150% return on the Cash Purchase Price within five (5) years of the closing date of the sale, with payment being distributed 65.78947368% to TCB and 34.21052632% to IberiaBank, and (iii) at any time prior to February 10, 2022, Buyer may acquire the interest in clause (ii) above. In connection with the LSA, the Company released Sellers and its successors as holders of the rights under the Credit Agreement and Loan Documents, including Buyers, from any and all claims under the Credit Agreement and Loan Documents.

Also on February 10, 2017, the Company and its subsidiaries, and successor lender entered into a binding letter agreement dated February 10, 2017, which was subsequently amended on March 30, 2017 (as amended, the “~~letter agreement”) pursuant to which:~~

We have two options to extend the maturity date of the restated secured note by 90 days each (first to January 30, 2018 and then to April 30, 2018), upon payment of extension fees of $100,000 for each extension.

~~So long as we repay the $3,300,000 in indebtedness on or prior to the maturity date, as extended, all other amounts payable under the restated secured note are to be forgiven.~~

The closing occurred on May 10, 2017. As part of the closing procedures and net settlement, we issued a promissory note to Pass Creek Resources LLC in the amount of $105,806. The promissory bears interest at 16% per annum and matured on June 9, 2017. The amount due was not paid on June 9, 2017, but the holder has not provided the Company a notice of default.

In connection with the May 10, 2017 closing and in consideration of the satisfaction of $13,425,000 of the amount due under the Credit Agreement, as amended, the Company and certain of its subsidiaries transferred to PCR Holdings LLC, an affiliate of the successor lenders under the Credit Agreement, all of the Company’s oil and gas properties and assets located in Colorado, Texas, and Nebraska, as well as the Company’s shares of Oakridge Energy, Inc.

~~To evidence the Company’s remaining $4,500,000 of indebtedness to PWCM Investment Company IC LLC (“PWCM”), RES Investment Group, LLC (“RES”), Round Rock Development Partners, LP (“Round Rock”), and Cibolo Holdings, LLC (“Cibolo Holdings,” and together with PWCM, RES and Round Rock, “Successor Lenders~~”), the Company’s subsidiaries (except Kansas Holdings, LLC) entered into a Second Amended and Restated Credit Agreement with Cortland Capital Market Services LLC, as Administrative Agent, and the other financial institutions and banks parties thereto (the “~~New Credit Agreement”), and a related Amended and Restated Note (the “New Note”), in the amount of $3.3 million as described above.~~

Our subsidiaries’ obligations under the credit agreement and note are non-recourse and are secured by a first-priority lien in the Company’s and its subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees its subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the issuance of these financial statements. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United ~~States of America on~~States. The Company has elected a ~~going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the~~December 31 fiscal year end.

The interim condensed consolidated financial statements ~~do not~~ include ~~any adjustments relating to~~ the ~~recoverability~~accounts of ~~assets~~AgEagle Aerial Systems Inc. and ~~classification of liabilities that might be necessary should the Company be unable to continue as a going concern.~~

Our asset retirement obligations relate to the liabilities associated with the abandonment of oil and natural gas wells. The amounts recognized are based on numerous estimates and assumptions, including future retirement costs, inflation rates and credit adjusted risk-free interest rates. The following shows the changes in asset retirement obligations:

~~On October 3, 2011, the Company and DD Energy,~~its wholly-owned subsidiaries AgEagle Aerial, Inc., EnerJex Kansas, Inc., Black Sable Energy, LLC and ~~Working Interest, LLC, its subsidiaries (“Borrowers”) entered into an Amended and Restated Credit Agreement with Texas Capital Bank, N.A. (the “Bank~~”) and other financial institutions and banks that may become a party to the Credit Agreement from time to time. The facilities provided under the Amended and Restated Credit Agreement were used to refinance the Borrowers’ prior outstanding revolving loan facility with the Bank, dated July 3, 2008, and for working capital and general corporate purposes.

At our option, loans under the facility will bear stated interest based on the Base Rate plus Base Rate Margin, or Floating Rate plus Floating Rate Margin (as those terms are defined in the Credit Agreement). The Base Rate will be, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 0.50% and (b) the Bank’s prime rate. The Floating Rate shall mean, at Borrower’s option, a per annum interest rate equal to (i) the Eurodollar Rate plus Eurodollar Margin, or (ii) the Base Rate plus Base Rate Margin (as those terms are defined in the Amended and Restated Credit Agreement). Eurodollar borrowings may be for one, two, three, or nine months, as selected by the Borrowers. The margins for all loans are based on a pricing grid ranging from 0.00% to 0.75% for the Base Rate Margin and 2.25% to 3.00% for the Floating Rate Margin based on the Company’s Borrowing Base Utilization Percentage (as defined in the Amended and Restated Credit Agreement).

On December 15, 2011, we entered into a First Amendment to Amended and Restated Credit Agreement and Second Amended and Restated Promissory Note in the amount of $50,000,000 with the Bank. The Amendment reflected the addition of Rantoul Partners as an additional Borrower and added as additional security for the loans the assets held by Rantoul Partners.

On August 31, 2012, we entered into a Second Amendment to Amended and Restated Credit Agreement with the Bank. The Second Amendment: (i) increased our borrowing base to $7,000,000, (ii) reduced the minimum interest rate to 3.75%, and (ii) added additional new leases as collateral for the loan.

On November 2, 2012, we entered into a Third Amendment to Amended and Restated Credit Agreement with the Bank. The Third Amendment (i) increased our borrowing base to $12,150,000, and (ii) clarified certain continuing covenants and provided a limited waiver of compliance with one of the covenants so clarified for the quarter ended December 31, 2011.

On January 24, 2013, we entered into a Fourth Amendment to Amended and Restated Credit Agreement, which was made effective as of December 31, 2012, with the Bank. The Fourth Amendment reflected the following changes: (i) the Bank consented to the restructuring transactions related to the dissolution of Rantoul Partners, and (ii) the Bank terminated a Limited Guaranty, as defined in the Credit Agreement, executed by Rantoul Partners in favor of the Bank.

On September 30, 2013, we entered into a Fifth Amendment to the Amended and Restated Credit Agreement. The Fifth Amendment reflected the following changes: (i) an expanded principal commitment amount of the Bank to $100,000,000, (ii) an increase in our Borrowing Base to $38,000,000, (iii) the addition of Black Raven Energy, Inc., ~~our wholly-owned subsidiary,~~which was dissolved effective November 2019. All significant intercompany balances and transactions have been eliminated in consolidation.

The summary of significant accounting policies presented below is designed to assist in understanding the ~~Credit Agreement as a borrower party, (iv)~~Company’s interim condensed consolidated financial statements. Such interim condensed consolidated financial statements and accompanying notes are the ~~addition of certain collateral and security interests in favor~~representations of the ~~Bank,~~Company’s management, who are responsible for their integrity and ~~(v)~~objectivity. These accounting policies conform to accounting principles generally accepted in the ~~reduction~~United States of ~~our current interest rate to 3.30%.~~America (“US GAAP”) in all material respects and have been consistently applied in preparing the accompanying interim condensed consolidated financial statements.

~~On November 19, 2013, we entered into a Sixth Amendment~~Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the ~~Amended~~reported amounts of assets and ~~Restated Credit Agreement. The Sixth Amendment reflected~~liabilities and disclosure of contingent assets and liabilities at the ~~following changes: (i)~~date of the ~~addition~~financial statements and the reported amounts of ~~Iberia Bank as a participant in our credit facility (together with~~revenue and expenses during the ~~Bank,~~reporting period. Actual results could differ from those estimates. Significant estimates include the “~~Banks”),~~reserve for obsolete inventory, valuation of stock issued for services and ~~(ii) a technical correction to our covenant calculations.~~stock options, useful life of intangible assets and property and equipment, and the valuation of deferred tax assets.

~~On May 22, 2014, we entered into a Seventh Amendment~~Fair Value of Financial Instruments – Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued expenses, approximates their recorded values due to their short-term maturities.

Cash and Cash Equivalents – Cash and cash equivalents includes any highly liquid investments with an original maturity of three months or less. The Company held no cash equivalents as of September 30, 2020 or December 31, 2019. The Company maintains cash balances at financial institutions that are insured by the ~~Amended and Restated Credit Agreement. The Seventh Amendment reflected the Bank’s consent to our issuance of~~Federal Deposit Insurance Corporation (“FDIC”) up to ~~850,000 shares of our 10% Series A Cumulative Redeemable Perpetual Preferred Stock.~~$250,000. The Company’s bank balances at times may exceed the FDIC limit. To date, the Company has not experienced any losses on its invested cash.

On August 15, 2014, we entered into an Eighth Amendment to the Amended and Restated Credit Agreement. The Eighth Amendment reflected the following changes: (i) the borrowing base was increased from $38 million to $40 million, and (ii) the maturity

On April 29, 2015, we entered into a Ninth Amendment to the Amended and Restated Credit Agreement. In the Ninth Amendment, the Banks (i) re-determined the Borrowing Base based upon our recent Reserve Report dated January 1, 2015, (ii) imposed affirmative obligations on the Company to use a portion of proceeds received with regard to future sales of securities or certain assets to repay the loan, (iii) consented to non-compliance by the Company with certain terms of the Credit Agreement, (iv) waived certain provisions of the Credit Agreement, and (v) agreed to certain other amendments to the Credit Agreement.AGEAGLE AERIAL SYSTEMS INC.

On May 1, 2015, the Borrowers and the Banks entered into a Letter Agreement to clarify that up to $1,000,000 in proceeds from any potential future securities offering will be unencumbered by the Banks’ liens as described in the Credit Agreement through November 1, 2015, and that, until November 1, 2015, such proceeds would not be subject to certain provisions in the Credit Agreement prohibiting the Company from declaring and paying dividends that may be due and payable to holders of securities issued in such potential offerings or issued prior to the Letter Agreement.

On August 12, 2015, we entered into a Tenth Amendment to the Amended and Restated Credit Agreement. The Tenth Amendment reflected the following changes, it: (i) allowed the Company to sell certain oil assets in Kansas, (ii) allowed for approximately $1,300,000 of the proceeds from the sale to be reinvested in Company owned oil and gas projects, and (iii) provided that not less than $1,500,000 from the proceeds of the sale would be applied to outstanding loan balances.

On November 13, 2015, the Company entered into an Eleventh Amendment to the Amended and Restated Credit Agreement. The Eleventh Amendment reflected the following changes: (i) waived certain provisions of the Credit Agreement, (ii) suspended certain hedging requirements, and (iii) amended other provisions of the Credit Agreement.

On April 1, 2016, the Company informed the Banks that it would cease making the mandatory monthly borrowing base reduction payments and did not make the required April 1, 2016 payment. The Company made its mandatory quarterly interest payment on April 6, 2016 and on April 7, 2016 entered into a Forbearance Agreement whereby the Banks agreed to not exercise remedies and rights afforded it under the Amended and Restated Credit Agreement for thirty days. On May 31, 2016, the Company and the Banks amended the Forbearance Agreement to extend the forbearance period to August 31, 2016. On July 29, 2016, the Company and the Banks entered into a Third Forbearance Agreement which extended the forbearance period to October 1, 2016. Upon the expiration of the Third Forbearance agreement, the Company did not enter into a fourth Forbearance Agreement. Also, at that time the Company discontinued payment of interest on its outstanding loan obligations with the Banks.

On February 10, 2017, the Company and the other Sellers entered into and completed the transactions contemplated by the LSA, described in greater detail in “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – ~~Going Concern~~”Summary of Significant Accounting Policies – “~~Financing Transactions~~”.Continued

~~Below is a table showing~~Receivables and Credit Policy– Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the ~~reconciliation~~invoice date. Terms with our distributor allow for payment terms of 45 days from the invoice date. Trade receivables are stated at the amount billed to the customer. The Company generally does not charge interest on overdue customer account balances. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The Company estimates an allowance for doubtful accounts based upon an evaluation of the ~~gain~~current status of receivables, historical experience and other factors, as necessary. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. The Company determined that no allowance was necessary as of September 30, 2020 and December 31, 2019.

Inventories – Inventories, which consist of raw materials, finished goods and work-in-process, are stated at the lower of cost or net realizable value, with cost being determined by the average-cost method, which approximates the first-in, first-out method. Cost components include direct materials and direct labor, as well as in-bound freight. At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. This evaluation primarily includes an analysis of forecasted demand in relation to the inventory on ~~LSA as set forth~~hand, among consideration of other factors. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the respective inventories. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company’s estimates and expectations. As of September 30, 2020 and December 31, 2019, the Company had recorded a provision for obsolescence of $10,000.

Goodwill and Intangible Assets – The assets and liabilities of acquired businesses are recorded under the acquisition method of accounting at their estimated fair values at the date of acquisition. Goodwill represents costs in excess of fair values assigned to the underlying identifiable net assets of acquired businesses. Goodwill is not subject to amortization and is tested annually for the impairment, or more frequently if events or changes in circumstances indicate that the carrying value of the goodwill may not be recoverable.

Intangible assets from acquired businesses are recognized at fair value on the ~~statement~~acquisition date and consist of ~~operations~~customer programs, trademarks, customer relationships, technology and other intangible assets. Customer programs include values assigned to major programs of acquired businesses and represent the aggregate value associated with the customer relationships, contracts, technology and trademarks underlying the associated program and are amortized on a straight-line basis over a period of expected cash flows used to measure fair value, which ranges from four to five years.

Revenue Recognition and Concentration – The majority of the Company’s revenue is generated pursuant to written contractual arrangements to develop, manufacture and/or modify complex drone-related products, and to provide associated engineering, technical and other services according to customer specifications. These contracts are at a fixed price and are accounted for in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent the Company’s actual costs vary from the estimates upon which the price was negotiated, it will generate more or less profit or could incur a loss. The Company accounts for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

The Company generally recognizes revenue on sales to customers, dealers and distributors upon satisfaction of performance obligations, which generally occurs once controls transfer to customers, which is when product is shipped or delivered depending on specific shipping terms. Additionally, customers are required to place a deposit or pay upon shipping for each UAV or drone delivery assembly part ordered. Customer payments received in advance of the Company completing performance obligations are recorded as contract liabilities.

Subscription services for use of the Company’s proprietary FarmLens and HempOverview platforms are recognized ratably over the membership period as the services are provided.

Sales concentration information for customers comprising more than 10% of the Company’s total net sales is summarized below:

No accounts receivables were due from Customer A or B as of September 30, 2020 and December 31, 2019, respectively.

Vendor Concentration – As of September 30, 2020, there was one significant vendor that the Company relies upon to perform stitching in its FarmLens platform. This vendor provides services to the Company which can be replaced by alternative vendors should the need arise.

Shipping Costs – Shipping costs for the three months ended September 30, 2020 and 2019 totaled $98 and $240, respectively. For the nine months ended September 30, ~~2017:~~

~~To evidence~~2020 and 2019, shipping costs totaled $6,122 and $1,271, respectively. All shipping costs billed directly to the ~~Company’s remaining $4,500,000~~customer are directly offset to shipping costs resulting in a net expense to the Company, which is included in cost of ~~indebtedness to PWCM Investment Company IC LLC (“PWCM”), RES Investment Group, LLC (“RES”), Round Rock Development Partners, LP (“Round Rock”), and Cibolo Holdings, LLC (“Cibolo Holdings,” and together with PWCM, RES and Round Rock, “Successor Lenders”),~~goods sold on the Company’s subsidiaries (except Kansas Holdings, LLC) entered into a Second Amended and Restated Credit Agreement with Cortland Capital Market Services LLC, as Administrative Agent, and the other financial institutions and banks parties thereto (the “~~New Credit Agreement”), and a related Amended and Restated Note (the “New Note”), in the amount~~condensed interim statements of ~~$3.3 million as described above under “Note 2 – Going Concern” – “Financing Transactions”.~~operations.

~~Our subsidiaries’ obligations under~~Earnings Per Share– Basic loss per share is computed by dividing net loss attributable to common shareholder by the ~~credit agreement~~weighted average number of common shares outstanding for the period. Diluted loss per share is computed by dividing net loss attributable to common shareholder by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options and note are non-recourse and are secured by a first-priority lien in the Company’s and the subsidiaries’ oil properties and assets located in Kansas. The Company was removed as a borrower under the Credit Agreement, but entered into a Guaranty of Recourse Carveouts, pursuant to which the Company guarantees the Subsidiaries’ payment of certain fees and expenses due under the Credit Agreement, and may be liable for certain conduct, such as fraud, bad faith, gross negligence, and waste of the Kansas oil properties or assets.convertible instruments.

~~As of September 30, 2017, the principal balance of $105,806 along with accrued interest remained due under the promissory note with Pass Creek Resources LLC.~~

As of September 30, 2017, the Company had an outstanding irrevocable letter of credit in the amount of $50,000 issued in favor of the Texas Railroad Commission. The letter of credit is required by the Texas Railroad Commission for all companies operating in the state of Texas with production greater than limits they prescribe.

Rent expense for the nine months ended September 30, 2017 and 2016 was approximately $75,000 and $104,000, respectively. Future non-cancellable minimum lease payments are approximately $35,000 for the remainder of 2017, $91,000 for 2018, and $77,000 for 2019.

We, as a lessee and operator of oil and gas properties, are subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the lessee under an oil and gas lease for the cost of pollution clean-up resulting from operations and subject to the lessee to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area. As of September 30, 2017, we have no reserve for environmental remediation and are not aware of any environmental claims.

On September 23, 2016, the Company, American Standard Energy Corporation, Baylor Operating LLC, Bernard Given and Loeb & Loeb LLP were sued by Geronimo Holdings Corporation and Randal Capps in the 143rd Judicial District Court located in Pecos, Texas. The suit among other things, seeks damages for an alleged unlawful sale of properties in Crockett County, Texas and for alleged unpaid royalties. The Company believes the suit is without merit and will vigorously defend itself in connection with this proceeding. The Company has ~~faith that it will prevail~~excluded all common equivalent shares outstanding for warrants, options and ~~at September 30, 2017, no reserve~~convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for ~~potential losses arising from this matter has been recorded. Additionally, under its agreement with Baylor Operating LLC, Baylor has agreed to indemnify and defend~~ the ~~Company against all lawsuits and claims including this one.~~

On April 26, 2016, C&F Ranch, LLC sued the Company in Allen County, Kansas for alleged breach of contract related to the rental of certain lands located on the C&F Ranch. The Company believes that it has paid all rents owed to C&F Ranch LLC and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded.

Pursuant to full cost accounting rules, the Company must perform a ceiling test each quarter on its proved oil and natural gas assets within each separate cost center. All of the Company’s costs are included in one cost center as all of the Company’s operations are located in the United States. The Company’s ceiling test was calculated using trailing twelve-month, unweighted-average first-day-of-the-month prices for oil and natural gas as of September 30, 2017, which were based on a West Texas Intermediate oil price of $42.46 per Bbl and a Henry Hub natural gas price of $2.63 per Mcf (adjusted for basis and quality differentials), respectively.periods presented. For the nine-month period ended September 30, ~~2017, the Company’s present value of future estimate cash flows discounted at 10%, exceeded the net book value of those assets. Accordingly,~~2020, the Company ~~did not record an impairment charge. This test resulted in a pre-tax write-down of $7,444,597 for~~had 3,022,254 warrants, and 2,110,154 options to purchase common stock outstanding. For the nine-month period ended September 30, ~~2016.~~

~~Note 8 – Equity Transactions~~2019, the Company had 4,531,924 warrants, 2,270,665 options to purchase common stock, and 3,636 shares of Series C Preferred Stock which were convertible into 6,733,333 shares of common stock.

