AgEagle Aerial Systems Inc 10-Q for FY2026 Q1
AgEagle Aerial Systems Inc. (UAVS)
About this 10-Q
AgEagle Aerial Systems Inc filed this 10-Q on May 15, 2026, covering the quarter ended March 31, 2026 (FY2026 Q1).
Headline figures
Quarter ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.4M
- down 61.6% from $3.65M a year earlier
- Net income
- $1.42M
- down 79.9% from net income of $7.06M a year earlier
- Diluted EPS
- $0.00
- compared with -$0.09 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
OR
For the transition period from _______ to ________
Commission file number:
AGEAGLE AERIAL SYSTEMS INC.
(Exact name of registrant as specified in its charter)
| | | |
| (State or other jurisdiction | (I.R.S. Employer |
| | | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| | | |
Securities registered pursuant to Section 12(g) of the Act: None.
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| | ☒ | Smaller reporting company | |
| Emerging growth company | |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
As of May 15, 2026, there were
AGEAGLE AERIAL SYSTEMS INC.
| PART I |
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| ITEM 1. |
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| Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025 |
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| Notes to Condensed Consolidated Financial Statements (unaudited) |
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| ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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| ITEM 3. |
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| ITEM 4. |
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| PART II |
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| ITEM 1. |
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| ITEM 1A. |
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| ITEM 2. |
RECENT SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS |
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| ITEM 3. |
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| ITEM 4. |
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| ITEM 5. |
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| ITEM 6. |
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PART I – FINANCIAL INFORMATION
| Item 1. | Financial Statements. |
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | ||||||||
| March 31, 2026 | December 31, | |||||||
| (unaudited) | 2025 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Investment in equity securities, at fair value | ||||||||
| Prepaid and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Contract liabilities | ||||||||
| Current portion of lease liabilities | ||||||||
| Current portion of COVID loan | ||||||||
| Total current liabilities | ||||||||
| Long-term portion of lease liabilities | ||||||||
| Long-term portion of COVID loan | ||||||||
| Warrant liabilities | ||||||||
| Defined benefit plan obligation | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 9) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred Stock, $ par value, shares authorized: | ||||||||
| Preferred Stock, Series F Convertible, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Preferred Stock, Series G Convertible, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Common Stock, $ par value, shares authorized, and shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
| For the Three Months Ended |
||||||||
| March 31, |
||||||||
| 2026 |
2025 |
|||||||
| (unaudited) |
(unaudited) |
|||||||
| Revenues |
$ | $ | ||||||
| Cost of sales |
||||||||
| Gross Profit |
||||||||
| Operating expenses: |
||||||||
| General and administrative |
||||||||
| Research and development |
||||||||
| Sales and marketing |
||||||||
| Total operating expenses |
||||||||
| Loss from operations |
( |
) | ( |
) | ||||
| Other income (expense): |
||||||||
| Interest income (expense) net |
( |
) | ||||||
| Unrealized gain on investment in equity securities |
||||||||
| (Loss) gain on change in fair value of warrant liabilities |
( |
) | ||||||
| Other income (expense), net |
( |
) | ||||||
| Total other income, net |
||||||||
| Net income before provision for income taxes |
||||||||
| Provision for income taxes |
||||||||
| Net income |
||||||||
| Accrued dividends on Series F Preferred Stock |
( |
) | ( |
) | ||||
| Deemed dividends on Series F and G Preferred Stock and Warrants |
( |
) | ( |
) | ||||
| Net income attributable to common stockholders |
$ | $ | ||||||
| Net income per common share - Basic |
$ | $ | ||||||
| Net income (loss) per common share - Diluted |
$ | $ | ( |
) | ||||
| Weighted average number of shares outstanding during the period – Basic |
||||||||
| Weighted average number of shares outstanding during the period – Diluted |
||||||||
| Comprehensive income: |
||||||||
| Net income |
$ | $ | ||||||
| Amortization of unrecognized periodic pension costs |
||||||||
| Foreign currency cumulative translation adjustment |
( |
) | ( |
) | ||||
| Total comprehensive income, net of tax |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE three months ended March 31, 2026
(UNAUDITED)
| Par $0.001 |
||||||||||||||||||||||||||||||||||||||||
| Preferred |
Preferred |
Preferred |
Preferred |
|||||||||||||||||||||||||||||||||||||
| Stock, |
Stock, |
Stock, |
Stock, |
Accumulated |
||||||||||||||||||||||||||||||||||||
| Series F |
Series F |
Series G |
Series G |
Par $0.001 |
Common |
Additional |
Other |
Total |
||||||||||||||||||||||||||||||||
| Convertible |
Convertible |
Convertible |
Convertible |
Common |
Stock |
Paid-In |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Stock |
Amount |
Capital |
Income |
Deficit |
Equity |
|||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
| Issuance of Series F Preferred Stock and warrants |
||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Stock, Series F Convertible to shares of Common Stock |
( |
) | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||
| Cashless exercise of Series F Warrants |
( |
) | ||||||||||||||||||||||||||||||||||||||
| Dividends on Series F Preferred Stock |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Conversion of Preferred Stock, Series G Convertible to shares of Common Stock |
— | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||
| Issuance of Series G Preferred Stock |
||||||||||||||||||||||||||||||||||||||||
| Exercise of Series F Warrants |
||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Deemed dividends on Series F Preferred Stock and Series F Warrants |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||
| Issuance costs for sale of Series G Preferred Stock |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Amortization of unrecognized periodic pension costs |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Foreign currency cumulative translation adjustment |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Net income |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2026 |
$ | $ | $ | $ | $ | $ | ( |
) | $ | |||||||||||||||||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE three months ended March 31, 2025
(UNAUDITED)
| Preferred |
Preferred |
Preferred |
Preferred |
|||||||||||||||||||||||||||||||||||||
| Stock, |
Stock, |
Stock, |
Stock, |
Accumulated |
||||||||||||||||||||||||||||||||||||
| Series F |
Series F |
Series G |
Series G |
Par $0.001 |
Common |
Additional |
Other |
Total |
||||||||||||||||||||||||||||||||
| Convertible |
Convertible |
Convertible |
Convertible |
Common |
Stock |
Paid-In |
Comprehensive |
Accumulated |
Stockholders’ |
|||||||||||||||||||||||||||||||
| Shares |
Amount |
Shares |
Amount |
Stock |
Amount |
Capital |
Income (Loss) |
Deficit |
Equity |
|||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||||||||