WeIncome Taxes – The Company accounts for income taxes in accordance with FASB (Financial Accounting Standards Board) ASC Topic 740, Accounting for Income Taxes. This topic requires an asset and liability approach for accounting for income taxes. The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. The Company will recognize future accrued ~~dividends~~interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All income tax returns not filed more than three years ago are subject to federal and state tax examinations by tax authorities.

Stock-Based Compensation Awards– The Company accounts for its stock-based awards in accordance with ASC Subtopic 718-10, “Compensation – Stock Compensation,” which requires fair value measurement on the grant date and recognition of ~~$879,608~~compensation expense for all stock-based payment awards made to employees and ~~$2,638,823~~directors. For stock options, the Company estimates the fair value using a closed option valuation (Black-Scholes) model. The estimated fair value is then expensed over the requisite service period of the award, which is generally the vesting period, and the related amount is recognized in the consolidated statements of operations. The Company recognizes forfeitures at the time they occur.

The Black-Scholes option-pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial statements. The Company’s adoption of ASU No. 2016-01 effective January 1, 2019 did not have a material impact on the condensed interim consolidated financial statements.

In February 2016, FASB issued Account Standards Update 2016-02 – Leases (Topic 842) intended to improve financial reporting of leasing transactions whereby lessees will need to recognize a right-of-use asset and a lease liability for ~~our Series A Preferred Stock~~virtually all their leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP — which requires only capital leases to be recognized on the balance sheet — the new ASU will require both types of leases to be recognized on the balance sheet. The Company adopted this ASU on January 1, 2019 and it did not have a material impact on the Company’s condensed interim consolidated financial statements as the Company currently has no leases with a term of more than twelve months at the time of adoption

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). The update simplifies the process for assessing goodwill for impairment. The amended guidance removes the second step that was previously required. Under this ASU, impairment charges to goodwill are based on the excess of a reporting unit’s carrying value to its fair value. ASU 2017-04 is effective for us for the fiscal year ending September 30, 2021, with early adoption permitted for periods beginning after January 1, 2017. The Company adopted ASU 2017-04 on January 1, 2019 and applied the guidance to the annual impairment test (see Note 5).

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820). This ASU removes or modifies current disclosures while adding certain new disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods therein, with early adoption permitted for the removed or modified disclosures. The removed and modified disclosures can be adopted retrospectively, and the added disclosures should be adopted prospectively. The Company adopted this ASU on January 1, 2020 and it did not have a material impact on the Company’s condensed interim consolidated financial statements.

Other recent accounting pronouncements that have been issued or proposed by FASB did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements in the near term.

Depreciation expense for the three and nine months ended September 30, ~~2017, respectively. At~~2020 was $5,722 and $13,608, respectively; and for the three and nine months ended September 30, ~~2017, accumulated dividends payable~~2019, depreciation expense totaled $4,185 and $10,373, respectively, which is included in general and administrative expenses on the condensed interim consolidated statements of operations.

Intangible assets are recorded at cost and consist of assets acquired in 2018 as a result of a business acquisition in 2018. Amortization is computed using the straight-line method over the estimate useful life of the asset. Intangible assets were comprised of the following at September 30, 2020:

The weighted average remaining amortization period in years is 2.71 years. Amortization expense for the three and nine months ended September 30, 2020 was $38,236 and $114,710, respectively, and $38,236 and $118,309, respectively, for the three and nine months ended September 2019, which is included in general and administrative expenses on the condensed interim consolidated statements of operations.

On May 6, 2020, the Company received a loan in the amount of $107,439 from the Small Business Administration (SBA) as part of Coronavirus Aid, Relief and Economic Security Act’s Paycheck Protection Plan (PPP). The loan is unsecured, nonrecourse, accrues interest at one percent per annum, with a due date of May 6, 2022. Under the terms of the loan, a portion or all of the loan is forgivable to the extent that the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four-week period through October 21, 2020.

The unforgiven portion of the PPP loan is payable over two years and can be extended to five years if agreed upon by both parties and bears interest at a rate of 1%, with a deferral of payments for the first six months. The Company intends to use the proceeds for purposes consistent with the PPP. While the Company currently believes that its use of the loan proceeds will meet the conditions for forgiveness of the loan, there can be no assurance that the Company will not take actions that could cause the Company to be ineligible for forgiveness of the loan, in whole or in part.

As part of the liabilities assumed from the Merger, the Company recorded a promissory note for a principal amount of $125,556 and accrued interest of $4,171 payable over twelve months and maturing on March 27, 2019. The total amount outstanding as March 31, 2019 was $9,028, resulting in principal payments of $31,970 made in the first three months of 2019. The Company recorded interest of $462 for the three months ended March 31, 2019. The note was paid in full in April 2019.

On May 11, 2020, the Company and an institutional investor and existing Company shareholder (the “Investor”) entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell to the Investor in a registered direct offering 2,400,000 shares of common stock, par value $0.001, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,260,377 shares of common stock, for gross proceeds of approximately $6 million (which includes subsequent payment of the exercise price of the Pre-Funded Warrants in the amount of $3,267). The purchase price for each share of common stock was $1.06 and the purchase price for each Pre-Funded Warrant was $1.05999. The exercise price for each Warrant was $0.001. Net proceeds from the sale were used to repurchase 262 shares of the Company’s Series AE Preferred Stock, ~~holders totaled $6,039,972.~~convertible into 1,048,000 shares of common stock currently held by the Investor at a repurchase price of $1.06 per share of common stock (see below). The Company expects to use the balance for working capital and general corporate purposes. The Company increased net loss available to common stockholders’ in computing earnings per share for the excess of the consideration paid for the Series E Preferred Stock over its carrying value totaling $848,880 as presented on the condensed interim consolidated statements of operations.

Pursuant to the terms of the Purchase Agreement, the Company had agreed to certain restrictions on future stock offerings, including that during the 60-day period following the closing, the Company did not issue (or enter into any agreement to issue) any shares of common stock or common stock equivalents, subject to certain exceptions. The exercise price of the Warrants and the shares of the common stock issuable upon the exercise thereof were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants, and were exercisable on a “cashless” basis in certain circumstances.

On June 24, 2020, the Company and the Investor entered into a Purchase Agreement pursuant to which the Company agreed to sell to the Investor in a registered direct offering 4,407,400 shares of common stock, par value $0.001, pre-funded warrants to purchase up to 1,956,236 shares of common stock, and warrants (the “Warrants”) to purchase up to 2,455,476 shares of common stock at an exercise price of $1.35 per share, for gross proceeds of $7 million (which includes subsequent payment of the exercise price of the Pre-Funded Warrants in the amount of $1,956) and net proceeds of $6,950,000 after issuance costs. Upon exercise of the Warrants in full by the Investor, the Company will receive additional gross proceeds of $3,314,892. The shares of common stock underlying the Pre-Funded Warrants and the Warrants are referred to as “June Warrant Shares.”

The purchase price for each share of common Stock is $1.10 and the purchase price for each Pre-Funded Warrant is $1.099. The exercise price for each Pre-Funded Warrant is $0.001. Net proceeds from the sale will be used for working capital, capital expenditures and general corporate purposes. The Shares, Pre-funded Warrants, Warrants and June Warrant Shares are being offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-239157), which was declared effective on June 19, 2020.

Pursuant to the terms of the Purchase Agreement, the Company agreed to certain restrictions on future stock offerings, including that during the 75-day period following the closing, the Company will not issue (or enter into any agreement to issue) any shares of common stock or common stock equivalents, subject to certain exceptions, including if the consolidated closing price on the trading market on which the Company’s common stock is traded at the time is greater than $1.90 (adjusted for any subsequent stock splits or similar capital adjustments) for five consecutive trading days, the Company may issue such securities at not less than $1.90 per common stock Equivalent. The Investor has a right from the date of the Purchase Agreement until December 31, 2020 to participate in a subsequent financing by the Company or any of its Subsidiaries of common stock or common stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), in an amount equal to 50% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

The exercise price of the Prefunded Warrants and the Warrants and the number of June Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Prefunded Warrants and the Warrants. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of the shares underlying the Warrants. The Pre-Funded Warrants allow for cashless exercise at any time. The Pre-Funded Warrants and the Warrants each contain a beneficial ownership limitation, such that none of such Pre-Funded Warrants nor the Warrants may be exercised, if, at the time of such exercise, the holder would become the beneficial owner of more than 9.99% of our outstanding shares of common stock following the exercise of such Pre-Funded Warrant or Warrant. During the three and nine months ended September 30, 2020 the Company received $2,632,500 in additional gross proceeds associated with exercise of 1,950,000 of the June Warrant Shares into common stock. As of September 30, 2020, 505,476 June Warrant Shares at an exercise price of $1.35 per share remain outstanding.

On August 4, 2020, the Company and an institutional investor and existing Company stockholder (the “Investor”) entered into a Purchase Agreement pursuant to which the Company agreed to sell to the Investor in a registered direct offering 3,355,705 shares of common stock and warrants to purchase up to 2,516,778 shares of Common Stock at an exercise price of $3.30 per share (the “Warrants”), for proceeds of $9,900,000 net of issuance costs of $100,000. Upon exercise of the Warrants in full by the Investor, the Company will receive additional gross proceeds of approximately $8,305,367. The shares of Common Stock underlying the Warrants are referred to as “August Warrant Shares.”

The purchase price for each share of Common Stock is $2.98. Net proceeds from the sale will be used for working capital, capital expenditures and general corporate purposes. The Shares, the Warrants and the August Warrant Shares are being offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-239157), which was declared effective on June 19, 2020.

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on future stock offerings, including that during the 75-day period following the closing, the Company will not issue (or enter into any agreement to issue) any shares of Common Stock or Common Stock equivalents, subject to certain exceptions, including if the consolidated closing price on the trading market on which the Company’s Common Stock is traded at the time is greater than $5.00 (adjusted for any subsequent stock splits or similar capital adjustments) for ten consecutive trading days, the Company may issue such securities at not less than $5.00 per Common Stock Equivalent. In addition, the Company’s executive officers and directors agreed that they shall not sell (or hedge in any manner) any of their shares of the Common Stock for a period ending September 7, 2020. The Investor has a right from the date of the Purchase Agreement until December 31, 2020, to participate in a subsequent financing by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), in an amount equal to 50% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

The exercise price of the Warrants and the number of August Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of the shares underlying the Warrants. The Warrants contain a beneficial ownership limitation, such that none of such Warrants may be exercised, if, at the time of such exercise, the holder would become the beneficial owner of more than 9.99% of our outstanding shares of Common Stock following the exercise of such Warrant. The Warrant is for a ten-month term and is not exercisable for the first six months.

On April ~~27, 2017,~~13, 2020, the Company ~~entered into an Additional Issuance Agreement~~issued in connection with ~~Alpha Capital Anstalt, for~~ the ~~purchase of 300~~2019 Executive Compensation Plan, 100,000 restricted shares ~~of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, with an option~~ to ~~purchase an additional 200~~Mr. Barrett Mooney and 70,000 restricted shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet in the aggregate amount of $150,000.

Ms. Nicole Fernandez-McGovern. The Company ~~recorded~~recognized a ~~beneficial conversion feature~~total of ~~$208,500 based on the~~$59,500 of expense at a fair value of ~~the common~~$0.35 per share within stock ~~and the conversion rate as of the date of issuance. This amount was recorded as a deemed distribution~~compensation expense related to these issuances for the nine months ended September 30, ~~2017.~~2020, which is included in general and administrative expenses on the condensed interim consolidated statements of operations.

On May 18, 2020, the company issued in connection with the commencement of the Chief Executive officer, 100,000 shares of restricted stock units under the Company’s 2017 Omnibus Equity Incentive Plan (the “Equity Plan”), which will fully vest after one year of continued employment. The Company determined the fair-market value of the restricted stock units to be $134,000. In connection with the issuance of these restricted stock units, the Company recognized $33,688 and $49,794 in stock compensation expense for the three and nine months ended September 30, 2020, respectively, which is included in general and administrative expenses on the condensed interim consolidated statements of operations. The remaining unrecognized stock compensation expense of $84,206 will be recognized through May 2021.

On June 30, 2020, the Company issued in connection with a consulting agreement, dated May 3, 2019, 250,000 shares of its common stock to the consulting company as a part of their compensation for services. The Company recognized a total of $297,500 of expense at a fair value of $1.19 per share related to these issuances. within general and administrative costs on the condensed interim consolidated statements of operations. In addition, the Consultant also held options to purchase 207,055 shares of the Company’s common stock that were cashless exercised at a price of $0.06 per share on July 20, 2020 into 201,791 shares of common stock.

As a result of the Merger, the Company’s Series C Convertible Preferred Stock (“(the “Series C Preferred Stock”) included 2,879 of remaining shares after the conversion and retirement of all the Company’s promissory notes due. These shares were convertible into 1,471,425 shares of the Company’s common stock. Furthermore, an additional 4,000 shares of Series C Preferred Stock~~”) is non-voting (except~~ were issued and were convertible into 3,020,797 shares of the Company’s common stock, as they were issued to the ~~extent required by law and except for certain consent rights relating to amending the certificate~~current holder of ~~incorporation or bylaws, and the like), ranks senior to the common stock~~Series C Preferred Stock in connection with ~~respect to dividends and with respect to distributions upon~~ a ~~deemed dissolution, liquidation or winding-up~~$4 million financing of Series C Preferred Stock (the “Financing”).

On May 11, 2018, the Company and ranks junior to the Company’s Series A preferred stock and Series B preferred stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-upissued an additional 250 shares of the Company. Upon request of the Holders, the Company can seek stockholder approval to remove the Issuance Limitation described therein and to allow for further adjustments related to anti-dilution protection, only if such stockholder approval is obtained. Theour Series C ~~Convertible~~ Preferred Stock, ~~has a liquidation preference of $1,000 per share, and is~~ convertible ~~at the option of the holder at a conversion price equal to $0.30 per share, or a ratio equal to approximately 3,333~~into 163,265 shares of common stock ~~for each one (1) share~~and received a cash payment of Series C Convertible Preferred Stock, subject to customary adjustments. Dividends are payable on the shares of Series C Convertible Preferred Stock only if and to the extent that dividends are payable on the common stock into which the Series C Convertible Preferred Stock is convertible. The Series C Convertible Preferred Stock has no maturity date and can be redeemed by the Company beginning twelve months after the closing of the offering or upon a change of control$250,000 for the ~~redemption price of $1,000 per share, as adjustable as provided in the designation~~issuance of the Series C Preferred Stock.

The Series C Preferred Stock ~~includes~~included a beneficial ownership limitation preventing conversion of shares of Series C Preferred Stock into more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Stock. ~~In addition, the Company may not convert the~~

Each share of Series C Preferred Stock was convertible into a number of shares of common stock ~~which, when aggregated with any shares~~equal to the quotient determined by dividing (x) the stated value of $1,000 per share, by (y) an original conversion price of $1.53. Until the volume weighted average price of common stock ~~issued~~ on ~~or after~~NYSE exceeds $107.50 with average trading volume of 200,000 shares per day for ten consecutive trading days, the ~~original issue date and prior to such~~ conversion ~~date in connection with any conversion~~price of Series C Preferred Stock ~~would exceed 1,683,944~~was subject to full-ratchet, anti-dilution price protection. Under that provision, if, while that full-ratchet, anti-dilution price protection is in effect, the Company issues shares of common stock ~~(19.99% of~~at a price per share (the “Dilutive Price”) that is less than the ~~outstanding shares as of~~conversion price, then the ~~original issue date), subject to adjustment for forward and reverse stock splits, recapitalizations and the like. In the event~~ conversion price of the Series C Preferred Stock is ~~limited pursuant~~automatically reduced to ~~these provisions, each holder shall~~ be ~~entitled to a pro rata portion of the issuable maximum.~~

~~Pursuant~~equal to the ~~anti-dilutive provisions~~Dilutive Price. The effect of that reduction is that, upon the ~~Securities Purchase Agreement dated as~~issuance of ~~March 11, 2015, which requires the Company to issue additional~~ shares of common stock ~~to adjust the purchase price paid by purchasers in the Company’s March 2015 offering, in the event any shares are sold (or convertible securities are sold), with~~at a price per share less than the purchase price paid by the March 2015 purchasers subject to the terms of the Securities Purchase Agreement, Alpha Capital Anstalt received 597,461 shares of common stock. In addition, the Series B Convertible Preferred Stock conversion ratio equal to approximately 571 shares of common stock for each one (1) share of Preferred Stock reset to approximately 3,333 shares of common stock for each one (1) share of Series B Convertible Preferred Stock, to be consistent with the terms ofDilutive Price, the Series C ~~Convertible~~ Preferred Stock ~~pursuant to the anti-dilution requirements~~would be convertible into a greater number of ~~the Series B Convertible Preferred Stock.~~

~~During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000~~ shares of common stock.

~~See also~~The Series C preferred stock anti-dilution protection was initially triggered on December 27, 2018 as a result of the ~~description~~Company issuing the Series D Preferred Stock, (the “Series D Preferred Stock”) as described below. The Series D Preferred Stock had a $0.54 conversion price thereby qualifying as a subsequent equity offering at a price less than $1.53.

On April 7, 2020, upon the issuance of the Series E Preferred Stock, (the “Series E Preferred Stock”) offering (see below), a subsequent anti-dilution provision was triggered for the Series C Preferred Stock whereby the conversion price was further adjusted from $0.54 per share to $0.25 per share (a “Down Round), which resulted in approximately 13,248,000 shares of common stock being issuable upon conversion of the remaining Series C Preferred Stock. As a result of this Down Round being triggered, the Company recorded a deemed dividend in the amount of $3,841,920 representing the intrinsic spread between the previous conversion price of $.54 and the adjusted conversion price of $.25 multiplied by approximately 13,248,000 common stock shares issuable upon conversion. The deemed dividend was recorded as a reduction of retained earnings and increase in additional paid-in-capital and increased the net loss to common stockholders by the same amount in computing earnings per share.

During the month of January 2020, Alpha Capital Anstalt ~~warrant exercises which occurred subsequent to~~(“Alpha”) converted 189 shares of Series C Preferred Stock into 350,000 shares of common stock at a conversion price of $0.54. During the month of April 2020, Alpha converted 3,312 shares of Series C Preferred Stock into 13,247,984 shares of common stock at a conversion price of $0.25. As of September 30, ~~2017, as described in “Note 10 – Subsequent Events~~”.2020, no Series C Preferred Stock remain issued and outstanding.

~~Effective May 1, 2017,~~On December 27, 2018, the Company entered into ~~an agreement~~a Purchase Agreement with ~~Camber Energy, Inc., pursuant~~Alpha. Pursuant to ~~which EnerJex will be responsible for performing certain general and administrative services for Camber for a fee~~the terms of ~~$150,000 per month. This fee includes payments to vendors who provide accounting services to Camber. Richard E. Menchaca, a member of~~the Agreement, the Board of Directors of the Company (the “Board”) designated a new series of preferred stock by filing a certificate of designation, the Series D Preferred Stock, which is non-convertible and provides for an 8% annual dividend and is subject to optional redemption by the Company. The Company issued 2,000 shares of Preferred Stock and a warrant to purchase 3,703,703 shares of common stock, par value $0.001 per share (the “Warrant,” and the shares of common stock underling the warrants, the “Series D Warrant Shares”) for $2,000,000 in gross proceeds. The Company also entered into a Registration Rights Agreement, granting registration rights to Alpha with respect to the Series D Warrant Shares.

The Agreement provides that upon a subsequent financing or financings with net proceeds of at least $500,000, the Company must exercise its optional redemption of the Preferred Stock (as more fully described below in Item 5.03) and apply any and all net proceeds from such financing(s) to the redemption in full of the Preferred Stock.

The Preferred Stock is non-convertible, provides for an 8% annual dividend payable semi-annually and has liquidation rights senior to the common stock, but pari passu with the Company’s Series C Preferred Stock. During the nine months ended September 30, 2020 and 2019, the Company recorded $69,778 and $121,333 of accrued dividends, respectively. As of September 30, 2020, and December 31, 2019, accumulated accrued dividends totaled $0 and $163,555, respectively, as presented on the condensed interim consolidated balance sheets.

The Preferred Stock has no voting rights, except that the Company shall not undertake certain corporate actions as set forth in the Certificate of Designation that would materially impact the holders of Preferred Stock without their consent.

The Preferred Stock is subject to optional redemption by the Company at 115% of the stated value of the Preferred Stock outstanding at the time of such redemption, plus any accrued but unpaid dividends and all liquidated damages or other amounts due. Any such optional redemption may only be exercised after giving notice and upon satisfaction of certain equity conditions set forth in the Certificate of Designation, including (i) all dividends, liquidated damages and other amounts have been paid; (ii) there is an effective registration statement covering the Series D Warrant Shares, or the Series D Warrant Shares can be exercised through a cashless exercise without restriction under Rule 144, (iii) the Series D Warrant Shares are listed on an exchange, (iv) the holder is not in possession of material, non-public information, (v) there is a ~~co-guarantor~~sufficient number of ~~bank debt held by Camber Energy, Inc.~~authorized shares for issuance of all Series D Warrant Shares, and ~~Robert Schleizer, our newly appointed Interim Chief Financial Officer is also~~(vi) for each trading day in a period of 20 consecutive trading days prior to the ~~Chief Financial Officer and a Director~~redemption date, the daily trading volume for the common stock on the principal trading market exceeds $200,000 per trading day.

~~See the subsequent events in “Note 2~~Stockholders’ Equity – ~~Going Concern~~”.Continued

On ~~October 23, 2017, Alpha Capital Anstalt exercised warrants to purchase 1,000,000 shares~~April 7, 2020, upon the issuance of ~~our common stock~~the Series E Preferred Stock, (the “Series E Preferred Stock”) offering (see below), a subsequent anti-dilution provision was triggered for ~~an aggregate~~the Series D Warrants whereby the exercise price of ~~$300,000 (or $0.30~~the Warrant Shares was adjusted from $0.54 to $0.25 per ~~share)~~share (a “Warrant Down Round). Upon the Warrant Down Round being triggered, the Company recognized $208,918 of a deemed dividend for the difference between the fair value of the original warrants right before modification and the fair value of the modified warrants. The fair value of the warrants was determined using the Black-Scholes option-pricing model based on the following assumptions: expected life of 3.5 years, expected dividend rate of 0%, volatility of 90.0%, and an interest rate of 0.29%. The deemed dividend to the preferred stockholders was a recorded as additional paid in capital and a reduction of retained earnings and as an increase to net loss attributable to common stockholders in computing earnings per share on the condensed interim consolidated statements of operations.

On June 5, 2020, the Company and Alpha entered into a letter agreement whereby they agreed to amend the Original Series D Preferred Stock and terminate the Purchase Agreement. Alpha is a current holder of less than 10% of the Company’s issued and outstanding common stock and has no material relationship with the Company.

On June 5, 2020, the Board of Directors of the Company approved an amendment to the Original Series D Preferred Stock Certificate of Designation for Nevada Profit Corporations with the Secretary of State of the State of Nevada (the “Original Series D Preferred Stock Certificate of Designation”). The amendment among other things, (i) provided for the ability of the Holder to convert the Original Series D, including all accrued, but unpaid dividends on the Original Series D, into shares of common stock, par value $0.001 per share of the Company, (ii) set a conversion price at $0.54 per share (subject to customary adjustments), and (iii) increased the stated value of the Original Series D from $1,000 to $1,116.67. The Amended and Restated Certificate of Designation of the Series D Preferred Stock was filed with the Secretary of the State of Nevada effective as of June 8, 2020.

The holder of the Original Series D approved the amendment to the Original Series D. There is no class or series of stock which is senior to the Original Series D as to the payment of distributions upon dissolution of the Company, and therefore the approval of any other class or series of stock of the Company to the amendments to the Original Series D Preferred Stock Certificate of Designation is not required pursuant to Nevada law.

On the date of the above amendment to the Original Series D Preferred Stock the fair value of the Company’s common stock price was $1.45 which is higher than the effective conversion price of $0.54 that was agreed to on June 5^th, 2020. Due to the modification of the Series D Preferred Stock, the Company recorded a deemed dividend of $3,763,591 representing the intrinsic value of $0.91 multiplied by the number of common stock shares to be issued upon conversion. The deemed dividend to the preferred stockholders was a recorded as additional paid in capital and a reduction of retained earnings and has an increase to net loss attributable to common stockholders in computing earnings per share

During the month of June 2020, the Series D Preferred Stockholder converted 1,890 shares of Series D Preferred Stock and all outstanding accrued dividends totaling $233,333 into 3,500,000 shares of common stock at a conversion price of $0.54.

During the three months ended September 30, 2020, the Series D Preferred Stockholders converted the remaining 110 shares of the Series D Preferred Stock into 635,815 shares of common stock at a conversion price of $0.54 which includes an additional 421,308 of common stock shares to correct conversions that occurred in June 2020 computed using the stated value of $1,000 rather than $1,116.67.

On April 7, 2020 the Company entered into a Purchase Agreement with Alpha, pursuant to the terms of the Agreement, the Board of Directors of the Company authorized 1,050 shares of a newly designated series of preferred stock, the Series E Convertible Preferred Stock. The Preferred Stock was 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 purchase price for the Preferred Stock was $1,050,000 of which the Company received net proceeds of $1,010,000. The Preferred Stock has liquidation rights senior to the common stock, but pari passu with the Series C Preferred Stock and the Series D Preferred Stock. The Preferred Stock has no voting rights. The conversion price adjusts for stock splits and combinations and is subject to anti-dilution protection for subsequent equity issuances until such time as no shares of Series E Preferred Stock are outstanding. The Certificate of Designation of the Series E Convertible Preferred Stock was filed with the State of Nevada on April 2, 2020.The Company also entered into a Registration Rights Agreement, granting registration rights to Alpha with respect to the Conversion Shares and common stock underlying warrants currently owned by Alpha.

On the date that the Series E Preferred Stock was consummated the fair value of the Company’s common stock price was $0.37 which is higher than the effective conversion price of $0.25 that was agreed to on April 7^th, 2020. As a result, the Company recognized a beneficial conversion feature (“BCF”) of $378,240 on 788 of Preferred Shares representing the intrinsic value of $.12 multiplied by the number of common stock shares to be issued upon conversion. The remaining amount of 262 shares was repurchased as described below. The discount to the Series E Preferred Stock resulting from the BCF has been presented as an increase to net loss attributable to common stockholders in computing earnings per share on the condensed interim consolidated statements of operations.

On May 11, 2020, the Company entered into a Purchase Agreement for the sale of common stock as described above with Alpha whereby we agreed to repurchase 262 shares of Series E Preferred Stock with the proceeds from the new issuance. The repurchase of the Preferred Series E Stock was convertible into 1,048,000 shares of common stock at a repurchase price of $1.06 per share. The Company increased its net loss available to common stockholders’ in computing earnings per share for the excess of the consideration paid for the Series E Preferred Stock over its carrying value totaling $848,880.

Pursuant to the terms of the Registration Rights Agreement executed on April 7, 2020, the Company filed an initial registration statement registering the Conversion Shares and the Warrant Shares on April 27, 2020. The Company’s registration statement was declared effective May 6, 2020.

On March 26, 2018, the EnerJex 2017 Omnibus Equity Incentive Plan (the “Plan”) became effective. Under the Plan, the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, the Company. The purpose of the Plan is to help the Company attract, motivate and retain such persons and thereby enhance shareholder value. The Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date). The Board of Directors in its discretion may terminate the Plan at any time with respect to any shares for which awards have not theretofore been granted; provided, however, that the Plan’s termination shall not materially and adversely impair the rights of a holder, without the consent of the holder, with respect to any award previously granted.

On July 15, 2020 the Company held its 2020 annual meeting of stockholders and approved a proposal to increase the number of shares of common stock reserved for issuance under the Plan from 3,000,000 to 4,000,000. To the extent that an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate, any shares subject to such award shall again be available for the grant of a new award. The number of shares for which awards which are options or SARs may be granted to a participant under the Plan during any calendar year is limited to 500,000. For purposes of qualifying awards as “performance-based” compensation under Code Section 162(m), the maximum amount of cash compensation that may be paid to any person under the Plan in any single calendar year shall be $500,000.

During the nine months ended September 30, 2020, the Company issued ~~1,000,000~~options to purchase 481,167 shares of common stock, in the aggregate, to directors and employees of the Company at the fair value exercise price ranging from $0.41 to $3.10 per share expiring on dates between February 23, 2025 and September 29, 2025. The Company determined the fair-market value of the options to be $439,530. In connection with the issuance of these options to employees and directors, the Company recognized $26,575 and 29,262 in stock compensation expense for the three and nine months ended September 30, 2020. During the three and nine months ended September 30, 2020, the Company recognized $64,248 and $125,833, respectively, in stock compensation expense in connection with options previously issued to employees and directors in the prior years.

During the nine months ended September 30, 2019, the Company issued options to purchase 1,054,000 shares of common stock, in the aggregate, to directors and employees of the Company at the fair value exercise price ranging from $0.29 to $0.54 per share expiring on dates between December 31, 2023 and March 28, 2029. The Company determined the fair-market value of the options to be $248,761. In connection with the issuance of these options to employees and directors, the Company recognized $15,873 and $32,362, respectively in stock compensation expense for the three and nine months ended September 30, 2019. During the three and nine months ended September 30, 2020, the Company recognized $56,115 and $185,014, respectively, in stock compensation expense in connection with options previously issued to employees and directors in the prior years.

The fair value of options granted during the nine-month periods ending September 30, 2020 and 2019 were determined using the Black-Scholes option valuation model. The expected term of options granted is based on the simplified method in accordance with Securities and Exchange Commission Staff Accounting Bulletin 107 using the average of vesting period and contractual term. . The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk-free rate by selecting the U.S. Treasury with maturities similar to the expected terms of grants, quoted on an investment basis in effect at the time of grant for that business day.

The significant weighted average assumptions relating to the valuation of the Company’s stock options granted during the nine months ended September 30, 2020 were as follows:

A summary of the options activity for the nine months ended September 30, 2020 is as follows:

For options granted during the nine months ended September 30, 2020, the fair value of the Company’s stock was based upon the close of market price on the date of grant. As of September 30, 2020, the future expected stock-based compensation expense to be recognized in future years is $535,658 through September 30, 2022.

During the nine months ended September 30, 2020, the Company had exercises of options to purchase 430,220 shares of common stock, in the aggregate, to directors and employees.

During the month the nine months ended September 30, 2020, 466,344 options were converted into 430,220 shares of common stock at a weighted average exercise price of $0.22. The Company received cash proceeds of $47,400 associated with exercise of the exercise.

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at September 30, 2020 (for outstanding options), less the applicable exercise price.

A summary of the options activity for the nine months ended September 30, 2019 is as follows:

On June 24, 2020, the Company entered into a Purchase Agreement, described above in Note 7, pursuant to which the Company agreed to sell to the Investor in a registered direct offering June Warrant Shares to purchase up to 2,455,476 shares of common stock at an exercise price of $1.35 per share. During the three and nine months ended September 30, 2020 the Company received $2,632,500 in additional gross proceeds associated with exercise of 1,950,000 of the June Warrant Shares into common stock. As of September 30, 2020, 505,476 of the June Warrant Shares at an exercise price of $1.35 per share remain outstanding.

On August 4, 2020, the Company entered into a Purchase Agreement, described above in Note 7, pursuant to which the Company agreed to sell to the Investor in a registered direct offering Warrants to purchase up to 2,516,778 shares of common stock at an exercise price of $3.30 per share. Upon exercise of the Warrants in full by the Investor, the Company will receive additional gross proceeds of approximately $8,305,367. As of September 30, 2020, all of these Warrants remain outstanding.

During the nine months ended September 30, 2020, 6,481,924 warrants were converted into 5,303,455 shares of common stock at a weighted average conversion price of $0.74. The Company received cash proceeds of $2,632,500 associated with exercise of the warrants.

All warrants outstanding as of September 30, 2020 are scheduled to expire between June 06, 2021 and June 25, 2021.

A summary of activity related to warrants for the nine months ended September 30, 2020 follows:

A summary of activity related to warrants for the nine months ended September 30, 2019 follows:

The Company leases office space located at 117 South 4^thStreet, Neodesha, Kansas 66757. This serves as the corporate headquarters and manufacturing facility. The facility is 4,000 square feet at a cost of $500 per month. This lease terminated on September 30, 2019 but has a year-to-year option to renew upon approval by the city commission of Neodesha. The Company has exercised its option and has been approved to renew the lease through September 30, 2020 at a monthly cost of $600 per month.

The Company has a lease for offices in Boulder, Colorado for $2,000 a month. The Company renewed the lease on May 31, 2019 until December 31, 2020 on a month-to-month basis with an option to terminate at any time with a 30-day prior notice period.

On August 3, 2020 (the “Effective Date”), the Company entered into a lease agreement (the “Wichita Lease”) with U.S. Business Centers, L.L.C. (the “Landlord”) with an expected commencement date of November 1, 2020 (the “Commencement Date”) and expected expiration date of October 31, 2023, unless the Wichita Lease is sooner terminated or extended. The Wichita Lease premises includes approximately 12,000 square feet, located at 8833 E. 34^th Street, Wichita, Kansas 19103 (the “Leased Premises”). The aggregate estimated rent payments due over the initial three-year term of the Wichita Lease is $297,000. The lease requires a security deposit in the amount of $9,720 upon payment.

The Landlord may grant the Company the option to extend the term of the Wichita Lease for an additional 36 months (the “Option Term”). The aggregate estimated rent payments due over the Option Term of the Wichita Lease would be $314,640.

In addition, the Landlord granted the Company the right to take occupancy of the Leased Premises rent free, beginning on September 1, 2020. The Company expects to use the Leased Premises as its new corporate headquarters and base of operations for manufacturing, assembly, design and engineering and testing of drones, drone subcomponents and drone-related equipment.

Total rent expense associated with the above leases was $23,100 and $22,500 for the nine months ended September 30, 2020 and 2019, respectively, which is included in general and administrative expenses on the condensed interim statements of operations.

On May 3, 2019, the Company entered into a consulting agreement with GreenBlock Capital LLC (“Consultant”) to serve as strategic advisor and consultant to the Company with respect to the development of business opportunities and the implementation of business strategies to be agreed to by both parties. The extent of the services will be set forth in separate scopes of work, from time to time, to be prepared and mutually agreed to by the parties. As compensation for the services under the terms of the agreement, Consultant shall receive (i) $25,000 per month during the term of the agreement, (ii) 500,000 shares of restricted common stock upon execution of the agreement, and (iii) up to 2,500,000 shares of restricted common stock upon the achievement of predetermined milestones.

The Consultant was also previously engaged by the Company between March 2015 and August 2016 to provide consulting services. In addition, the Consultant held options to purchase 207,055 shares of the Company’s common stock that were cashless exercised at a price of $0.06 per share on July 20, 2020 into 201,791 shares of common stock.

On ~~November 6, 2017, Alpha Capital Anstalt exercised warrants~~October 31, 2019, the consulting agreement with the Consultant was terminated as a result of the Company no longer needing these services to ~~purchase 771,428~~be provided by an outside consultant. During the term of the agreement, the Company paid to the Consultant (i) $25,000 per month for six months and issued (ii) 500,000 restricted shares of ~~our~~ common stock at the execution of the agreement. The agreement also provided for the issuance of up to an ~~aggregate exercise price~~additional 2,500,000 shares of ~~$231,429 (or $0.30 per share), pursuant~~restricted common stock upon the achievement of milestones that were to be determined by the Company and the Consultant during the term of the agreement. There are no early termination penalties incurred as a result of the termination of the consulting agreement. The Consultant may still be entitled to receive the shares after termination of the Agreement, if the achievement of milestones that commenced during the term of the Agreement are completed.

On June 30, 2020, the Company issued an additional 250,000 shares of its common stock to the ~~terms~~Consultant as part of ~~such warrants,~~its compensation for services. The Company recognized a total of $297,500 of expense at a fair value of $1.19 per share within professional fees related to these issuances.

On April 7, 2020, as a condition to the consummation of the Series E Preferred Agreement, the Company entered into a Leak-Out Agreement with Mr. Bret Chilcott, founder and ~~was issued 771,428~~former director and President of the Company, and Alpha 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 Company common stock.

~~We have reviewed all material events through~~On August 26, 2020, the ~~date~~Company, together with Mr. Chilcott and Alpha Capital Anstalt, who was a party to the Leak Out Agreement, agreed to amend the Leak Out Agreement to change the restrictions on the disposition of ~~this report~~Mr. Chilcott’s shares that are subject to the Leak Out Agreement (the “Amended Leak Out Agreement”). The Amended Leak Out Agreement provides that Mr. Chilcott (together with his affiliates) may sell or otherwise dispose of his shares for a period of twelve (12) months commencing on September 7, 2020 (the “Restricted Period”) in ~~accordance with ASC 855-10.~~an amount representing no more than 50,000 shares per calendar month during the Restricted Period. After the Restricted Period, the restrictions set forth in the Amended Leak Out Agreement cease.

~~FORWARD-LOOKING STATEMENTS~~Approval of Compensation by Compensation Committee

~~This report contains forward-looking statements. These forward-looking statements are~~Mr. Barrett Mooney and Mr. Brett Chilcott resigned from their roles with the Company, effective May 5, 2020. Mr. Mooney now serves as Chairman of the Board, and Mr. Chilcott no longer serves as management of the Company.

Mr. Mooney was entitled to receive his current salary and benefits between the dates of March 6, 2020 and April 4, 2020. In addition, Mr. Mooney will be paid $50,000 in cash, $25,000 of which was paid in a lump sum in April 2020 and the balance will be paid in equal installments over a six-month period beginning on May 5, 2020. Mr. Mooney will remain eligible to receive bonuses of up to $15,000, as approved by the Board of Directors based on certain revenue and operational targets being achieved. Commencing May 5, 2020 when he accepted the appointment as Chairman of the Board, Mr. Mooney is entitled to receive (i) a quarterly grant of 16,500 stock options at the fair market value of the stock on the issuance date, vesting over two years and exercisable for a period of five years; and (ii) reimbursement for travel expenses. Mr. Mooney has agreed to also provide the Company with consulting services, as needed, at a fixed price of $4,500 per month on a month-to-month basis, plus reimbursement for travel expenses.