| Issuance of Series F Preferred Stock and warrants, net of issuance costs |
||||||||||||||||||||||||||||||||||||||||
| Conversion of Preferred Stock, Series F Convertible to shares of Common Stock |
( |
) | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||||||||||
| Dividends on Series F Preferred Stock |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Exercise of Series B Warrants |
||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Conversion of Convertible Note principal to Common Stock |
— | — | — | — | ||||||||||||||||||||||||||||||||||||
| Deemed dividend on Series F Preferred Stock and Series F Warrants |
— | — | — | ( |
) | |||||||||||||||||||||||||||||||||||
| Amortization of unrecognized periodic pension costs |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Foreign currency cumulative translation adjustment |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||||||
| Net income |
— | — | — | |||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Three Months Ended |
||||||||
| March 31, |
||||||||
| 2026 |
2025 |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
| Stock-based compensation |
||||||||
| Depreciation and amortization |
||||||||
| Amortization of debt discount and warrant modification |
||||||||
| Unrealized gain on short-term investment in equity securities |
( |
) | ||||||
| Loss (gain) on change in fair value of warrant liabilities |
( |
) | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
||||||||
| Inventories, net |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets |
||||||||
| Accounts payable |
( |
) | ( |
) | ||||
| Accrued liabilities and other liabilities |
( |
) | ||||||
| Contract liabilities |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Purchase of short-term investment in equity securities |
( |
) | ||||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Proceeds from exercise of Series B warrants |
||||||||
| Proceeds from the sale of Series F preferred stock and warrants |
||||||||
| Proceeds from the exercise of Series F warrants |
— | |||||||
| Proceeds from the sale of Series G preferred stock |
||||||||
| Repayments on COVID loans |
( |
) | ||||||
| Payment on accrued dividends |
( |
) | ||||||
| Repayment on other short-term loans |
( |
) | ||||||
| Issuance costs for sale of Series G preferred stock |
( |
) | ||||||
| Net cash provided by financing activities |
||||||||
| Effects of foreign exchange rates on cash flows |
||||||||
| Net change in cash |
( |
) | ||||||
| Cash at beginning of period |
||||||||
| Cash at end of period |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
||||||||
| Interest cash paid |
$ | $ | ||||||
| Income taxes paid |
$ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
| Conversion of Preferred Stock Series F to Common Stock |
$ | $ | ||||||
| Conversion of Preferred Stock Series G to Common Stock |
$ | $ | ||||||
| Series F Warrants exchanged for shares of Common Stock |
$ | $ | ||||||
| Accrued dividends on Series F Preferred Stock |
$ | $ | ||||||
| Deemed dividends on Series F Preferred Stock and warrants and Series G Preferred Stock |
$ | $ | ||||||
| Accrued expense settled with Series B Warrant exercise |
$ | $ | ||||||
| Initial recognition of ROU asset and operating lease liabilities |
$ | $ | ||||||
See accompanying notes to these unaudited condensed consolidated financial statements.
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 1 – Description of the Business and Basis of Presentation
Description of Business – AgEagle™ Aerial Systems Inc. (“AgEagle”, the “Company”, “we”, “our” or "EagleNXT”) through its wholly owned subsidiaries,
Founded in 2010, AgEagle was originally formed to pioneer proprietary, professional-grade, fixed-winged drones and aerial imagery-based data collection and analytics solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced autonomous uncrewed aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include military/defense, public safety, surveying/mapping, agriculture and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight and/or Operations Over People in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of War.
The Company is currently headquartered in Allen, Texas, where we house our sensor and drone manufacturing operations, and we operate drone distribution and coordinate global customer service operations out of Raleigh, North Carolina. In addition, the Company operates engineering and drone manufacturing operations in Lausanne, Switzerland in support of our international business activities.
On September 11, 2025 the Company rebranded to EagleNXT. The rebrand to EagleNXT underscores the Company’s commitment to advancing best-in-class drones, sensors, and software that serve both government and commercial markets.
The Company’s mission statement, EagleNXT protects what matters most: lives, land, and the pursuit of peace, serves as the foundation of the rebrand and communicates EagleNXT’s focus on innovation, resilience, and long-term value creation.
Basis of Presentation – The condensed consolidated financial statements of the Company are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments, for a fair statement of the Company’s consolidated financial position and results of operations for the periods presented. Certain information and disclosures included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the U.S. Securities and Exchange Commission (“SEC”) rules. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 31, 2026. The results for the three months ended March 31, 2026 and 2025 are not necessarily indicative of the results to be expected for a full year, any other interim periods or any future year or periods.
The condensed consolidated financial statements include the accounts of AgEagle and its wholly-owned subsidiaries, AgEagle Aerial, Inc., Measure Global, Inc, (currently inactive with no operations), senseFly S.A. and senseFly Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 1 – Description of the Business and Basis of Presentation – Continued
Liquidity and Going Concern – In pursuit of the Company’s long-term growth strategy and acquisitions, the Company has sustained continued operating losses. During the three months ended March 31, 2026, the Company had net income of $
Note 2 – Summary of Significant Accounting Policies
Risks and Uncertainties – Global economic challenges, including the impact of the war in Ukraine and Iran, rising inflation supply-chain disruptions, and adverse labor market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the Unmanned Aerial Vehicle (UAV) industry and the Company’s operational and financial performance remain uncertain and outside of the Company’s control. Specifically, because of the aforementioned continuing risks, the Company’s ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either the Company or any of its third parties used in our manufacturing and assembly processes continue to be adversely impacted by these matters, the Company’s supply chain may be disrupted, limiting its ability to manufacture and assemble products. The Company expects inflation and supply-chain disruptions and its effects to continue to have a significant negative impact on its business for an extended period of time. The company continues to monitor developments in trade policy and is evaluating alternatives to mitigate the impact of these tariffs, including supplier diversification. However, additional or sustained tariff actions could materially and adversely affect our operations, financial condition, and results of operations.
Use of Estimates – The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the reserve for obsolete inventory and fair value of deemed dividends resulting from the triggering of down round provisions embedded in our equity-linked instruments.
Allowance for Credit Losses - We establish allowances for credit losses on accounts receivable, under Accounting Standards Codification ("ASC") 326-20-55-37. The adequacy of these allowances is assessed quarterly through consideration of factors such as customer credit ratings, age of the receivable, expected loss rates and general economic conditions. It is reasonably possible that the Company’s estimate of the allowance for credit losses will change. As of March 31, 2026, December 31, 2025 and January 1, 2025, the Company had an allowance for credit losses balance of $
Investments in Equity Securities, at Fair Value - During the three months ended March 31, 2026, the Company acquired an investment in a marketable equity security with a readily determinable fair value. We have applied the provisions of ASC 321, Investments - Equity Securities as our interest is less than a twenty percent and we do not have the ability to exercise significant influence over operating and financial policies of the investee. Equity investments within the scope of ASC 321 are carried at fair value with unrealized gains or losses recorded as net unrealized gain (loss) on equity investments, a component of other income, in the accompanying condensed consolidated statements of operations. Realized gains and losses are determined on a specific identification basis which is recorded in earnings or loss as a net realized gain (loss) on equity investments in the condensed consolidated statements of operations. The investment is classified within current assets on the condensed consolidated balance sheets based on management's ability to hold or dispose of portions or all of the marketable security within the next twelve months. Fair value is determined based on the quoted market price of the security on the principal exchange on which it trades as of the balance sheet date and is classified as Level 1 within the fair value hierarchy established by ASC 820, Fair Value Measurement, as the valuation is based on unadjusted quoted prices in active markets for identical assets. The Company reviews investments in equity securities, at fair value, for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.
Fair Value of Financial Instruments - The Company measures the fair value of financial instruments in accordance with U.S. GAAP, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. U.S. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. U.S. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. U.S. GAAP describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities.
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable.
Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions).
See Note 6 for details of assets and liabilities recorded at fair value on a recurring basis.
Revenue Recognition – Most of the Company’s revenues are derived primarily through the sales of drones, sensors and related accessories. The Company utilized ASC Topic 606 and the related amendments, Revenue from Contracts with Customers, which requires revenue to be recognized in a manner that depicts the transfer of goods or services to customers in amounts that reflect the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company recognizes revenue on sales to customers, dealers, and distributors upon satisfaction of performance obligations which occurs once control transfers to customers, which is when product is shipped or delivered depending on specific shipping terms and, where applicable, a customer acceptance has been obtained. The fee is not considered to be fixed or determinable until all material contingencies related to the sales have been resolved. The Company records revenue in the consolidated statements of operations and comprehensive loss, net of any sales, use, value added, or certain excise taxes imposed by governmental authorities on specific sales transactions and net of any discounts, allowances and returns. Therefore, revenue is recognized at a point in time.
Pursuant to ASC 606, we have the following revenue recognition policies:
| ● | Sensor Sales – sales are recognized on products when the related goods have been shipped, title has passed to the customer, and there are no undeliverable elements or uncertainties. Amounts incurred related to shipping and handling are included in cost of sales. | |
| ● | Drone Sales - sales are recognized on products when the related goods have been shipped, title has passed to the customer, and there are no undeliverable elements or uncertainties. Amounts incurred related to shipping and handling are included in cost of sales. |
Additionally, customer payments or deposits received in advance of the Company completing performance obligations are recorded as contract liabilities. As of March 31, 2026, December 31, 2025, and January 1, 2025 we have $
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 2 – Summary of Significant Accounting Policies – Continued
Summary of Significant Accounting Policies - A description of all of the Company’s significant accounting policies and other financial information is included in the Company’s audited consolidated financial statements filed on March 31, 2026, with the SEC on Form 10-K for the year ended December 31, 2025. These policies have been applied consistently in these unaudited condensed interim consolidated financial statements.
Income (Loss) Per Common Share and Potentially Dilutive Securities – Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus Common Stock (as defined below), equivalents (if dilutive) related to unvested restricted stock units ("RSUs"), warrants, and convertible instruments. When the Company reports a net loss, the calculation of diluted net loss per share excludes potential common shares as their effect would be anti-dilutive.
The following table presents the reconciliation of basic to diluted weighted average shares used in computing net income (loss) per share of common stock attributable to common stockholders for three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Numerator: | ||||||||
| Net income | $ | $ | ||||||
| Accrued dividends on Series F Preferred Stock | ( | ) | ( | ) | ||||
| Deemed dividends | ( | ) | ( | ) | ||||
| Numerator for basic EPS - net income (loss) available to common stockholders | ||||||||
| Effect of convertible securities and liability classified equity instrument: | ||||||||
| Accrued dividends on Series F Preferred Stock | ||||||||
| Interest expense on convertible note payable | ||||||||
| Loss (gain) on change in fair value of warrant liabilities | ( | ) | ||||||
| Numerator for diluted EPS - net income (loss) available to common stockholders | $ | $ | ( | ) | ||||
| Denominator: | ||||||||
| Denominator for basic EPS - weighted average shares | ||||||||
| Effect of dilutive securities: | ||||||||
| Incremental shares for outstanding warrants (Series A, B and F) | | |||||||
| Convertible note and accrued interest | ||||||||
| Convertible Series F Preferred Stock | ||||||||
| Convertible Series G Preferred Stock | ||||||||
| Incremental unvested restricted stock units | ||||||||
| Denominator for diluted EPS - weighted average shares | ||||||||
| Net loss per common share - basic | $ | $ | ||||||
| Net loss per common share - diluted | $ | $ | ( | ) | ||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 2 – Summary of Significant Accounting Policies – Continued
Segment Reporting – In accordance with ASC Topic 280, Segment Reporting, the Company identifies operating segments as components of an entity for which discrete financial information is available and is regularly reviewed by the chief operating decision maker in making decisions regarding resource allocation and performance assessment. The Company defines the term “chief operating decision maker” to be its chief executive officer.
The Company has determined that it operates in two segments:
| ● | Drones, which comprises revenues earned from 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. | |
|
| ||
| ● | Sensors, which comprises the revenue earned through the sale of sensors, cameras, and related accessories. | |
|
| ||
| ● | Corporate, which comprises corporate costs only, and is not considered an operating segment. |
Recently Issued Accounting Pronouncements Not Yet Adopted – In March 2024, the Securities and Exchange Commission (“SEC”) released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies (“SRC”). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting (“ICFR”) and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impact of the improvements to our disclosure.
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 2 – Summary of Significant Accounting Policies – Continued
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, Disaggregation of Income Statement Expenses (“DISE”), a new accounting standard to improve the disclosures about an entity’s expenses and address requests from investors for more detailed information about the types of expenses included in commonly presented expense captions. The new standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with retrospective application permitted. The Company is evaluating the disclosure requirements related to the new standard and its impact on our consolidated financial statements.
Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company’s present and future condensed consolidated financial statements.
Note 3 – Inventories, Net
As of March 31, 2026 and December 31, 2025, inventories, net consist of the following:
| March 31, 2026 |
December 31, 2025 |
|||||||
| Raw materials |
$ | $ | ||||||
| Work in process |
||||||||
| Finished goods |
||||||||
| Gross inventories |
||||||||
| Less: Provision for obsolescence |
( |
) | ( |
) | ||||
| Inventories, net |
$ | $ | ||||||
Note 4 - Investment in Equity Securities
On March 4, 2026, the Company executed a private placement subscription form (the "Subscription") with Aerodrome Group Ltd. ("ARDM"), a company whose ordinary shares are listed for trading on the Tel Aviv Stock Exchange Ltd. ("TASE"). Pursuant to the Subscription, the Company purchased
| For the Three Months Ended | ||||
| March 31, 2026 | ||||
| Beginning balance, at fair value | $ | |||
| Purchases | ||||
| Change in fair value - unrealized gain | ||||
| Ending balance, at fair value | $ | |||
Note 5 – COVID Loans
The Company assumed the obligations for two COVID loans originally made by the Small Business Administration to senseFly S.A. on July 27, 2020 (“senseFly COVID Loans”). As of March 31, 2026, the Company’s outstanding obligations under the senseFly COVID Loans are $
As of March 31, 2026, scheduled principal payments due under the senseFly COVID Loans are as follows:
| Year ending December 31, | ||||
| 2026 (remaining) | $ | |||
| 2027 | ||||
| Total | $ |
Note 6 – Fair Value Measurements
As disclosed in Note 4, we acquired an investment in equity securities during the three months ended March 31, 2026 that are recorded at fair value each reporting period. Since the ordinary shares we hold in ARDM trade on the TASE, we have determined the fair value of these shares using quoted market prices on the TASE as of March 31, 2026 (
We closed on an offering of units consisting of Common Stock, Series A warrants ("Series A Warrants") and Series B warrants (Series B Warrants") in October 2024 (the “October 2024 Offering"). In connection with the October 2024 Offering, we sold units comprised of Common Stock, Series A Warrants and a Series B Warrants (collectively referred to as the “Warrants”) (see Note 8). The Warrants were deemed to be derivative liabilities, at issuance, due to variability in the ultimate settlement of the Warrants caused by various settlement provisions embedded within the Warrants. Liability classified warrants are reported at fair value upon issuance and subsequently at each reporting period.
On April 2, 2025, the Company and the majority holder of the Series B Warrants, executed an amendment to the Series B Warrant to Purchase Common Stock and Exchange Agreement (the "Series B Amendment"). The Series B Amendment amended the contractual terms of the Series B Warrants by removing Section 3.2 of the original warrant agreement in its entirety, so that the Series B Warrant would be accounted for as equity on the consolidated financial statements of the Company (the "Share Combination Event"). Pursuant to the Share Combination Event, if a share split, share dividend, share combination recapitalization or other similar transaction involving common stock occurred after the issuance date of the Series B Warrants, the exercise price of the Series B Warrants would be adjusted to the lowest volume weighted average price during the five days prior to and after such a Share Combination Event if less than the exercise price in effect. The Company reassessed the classification of the Series B Warrants after the execution of the Series B Amendment and concluded that the Series B Warrants were no longer precluded from being classified within stockholders' equity. On April 2, 2025, we reclassified the fair value of the outstanding Series B Warrants of $
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:
| Fair Value Measurements at March 31, 2026 | ||||||||||||||||
| Quoted Prices in | Other | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Short-term investment in marketable equity securities, at fair value (asset) | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities - Series A warrants | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 6 – Fair Value Measurements – Continued
| Fair Value Measurements at December 31, 2025 | ||||||||||||||||
| Quoted Prices in | Other | Significant | ||||||||||||||
| Active Markets for | Observable | Unobservable | ||||||||||||||
| Identical Assets | Inputs | Inputs | ||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Derivative liabilities - Series A | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair value of the warrants was determined by using a Black-Scholes pricing model and the following assumptions:
| March 31, 2026 | December 31, 2025 | |||||||
| Exercise price | $ | $ | ||||||
| Stock price | $ | $ | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend yield | % | % | ||||||
| Probability of capital raise below exercise price | % | % | ||||||
As of March 31, 2026 and December 31, 2025, the Company measured the Warrants using significant unobservable inputs that are based on little or no verifiable market data, which is Level 3 in the fair value hierarchy, resulting in a fair value estimate of $
During the three months ended March 31, 2026, we recognized a loss on the change in the fair value of the warrant liabilities of $
| Amount | ||||
| Balance as of December 31, 2025 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Balance as of March 31, 2026 | $ | |||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity
Preferred Series F Convertible Stock
Purchase History
On June 26, 2022, the Company entered into the Series F Agreement with Alpha Capital Anstalt ("Alpha"). Pursuant to the terms of the Series F Agreement, the Board of Directors of the Company (the “Board”) designated a new series of Preferred Stock, the Series F, and authorized the sale and issuance of up to
Additional Investment Right
The Series F Agreement provides Alpha the right to purchase up to an additional $
On February 7, 2025, Alpha and the Company executed a funding agreement in which Alpha agreed to exercise its AIR quarterly to provide financing to the Company for the next twelve months, with such amounts and timing of funding to be agreed to by the parties.