Mr. Barrett Mooney, who is currently the Chairman of the Board, receives a monthly fee for consulting services he provides to the Company, which is outside of his role as Chairman of the Board. Mr. Mooney’s consulting fee increased to $10,000 per month commencing on August 1, 2020.

Mr. Chilcott is entitled to receive a base annual salary of $140,000, plus benefits, for the twelve-month period commencing May 5, 2020 and ending May 4, 2021. Subsequent to May 4, 2021, Mr. Chilcott will provide the Company with consulting services, as needed, at a fixed fee of $4,500 per month on a month-to-month basis plus reimbursement of travel expenses.

The Compensation Committee also approved a 2020 Executive Compensation Plan for Nicole Fernandez-McGovern, the Chief Financial Officer and EVP of Operations, and the new Chief Executive Officer the Company. The Plan is as follows, with the Cash Bonus, Option and Restricted Stock Units (RSUs) components to be dependent upon achieving certain to-be-determined financial and operational milestones:

On April 28, 2020, the Company extended an offer of employment that was accepted by Mr. Michael Drozd to serve as the Company’s new Chief Executive Officer. Mr. Drozd officially joined the Company on May 18, 2020. The Company previously announced that Mr. Barrett Mooney would resign from his role as Chief Executive Officer effective as of May 5, 2020, but would remain with the Company as Chairman of the Board thereafter. From May 5, 2020 through May 18, 2020, Ms. Nicole Fernandez-McGovern, the Company’s Chief Financial Officer, served as Interim Chief Executive Officer until Mr. Drozd officially commenced his new role on May 18, 2020. Ms. Fernandez-McGovern did not receive any additional compensation for serving as Interim Chief Executive Officer.

From 2015 through 2019, Mr. Drozd served as President of Eurofins AgBio Division, a global business focused primarily on testing for the agriculture sector (seed, plant and animals). From 2014 until 2015, he was Chief Operating Officer of Arbiom, a French biotechnology company where he restructured the organization, materially increasing overall efficiency and improving resource allocations through numerous measured steps and initiatives. Mr. Drozd served as President and CEO of Aseptia/Wright Foods from 2011 through 2014, a leading technology company in shelf-stable food processing and co-packaging.

Mr. Drozd will receive a base salary of $235,000 per year, which shall be subject to ~~a number~~annual performance review by the Compensation Committee of ~~risks~~the Board and ~~uncertainties, many of which are beyond our control. All statements, other than statements of historical fact, contained~~may be revised by the Committee, in this report, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attemptedits sole discretion. Mr. Drozd is entitled to ~~identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” or “should~~” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “~~Risk Factors~~” or elsewhere in this report, our latest Annual Report on Form 10-K, filed with the SEC on March 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 21, 2017,receive an annual 20% bonus, which may ~~cause our or our industry’s actual results, levels~~be a mix of ~~activity,~~cash and stock options, based upon his performance ~~or achievements~~as determined by certain metrics to be ~~materially different from any future results, levels~~established by the Board and Mr. Drozd. He will receive an initial grant of ~~activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in~~100,000 restricted stock units under the Company’s 2017 Omnibus Equity Incentive Plan (the “Equity Plan”), which will fully vest after one year of continued employment. Mr. Drozd is eligible to receive a ~~very competitive~~quarterly award of 15,000 non-qualified stock options under the Equity Plan. At the time of issuance, the stock option award agreements will set forth the vesting, exercisability and ~~rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address~~exercise price of the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. The factors impacting these risks and uncertainties include, but are not limited to:

~~You should not place undue reliance on any forward-looking statement, each of which applies only~~stock options as of the date of ~~this report. Except as required by law, we undertake no obligation to update or revise publicly any~~the grants.

On July 20, 2020, the Board of Directors of the ~~forward-looking~~Company, upon recommendation of the Compensation Committee, approved a change in the compensation of the directors and of Ms. Nicole Fernandez-McGovern, the Company’s Chief Financial Officer and EVP of Operations. The Compensation Committee engaged Albeck to perform an independent third-party study of compensation to assess the Company’s compensation of its Board and its executive officers in comparison to industry averages.

As a result of the study, and upon the recommendation of the Compensation Committee, the Board approved an increase in Ms. Fernandez-McGovern’s annual salary from $200,000 to $220,000 and quarterly stock options from 12,500 to 15,000. In addition to the previously approved 2020 bonus structure, Ms. Fernandez-McGovern was awarded an additional performance-based bonus of $40,000, equal to 20% of her current salary. Also approved was a cash component for director compensation in the amount of $60,000 per year, payable quarterly, and an increase in quarterly stock options from 16,500 to 25,000 per director. The approved compensation is retroactive for all to July 1, 2020.

As previously disclosed in an amendment to the Current Report on Form 8-K filed on April 20, 2020, Mr. Barrett Mooney, who is currently the Chairman of the Board, receives a monthly fee for consulting services he provides to the Company, which is outside of his role as Chairman of the Board. Mr. Mooney’s consulting fee has been increased to $10,000 per month commencing on August 1, 2020.

The following reflects the related party transactions during the nine months ended September 30, 2020 and 2019.

The Company’s Chief Financial Officer, Nicole Fernandez-McGovern, is one of the principals of Premier Financial Filings, a full-service financial printer. Premier Financial Filings provided contracted financial services to the Company and their related expenses have been included within general and administrative expenses. For the three and nine months ended September 30, 2020, Premier Financial Filings provided services to the Company resulting in fees of $7,597 and $18,720, respectively recorded in general and administrative costs. There were $825 payables due to Premier Financials Filings as of September 30, 2020.

The Company contracted external fractional CTO services to a firm whereby one of our board members is currently a shareholder. For the three and nine months ended September 30, 2020, the Company paid $25,000 and $86,000 in fees, respectively, recorded in professional fees on the condensed interim statements ~~after~~of operations. No expenses related to these services were incurred in 2019. Also, there are no payables due to this company as of September 30, 2020.

On October 14, 2020, in connection with, and as an incentive to the entry into a two-year exclusive manufacturing agreement to produce a patented Drone Delivery Station for Valqari LLC (“Valqari”), the Company entered into a Convertible Promissory Note pursuant to which the Company has made a loan to Valqari, in the principal aggregate amount of $500,000 (the “Note”), which amount accrues interest at a rate of three percent per annum.

The loan matures on April 14, 2021 (the “Maturity Date”), at which time all outstanding principal and interest that has accrued, but remains, unpaid shall be due. The Note provides for an automatic six month extension of the Maturity Date under the following circumstances (i) Valqari has received in writing, (x) a good faith acquisition offer at a consideration value greater than $15,000,000, (y) such offer, upon consummation, would result in a change in control (as defined in the note) of Valqari, and (z) at such time Valqari, is actively engaged in the negotiation or finalization of such acquisition transaction; or (ii) Valqari has initiated, or is in the process of initiating, a conversion to a “C-Corporation” under the Internal Revenue Code, whereas such conversion will be completed no later than one day prior to the extended Maturity Date. Valqari may not prepay the Note prior to the Maturity Date.

In the event of a change in control or conversion of Valqari to a “C-Corporation” under the Internal Revenue Code on or before the Maturity Date, the Company may convert the outstanding principal amount of the Note and any unpaid accrued interest into (i) Class B Common Units of Valqari: immediately prior to the closing of a Change in Control or (ii) upon Valqari’s conversion to a C-Corporation, shares of Valqari common stock, in both cases at a conversion price no higher than a pre-money valuation of $15,000,000.

The Note is subject to customary representations and warranties by Valqari, as well as events of default, which may lead to acceleration of the payment of the Note such as (i) failure to pay all of the outstanding principal, plus accrued interest on the Maturity Date, (ii) Valqari filing a petition or action under any bankruptcy, or other law, or (iii) an involuntary petition is filed again Valqari under any bankruptcy statute (that is not dismissed or discharged within 60 days). The indebtedness evidenced by the Note is subordinated in right of payment to the prior payment in full of any senior indebtedness (as defined in the Note) in existence on the date of ~~this report to conform our statements to actual results~~the Note or ~~changed expectations. For~~incurred thereafter.

Also, on October 14, 2020, AgEagle entered into a ~~detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Risk Factors” in this document and in our Annual Report on Form 10-K~~manufacturing agreement with Valqari for the ~~fiscal year ended December 31, 2016, filed~~manufacture and assembly of Valqari’s patented Drone Delivery Station, in accordance with the ~~SEC on March 31, 2017~~specification provided by, and ~~our Quarterly Report on Form 10-Q~~the components designated by Valqari, for sale and delivery to its customers. AgEagle has been appointed as Valqari’s exclusive manufacturer of its products in the ~~quarter ended June 30, 2017, filed with~~United States of America for a term of two-years, unless terminated earlier. Valqari, based in Chicago, Ilinois, is engaged in the ~~SEC on August 21, 2017.~~development, manufacture and sale of a patented Drone Delivery Station, including related software, which is the only universal, standardized, safe and secure drone landing station that protects people, property and packages.

~~You should read the matters described in “Risk Factors~~” and the other cautionary statements made in this report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this report. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements.

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “~~Part II”, “~~Item 7,2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”

The information contained in this Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the Securities and Exchange Commission on April 13, 2020 (the “~~Annual Report~~”“Form 10-K”).

~~Certain capitalized terms used below~~ and ~~otherwise defined below,~~presumes that readers have access to, and will have read, the ~~meanings given~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our financial statements and the notes to ~~such terms in~~ the ~~footnotes to our consolidated~~ financial statements included ~~above under “Part I - Financial Information”~~ -~~“Item 1. Financial Statements~~”.elsewhere in this Form 10-Q.

~~All~~The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 10-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

Except as otherwise indicated herein or as the context otherwise requires, references in this ~~report~~offering circular to “~~we,~~“we,” “~~us,~~“us,” “~~our,~~“our,” “~~Company~~“Company,” and “~~EnerJex~~”“AgEagle” refer to ~~EnerJex Resources, Inc. and our wholly-owned operating subsidiaries, EnerJex Kansas,~~AgEagle Aerial Systems, Inc., ~~Black Sable Energy, LLC, Working Interest, LLC,~~a Nevada corporation.

AgEagle Aerial Systems Inc. (“AgEagle” or “the Company”) designs, produces and ~~Black Raven Energy, Inc. unless~~supports technologically-advanced small, unmanned aerial vehicles (“UAVs” or “drones”). In addition, providing new utility to UAVs, we pioneer and innovate advanced aerial imaging data collection and analytics technologies capable of addressing the ~~context requires otherwise.~~impending food and environmental sustainability crises that threaten our planet. Historically, our 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 solutions that solve important problems confronting the global agricultural industry. We ~~report~~have spent ten 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 partner to clients seeking to adopt and support productive agricultural approaches to better farming practices which limit the impact on our ~~financial information~~natural resources, reduce reliance on ~~the basis of a December 31 fiscal year end.~~inputs and materially increase crop yields and profits.

In addition ~~unless~~to UAV sales, in late 2018, we 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 ~~context otherwise requires~~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 first half of 2019, we introduced HempOverview, 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 we believe is the gold standard for regulatory oversight, operational assistance and reporting capabilities for the ~~purposes~~fast emerging industrial hemp industry.

Central to our long-term growth strategy, we will continue to identify opportunities to leverage our proprietary technological platform and industry expertise to penetrate new, high growth market sectors that may benefit from our advanced aerial imagery-based data collection and analytics solutions.

Research and development activities are integral to our business and we follow a disciplined approach to investing our resources to create new technologies and solutions.

Our business is seasonal in nature and, as a result, our revenue and expenses and associated revenue trends fluctuate from quarter to quarter.

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 us a logical partner for designing, manufacturing and testing drone platforms in the fast growing package delivery market – a market forecasted by Research and Markets 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, we announced that we were actively pursuing expansion opportunities within the Drone Logistics and Transportation market, and reported that we had received our 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 ~~report only:~~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 had recognized additional revenues from the project in the first quarter of 2020.

In the second quarter of 2020, we announced that we had received follow-on purchase orders from the ecommerce company client relating to the continued manufacture and assembly of drones used for the testing and refining of client’s commercial drone small delivery vehicles, systems and operations currently in development. Due to the impact of the global COVID-19 pandemic and the resulting delivery delays of components ordered from certain suppliers for this project, revenues associated with these purchase orders will be reported in the third quarter, ending September 30, 2020. It is our belief that we will continue to perpetuate and enhance our relationship with this customer on a moving-forward basis.

Our first commercially available product was the AgEagle Classic, which was followed shortly thereafter by the RAPID System. As we improved and matured our product, we launched the RX-60 and subsequently our current UAV product, the RX-48. The success AgEagle has achieved with its legacy products, which we believe has carried over into the continued improvement of the RX-60 and RX-48, stems from AgEagle’s ability 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. Our core technological capabilities, developed over five years of research and innovation, include a 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-60), and high-end software that automates drone flights 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) per flight from their launch location, and are configured to carry a camera with an NIR filter that uses near infrared images to capture crop data. Our 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 health and field conditions faster than any other method available.

Our UAVs were initially specifically designed to help farmers increase profits by pinpointing areas where nutrients or chemicals need to be applied, as opposed to traditional widespread land application processes, thus decreasing input costs, reducing the amount of chemicals applied 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 some of its competitors require. The software can automatically take pictures from the camera, stitch the photos together through the cloud, and deliver a geo-referenced, high quality aerial map 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 result is a prescription or zone map that can then be used in a field computer that is typically found in a sprayer or applicator designed to drive through fields to precisely apply the amount of nutrients or chemicals required to continue or restore the production of healthy crops.

In addition to UAV sales, in late 2018, AgEagle 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 our customers.

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.

As one of the agriculture industry’s leading pioneers of advanced aerial-image-based data collection and analytics solutions, AgEagle is intent on leveraging our expertise to champion the use of proven, advanced web- and map-based technologies as a means 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 of HempOverview, 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.

In November, 2019, AgEagle announced that the Florida Department of Agriculture and Consumer Services (“FDACS”) had chosen 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 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 new HempOverview clients in 2020.

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.

Our FarmLens platform has benefitted us and our shareholders by developing important vertically integrated products and services with our drone-enabled software technologies. FarmLens is a subscription cloud analytics service that processes data, primarily collected with a drone, such as those produced by AgEagle, and makes such data actionable by farmers and agronomists. FarmLens is 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. The FarmLens platform extends AgEagle’s reach as a business through key partnerships.

Moving forward, the Company intends to concentrate its growth strategies on three focused pursuits:

~~We file annual, quarterly and other reports and other information with the SEC. You can read these SEC filings and reports over the Internet at the SEC’s website at www.sec.gov or on our website at~~~~www.enerjex.com~~~~. You can also obtain copies~~Impact of the documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, NE, Washington, DC 20549 on official business days between the hours of 10:00 am and 3:00 pm. Please call the SEC at (800) SEC-0330 for further information on the operations of the public reference facilities. We will provide a copy of our annual report to security holders, including audited financial statements, at no charge upon receipt of a written request to us at EnerJex Resources, Inc., 4040 Broadway, Suite 425, San Antonio, Texas 78209.

The ~~market data~~outbreak of the novel coronavirus (COVID-19) has evolved into a global pandemic. The coronavirus has spread to many regions of the world, including the United States. The extent to which COVID-19 impacts our business and ~~certain~~operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain the coronavirus or treat its impact, among others.

Should the coronavirus continue to spread, our business operations could be delayed or interrupted. For instance, we currently utilize third parties to, among other ~~statistical information~~things, manufacture components and parts for the proprietary and contracted drones we produce, and to perform quality testing. We also manufacture and assemble products and perform various services at our manufacturing facility. If either we or any third-parties in the supply chain for materials used ~~throughout this report~~in our manufacturing and assembly processes are ~~based~~adversely impacted by restrictions resulting from the coronavirus pandemic, our supply chain may be disrupted, limiting our ability to manufacture and assemble products.

The spread of the coronavirus, which has caused a broad impact globally, including restrictions on ~~independent industry publications, government publications, reports~~travel and quarantine policies put into place by ~~market research firms~~businesses and governments, may have a material economic effect on our business. While the potential economic impact brought on by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruptions of global financial markets, which may reduce our future ability to access capital either at all or on favorable terms. In addition, a recession, depression or other ~~published independent sources. In addition, some data~~sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.

The ultimate impact of the current pandemic, or any other health epidemic, is ~~based~~highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our ~~good faith estimates. Although we believe that this information is reliable, we cannot guarantee~~business or the ~~accuracy and completeness of this information, and we~~global economy as a whole. However, these effects could have ~~not independently verified any of it.~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.~~a material impact on our operations in the future. We will continue to monitor the situation closely.

~~The following~~During the nine months ended September 30, 2020, in addition to complying with ’shelter at home’ mandates in those states affecting our employees, most of whom worked virtually from their homes, our supply chain was adversely impacted by the pandemic, causing material delays in the delivery of critical supply orders associated with timely fulfilling our obligations to our large ecommerce client. As a consequence, revenues originally expected to be reported in the second quarter 2020 will be reported in our third quarter 2020 results.

Our management’s discussion and analysis of our financial condition and results of operations ~~should be read~~are based on our consolidated financial statements, which have been prepared in ~~conjunction~~accordance with ~~our~~accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Our most critical estimates include those related ~~notes~~ to revenue recognition, inventories and reserves for excess and obsolescence, accounting for stock-based awards, and income taxes. On an ongoing basis, we evaluate our financial statements included elsewhere in this report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertaintiesestimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results ~~and timing of selected events~~ may differ ~~materially~~ from ~~those anticipated~~these estimates under different assumptions or conditions.

See Note 2 in ~~these forward-looking~~the accompanying unaudited condense interim consolidated financial statements asfor a ~~result~~listing of ~~many factors, including those discussed under, and incorporated by reference in, ITEM 1A. Risk Factors and elsewhere in this report.~~our critical accounting policies.

~~On October 19, 2017, EnerJex entered the Merger Agreement with AgEagle, described in greater detail under “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Merger Agreement~~”.

~~The completion of the Merger is subject to various customary conditions described in greater detail under “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Merger Agreement~~”.

In the event the Merger closes, the shareholders of AgEagle will become our majority shareholders, our operations will change to those of AgEagle, i.e., the design, development, production, and distribution of technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry and we will also dispose of our current principal assets, consisting of our Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated, the Company does not have a present intention to dispose of the above described assets or to change its business focus.

Our current principal strategy is to consummate the pending Merger with AgEagle. We continue to manage our existing assets with reduced operating expenses while working to complete the Merger. In the event that the Merger does not close, we will continue to operate as an oil and gas company.

We will continue to investigate multiple opportunities to both increase and unlock value and accelerate growth in an accretive manner on behalf of shareholders, including but not limited to mergers, acquisitions, joint ventures, and non-dilutive financings. There can be no assurance of the results or timing associated with this process.

The Board of Directors is currently focused on the pending Merger, but is continuing to pursue possible strategic transactions involving opportunities both in and outside the oil and gas industry that will offer the opportunity for future growth and net cash flow. Those opportunities may involve a business combination with another business enterprise, the acquisition of one or more groups of assets, an equity or debt financing transaction to provide capital with which to fund operations and expansion, and other similar transactions. To illustrate the types of transactions that the Company is investigating, the Company has been investigating the acquisition by purchase or contribution of certain operating oil and gas assets.

As discussed previously, on October 19, 2017, the Company executed the Merger Agreement with AgEagle which is subject to shareholder approval at a meeting to be scheduled. While we are confident the Merger will be approved, the Company expects to continue to pursue other acquisition and business combination opportunities. No assurance can be given that any one or more of these potential business combinations or asset acquisition opportunities will be consummated.