As consideration for Alpha’s commitment to provide additional funding, the Company agreed to (i) extend the period in which Alpha can exercise its AIR by extending the termination date of December 31, 2025 to June 1, 2026 and (ii) granting Alpha certain registration rights related to the Series F Alpha currently holds and will receive upon further exercises of its AIR. The Company filed the required registration statement to register
During the three months ended March 31, 2026, we issued the following Series F pursuant to the exercise of the AIR by Alpha:
| ● | On January 2, 2026, we issued | |
|
| ||
|
|
|
|
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity – Continued
During the three months ended March 31, 2025, we issued the following Series F pursuant to the exercise of the AIR by Alpha:
● On February 7, 2025, we issued
● On March 17, 2025, we issued
Since the execution of the Series F Agreement, the Company has sold and issued Series F and Series F Warrants to Alpha or investors that Alpha has assigned the AIR for cash proceeds through the exercise of the AIR. As of March 31, 2026, a total of
A summary of the Series F activity for the three months ended March 31, 2026, is as follows:
| Original | Shares | Shares | Conversion | Shares | ||||||||||||||||||||||||||||||||||||
| Shares | Gross | Net | Conversion | Outstanding | Series F | Series F | Outstanding | Price at | Issuable at | |||||||||||||||||||||||||||||||
| Date of Purchase | Purchased | Proceeds | Proceeds | Price | December 31, 2025 | Issued | Converted | March 31, 2026 | March 31, 2026 | March 31, 2026 | ||||||||||||||||||||||||||||||
| November 15, 2023 | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| March 6, 2024 | ||||||||||||||||||||||||||||||||||||||||
| May 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| July 18, 2025 | ( | ) | (i) | |||||||||||||||||||||||||||||||||||||
| July 21, 2025 | ( | ) | (i) | |||||||||||||||||||||||||||||||||||||
| July 24, 2025 | ( | ) | (i) | |||||||||||||||||||||||||||||||||||||
| October 6, 2025 | ( | ) | (i) | |||||||||||||||||||||||||||||||||||||
| November 24, 2025 | ( | ) | (i) | |||||||||||||||||||||||||||||||||||||
| December 22, 2025 | (i) | |||||||||||||||||||||||||||||||||||||||
| January 2, 2026 | ||||||||||||||||||||||||||||||||||||||||
| Total March 31, 2026 | $ | $ | $ | — | ( | ) | $ | — | ||||||||||||||||||||||||||||||||
| (i) - Reflects the conversion price after the January 2026 Down Round Trigger that was triggered with the sale of Series F on January 2, 2026. | ||||||||||||||||||||||||||||||||||||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity – Continued
A summary of the Series F activity for the three months ended March 31, 2025, is as follows:
| Original | Shares | Shares | Conversion | Shares | ||||||||||||||||||||||||||||||||||||
| Shares | Gross | Net | Conversion | Outstanding | Series F | Series F | Outstanding | Price at | Issuable at | |||||||||||||||||||||||||||||||
| Date of Purchase | Purchased | Proceeds | Proceeds | Price | December 31, 2024 | Issued | Converted | March 31, 2025 | March 31, 2025 | March 31, 2025 | ||||||||||||||||||||||||||||||
| November 15, 2023 | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| March 6, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| April 12, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| May 31, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| July 25, 2024 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| August 27, 2024 | ||||||||||||||||||||||||||||||||||||||||
| October 1, 2024 (i) | ||||||||||||||||||||||||||||||||||||||||
| December 18, 2024 | (ii) | |||||||||||||||||||||||||||||||||||||||
| February 7, 2025 | (ii) | |||||||||||||||||||||||||||||||||||||||
| March 17, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Total March 31, 2025 | $ | $ | $ | — | ( | ) | $ | — | ||||||||||||||||||||||||||||||||
| (ii) - Reflects the conversion price after the March 2025 Down Round Trigger that was triggered with the sale of Series F on March 17, 2025. | ||||||||||||||||||||||||||||||||||||||||
During the three months ended March 31, 2026 and 2025, the dividends accrued on the Series F were $
Series G Convertible Preferred Stock
On November 5, 2025, the Company executed a certificate of designation (the "Series G Certificate of Designation") of preferences, rights and limitations of the Series G Convertible Preferred Stock, designating
On November 10, 2025, the Company sold
On March 4 and 5, 2026, the Company sold
A summary of the Series G activity for the three months ended March 31, 2026, is as follows:
| Original | Shares | Shares | Conversion | Shares | ||||||||||||||||||||||||||||||||||||
| Shares | Gross | Net | Conversion | Outstanding | Series G | Series G | Outstanding | Price at | Issuable at | |||||||||||||||||||||||||||||||
| Date of Purchase | Purchased | Proceeds | Proceeds | Price | December 31, 2025 | Issued | Converted | March 31, 2026 | March 31, 2026 | March 31, 2026 | ||||||||||||||||||||||||||||||
| November 10, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||
| March 4, 2026 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| March 5, 2026 | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Total March 31, 2026 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||||||
Common Stock Issuances
Conversions
During the three months ended March 31, 2026 and 2025, a total of
During the three months ended March 31, 2026 and 2025, a total of
Warrant Exercises
During the three months ended March 31, 2026, we issued
During the three months ended March 31, 2025, we issued
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity – Continued
Down Round Triggers and Deemed Dividends
We have several outstanding equity classified and equity-linked instruments that include down round provisions in which the conversion or exercise price is adjusted down upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the conversion or exercise price of the equity-linked instruments. As of March 31, 2026, these equity-linked instruments include the Series F, Series F Warrants, Series G and Series B Warrants.
Upon a down round provision being triggered in an equity classified instrument, we compute the incremental value provided to the holder for the reduction in conversion or exercise price using a Black-Scholes model to determine the fair value of the equity-linked instruments prior to and after the down round provision trigger. The incremental value is recorded within stockholders’ equity as a deemed dividend. Specifically, deemed dividends increase additional paid in capital and increase accumulated deficit and increase total net loss or decrease to total net income attributable to common stockholders in computing earnings per share on the condensed consolidated statements of operations and comprehensive income.
During the periods ended March 31, 2026 and 2025, we used the following assumptions in the Black-Scholes model used to compute the incremental value for the conversion price reductions in the Series F and Series G and Series F Warrants and Series B Warrants:
| For the Three Months Ended | ||||
| March 31, | ||||
| 2026 | 2025 | |||
| Expected term (years) | | | ||
| Volatility | | | ||
| Risk-free rate | | | ||
| Dividend yield | | | ||
Below is a summary of the deemed dividends resulting from the January 2026 Down Round Trigger that reduced the conversion and exercise price of outstanding Series F and Series G, and Series F Warrants, as applicable, during the three months ended March 31, 2026.
| Deemed Dividend on Series F and G Preferred Stock | ||||||||||||||||||
| Description of | Series F and G Shares | Conversion Price | Conversion Price | Incremental Value | ||||||||||||||
| Date of Trigger Event | Trigger Event | Triggered | Prior to Trigger | After Trigger | Deemed Dividend | |||||||||||||
| January 2, 2026 | January 2026 Down Round Trigger | $ | $ | $ | ||||||||||||||
| Deemed Dividends on Series F and G Preferred Stock | $ | |||||||||||||||||
| Deemed Dividend on Series F Warrants | ||||||||||||||||||
| January 2, 2026 | January 2026 Down Round Trigger | $ | $ | |||||||||||||||
| Deemed Dividends on Series F Warrants | $ | |||||||||||||||||
| Total Deemed Dividends Series F and G Preferred Stock and Series F Warrants | $ | |||||||||||||||||
Below is a summary of the deemed dividends resulting from the March 2025 Down Round Trigger that reduced the conversion and exercise price of outstanding Series F Preferred Stock and Series F Warrants during the three months ended March 31, 2025.
| Deemed Dividends on Series F Preferred Stock | |||||||||||||||||
| Description of | Series F | Conversion Prices | Conversion Price | Incremental Value | |||||||||||||
| Date of Trigger Event | Trigger Event | Triggered | Prior to Trigger | After Trigger | Deemed Dividend | ||||||||||||
| March 17, 2025 | March 2025 Down Round Trigger | $ | $ | $ | |||||||||||||
| Deemed Dividends on Series F Preferred Stock | $ | ||||||||||||||||
| Deemed Dividends on Series F Warrants | |||||||||||||||||
| March 17, 2025 | March 2025 Down Round Trigger | $ | $ | ||||||||||||||
| Deemed Dividends on Series F Warrants | $ | ||||||||||||||||
| Total Deemed Dividends Series F PS and Series F Warrants | $ | ||||||||||||||||
| Series F and Series F Warrants issued prior to December 2024 have conversion and exercise prices equal to $1.10 and were not impacted by the March 2025 Down Round Trigger. | |||||||||||||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity – Continued
Stock-based Compensation
The Company determines the fair value of awards granted under the 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) based on the fair value of its Common Stock on the date of grant. Stock-based compensation expenses related to grants under the Equity Plan are included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income.
Restricted Stock Units (“RSUs”)
For the three months ended March 31, 2026, a summary of RSU activity is as follows:
| Weighted Average | ||||||||
| Grant Date | ||||||||
| Shares | Fair Value | |||||||
| Outstanding as of December 31, 2025 | $ | |||||||
| Granted | ||||||||
| Cancelled | — | — | ||||||
| Vested and released | ( | ) | ||||||
| Outstanding as of March 31, 2026 | ||||||||
| Vested as of March 31, 2026 | ||||||||
| Unvested as of March 31, 2026 | $ | |||||||
For the three months ended March 31, 2026, the aggregate fair value of RSU awards at the time of grant was $
For the three months ended March 31, 2026, the Company recognized $
For the three months ended March 31, 2025, a summary of RSU activity is as follows:
| Weighted Average | ||||||||
| Grant Date | ||||||||
| Shares | Fair Value | |||||||
| Outstanding as of December 31, 2024 | $ | |||||||
| Granted | ||||||||
| Cancelled | (1,072 | ) | 264.60 | |||||
| Vested and released | ||||||||
| Outstanding as of March 31, 2025 | ||||||||
| Vested as of March 31, 2025 | ||||||||
| Unvested as of March 31, 2025 | $ | |||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 7 – Stockholders’ Equity – Continued
For the three months ended March 31, 2025, the aggregate fair value of RSU awards at the time of vesting was $
For the three months ended March 31, 2025, the Company recognized $
Note 8 – Warrants
Equity Classified Warrants
During the three months ended March 31, 2026, we issued the following Series F Warrants in connection with the issuance of Series F Preferred Stock (see Note 7) pursuant to the exercise of the AIR by Alpha:
| ● | On January 2, 2026, we issued Series F Warrants to purchase up to |
During the three months ended March 31, 2025, we issued the following Series F Warrants in connection with the issuance of Series F Preferred Stock (see Note 7) pursuant to the exercise of the AIR by Alpha:
| ● | On February 7, 2025, we issued Series F Warrants to purchase up to | |
|
| ||
| ● | On March 17, 2025, we issued Series F Warrants to purchase up to | |
A summary of activity related to warrants, classified within stockholders’ equity (deficit) for the periods presented is as follows:
| Weighted Average | ||||||||||||
| Weighted Average | Remaining | |||||||||||
| Shares | Exercise Price | Contractual Term | ||||||||||
| Outstanding as of December 31, 2025 | $ | |||||||||||
| Issued – January 02, 2026 | — | |||||||||||
| Exercise of Series F Warrants | ( | ) | — | |||||||||
| Outstanding as of March 31, 2026 | $ | * | ||||||||||
| Exercisable as of March 31, 2026 | $ | * | ||||||||||
| * | Reflects the exercise price after the January 2026 Down Round Trigger |
The table above includes the total Series F Warrants issued with Series F Preferred Stock (see Note 7) and the Series B Warrants issued in the October 2024 Offering (see Note 7) of
During the three months ended March 31, 2026,
As of March 31, 2026, the intrinsic value of the warrants was $
Liability Classified Warrants
The Series A Warrants issued in October 2024, pursuant to an offering, have the following contractual terms.
Each Series A Warrant was immediately exercisable on the date of issuance and expires years from the closing date of the offering.
Under the alternate cashless exercise option of the Series A Warrants, a holder of the Series A Warrant, has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of Common Stock that would be issuable upon a cash exercise of the Series A Warrant and (y) 2.0. In addition, the Series A Warrants and Series B Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) the lowest volume weighted average price for the five trading days immediately preceding and immediately following the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants so that the aggregate exercise price remains constant in such an event (the “Share Combination Event”). The Share Combination Event was eliminated from the contractual terms of the Series B Warrants with the execution of the Series B Amendment (see Note 6). Finally, with certain exceptions, the Series B Warrants provide for a down round adjustment to the exercise price and number of shares underlying the Series B Warrants upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the exercise price of the Series B Warrant. The exercise price was adjusted down to $
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 8 – Warrants – Continued
A summary of activity related to the Series A and B warrants, initially classified as liabilities, for the three months ended March 31, 2026 is as follows:
| Weighted Average | ||||||||||||
| Weighted Average | Remaining | |||||||||||
| Shares | Exercise Price | Contractual Term | ||||||||||
| Outstanding as of December 31, 2025 | $ | |||||||||||
| Outstanding as of March 31, 2026 | ||||||||||||
| Exercisable as of March 31, 2026 | $ | |||||||||||
The outstanding and exercisable Series A Warrants provide for an alternative cashless exercise which allows the holder to exercise the Series A Warrant for no consideration and receive shares of common stock for each warrant exercised.