~~The following is a brief description of our most significant corporate developments that have occurred since the end of 2015:~~

~~On April 28, 2016, the Bank informed the Company that it would extend the above Forbearance Agreement period to May 31, 2016, upon effecting a principal reduction of $125,000.~~

On October 1, 2016, the Company and the Bank could not reach an agreement to extend the Third Amendment to the Forbearance Agreement. Following this outcome, the Company decided to discontinue payment of interest on its outstanding loan obligations with the Bank. The Company continued to evaluate plans to restructure, amend or refinance existing debt through private options.

~~On October 26, 2016, the NYSE American (the “NYSE~~”) delisted our Series A preferred stock from the NYSE due to the failure to maintain a market capitalization of above $1 million. On January 11, 2017, we announced that we received a letter of noncompliance from the NYSE due to our failure to hold an annual meeting for the fiscal year ended December 31, 2015. On January 17, 2017, we announced that the NYSE had accepted our plan to restore compliance with certain NYSE regulations on or before March 31, 2017. The NYSE subsequently granted an extension and on April 27, 2017, the Company held an annual meeting of shareholders.

~~On February 10, 2017, we and the other Sellers entered into the LSA, described in greater detail in “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” and thereafter, the Company entered into the New Credit Agreement and New Note, also described in “Note 2 – Going Concern” under “Financing Transactions~~”.

Additional information regarding the Merger, the operations of AgEagle, which will become the operations of the Company in the event the Merger is completed and risk factors associated with the Merger, can be found in the Current Report on Form 8-K which we filed with the SEC on October 10, 2017.

~~On October 19, 2017, concurrently with the execution of the Merger Agreement, a principal stockholder of AgEagle (the “Key AgEagle Stockholder”) entered into a voting agreement in favor of EnerJex (the “EnerJex Voting Agreement~~”). Pursuant to the EnerJex Voting Agreement, the Key AgEagle Stockholder has agreed, among other things, to vote all shares of capital stock of AgEagle beneficially owned by him in favor of the Merger and the adoption of the Merger Agreement and the approval of the transactions contemplated by the Merger Agreement, and any actions required in furtherance thereof. The AgEagle Voting Agreement will terminate upon the earliest to occur of: (i) the termination of the Merger Agreement in accordance with its terms; or (ii) the date on which the Merger becomes effective.

~~On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not compliance with certain NYSE American (“NYSE American~~”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE American Company Guide (the “~~Company Guide~~”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017, advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

The Company intends to submit a plan by the November 19, 2017 deadline. The plan will be based in significant part upon the merger and the associated financing. The Company expects that its common stock will continue to be listed on the NYSE American while the Company seeks to regain compliance with the listing standard noted, subject to the Company’s compliance with other continued listing requirements. If the Company fails to submit a plan or if the Company’s plan is not accepted then the NYSE American may commence delisting procedures. Upon completion of the Merger, the Company will be required to satisfy all applicable requirements for the initial listing on the NYSE American.

~~Net Production, Average Sales Price and Average Production and Lifting Costs~~

The table below sets forth our net oil production (net of all royalties, overriding royalties and production due to others), the average sales prices, average production costs and direct lifting costs per unit of production for the three and nine-month periods ended September 30, 2017 and 2016.

~~Results of Operations for~~For the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016 compared.~~

~~Oil~~For the three months ended September 30, 2020, we recorded revenues of $750,325 compared to revenues of $41,616 for the same period in 2019, a 1,703% increase. The increase for this quarter in comparison to the prior quarter was largely due to new revenues derived from follow-on purchase orders to manufacture and assemble drone related products that had been deferred due to vendor delays impacted by COVID-19 shut-downs. For the nine months ended September 30, 2020, we recorded revenues of $1,157,930 compared to revenues of $107,785 for the same period in 2019, a 974% increase. The increase was largely due to new revenues derived from follow-on purchase orders to manufacture and assemble drone delivery products designed to meet specific criteria for package delivery in urban and suburban area. In addition, revenue growth was also positively impacted by continued focus on expansion of our platforms, providing for aerial imaging and analytics solutions which serve new and emerging markets including registration, oversight and compliance of hemp fields by state departments of agriculture.

For the three months ended September 30, 2020 and 2019, cost of sales totaled $430,683 and $32,728, respectively, an increase of $397,955 or 1,216%. Costs of sales totaled $620,196 and $85,875, for the nine months ended September 30, ~~2017, were $1,082,492~~2020 and 2019, respectively, reflecting an increase in our cost of goods sold of 622% commensurate with the increase in sales.

We also had gross profit of $319,642, or 43%, during the three months ended September 30, 2020 compared to ~~revenues~~$8,888, or 21%, for the comparable period in 2019, resulting in an increase in our profit margin in the current period. For the nine months ended September 30, 2020 and 2019, we had a gross profit of ~~$1,581,972~~$537,734 or 46% and $21,910 or 20%, respectively, an increase in our profit margins of 2,354%. The primary factors contributing to the increase in our cost of sales and gross profit margin was due to the continued shift in mix of products and services we now offer customers in the new markets we serve that have resulted in higher margin for our sales.

We recorded total operating expenses of $897,379 during the three months ended September 30, 2020, a 57% increase as compared to operating expenses of $571,926 in the same period of 2019. Our operating expenses are comprised of general and administrative costs, professional fees and selling expenses. General and administrative expenses totaled $626,605 in the three months ended September 30, 2020 compared to $396,432 in 2019, an increase of 58%. The increase was due primarily to stock compensation expenses, investor relations costs, payments to directors as compensation fees, and additional payroll and bonus payments made to employees. Professional fees also increased 67% as we had $254,532 of expenses for the current period versus $152,192 in the comparable prior period. The increase was mainly due to additional consulting service fees related to fractional CTO services, an operational consultant and business development consultants required to expand our growth opportunities along with incremental legal expenses as a result of our capital raising activities. Lastly, included in operating expenses was selling costs that decreased 30% to $16,242 versus $23,302 in the prior comparable period due to less travel and conference expenses for the purposes of new business development as a result of COVID-19.

We recorded total operating expenses of $2,774,113 and $1,889,214, respectively, for the nine months ended September 30, ~~2016~~2020 and ~~for the three months ended September 30, 2017, were $187,297 compared to revenues~~2019, a 47% increase. Our operating expenses are comprised of $454,285 for the same period in 2016. Of the year-to-date oil revenue decrease of $499,480, approximately $852,109 (offset by the increase in prices as described below) was due to lower production volumes. Oil production decreased approximately 44% in the first nine months of 2017 from barrels produced in the first nine months of 2016 to barrels produced for the first nine months ended September 30, 2017. The production decrease was due primarily to the curtailment of both growthgeneral and ~~maintenance capital expenditures,~~administrative costs, professional fees and ~~the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas in connection with the restructuring of its outstanding senior debt in May 2017.~~

This was offset by an increase in revenues of approximately $352,629 due to higher crude oil prices. Crude oil prices increased $7.84 or 22% to an average price of $43.03 per barrel for the first nine months of 2017 compared to $35.19 per barrel for the same period in 2016.

~~Natural gas revenues for~~selling expenses. For the nine months ended September 30, ~~2017 were $19,509 compared~~2020 and 2019, we recorded $1,782,926 and $1,305,221 in general and administrative expenses, respectively, resulting in a 37% increase. The increase is mainly due to ~~natural gas revenues~~recruiting fees associated with search for new CEO, costs for public relations services, payments to directors as compensation fees, additional payroll and bonus payments made to employees, stock compensation expenses, and investor relations costs. Professional fees also increased 80% as we had $958,436 of ~~$43,461~~expenses for the ~~nine months ended September 30, 2016~~current period versus $531,885 in the comparable prior period. The increase was mainly due to additional consulting service fees related to fractional CTO services, an operational consultant and business development consultants required to expand our growth opportunities along with incremental legal expenses as a result of our capital raising activities. Lastly, included in operating expenses was selling costs that decreased 37% to $32,751 versus $52,108 in the prior year’s comparable period due to less travel and conference expenses for the ~~three months ended September 30, 2017 were $-0- compared to natural gas revenues~~purposes of ~~$18,929 for the same period in 2016. Of the year-to-date revenue decrease~~new business development as a result of $23,952, approximately $46,964 (offset by the increase in prices as described below) was due to lower production volumes. Production decreased in the first nine months of 2017 from 39,692 Mcf for the nine months ended September 30, 2016, to 11,649 Mcf for the comparable period of 2017, as shown in the table above. The production decrease was due primarily to the curtailment of both growth and maintenance capital expenditures and the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas in connection with the restructuring of its outstanding senior debt in May 2017. This was offset by an increase in revenues of approximately $23,012 due to higher natural gas prices. Natural gas prices increased $0.58 or 53% from an average price of $1.09 per Mcf for the first nine months of 2016 to an average price of $1.67 per Mcf for the same period of 2017.

Direct operating costs include direct labor and equipment costs related to pumping, gauging, pulling, well repairs, compression, transportation costs, and general maintenance requirements in our oil and gas fields. These costs also include certain contract labor costs, and other non-capitalized expenses. Direct operating costs for the nine months ended September 30, 2017 decreased by $903,385, or 47% to $1,013,389 from $1,916,774 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017 were $205,253 compared to $569,109 for the same period in 2016. Year-to-date direct operating costs per Boe decreased $1.29 or approximately 3% to $37.40 for 2017, compared to $37.16 per boe for the same period of 2016. The decrease was primarily due to the curtailment of both growth and maintenance capital expenditures, and the conveyance of the Company’s oil and gas properties in Colorado, Nebraska and Texas.

Depreciation, depletion and amortization for the nine months ended September 30, 2017 was $305,684 compared to $312,322 for the nine months ended September 30, 2016 and for the three months ended September 30, 2017 was $80,449 compared to $63,644 for the same period in 2016. The year-to-date decrease in depletion expense of $16,805 or approximately 26% was due to the decrease in our depletable base year-over-year resulting from the impairment sustained in 2016 and further reduced by lower production volumes. Depletion expense per Boe decreased $1.29 or approximately 44% in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2017 and also as discussed above production decreased approximately 44% nine months over nine months due primarily to lower spending on lease operating expenditures and lower investments in maintenance capital.

Under the full cost method of accounting, capitalized oil and gas property costs less accumulated depletion and net of deferred income taxes may not exceed an amount equal to the sum of the present value, discounted at 10%, of estimated future net revenues from proved oil and gas reserves and the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are not subject to amortization. Should capitalized costs exceed this ceiling, an impairment expense is recognized.

~~For~~During the three and nine months ended September 30, ~~2017,~~2020 we ~~were not required to record an impairment expense~~recorded a loss on ~~our evaluated oil and gas properties~~disposal of fixed assets due to ~~improved commodity prices and market conditions. For~~our moving to Wichita of $594. There were no other expenses recorded for the same period during 2019.

Interest expense for the three and nine months ended September 30, ~~2016, we recognized an impairment expense on our evaluated oil~~2020 was $275 related to the Paycheck Protection Plan (PPP) loan, compared to $0 during the three months ended September 30, 2019 and ~~gas properties of $800,000 and $7,444,597, respectively.~~$501for the nine months ended September 30, 2019.

~~Professional fees~~Our net loss was $578,606 and $563,038 for the three months ended September 30, 2020 and 2019, respectively and $2,237,248 and $1,867,805, for the nine months ended September 30, ~~2017 were $422,538~~2020 and 2019, respectively. Overall, the increase in net loss is due to an increase in our operating costs as a result of the shifts in our sales and our business development growth strategies. We are in the process of continuing to address these shifts by developing new platforms, products and services that support prevailing growth opportunities in the domestic industrial hemp market, sustainable agriculture market and the growing drone-enabled package delivery business.

For the three months ended September 30, 2020 and 2019, our net loss available to common stockholders decrease to $578,606 from $603,927, a decrease of 4%. Our net loss available to common stockholders for the nine-month period ended September 30, 2020 and 2019 was $11,348,575 and $1,989,138, respectively. The increase is due to non-cash charges stemming from required deemed dividend accounting for modifications to certain preferred stock, redemption of preferred stock and the trigger of Down Round provisions on certain preferred stock and warrants.

Cash on hand was $24,693,417 at September 30, 2020 compared to ~~$181,086~~the $717,997 at December 31, 2019, an increase of $23,975,420. Cash used in operations for the nine months ended September 30, ~~2016 and $0 for the three months ended September 30, 2017~~2020 was $(1,442,919) compared to ~~$43,968 for the same period~~$(1,121,260) of cash used in 2016. The increase in year-to-date professional fees of $241,452 was primarily due to increased spending in 2017 on consulting, legal and investor relation services. These increases were partially offset by decreased third party reserve engineering fees.

~~Salaries~~operations for the nine months ended September 30, ~~2017 were $407,888 compared~~2019. The increase in cash used in operating activities was driven largely by payments received from revenue that was initially recorded as a contract liability offset by additional accounts payables related to ~~$1,044,639 for~~purchases of inventories associated with this project.

There was $(70,086) cash used in our investing activities during the nine months ended September 30, ~~2016 and $130,741 for the three months ended September 30, 2017~~2020 as compared to ~~$297,244 for the same period~~$(57,715) used in ~~2016. The decrease in year-to-date salaries of approximately $636,751 is due primarily to a reduced number of employees from the prior period.~~

~~Administrative expenses for~~investing activities during the nine months ended September 30, ~~2017 were $461,378 compared to $435,616~~2019. The increase in cash used in our investing activities resulted from purchases of property and equipment and building improvements for the new leased warehouse.

Cash provided in financing activities during the nine months ended September 30, ~~2016 and $190,341 for the three months ended~~2020 was $25,488,425 compared to cash used in financing activities of $(40,998) as of September 30, ~~2017 compared to $124,090 for the same period~~2019. The increase in ~~2016. The year-to-date decrease of $25,762 in 2017 compared to 2016, was due primarily to decreased general and administrative services~~cash provided ~~from a working interest partner, and decreased IT, telecom, software, and meals, travel, and entertainment.~~

Interest expense for the nine months ended September 30, 2017 was $908,642 compared to $1,001,937 for the nine months ended September 30, 2016, a decrease of $93,295 and $184,148 for the three months ended September 30, 2017 compared to $339,719 for the same period in 2016. Interest expense decreased as a result of the reduction of debt under the Loan Sale Agreement (“~~LSA”) (see “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” for further information) offset~~ by ~~higher interest rate charges under the forbearance agreement also described under the Note 2.~~

~~For the nine months ended September 30, 2017, we recognized a gain of $11,500,124 on the LSA and the restructuring of~~ our ~~debt completed thereby. For the three and nine months ended September 30, 2016, and the three months ended September 30, 2017, we had no loan sale gains or sale of loans.~~

All of the Company’s hedge contracts expired in 2016, so we incurred no unrealized gains or losses in the nine-months ended September 2017. We recorded an unrealized loss of $2,449,855 in the marking to market of our derivative contracts for the first nine months of 2016 and $68,459 for the three months ended September 30, 2016.

Other income decreased by $1,780,415 from $2,312,261 for the nine months ended September 30, 2016 to $531,846 for the nine months ended September 30, 2017 and decreased by $146,925 for the three months ended September 30, 2017 compared to the same period in 2016. The decreasefinancing activities was due to ~~the expiration~~sales of ~~derivative contracts in 2016, resulting in no realization~~our preferred stock, common stock, warrants and promissory note proceeds as part of ~~gains from their monetization in 2017 offset by income from performing certain general~~Coronavirus Aid, Relief and ~~administrative services for Camber Energy, Inc., for a fee of $150,000 per month beginning in May 2017.~~Economic Security Act’s Paycheck Protection Plan (PPP).

The net income for the nine months ended September 30, 2017 was $9,614,452 compared to a net loss of $10,849,132 for the nine months ended September 30, 2016 and net loss was $318,635 for the three months ended September 30, 2017, compared to net loss of $1,694,404 for the same period in 2016. The year-to-date increase in the net income was due primarily to the gain from the LSA of $11,500,124 and the reduction in the impairment of oil and gas properties of $7,444,597.

Liquidity is a measure of a company’s ability to meet potential cash requirements. We have historically met our capital requirements through debt financing, revenues from operations, asset sales, and the issuance of equity securities. Due to the decline in oil prices and the restructuring of our outstanding debt, it will be more difficult during the remainder of 2017 and into 2018 to use our historical means of meeting our capital requirements to provide us with adequate liquidity to fund our operations and capital program.

~~The following table summarizes total current assets, total current liabilities and working capital.~~

The working capital deficit at September 30, 2017 was $5,016,601 compared to $18,075,439 at December 31, 2016. The year-to-date decrease in the working capital deficit was primarily due to the $13.5 million of debt forgiven as part of the LSA.

We had $515,752 of cash used in operating activities for the nine months ended September 30, 2017, which was mainly due to $11.5 million of gain on the LSA, offset by the $9.7 million net income for the period.

~~We had $4,635 of cash used in investing activities for the nine months ended September 30, 2017, which was solely due to the purchase of oil and gas properties.~~

We had $357,453 of cash provided by financing activities for the nine months ended September 30, 2017, which was due to proceeds from the sale of Series C Convertible Preferred Stock of $450,000 and bank balance transfer on loan sale agreement.

~~The unaudited condensed consolidated financial statements included in “Part I” – “Item 1 Financial Statements~~” of this report have been prepared assuming that the Company will continue as a going concern. There is currently substantial doubt about the Company’s ability to continue as a going concern as discussed in “~~Note 2 – Going Concern” to the unaudited condensed consolidated financial statements.~~

~~The Company’s Senior Secured Credit Facility is described in “Part I” – “Item 1 Financial Statements” of this report above under “Note 5 – Long-Term Debt” – “Senior Secured Credit Facility”. “Note 6 – Commitments & Contingencies” to the unaudited condensed consolidated financial statements includes additional information on certain commitments and contingencies of the Company. “Part I” – “Item 1 Financial Statements” of this report above under “Note 2 – Going Concern” – “Financing Transactions” includes a discussion of the LSA and related transactions and “Note 2 – Going Concern” – “Merger Agreement” includes information on the pending Merger.~~

~~On April 10, 2017, we obtained an unsecured loan in the principal amount of $150,000 from an affiliate of the holder of our issued and outstanding shares of Series B Preferred Stock (the “lender”). The loan was converted into 150 shares of Series Convertible Preferred Stock.~~

On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, of which $150,000 was payable in cash and $150,000 was payable via a note conversion, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, ~~2017,~~2020, we had working capital of $24,535,292 and a loss from operations of $2,237,248 for the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet in the aggregate amount of $150,000. The shares have also not been issued as of the date of this filing.

The Series C Preferred Stock is non-voting (except to the extent required by law and except for certain consent rights relating to amending the certificate of incorporation or bylaws, and the like), ranks senior to the common stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company, and ranks junior to the Company’s Series A preferred stock and Series B preferred stock with respect to dividends and with respect to distributions upon a deemed dissolution, liquidation or winding-up of the Company. Upon request of the Holders, the Company can seek stockholder approval to remove the Issuance Limitation described therein and to allow for further adjustments related to anti-dilution protection, only if such stockholder approval is obtained. The Series C Convertible Preferred Stock has a liquidation preference of $1,000 per share, and is convertible at the option of the holder at a conversion price equal to $0.30 per share, or a ratio equal to approximately 3,333 shares of common stock for each one (1) share of Series C Convertible Preferred Stock, subject to customary adjustments. Dividends are payable on the shares of Series C Convertible Preferred Stock only if and to the extent that dividends are payable on the common stock into which the Series C Convertible Preferred Stock is convertible. The Series C Convertible Preferred Stock has no maturity date andperiod then ended. While there can be redeemed by the Company beginning twelve months after the closing of the offering or upon a change of control for the redemption price of $1,000 per share, as adjustable as provided in the designation of the Series C Preferred Stock.