Note 9 – Commitments and Contingencies
Leases
On January 1, 2026, a lease commenced for a
As a result of the senseFly acquisition, the Company assumed the operating leases for office spaces in Raleigh, North Carolina and Lausanne, Switzerland. The operating lease in Raleigh expired in July 2023 and the operating lease in Lausanne was set to expire in April 2023. The Company was required to notify the landlord of its intention to not renew the lease in March 2022. The Company neglected to provide such notification, therefore, a five year renewal option was automatically triggered in March 2022. The Lausanne lease is now set to expire in April 2028. The estimated cash rent payments due through the expiration of this operating lease total approximately $
The Company has an operating lease in Wichita, Kansas, which served as its corporate offices. The lease commencement date was November 1, 2023, and will expire on October 31, 2026, unless sooner terminated or extended. The estimated cash rent payments due through the expiration of this operating lease total $
As of March 31, 2026 and December 31, 2025, balance sheet information related to the Company’s operating leases is as follows:
| Balance Sheet Location | March 31, 2026 | December 31, 2025 | ||||||
| Right-of-use assets | $ | $ | ||||||
| Current portion of operating lease liability | $ | $ | ||||||
| Long-term portion of operating lease liability | $ | $ | ||||||
As of March 31, 2026, scheduled future maturities of the Company’s lease liabilities are as follows:
| Year Ending December 31, | ||||
| 2026 (remaining) | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total future minimum lease payments, undiscounted | ||||
| Less: Amount representing interest | ( | ) | ||
| Present value of future minimum lease payments | ||||
| Present value of future minimum lease payments – current | ||||
| Present value of future minimum lease payments – long-term | $ |
As of March 31, 2026 and December 31, 2026, the weighted-average lease-term and discount rate of the Company’s leases are as follows:
| Other Information | March 31, 2026 | March 31, 2025 | ||||||
| Weighted-average remaining lease terms (in years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
For the three months ended March 31, 2026 and 2025, supplemental cash flow information related to leases is as follows:
| Other Information | March 31, 2026 | March 31, 2025 | ||||||
| Cash paid for amounts included in the measurement of liabilities: Operating cash flows for operating leases | $ | $ | ||||||
Legal Matters
We note that in the ordinary course of business that we may be the subject of, or party to, various pending or threatened legal actions which could result in a material adverse outcome for which the related damage may not be estimable. We do not believe any legal action would have a significant impact on the financials. However, there is inherent uncertainty regarding such matters.
Purchase Commitments
The Company routinely places orders for manufacturing services and materials. As of March 31, 2026, the Company had purchase commitments of $
Note 10 – Segment Information
Operating segments are defined as components of an entity for which separate financial information is available and that is regularly provided to the Chief Operating Decision Maker (CODM) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented by operating segment in making operating decisions, allocating resources, and evaluating financial performance.
During the three months ended March 31, 2026, the Company conducted the business through primary operating segments: Drones and Sensors. During the year ended December 31,2024, our Software-as-a-service segment ceased operations and did not renew any of its software subscriptions. Transactions in this segment during 2025 consisted primarily of run-off related expenses until this segment was fully shut down. In February 2025, we sold the Measure Global, Inc. domain name and received approximately $
The accounting policies of the operating segments are the same as those described in Note 2. Non-allocated administrative and other expenses are reflected in Corporate. Corporate assets include cash, prepaid expenses, right-of-use assets and other assets.
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 10 – Segment Information – Continued
As of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 and 2025, operating information about the Company’s reportable segments consisted of the following:
Assets
| Corporate | Drones | Sensors | SaaS | Total | ||||||||||||||||
| As of March 31, 2026 | ||||||||||||||||||||
| Assets | $ | $ | $ | $ | ||||||||||||||||
| As of December 31, 2025 | ||||||||||||||||||||
| Assets | $ | $ | $ | $ | $ | |||||||||||||||
Net Income (Loss)
| Corporate | Drones | Sensors | SaaS | Total | ||||||||||||||||
| Three Months Ended March 31, 2026 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Compensation and related expenses | ||||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||
| Other income (expense), net | ( | ) | ||||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | $ | |||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Compensation and related expenses | ||||||||||||||||||||
| Professional fees | ||||||||||||||||||||
| Other operating expenses | ||||||||||||||||||||
| Income (loss) from operations | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||
| Other income (expense), net | ( | ) | ||||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 10 – Segment Information – Continued
Revenues by Geographic Area
| Drones | Sensors | SaaS | Total | |||||||||||||
| Three Months Ended March 31, 2026 | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Latin America | ||||||||||||||||
| Europe, Middle East and Africa | ||||||||||||||||
| Asia Pacific | ||||||||||||||||
| Other | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Drones | Sensors | SaaS | Total | |||||||||||||
| Three Months Ended March 31, 2025 | ||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||
| Latin America | ||||||||||||||||
| Europe, Middle East and Africa | ||||||||||||||||
| Asia Pacific | ||||||||||||||||
| Other | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
FOR THE three months ended March 31, 2026 and 2025
(UNAUDITED)
Note 11 – Subsequent Events
Management has evaluated subsequent events through the date that the Company’s unaudited condensed consolidated financial statements were issued. Based on this evaluation, the Company has determined that no additional subsequent events have occurred, other than those noted below, which require disclosure through the date that these unaudited condensed consolidated financial statements were issued.
Subsequent to March 31, 2026, through the date of this filing, the Company has issued a total of
Subsequent to March 31, 2026, through the date of this filing, the Company has issued a total of
On April 13, 2026, the Company entered into a private placement agreement (the "ThirdEye Agreement") with ThirdEye Systems Ltd. ("ThirdEye Systems"). Pursuant to the ThirdEye Agreement, the Company agreed to invest an aggregate amount between $
Pursuant to the terms of the ThirdEye Agreement, EagleNXT and ThirdEye Systems also entered into a joint venture agreement (the “JV Agreement”) on April 13, 2026 that provided for the formation of ThirdEye USA, LLC (“ThirdEye USA”) as a Delaware limited liability company. ThirdEye USA will provide a line of counter-drone products and systems to the U.S. and Canadian markets. The Company will own
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion highlights the principal factors that have affected our financial condition and results of operations as well as our liquidity and capital resources for the periods described. This discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements. Please see the explanatory note concerning “Forward-Looking Statements” in Part I of the Annual Report on Form 10-K and Item 1A. Risk Factors for a discussion of the uncertainties, risks and assumptions associated with these forward-looking statements. The operating results for the periods presented were not materially affected by inflation.