The Series C Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Preferred Stock into more than 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Preferred Stock. In addition, the Company may not convert the Series C Preferred Stock into a number of shares of common stock which, when aggregated with any shares of common stock issuedno guarantees, we believe cash on ~~or after the original issue date and prior to such conversion date~~hand, in connection with ~~any conversion~~cash from operations, will be sufficient to fund operations for the next year of ~~Series C Preferred Stock would exceed 1,683,944 shares~~operations. In addition, we intend to pursue other opportunities of common stock (19.99% of the outstanding shares as of the original issue date), subject to adjustment for forward and reverse stock splits, recapitalizations and the like. In the event conversion of the Series C preferred is limited pursuant to these provisions, each holder shall be entitled to a pro rata portion of the issuable maximum.financing with outside investors.

~~Pursuant to the anti-dilutive provisions of the~~ On April 7, 2020, we entered into a Securities Purchase Agreement ~~dated as of March 11, 2015, which requires~~( the Company to issue additional shares of common stock to adjust the purchase price paid by purchasers in the Company’s March 2015 offering, in the event any shares are sold (or convertible securities are sold), “Purchase Agreement”)with ~~a price per share less than the purchase price paid by the March 2015 purchasers subject~~an institutional investor, pursuant to the terms of the ~~Securities Purchase~~ Agreement, Alpha Capital Anstalt received 597,461 shares of common stock. In addition, the Series B Convertible Preferred Stock conversion ratio equal to approximately 571 shares of common stock for each one (1) share of Preferred Stock reset to approximately 3,333 shares of common stock for each one (1) share of Series B Convertible Preferred Stock, to be consistent with the terms of the Series C Convertible Preferred Stock, pursuant to the anti-dilution requirements of the Series B Convertible Preferred Stock.

~~During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.~~

Effective May 1, 2017, the Company entered into an agreement with Camber Energy, Inc., pursuant to which EnerJex will be responsible for performing certain general and administrative services for Camber for a fee of $150,000 per month. Richard E. Menchaca, a member of the Board of Directors of the Company authorized 1,050 shares of a newly designated series of preferred stock, the Series E Convertible Preferred Stock. The Preferred Stock was 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 purchase price for the Preferred Stock was $1,050,000 of which we received net proceeds of $1,010,000. The Preferred Stock has liquidation rights senior to the common stock, but pari passu with the Series C Preferred Stock and the Series D Preferred Stock. The Preferred Stock has no voting rights. The conversion price adjusts for stock splits and combinations and is subject to anti-dilution protection for subsequent equity issuances until such time as no shares of Series E Preferred Stock are outstanding. The Certificate of Designation of the Series E Convertible Preferred Stock was filed with the State of Nevada on April 2, 2020.We also entered into a ~~co-guarantor of bank debt held~~Registration Rights Agreement, granting registration rights to the Purchaser with respect to the Conversion Shares and common stock underlying warrants currently owned by ~~Camber Energy, Inc. and Robert Schleizer, our newly appointed Interim Chief Financial Officer is also~~ the ~~Chief Financial Officer of Camber Energy, Inc.~~Purchaser.

On ~~July 14, 2017, the Company~~May 11, 2020, we entered into a ~~Secured Promissory Note~~Purchase Agreement with an institutional investor and existing Company shareholder (the “Investor”) pursuant to which we agreed to sell to the Investor in a registered direct offering 2,400,000 shares of common stock, par value $0.001, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 3,260,377 shares of common stock, for ~~$100,000 with Alpha Capital Anstalt, which has a maturity date~~gross proceeds of ~~November 15, 2017,~~approximately $6 million and ~~accrues interest~~net proceeds of $5,950,010 after issuance costs. The purchase price for each share of common stock was $1.06 and the purchase price for each Pre-Funded Warrant was $1.05999. The exercise price for each Warrant was $0.001. Net proceeds from the sale were used to repurchase 262 shares of our Series E Preferred Stock, convertible into 1,048,000 shares of common stock currently held by the Investor at a ~~rate~~repurchase price of 8%$1.06 per ~~annum. The amount due under~~share of common stock. We expect to use the ~~note is secured by a security interest, subordinate~~balance for working capital and general corporate purposes.

Pursuant to the terms of the Purchase Agreement, we agreed to certain ~~other security interests~~restrictions on future stock offerings, including that during the 60-day period following the closing, where we will not issue (or enter into any agreement to issue) any shares of common Stock or common Stock equivalents, subject to certain exceptions. The exercise price of the ~~Company, in substantially all~~Warrants and the shares of the ~~Company’s assets.~~common stock issuable upon the exercise thereof were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants, and were exercisable on a “cashless” basis in certain circumstances.

On ~~July 28, 2017,~~June 24, 2020, we entered into a Purchase Agreement with an Investor pursuant to which we agreed to sell to the ~~Company received~~Investor in a registered direct offering 4,407,400 shares of common stock, par value $0.001, pre-funded warrants to purchase up to 1,956,236 shares of common stock, and warrants to purchase up to 2,455,476 shares of common stock at an ~~advance~~exercise price of ~~$50,000 from Alpha Capital Anstalt.~~$1.35 per share (the “Warrants”), for gross proceeds of $7 million (which includes subsequent payment of the exercise price of the Pre-Funded Warrants in the amount of $1,956.24). Upon exercise of the Warrants in full by the Investor, we will receive additional gross proceeds of $3,314,892.60. The shares of common stock underlying the Pre-Funded Warrants and the Warrants are referred to as “Warrant Shares.”

The purchase price for each share of common Stock is $1.10 and the purchase price for each Pre-Funded Warrant is $1.099. The exercise price for each Pre-Funded Warrant is $0.001. Net proceeds from the sale will be used for working capital, capital expenditures and general corporate purposes. The Shares, Pre-funded Warrants, Warrants and Warrant Shares are being offered by us pursuant to an effective shelf registration statement on Form S-3 (File No. 333-239157), which was declared effective on June 19, 2020.

Pursuant to the terms of the Purchase Agreement, we agreed to certain restrictions on future stock offerings, including that during the 75-day period following the closing, we will not issue (or enter into any agreement to issue) any shares of common stock or common stock equivalents, subject to certain exceptions, including if the consolidated closing price on the trading market on which our common stock is traded at the time is greater than $1.90 (adjusted for any subsequent stock splits or similar capital adjustments) for five consecutive trading days, we may issue such securities at not less than $1.90 per common stock Equivalent. The Investor has a right from the date of the Purchase Agreement until December 31, 2020 to participate in a subsequent financing by us or any of its Subsidiaries of common stock or common stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), in an amount equal to 50% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

The exercise price of the Prefunded Warrants and the Warrants and the number of Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Prefunded Warrants and the Warrants. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of the shares underlying the Warrants. The Pre-Funded Warrants allow for cashless exercise at any time. The Pre-Funded Warrants and the Warrants each contain a beneficial ownership limitation, such that none of such Pre-Funded Warrants nor the Warrants may be exercised, if, at the time of such exercise, the holder would become the beneficial owner of more than 9.99% of our outstanding shares of common stock following the exercise of such Pre-Funded Warrant or Warrant. During the three and nine months ended September 30, 2020 we received $2,632,500 in additional gross proceeds associated with exercise of the Warrant Shares. As of September 30, 2020, 505,476 Warrant Shares at an exercise price of $1.35 per share remain outstanding.

~~Summary~~On August 4, 2020, we and an institutional investor and existing Company shareholder entered into a Purchase Agreement, pursuant to which we agreed to sell to the Investor in a registered direct offering 3,335,705 shares of ~~product research~~common stock, par value $0.001, and ~~development~~warrants to purchase up to 2,516,778 shares of Common Stock at an exercise price of $3.30 per share, for gross proceeds of approximately $10 million. Upon exercise of the Warrants in full by the Investor, we would receive additional gross proceeds of approximately $8,305,367.

~~We do not anticipate performing any significant product research~~The purchase price for each share of Common Stock was $2.98. Net proceeds from the sale will be used for working capital, capital expenditures and ~~development under our plan of operations.~~general corporate purposes. The shares and the warrant were being offered by us pursuant to an effective shelf registration statement on Form S-3 (File No. 333-239157), which was declared effective on June 19, 2020.

~~Expected purchase~~Pursuant to the terms of the Purchase Agreement, we have agreed to certain restrictions on future stock offerings, including that during the 75-day period following the closing, we will not issue (or enter into any agreement to issue) any shares of Common Stock or Common Stock equivalents, subject to certain exceptions, including if the consolidated closing price on the trading market on which the our Common Stock is traded at the time is greater than $5.00 (adjusted for any subsequent stock splits or similar capital adjustments) for ten consecutive trading days, we may issue such securities at not less than $5.00 per Common Stock Equivalent. In addition, our executive officers and directors agreed that they shall not sell (or hedge in any manner) any of their shares of the Common Stock for a period ending September 7, 2020. The Investor has a right from the date of the Purchase Agreement until December 31, 2020, to participate in a subsequent financing by us or any of our Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), in an amount equal to 50% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

The exercise price of the Warrants and the number of Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of ~~any significant equipment~~

~~We anticipate~~the shares underlying the Warrants. The Warrants contain a beneficial ownership limitation, such that ~~we will purchase~~none of such Warrants may be exercised, if, at the ~~necessary production~~time of such exercise, the holder would become the beneficial owner of more than 9.99% of our outstanding shares of Common Stock following the exercise of such Warrant. The Warrant is for a ten-month term and ~~field service equipment required to produce oil during our normal course of operations over~~is not exercisable for the ~~next twelve~~first six months.

~~Significant changes in the number~~Our primary need for liquidity is to fund working capital requirements of ~~employees~~our business, capital expenditures, acquisitions, debt service and for general corporate purposes. To date, our primary source of liquidity is funds generated by financing activities and from private placements. Our ability to fund our operations, to make planned capital expenditures, to make planned acquisitions, to make scheduled debt payments, and to repay or refinance indebtedness depends on our future operating performance and cash flows, which are subject to prevailing economic conditions and financial, business and other factors, some of which are beyond our control.

At September 30, ~~2017,~~2020, we ~~had one full-time employee,~~did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources. Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including field personnel. As production and drilling activities increase or decrease, we may have to continue to adjust our technical, operational and administrative personnel as appropriate. We are using and will continue to use independent consultants and contractors to perform various professional services, particularly in the area of land services, reservoir engineering, geology drilling, water hauling, pipeline construction, well design, well-site monitoring and surveillance, permitting and environmental assessment. We believe that this use of ~~third-party service providers may enhance our ability to contain operating and general expenses, and capital costs.~~

structured finance, special purpose entities or variable interest entities. We ~~do not~~ have ~~any~~no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to ~~investors.~~ stockholders.

Our ~~critical accounting estimates include the value of~~opinion is that inflation has not had, and is not expected to have, a material effect on our ~~oil and gas properties, asset retirement obligations, and share-based payments.~~operations.

Our opinion is that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and ~~Gas Properties~~are not expected to a have a material impact on our consolidated financial position, results of operations or cash flows.

We follow the full-cost method of accounting under which all costs associated with property acquisition, exploration and development activities are capitalized. We also capitalize internal costs that can be directly identified with our acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities.

Proved properties are amortized using the units of production (UOP) method. Currently we only have operations in the Unites States of America. The UOP calculation multiplies the percentage of estimated proved reserves produced each quarter by the cost of these reserves. The amortization base in the UOP calculation includes the sum of proved property, net of accumulated depreciation, depletion and amortization (DD&A), estimated future development costs (future costs to access and develop proved reserves) and asset retirement costs, less related salvage value.

The cost of unproved properties are excluded from the amortization calculation until it is determined whether or not proved reserves can be assigned to such properties or until development projects are placed into service. Geological and geophysical costs not associated with specific properties are recordedAs a “smaller reporting company” as ~~proved property immediately. Unproved properties are reviewed for impairment quarterly.~~

~~Under the full cost method of accounting, the net book value of oil and gas properties, less deferred income taxes, may not exceed a calculated “ceiling.~~” The ceiling limitation is (a) the present value of future net revenues computed by applying current prices of oil & gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil & gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of 10 percent and assuming continuation of existing economic conditions plus (b) the cost of properties not being amortized plus (c) the lower of cost or estimated fair value of unproven properties included in the costs being amortized less (d) income tax effects related to differences between book and tax basis of properties. Future cash outflows associated with settling accrued retirement obligations are excluded from the calculation. Estimated future cash flows are calculated using end-of-period costs and an unweighted arithmetic average of commodity prices in effect on the first day of each of the previous 12 months held flat for the life of the production, except where prices are defined by ~~contractual arrangements.~~

~~Any excess~~Item 10 of Regulation S-K, the ~~net book value of proved oil and gas properties, less related deferred income taxes, over the ceiling~~Company is ~~charged to expense and reflected as additional DD&A in the statement of operations. The ceiling calculation is performed quarterly. For the three and nine months ended September 30 30, 2017, we were~~ not required to record an impairment expense on our evaluated oil and gas properties. For the nine months ended September 30, 2017, we incurred no impairment charges and for the nine months ended September 30, 2016 our impairment charge was $7,444,597.

~~The asset retirement obligation relates to the plugging and abandonment costs when our wells are no longer useful. We determine the value of the liability~~provide information required by ~~obtaining quotes for~~ this service and estimate the increase we will face in the future. We then discount the future value based on an intrinsic interest rate that is appropriate for us. If costs rise more than what we have expected there could be additional charges in the future however we monitor the costs of the abandoned wells and we will adjust this liability if necessary.

The value we assign to the options and warrants that we issue is based on the fair market value as calculated by the Black-Scholes pricing model. To perform a calculation of the value of our options and warrants, we determine an estimate of the volatility of our stock. We need to estimate volatility because there has not been enough trading of our stock to determine an appropriate measure of volatility. We believe our estimate of volatility is reasonable, and we review the assumptions used to determine this whenever we issue new equity instruments. If we have a material error in our estimate of the volatility of our stock, our expenses could be understated or overstated.

The oil industry is very cyclical and the demand for goods and services of oil field companies, suppliers and others associated with the industry puts extreme pressure on the economic stability and pricing structure within the industry. Material changes in prices impact revenue stream, estimates of future reserves, borrowing base calculations of bank loans and value of properties in purchase and sale transactions. Material changes in prices can impact the value of oil companies and their ability to raise capital, borrow money and retain personnel. We anticipate business costs and the demand for services related to production and exploration will fluctuate while the commodity prices for oil remains volatile.Item.

~~ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.~~Item 4. Controls and Procedures.

~~We are a smaller reporting Company as defined by Rule 12b-2 under the Exchange Act,~~Evaluation of Disclosure and ~~are not required to provide the information required under this item.~~

~~Disclosure Controls~~The Company’s Chief Executive Officer and ~~Procedures~~.

~~Disclosure~~the Company’s Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures ~~(as defined in Rules 13a-15(e)~~as of September 30, 2020 and ~~15d-15(e) under~~had concluded that the ~~Exchange Act)~~Company’s disclosure controls and procedures are effective. The term disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by the Company in the reports ~~filed~~that it files or ~~submitted~~submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in ~~Securities and Exchange Commission~~the SEC’s rules and ~~forms~~forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that ~~such~~ information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including ~~the Interim Chief Executive Officer and Interim Chief Financial Officer (our~~its principal executive ~~officer~~ and principal financial ~~officer),~~officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures. The Company’s management, including our Interim Chief Executive Officer and our Interim Chief Financial Officer (our principal executive officer and principal financial officer), evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s Interim Chief Executive Officer and Interim Chief Financial Officer (our principal executive officer and principal financial officer) concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2017.disclosure.

There ~~have not been any~~were no changes in our internal control over financial reporting, as defined in Rules 13a-15(t) and 15d-15(f) under the Exchange Act, during the ~~three~~nine months ended September 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

WeFrom time to time, we may become involved in ~~various routine~~lawsuits and legal proceedings ~~incidental~~which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. ~~However,~~Although we currently maintain liability insurance coverage intended to cover professional liability and certain other claims, we cannot assure that our ~~knowledge~~insurance coverage will be adequate to cover liabilities arising out of claims asserted against us in the future where the outcomes of such claims are unfavorable to us. Liabilities in excess of our insurance coverage, including coverage for professional liability and certain other claims, could have a material adverse effect on our business, financial condition and results of operations.

We are a smaller reporting company as defined by Rule 12b-2 of the ~~date~~Securities Exchange Act of 1934 and are not required to provide the information under this ~~report, there are no material pending legal proceedings to which we are a party or to which any of our property is subject, except the legal proceedings discussed below.~~

On September 23, 2016, the Company, American Standard Energy Corporation, Baylor Operating LLC, Bernard Given and Loeb & Loeb LLP were sued by Geronimo Holdings Corporation and Randal Capps in the 143rd Judicial District Court located in Pecos, Texas. The suit among other things, seeks damages for an alleged unlawful sale of properties in Crockett County, Texas and for alleged unpaid royalties. The Company believes the suit is without merit and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded. Additionally, under its agreement with Baylor Operating LLC, Baylor has agreed to indemnify and defend the Company against all lawsuits and claims including this one.

On April 26, 2016, C&F Ranch, LLC sued the Company in Allen County, Kansas for alleged breach of contract related to the rental of certain lands located on the C&F Ranch. The Company believes that it has paid all rents owe to C&F Ranch LLC and will vigorously defend itself in connection with this proceeding. The Company has faith that it will prevail and at September 30, 2017, no reserve for potential losses arising from this matter has been recorded.item.

~~In addition to the other information set forth in this report, you should carefully consider the factors discussed below~~Item 2. Recent Sales of Unregistered Equity Securities and ~~in “Part I” - “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017, and “Part II” – “Item 1A. Risk Factors~~” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the SEC on August 21, 2017, which could materially affect our business, financial condition or future results and which risk factors are incorporated by reference herein. You should also review the risk factors relating to the Merger set forth under AgEagle Risk Factors in our Current Report on Form 8-K, filed with the SEC on October 20, 2017. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially affect our business, financial condition or future results.

~~In the event the Merger closes, it will cause immediate and substantial dilution to existing shareholders and a change~~Use of ~~control of the Company.~~

As described above, we are party to a Merger Agreement with AgEagle relating to the acquisition by us of the outstanding securities of AgEagle. We anticipate the consideration exchanged with AgEagle for the securities of AgEagle will be 85% of our total outstanding securities on a fully-diluted basis. As such, in the event the contemplated transaction closes, the issuance of the common stock consideration to AgEagle will result in immediate and substantial dilution to the interests of our then shareholders and result in a change of control of the Company.

~~The Merger Agreement limits our ability to pursue alternatives to the Merger.~~

The Merger Agreement contains provisions that could adversely impact competing proposals to acquire us. These provisions include the prohibition on us generally from soliciting any acquisition proposal or offer for a competing transaction. These provisions might discourage a third party that might have an interest in acquiring all or a significant part of our company from considering or proposing an acquisition, even if that party were prepared to pay consideration with a higher value than the current proposed Merger consideration.

~~Failure to complete the Merger could negatively impact our stock price and future business and financial results.~~

~~If the Merger is not completed, our ongoing business may be adversely affected and we would be subject to a number of risks, including the following:~~

~~The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.~~

The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the shareholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the shareholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle shareholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) that all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement. These conditions to the closing of the Merger may not be fulfilled and, accordingly, the Merger may not be completed. In addition, if the Merger is not completed by January 31, 2018, provided that if all of the conditions to closing shall have been satisfied or shall be capable of being satisfied at such time, the required closing date may be extended until March 31, 2018, either we or AgEagle may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time, before or after shareholder approval. In addition, we or AgEagle may elect to terminate the Merger Agreement in certain other circumstances.

~~Termination of the Merger Agreement could negatively impact the Company.~~

In the event the Merger Agreement is terminated, our business may have been adversely impacted by our failure to pursue other beneficial opportunities due to the focus of management on the Merger, and the market price of our common stock might decline to the extent that the current market price reflects a market assumption that the Merger will be completed. If the Merger Agreement is terminated and our board of directors seek another business combination, our shareholders cannot be certain that we will be able to find a party willing to offer equivalent or more attractive consideration than the consideration provided for by the Merger.

~~We will be subject to business uncertainties and contractual restrictions while the Merger is pending.~~

Uncertainty about the effect of the Merger on our partners may have an adverse effect on us. These uncertainties may impair our ability to attract, retain and motivate key personnel until the Merger is completed, and could cause partners and others that deal with us to seek to change existing business relationships, cease doing business with us or cause potential new partners to delay doing business with us until the Merger has been successfully completed. Retention of certain employees may be challenging during the pendency of the Merger, as certain employees may experience uncertainty about their future roles or compensation structure. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the business, our business following the Merger could be negatively impacted. In addition, the Merger Agreement restricts us from making certain acquisitions and taking other specified actions until the Merger is completed without the consent of AgEagle. These restrictions may prevent us from pursuing attractive business opportunities that may arise prior to the completion of the Merger.

We are currently not in compliance with NYSE American continued listing standards and if we are unable to maintain compliance with NYSE American continued listing standards, our common stock may be delisted from the NYSE American equities market, which would likely cause the liquidity and market price of our common stock to decline.

Our common stock is currently listed on the NYSE American. The NYSE American will consider suspending dealings in, or delisting, securities of an issuer that does not meet its continued listing standards. If we cannot meet the NYSE American continued listing requirements, the NYSE American may delist our common stock, which could have an adverse impact on us and the liquidity and market price of our stock.

We may be unable to comply with NYSE American continued listing standards. Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, could affect our ability to comply with the NYSE American’s listing standards. The NYSE American has the ability to suspend trading in our common stock or remove our common stock from listing on the NYSE American if in the opinion of the exchange: (a) the financial condition and/or operating results of the Company appear to be unsatisfactory; or (b) it appears that the extent of public distribution or the aggregate market value of our common stock has become so reduced as to make further dealings on the exchange inadvisable; or (c) we have sold or otherwise disposed of our principal operating assets, or have ceased to be an operating company; or (d) we have failed to comply with our listing agreements with the exchange (which include that we receive additional listing approval from the exchange prior to us issuing any shares of common stock, something we have inadvertently failed to comply with in the past); or (e) any other event shall occur or any condition shall exist which makes further dealings on the exchange unwarranted.

~~On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not in compliance with certain NYSE American (“NYSE American~~”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE American Company Guide (the “~~Company Guide~~”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017, advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

If we are unable to retain compliance with the NYSE American criteria for continued listing, our common stock would be subject to delisting. A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock and reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing. In addition, delisting from the NYSE American might negatively impact our reputation and, as a consequence, our business. Additionally, if we were delisted from the NYSE American and we are not able to list our common stock on another national exchange we will no longer be eligible to use Form S-3 registration statements and will instead be required to file a Form S-1 registration statement for any primary or secondary offerings of our common stock, which would delay our ability to raise funds in the future, may limit the type of offerings of common stock we could undertake, and would increase the expenses of any offering, as, among other things, registration statements on Form S-1 are subject to SEC review and comments whereas take downs pursuant to a previously filed Form S-3 are not.

If we are delisted from the NYSE American, your ability to sell your shares of our common stock would also be limited by the penny stock restrictions, which could further limit the marketability of your shares.

~~If our common stock is delisted from the NYSE American, it would come within the definition of “penny stock~~” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. That Rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors. For transactions covered by Rule 15g-9, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, Rule 15g-9, if it were to become applicable, would affect the ability or willingness of broker-dealers to sell our securities, and accordingly would affect the ability of shareholders to sell their securities in the public market. These additional procedures could also limit our ability to raise additional capital in the future.

On April 27, 2017, the Company entered into an Additional Issuance Agreement with Alpha Capital Anstalt, for the purchase of 300 restricted shares of its newly designated Series C Convertible Preferred Stock in consideration for $300,000, with an option to purchase an additional 200 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $200,000. As of September 30, 2017, the Company had issued 300 shares of Series C Convertible Preferred Stock for an aggregate purchase price of $300,000. In addition, during the nine months ending September 30, 2017, the Company had received $150,000 from Alpha Capital Anstalt to purchase an additional 150 shares of Series C Convertible Preferred Stock. As of September 30, 2017, and the date of this filing, the additional 150 shares of Series C Convertible Preferred Stock have not been issued and are reflected as Series C Convertible Preferred Stock Issuable on the balance sheet as of September 30, 2017, in the aggregate amount of $150,000.

We claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the transaction did not involve a public offering, the recipient was an “~~accredited investor~~”, and acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom and are further subject to the terms of the escrow agreement. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

Pursuant to the anti-dilutive provisions of the Securities Purchase Agreement dated as of March 11, 2015, which requires the Company to issue additional shares of common stock to adjust the purchase price paid by purchasers in the Company’s March 2015 offering, in the event any shares are sold (or convertible securities are sold), with a price per share less than the purchase price paid by the March 2015 purchasers subject to the terms of the Securities Purchase Agreement, Alpha Capital Anstalt received 597,461 shares of common stock. In addition, the Series B Convertible Preferred Stock conversion ratio equal to approximately 571 shares of common stock for each one (1) share of Preferred Stock reset to approximately 3,333 shares of common stock for each one (1) share of Series B Convertible Preferred Stock, to be consistent with the terms of the Series C Convertible Preferred Stock, pursuant to the anti-dilution requirements of the Series B Convertible Preferred Stock.

~~As the issuance of the anti-dilutive shares did not involve a “sale~~” of securities under Section 2(a)(3) of the Securities Act, we believe that no registration of such securities, or exemption from registration for such securities, was required under the Securities Act. Notwithstanding the above, to the extent such shares are deemed “~~sold or offered~~”, we claim an exemption from registration pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities Act, since the transaction did not involve a public offering, the recipient was an “~~accredited investor~~”, and acquired the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The securities are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom and are further subject to the terms of the escrow agreement. The securities were not registered under the Securities Act and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

~~During the nine months ending September 30, 2017, Alpha Capital Anstalt converted 390 shares of Series B Convertible Preferred Stock into 1,300,000 shares of common stock.~~

We claim an exemption from registration provided by Section 3(a)(9) of the Securities Act for such issuance, as the securities were exchanged by us with our existing security holder in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting such exchange.

Pursuant to the Merger, the Company will issue unregistered shares of Company common stock to the stockholders of AgEagle with respect to the Merger equal to 85% of the then issued and outstanding capital stock of the Company on a fully diluted basis.

The shares to be issued by the Company to the stockholders of AgEagle in the Merger and related transactions will be issued exempt from registration under Section 4(a)(2) of the Securities Act because the offer and sale of such securities does not involve a “~~public offering” as defined in Section 4(a)(2) of the Securities Act and other applicable requirements will be met.~~

Table of Contents

SIGNATURES

~~In accordance with~~Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the ~~registrant~~Registrant has duly caused this ~~report~~Report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~ENERJEX RESOURCES, INC.~~
~~(Registrant)~~

~~By:~~	~~/s/ Louis G. Schott~~AgEagle Aerial Systems, Inc.

	~~Louis G. Schott~~By:	/s/ J. Michael Drozd
		J. Michael Drozd
		Chief Executive Officer
		(Principal Executive Officer)

	~~Interim Chief Executive Officer~~ ~~(Principal Executive Officer)~~ By:	/s/ Nicole Fernandez-McGovern
		Nicole Fernandez-McGovern
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Date: November ~~14, 2017~~

13, 2020

Nevada		88-0422242
(State or other jurisdiction of incorporation or		~~(I.R.S. Employer Identification No.)~~
organization)

~~4040 Broadway, Suite 425~~
~~San Antonio, Texas~~		~~78209~~(I.R.S. Employer Identification No.)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
~~(Address of principal executive offices)~~Common Stock	UAVS	~~(Zip Code)~~

~~Large accelerated filer~~☐Class		~~Accelerated filer~~☐Outstanding at November 13, 2020
~~Non-accelerated filer~~☐ ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~☒
~~Emerging growth company~~☐Common stock, $.001 par value		57,980,377

		Page
PART I	FINANCIAL INFORMATION	3
~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~	3

ITEM 1.	~~Condensed Consolidated Balance Sheets at September 30, 2017 (Unaudited) and December 31, 2016~~FINANCIAL STATEMENTS:	3

	Condensed Interim Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (unaudited)	3

	Condensed Interim Consolidated Statements of Operations for the ~~three~~Three and ~~nine months ended~~Nine Months Ended September 30, ~~2017~~2020 and ~~2016 (Unaudited)~~2019 (unaudited)	4

	Condensed Interim Consolidated Statement of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (unaudited)	5

	Condensed Interim Consolidated Statements of Cash Flows for the ~~nine months ended~~Nine Months Ended September 30, ~~2017~~2020 and ~~2016 (Unaudited)~~2019 (unaudited)	57

	Notes to Condensed Interim Consolidated Financial Statements ~~(Unaudited)~~(unaudited)	68
	~~FORWARD-LOOKING STATEMENTS~~	16
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1833

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28
~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~	2945

ITEM 4.	CONTROLS AND PROCEDURES	45

PART II	OTHER INFORMATION	3046

ITEM 1.	LEGAL PROCEEDINGS	3046
~~ITEM 1A.~~	~~RISK FACTORS~~	30
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	33
~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~	34
~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~	34
~~ITEM 5.~~	~~OTHER INFORMATION~~	34
~~ITEM 6.~~	~~EXHIBITS~~	3446

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	46

ITEM 4.	MINE SAFETY DISCLOSURES	46

ITEM 5.	OTHER INFORMATION	46

ITEM 6	EXHIBITS	46

SIGNATURES		3547

	As of
	September 30,			December 31,
ASSETS	2020			2019
CURRENT ASSETS:
Cash	$	24,693,417		$	717,997
Accounts receivable		—			65,833
Inventories, net		158,389			221,167
Prepaid and other current assets		120,537			124,163
Total current assets		24,972,343			1,129,160

Property and equipment, net		93,658			37,776
Intangible assets, net		405,865			520,573
Goodwill		3,108,000			3,108,000
Total assets	$	28,579,866		$	4,795,509

LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	158,353		$	57,432
Accrued expenses		43,468			36,416
Accrued dividends		—			163,555
Contract liabilities		127,791			264,472
Promissory note		107,439			—
Total current liabilities		437,051			521,875
Total liabilities		437,051			521,875

COMMITMENTS AND CONTINGENCIES (SEE NOTE 9)

STOCKHOLDERS’ EQUITY:
Preferred stock, $0.001 par value, 25,000,000 shares authorized:
Preferred stock, Series C convertible, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding at September 30, 2020 and 3,501 at December 31, 2019		—			4
Preferred stock, Series D, $0.001 par value, 2,000 shares authorized, 0 shares issued and outstanding at September 30, 2020 and 2,000 at December 31, 2019		—			2
Common stock, $0.001 par value, 250,000,000 shares authorized, 57,881,002 and 15,424,394 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		57,881			15,424
Additional paid-in capital		46,335,395			12,456,989
Accumulated deficit		(18,250,461	)		(8,198,785	)
Total stockholders’ equity	$	28,142,815		$	4,273,634
Total liabilities and stockholders’ equity	$	28,579,866		$	4,795,509

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Revenues	$	750,325		$	41,616		$	1,157,930		$	107,785
Cost of sales		430,683			32,728			620,196			85,875
Gross Profit		319,642			8,888			537,734			21,910

Operating Expenses:
Selling		16,242			23,302			32,751			52,108
General and administrative		626,605			396,432			1,782.926			1,305,221
Professional fees		254,532			152,192			958,436			531,885
Total Operating Expenses		897,379			571,926			2,774,113			1,889,214
Loss from Operations		(577,737	)		(563,038	)		(2,236,379	)		(1,867,304	)

Other Expenses:
Loss on disposal of property and equipment		(594	)		—			(594	)		—
Interest expense		(275	)		—			(275	)		(501	)
Total Other Expenses		(869	)		—			(869	)		(501	)
Loss Before Income Taxes		(578,606	)		(563,038	)		(2,237,248	)		(1,867,805	)
Provision for income taxes		—			—			—			—
Net Loss	$	(578,606	)	$	(563,038	)	$	(2,237,248	)	$	(1,867,805	)

Deemed dividend on Series C Preferred stock and Series D warrants		—			—			(4,050,838	)		—
Deemed dividend on redemption of Series D Preferred stock		—			—			(3,763,591	)		—
Deemed dividend on issuance and repurchase of Series E Preferred stock		—			—			(1,227,120	)		—
Series D Preferred stock dividends		—			(40,889	)		(69,778	)		(121,333	)

Net Loss Available to Common Stockholders		(578,606	)		(603,927	)		(11,348,575	)		(1,989,138	)

Net Loss Per Share – Basic and Diluted	$	(0.01	)	$	(0.04	)	$	(0.33	)	$	(0.14	)

Weighted Average Number of Shares Outstanding During the Period – Basic and Diluted		55,380,250			15,174,394			34,722,816			14,523,838

	Par $ .0001 Preferred Stock Series C Shares			Preferred Stock Series C Amount			Par $ .0001 Preferred Stock Series D Shares			Preferred Stock Series D Amount			Par $ .0001 Preferred Stock Series E Shares			Preferred Stock Series E Amount			Par $ .0001 Common Shares			Common Stock Amount			Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2019		3,501		$	4			2,000		$	2			—		$	—			15,424,394		$	15,424		$	12,456,989		$	(8,198,785	)	$	4,273,634
Conversion of Series C Preferred stock		(189	)		(1	)		—,			—			—			—			350,000			350			(349	)		—			—
Purchase of acquisition		—			—			—			—			—			—			(164,375	)		(164	)		164			—			—
Dividend on Series D Preferred stock		—			—			—			—			—			—			—			—			(40,445	)		—			(40,445	)
Stock-based compensation expense		—			—			—			—			—			—			—			—			54,635			—			54,635
Net loss		—			—			—			—			—			—			—			—			—			(403,273	)		(403,273	)
Balance as of March 31, 2020		3,312			3			2,000			2			—			—			15,610,019			15,610			12,470,994			(8,602,058	)		3,884,551
Conversion of Series C Preferred stock		(3,312	)		(3	)		—			—			—			—			13,247,984			13,248			(13,245	)		—			—
Conversion of Series D Preferred stock and accrued dividends		—			—			(1,890	)		(2	)		—			—			3,500,000			3,500			200,502			—			204,000
Conversion of Series D warrants		—			—			—			—			—			—			2,947,739			2,948			(2,948	)		—			—
Issuance of Series E Preferred stock, net of issuance costs		—			—			—			—			1,050			1			—			—			1,009,999			—			1,010,000
Repurchase of Series E Preferred stock		—			—			—			—			(262	)		—			—			—			(1,110,880	)		—			(1,110,880	)
Conversion of Series E Preferred stock		—			—			—			—			(788	)		(1	)		3,152,000			3,152			(3,151	)		—
Deemed dividend on Series C Preferred stock and Series D warrants		—			—			—			—			—			—			—			—			4,050,838			(4,050,838	)		—
Deemed dividend on redemption of Series D preferred stock		—			—			—			—			—			—			—			—			3,763,591			(3,763,591	)		—
Sale of Common stock, net of issuance costs		—			—			—			—			—			—			6,807,400			6,807			12,889,935			—			12,896,742
Sale of Common stock from conversion of warrants		—			—			—			—			—			—			3,260,377			3,260			7			—			3,267
Issuance of Common stock for consulting services		—			—			—			—			—			—			250,000			250			297,250			—			297,500
Exercise of options		—			—			—			—			—			—			33,758			34			(34	)		—			—
Stock-based compensation expense		—			—			—			—			—			—			170,000			170			84,752			—			84,922
Net loss		—			—			—			—			—			—			—			—			—			(1,255,368	)		(1,255,368	)
Balance at June 30, 2020		—			—			110			—			—			—			48,979,277			48,979			33,637,610			(17,671,855	)		16,014,734
Conversion of Series D Preferred stock and accrued dividends		—			—			(110	)		—			—			—			635,815			636			(636	)		—			—
Sales of Common stock from exercise of warrants		—			—			—			—			—			—			3,906,236			3,906			2,630,550			—			2,634,456
Sale of Common stock, net of issuance costs		—			—			—			—			—			—			3,355,705			3,356			9,896,644			—			9,900,000
Exercise of options		—			—			—			—			—			—			1,003,969			1,004			46,396			—			47,400
Stock-based compensation expense		—			—			—			—			—			—			—			—			124,831			—			124,831
Net Loss		—			—			—			—			—			—			—			—			—			(578,606	)		(578,606	)
Balance at September 30, 2020		—		$	—			—		$	—			—		$	—			57,881,002		$	57,881		$	46,335,395		$	(18,250,461	)	$	28,142,815

	Par $ .0001 Preferred Stock Series B Shares		Preferred Stock Series B Amount		Par $ .0001 Preferred Stock Series C Shares			Preferred Stock Series C Amount			Par $ .0001 Preferred Stock Series D Shares		Preferred Stock Series D Amount		Par $ .0001 Common Shares		Common Stock Amount		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance as of December 31, 2018		—	$	—		4,662		$	5			2,000	$	2		12,549,394	$	12,549	$	12,171,274		$	(5,676,091	)	$	6,507,739
Conversion of Series C		—		—		(1,026	)		(1	)		—		—		1,900,000		1,900		(1,899	)		—			—
Dividend on Series D Preferred Stock		—		—		—			—			—		—		—		—		(40,000	)		—			(40,000	)
Stock-based compensation expense		—		—		—			—			—		—		—		—		60,920			—			60,920
Net loss		—		—		—			—			—		—		—		—		—			(565,465	)		(565,465	)
Balance as of March 31, 2019		—		—		3,636			4			2,000		2		14,449,394		14,449		12,190,195			(6,241,556	)		5,963,194
Dividend on Series D Preferred Stock		—		—		—			—			—		—		—		—		(40,444	)		—			(40,444	)
Additional shares issued for acquisition		—		—		—			—			—		—		175,000		175		(175	)		—			—
Issuance of Common stock for consulting services		—		—		—			—			—		—		550,000		550		189,950			—			190,500
Stock-based compensation expense		—		—		—			—			—		—		—		—		84,467			—			84,467
Net loss		—		—		—			—			—		—		—		—		—			(739,302	)		(739,302	)
Balance as of June 30, 2019		—		—		3,636			4			2,000		2		15,174,394		15,174		12,424,093			(6,980,858	)		5,458,415
Dividend on Series D Preferred Stock		—		—		—			—			—		—		—		—		(40,889	)		—			(40,889	)
Share compensation period costs		—		—		—			—			—		—		—		—		71,988			—			71,988
Net loss		—		—		—			—					—		—		—		—			(563,038	)		(563,038	)
Balance as of September 30, 2019		—	$	—		3,636		$	4			2,000	$	2		15,174,394	$	15,174	$	12,455,192		$	(7,543,896	)	$	4,926,476

	For the Nine Months Ended September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,237,248	)	$	(1,867,805	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets		594			—
Depreciation and amortization		128,318			128,682
Stock-based compensation expense		264,389			217,375
Stock issued in exchange for professional services		297,500			190,500
Changes in assets and liabilities:
Accounts receivable		65,833			(8,951	)
Inventories		62,778			1,301
Prepaid expenses and other assets		3,626			(30,981	)
Contract liabilities		(136,682	)		380,119
Accounts payable		100,921			(136,028	)
Accrued expenses and other liabilities		7,052			4,528	)
Net cash used in operating activities		(1,442,919	)		(1,121,260	)

CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(70,086	)		(57,715	)
Net cash used in investing activities		(70,086	)		(57,715	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments on) promissory note		107,439			(40,998	)
Issuance of Series E Preferred stock		1,010,000			—
Repurchase of Series E Preferred stock		(1,110,880	)		—
Sales of common stock, net of issuance cost		22,796,743			—
Sale of common stock from exercise of warrants		2,637,723			—
Exercise of stock options		47,400			—
Net cash provided by (used in) financing activities		25,488,425			(40,998	)

Net increase (decrease) in cash		23,975,420			(1,219,973	)
Cash at beginning of period		717,997			2,601,730
Cash at end of period	$	24,693,417		$	1,381,757

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest cash paid	$	—		$	462
Income taxes paid	$	—		$	—

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Series B, C, D and E preferred stock into common stock		6,551			1,026
Deemed dividends	$	7,884,207		$	—

	September 30,			December 31,
	2017			2016
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	15,099		$	128,035
Restricted cash		—			50,000
Accounts receivable		257,152			600,255
Derivative receivable		—			10,570
Inventory		—			185,733
Marketable securities		—			210,990
Deposits and prepaid expenses		179,424			493,384
Total current assets		451,675			1,678,967
Non-current assets:
Fixed assets, net of accumulated depreciation of $600,085 and $1,817,711		196,691			2,077,055
Oil and gas properties using full-cost accounting, net of accumulated DD&A of $8,594,167 and $15,189,716		1,414,598			3,437,030
Other non-current assets		—			798,809
Total non-current assets		1,611,289			6,312,894
Total assets	$	2,062,964		$	7,991,861

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	153,170		$	294,241
Accrued liabilities		709,300			1,535,165
Note Payable		105,806			—
Current portion of long term debt		4,500,000			17,925,000
Total current liabilities		5,468,276			19,754,406

Asset retirement obligation		1,593,281			3,314,191
Other long-term liabilities		6,039,972			3,401,149
Total non-current liabilities		7,633,253			6,715,340
Total liabilities		13,101,529			26,469,746
Commitments & Contingencies
Stockholders’ Deficit:
10% Series A cumulative perpetual redeemable preferred stock, $0.001 par value, 25,000,000 shares authorized; 938,248 shares issued and outstanding September 30, 2017 and December 31, 2016		938			938
Series B convertible preferred stock, $0.001 par value, 1,764 shares authorized, and 1,374 and 1,764 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.		1			2
Series C convertible preferred stock, $0.001 par value, 500 shares authorized; 300 and 0 shares, issued and outstanding at September 30, 2017 and December 31, 2016, respectively		1			—
Series C convertible preferred stock issuable		150,000			—
Common stock, $0.001 par value, 250,000,000 shares authorized; shares issued and outstanding 10,321,397 at September 30, 2017 and 8,423,936 at December 31, 2016, respectively		10,322			8,424
Paid-in capital		69,610,909			69,090,613
Accumulated deficit		(80,810,736	)		(87,577,862	)
Total stockholders’ deficit		(11,038,565	)		(18,477,885	)
Total liabilities and stockholders’ deficit	$	2,062,964		$	7,991,861

	Options			Weighted Avg. Exercise Price		Warrants		Weighted Avg. Exercise Price
Outstanding December 31, 2016		207,664		$	9.69		1,904,286	$	2.75
Granted		—			—		—		—
Cancelled		(50,000	)		—		—		—
Exercised		—			—		—		—
Outstanding September 30, 2017		157,664		$	9.69		1,904,286	$	2.75

Asset retirement obligations, December 31, 2016	$	3,314,191
Release of liabilities		(1,814,408	)
Accretion		93,498
Asset retirement obligations, September 30, 2017	$	1,593,281

	Percent of total sales for nine months ended September 30,
Customers	2020			2019
Customer A		94.4	%		55.8	%
Customer B		—			12.2	%

	For the nine months ended September 30,
Type	2020		2019
Drone Assembly and Product Sales	$	1,105,971	$	84,745
Software Platform Sales		51,959		23,040
Total	$	1,157,930	$	107,785

Intangible Assets	Estimated Life	Gross Cost		Accumulated Amortization			Net Book Value
Intellectual property/technology	5 yrs.	$	433,400	$	(180,583	)	$	252,817
Customer base	5 yrs.		72,000		(30,000	)		42,000
Tradenames and trademarks	5 yrs.		58,200		(24,250	)		33,950
Non-compete agreement	4 yrs.		160,900		(83,802	)		77,098
Carrying value as of September 30, 2020		$	724,500	$	(318,635	)	$	405,865

	2020 (months remaining)		2021		2022		2023
Intellectual property/technology	$	21,670	$	86,680	$	86,680	$	57,786
Customer base		3,600		14,400		14,400		9,600
Tradenames and trademarks		2,910		11,640		11,640		7,760
Non-compete agreement		10,057		40,225		26,817		—
Total	$	38,237	$	152,945	$	139,537	$	75,146

	September 30, 2020
Dividend yield		0.00	%
Expected life		3.5 Years
Expected volatility		89.19 to 90.09	%
Risk-free interest rate		0.16 to 0.29	%

Forgiveness of existing secured loan	$	17,925,000
Forgiveness of accrued interest		1,306,801
Issuance of secured promissory note		(4,500,000	)
Transfer of oil and gas properties		(1,902,726	)
Transfer of gas gathering system		(1,772,588	)
Transfer of shares of Oakridge Energy, Inc.		(210,990	)
Transfer of ARO liability		1,814,407
Transfer of other assets		(1,159,780	)
Gain on LSA	$	11,500,124

	September 30, 2020			December 31, 2019

Raw materials	$	92,930		$	193,022
Work-in-process		68,350			26,456
Finished goods		7,109			11,689
Gross inventory	$	168,389		$	231,167
Less obsolete reserve		(10,000	)		(10,000	)
Total	$	158,389		$	221,167

	September 30, 2020			December 31, 2019

Property and equipment	$	197,063		$	140,758
Less accumulated depreciation		(103,405	)		(102,982	)
	$	93,658		$	37,776

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2020		2,480,470		$	0.39		6.28	$	378,111
Granted		481,167			1.52		4.75		—
Exercised/Forfeited		(851,483	)		0.53		—		—
Outstanding at September 30, 2020		2,110,154			0.59		5.67	$	3,605,844
Exercisable at period end		1,156,062		$	0.31		5.89	$	2,276,254

	Chief Executive Officer		Chief Financial Officer/ EVP of Operations
Annual Salary	$	250,000	$	200,000
Cash Bonus	$	50,000	$	30,000
Stock Options (Quarterly Grants)		15,000		15,000
RSUs		150,000		125,000

	●	~~inability to complete and/or risks associated with recently disclosed and pending business combination transactions;~~
	●	~~inability to attract and obtain additional development capital;~~
	●	~~inability to achieve sufficient future sales levels or other operating results;~~
	●	~~inability to efficiently manage our operations;~~
	●	~~effect of our hedging strategies on our results of operations;~~
	●	~~defaults under our secured obligations or material debt agreements;~~
	●	~~estimated quantities and quality of oil reserves;~~
	●	~~our ability to raise capital in the future;~~
	●	~~outstanding debt obligations and our ability to repay such obligations as they come due;~~
	●	~~ongoing and potential future litigation, judgments and settlements;~~
	●	~~declining local, national and worldwide economic conditions;~~
	●	~~fluctuations in the price of oil;~~
	●	~~continued weather conditions that impact our abilities to efficiently manage our drilling and development activities;~~
	●	~~the inability of management to effectively implement our strategies and business plans;~~
	●	~~approval of certain parts of our operations by state regulators;~~
	●	~~inability to hire or retain sufficient qualified operating field personnel;~~
	●	~~increases in interest rates or our cost of borrowing;~~
	●	~~deterioration in general or regional economic conditions;~~
	●	~~adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;~~
	●	the occurrence of natural disasters, unforeseen weather conditions, or other events or circumstances that could impact our operations or could impact the operations of companies or contractors we depend upon in our operations;
	●	~~inability to acquire mineral leases at a favorable economic value that will allow us to expand our development efforts;~~
	●	~~adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; and~~
	●	~~changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate.~~

	1)	Registration: secure, scalable software to handle all farmer and processer application and licensing matters.
	2)	Best Management Practices: iterative, intelligent data collection and analysis utilizing satellite imagery and advanced, proprietary algorithms to help farmers reduce input costs, avoid missteps, detect pest impacts and monitor water usage.
	3)	Oversight and Enforcement: integration of data management and satellite imagery to provide continuous monitoring of all hemp fields in the state, predict and respond to issues and assist in proper crop testing.
	4)	Reporting: generation of actionable reports for USDA requirements, legislative oversight and support of research institutions.

	1)	Contract Manufacturing: establishing AgEagle as the dominant commercial drone design, engineering, manufacturing, assembly and testing company in the United States with emphasis on quality;
	2)	Drone Solutions: establishing AgEagle as the world’s trusted source for turn-key drone delivery services and solutions; and
	3)	Ag Solutions: leveraging our reputation as one of the leading technology solutions providers to the Agriculture industry with best-in-class drones and data analytics for hemp and other commercial crops.

	●	“~~Bbl” refers~~Achieving greater market penetration of the U.S. industrial hemp industry by working to ~~one stock tank barrel, or 42 U.S. gallons liquid volume, used~~establish HempOverview and other related products and services as the gold industry standard for hemp cultivation oversight, compliance, enforcement and commerce. AgEagle is – and intends to remain – at the leading edge of leveraging best-in-class technology to provide turnkey solutions for state and tribal regulatory departments of agriculture, industrial hemp and hemp-derived CBD growers and processors. At this time, AgEagle believes that it is the only company in ~~this report~~the nation with extensive experience in ~~reference~~agriculture that is effectively addressing the emerging needs and challenges of the domestic hemp cultivation industry through the application of advanced technology – a key competitive differential that the Company hopes to ~~crude oil or other liquid hydrocarbons;~~capitalize on in the coming year.

	●	“~~Boe” barrels~~Pursue the expansion of ~~oil equivalent, determined using~~ the ~~ratio~~AgEagle platform of ~~one Bbl~~products and solutions into other complementary industries besides agriculture, including the Drone Logistics and Transportation market. We have begun actively exploring opportunities outside of ~~crude oil, condensate or natural gas liquids,~~traditional agriculture as we continue to ~~six Mcf~~expand and grow the AgEagle platform. We are confident in the UAV products and solutions we offer today and believe that these products and solutions could provide other industries the same kind of ~~natural gas;~~optimization we are currently providing the agriculture industry. In addition to drone package deliveries, we believe that our solutions and services may also be well suited for the aerial imaging and data collection and analytics needs involved in land surveying and scanning, insurance, inspections and search and rescue operations, among other industrial applications. Prior to the end of September 2020, we manufactured all of our proprietary and contracted products at our secure manufacturing facility in Neodesha, Kansas, which allows us to avoid many of the potential difficulties that may arise if our manufacturing facilities were otherwise located outside the U.S., which is of particular importance to those AgEagle customers who rely on confidentiality and protection of trade secrets in the development of their drone package delivery initiatives. In later September 2020, we began relocating our Neodesha-based manufacturing operations to a facility in Wichita, Kansas, providing us with ample room for the planned scaling of our contract manufacturing, assembly, design, engineering and testing business.

	●	“~~Mcf” refers~~Deliver new and innovative solutions for the agriculture and other emerging commercial drone markets. Our research and development efforts are the foundation of our Company, and we intend to continue investing in our own innovations, pioneering new and enhanced products and solutions that enable us to satisfy our customers – both in response to and in anticipation of their needs. We believe that by investing in research and development, we can be a ~~thousand cubic feet of natural gas;~~leader in delivering innovative products that address market needs within our current target markets, enabling us to create new opportunities for growth.

	●	“~~SEC” or~~Pursue the “~~Commission” refers~~expansion of the AgEagle platform of products and solutions into other industries besides agriculture and drone package delivery. The Company may investigate and pursue opportunities outside of agriculture and drone package delivery as we continue to expand and grow the ~~United States Securities~~AgEagle platform. We are confident in the UAV products, services and ~~Exchange Commission;~~solutions we offer today and
	●	“~~Securities Act” refers~~ believe that these products, services and solutions could provide other industries the same kind of optimization we are currently providing the agriculture and emerging drone package industry. These industries have yet to be identified by the ~~Securities Act of 1933,~~AgEagle team but may include verticals such as ~~amended.~~land surveying and scanning, insurance, inspections and search and rescue, among others.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Net Production
Oil (Bbl)		5,450		14,015		25,083		44,961
Natural gas (Mcf)		—		11,493		11,649		39,692

Average Sales Prices
Oil (Bbl)	$	42.71	$	32.45	$	43.03	$	35.19
Natural gas (Mcf)	$	—	$	1.65	$	1.67	$	1.06

Average Production Cost⁽¹⁾
Per barrel of oil equivalent (“Boe”)	$	52.42	$	39.72	$	48.68	$	43.22

Average Lifting Costs⁽²⁾
Per Boe	$	37.66	$	35.73	$	37.40	$	37.16

	⁽¹⁾	Production costs include all operating expenses, transportation expenses, depreciation, depletion and amortization, lease operating expenses and all associated taxes. Impairment of oil properties is not included in production costs.
	⁽²⁾	~~Direct lifting costs do not include impairment expense or depreciation, depletion and amortization.~~

	Three Months Ended				Increase /			Nine Months Ended				Increase /
	September 30,				(Decrease)			September 30,				(Decrease)
	2017		2016		$			2017		2016		$
Oil revenues	$	187,297	$	454,825	$	(267,528	)	$	1,082,492	$	1,581,972	$	(499,480	)
Natural gas revenues		—		18,929		(18,929	)		19,509		43,461		(23,952	)
Total	$	187,297	$	473,754	$	(286,457	)		1,102,001	$	1,625,433	$	(523,432	)

	September 30, 2017			December 31, 2016			Increase / (Decrease)

Current Assets	$	451,675		$	1,678,967		$	(1,227,292	)

Current Liabilities	$	5,468,276		$	19,754,406		$	(14,286,130	)

Working Capital Deficit	$	(5,016,601	)	$	(18,075,439	)	$	(13,058,838	)

	●	we will not realize the benefits expected from the Merger, including a potentially enhanced competitive and financial position, expansion of operations, and will instead be subject to all the risks we currently face as an independent company;

	●	~~we may experience negative reactions from the financial markets and our partners and employees;~~

	●	the Merger Agreement places certain restrictions on the conduct of our business prior to the completion of the Merger or the termination of the Merger Agreement. Such restrictions, the waiver of which is subject to the consent of AgEagle, may prevent us from making certain acquisitions, taking certain other specified actions or otherwise pursuing business opportunities during the pendency of the Merger; and

	●	matters relating to the Merger (including integration planning) may require substantial commitments of time and resources by our management, which would otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company.

Exhibit No.		Description
~~2.1***~~		Agreement and Plan of Merger and Reorganization, dated as of October 19, 2017, by and among EnerJex Resources, Inc., AgEagle Merger Sub, Inc., and AgEagle Aerial Systems, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
~~3.1~~31.1		~~Certificate~~Rule 13(a)-14(a)/15(d)-14(a) Certification of Designation of Series C Preferred Stock as filed with the Secretary of State of Nevada on April 27, 2017 (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)principal executive officer

~~10.1~~31.2		~~Form~~Rule 13(a)-14(a)/15(d)-14(a) Certification of ~~Additional Issuance Agreement among Enerjex Resources, Inc.~~principal financial and Alpha Capital Anstalt effective as of April 27, 2017 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)accounting officer
~~10.2~~32.1		~~Form~~Section 1350 Certification of Services Agreement among EnerJex Resources, Inc., and Camber Energy, Inc. dated April 27, 2017 (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on April 28, 2017, and incorporated herein by reference)principal executive officer
~~10.3~~32.2		~~Second Amended~~Section 1350 Certification of principal financial and Restated Credit Agreement dated May 10, 2017, by and among the Registrant, EnerJex Kansas, Inc., Black Raven Energy, Inc., Black Sable Energy, LLC, Adena, LLC, Working Interest, LLC, Kansas Holdings, LLC and Cortland Capital Market Services LLC (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)accounting officer
~~10.4~~		Amended and Restated Note dated May 10, 2017, by and among the Registrant, EnerJex Kansas, Inc., Black Raven Energy, Inc., Black Sable Energy, LLC, Adena, LLC, Working Interest, LLC, Kansas Holdings, LLC and Cortland Capital Market Services LLC (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)
~~10.5~~		Guaranty of Recourse Carveouts dated May 10, 2017, by and between the Registrant and Cortland Capital Market Services LLC (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on May 12, 2017, and incorporated herein by reference)
~~10.6~~		$100,000 Secured Promissory Note dated July 14, 2017, by the Company in favor of Alpha Capital Anstalt (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on July 20, 2017, and incorporated herein by reference)
~~10.7~~		Voting Agreement, dated as of October 19, 2017, by and among EnerJex Resources, Inc. and a principal stockholder of AgEagle (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
~~31.1~~*		~~Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
~~31.2~~*		~~Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
~~32.1~~**		~~Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~32.2~~**		~~Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~99.1~~		Audited Financial Statements of AgEagle Aerial Systems, Inc. for the years ended December 31, 2016 and 2015 (filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 20, 2017, and incorporated herein by reference)
~~99.2~~		Unaudited Financial Statements of AgEagle Aerial Systems, Inc. as of June 30, 2017 (filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K, filed with the Commission on October 10, 2017, and incorporated herein by reference)
101.INS*101.INS		XBRL ~~Instance Document~~INSTANCE DOCUMENT
101.SCH*101.SCH		XBRL ~~Taxonomy Extension Schema Document~~TAXONOMY EXTENSION SCHEMA
101.CAL*101.CAL		XBRL ~~Taxonomy Extension Calculation Linkbase Document~~TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*101.DEF		XBRL ~~Taxonomy Extension Definition Linkbase Document~~TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*101.LAB		XBRL ~~Taxonomy Extension Label Linkbase Document~~TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*101.PRE		XBRL ~~Taxonomy Extension Presentation Linkbase Document~~TAXONOMY EXTENSION PRESENTATION LINKBASE