Overview
AgEagle™ Aerial Systems Inc. (“AgEagle” or the “Company”, “we”, “our” or “us”), through its wholly owned subsidiaries, is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for our customers. Founded in 2010, AgEagle was originally formed to pioneer proprietary, professional-grade, fixed-winged drones and aerial imagery-based data collection and analytics solutions for the agriculture industry. Today, the Company is earning distinction as a globally respected market leader offering customer-centric, advanced, autonomous uncrewed aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include military/defense, public safety, surveying/mapping, agriculture, and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (“BVLOS”) and/or Operations Over People (“OOP”) in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of War ("DoW").
AgEagle’s shift and expansion from solely manufacturing fixed-wing farm drones in 2018, to offering what the Company believes is one of the industry’s best fixed-wing, full-stack drone solutions, culminated in 2021 when the Company acquired three market-leading companies engaged in producing UAS airframes, sensors and software for commercial and government use. In addition to a robust portfolio of proprietary, connected hardware and software products; an established global network of over 165 UAS resellers; and enterprise customers worldwide; these acquisitions also brought AgEagle a highly valuable workforce comprised largely of experienced engineers and technologists with deep expertise in the fields of robotics, automation, manufacturing and data science. In 2022, the Company succeeded in integrating all three acquired companies with AgEagle to form one global company focused on taking autonomous flight performance to a higher level.
Our core technological capabilities include robotics and robotics systems autonomy; advanced thermal and multispectral sensor design and development; embedded software and firmware; secure wireless digital communications and networks; lightweight airframes; UAS design, integration and operations; power electronics and propulsion systems; controls and systems integration; fixed wing flight; flight management software; data capture and analytics; human-machine interface development and integrated mission solutions.
The Company is currently headquartered in Allen, Texas where we house our sensor manufacturing operations, and we manufacture drones in Lausanne, Switzerland. We also operate a distribution and service center for our drone products in Raleigh, North Carolina. which supports our international business activities.
We intend to grow our business and preserve our leadership position by developing new drones, sensors and software and capturing a significant share of the global drone market. In addition, we expect to accelerate our growth and expansion through strategic acquisitions of companies offering distinct technological and competitive advantages and have defensible intellectual property protection in place, if applicable.
Key Growth Strategies
We intend to materially grow our business by leveraging our proprietary, best-in-class, full-stack drone solutions, industry influence and deep pool of talent with specialized expertise in robotics, automation, custom manufacturing and data science to achieve greater penetration of the global UAS industry – with near-term emphasis on capturing larger market share of the agriculture, energy/utilities, infrastructure and government/military verticals. We expect to accomplish this goal by first bringing three core values to life in our day-to-day operations and aligning them with our efforts to earn the trust and continued business of our customers and industry partners:
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Innovation – Committed to driving forward with positive change, our team is committed to innovate in technology, strategies, and cross-department initiatives. |
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Passion – This fuels our obsession with excellence, our desire to try the difficult things and tackle big problems, and our commitment to meet our customers’ needs – and then surpass them. |
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Integrity – This is not optional or situational at AgEagle – it is the foundation for everything we do, even when no one is watching. |
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Establish centers of excellence with respective expertise in UAS software, sensors and airframes. These centers of excellence cross pollinate ideas, industry insights and skill sets to yield intelligent autonomous solutions that fully leverage AgEagle’s experienced team’s specialized knowledge and know-how in robotics, automation, custom manufacturing and data science. |
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Deliver new and innovative solutions. AgEagle’s research and development efforts are critical building blocks of the 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. AgEagle believes that by investing in research and development, the Company can be a leader in delivering innovative autonomous robotics systems and solutions that address market needs beyond our current target markets, enabling us to create new opportunities for growth. |
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Foster our entrepreneurial culture and continue to attract, develop and retain highly skilled personnel. AgEagle’s company culture encourages innovation and entrepreneurialism, which helps attract and retain highly skilled professionals. We believe this culture is key to nurture the design and development of the innovative, highly technical system solutions that give us our competitive advantage. |
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Growth through acquisition. Through successful execution of our growth-through-acquisition strategies, we intend to acquire technologically advanced UAS companies and intellectual property that complement and strengthen our value proposition to the market. We believe that by investing in complementary acquisitions, we can accelerate our revenue growth and deliver a broader array of innovative autonomous flight systems and solutions that address specialized market needs. |
Competitive Strengths
| AgEagle believes the following attributes and capabilities provide us with long-term competitive advantages: |
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Proprietary technologies, in-house capabilities and industry experience – We believe our decade of experience in commercial UAS design and engineering; in-house manufacturing, assembly and testing capabilities; and advanced technology development skillset serve to differentiate AgEagle in the marketplace. In fact, approximately 70% of our Company’s global workforce is comprised of engineers and data scientists with deep experience and expertise in robotics, automation, custom manufacturing, and data analytics. In addition, AgEagle is committed to meeting and exceeding quality and safety standards for manufacturing, assembly, design and engineering and testing of drones, drone subcomponents and related drone equipment in our U.S. and Swiss-based manufacturing operations. As a result, our Switzerland-based operations have earned ISO:9001 international certification for our Quality Management System. |
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In December 2022, we unveiled our new eBee™ VISION, a small, fixed-wing UAS designed to provide real-time, enhanced situational awareness for critical intelligence, surveillance and reconnaissance missions; to produce and deliver eBee™ VISION fixed-wing drones and customized command and control software that proves compatible and is in full compliance with the DoW Robotic and Autonomous System-Air Interoperability Profile . In addition, three branches of European military forces accepted delivery of eBee VISION drones in 2023. In support of its sales and pre-order efforts, AgEagle’s team has been engaged in numerous live demonstrations and intensive training sessions with officials from government and military agencies across the world seeking to leverage the power of eBee VISION in their respective drone operations. In July 2023 alone, we completed a comprehensive training session with our first European military customers, who were confirmed as eBee VISION operators and qualified trainers of new users. These new customers confirmed with AgEagle’s technical teams that all operational capabilities of the eBee VISION continue to meet and exceed performance benchmarks in scouting, surveillance, usability, fast deployment and flight time, among other use case criteria specified by the international military community. We have also been working in close collaboration with our network of valued added reselling partners in France, United Kingdom, Poland, Italy and Spain, among other countries, to conduct live demonstrations and technical exchanges with prospective new customers, with emphasis on showcasing use of eBee VISION UAS for public safety and first responder missions, border patrol and a wide range of commercial applications. |
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| ● | In May 2023, we released the new RedEdge-P™ dual high resolution and RGB composite drone sensor, representing yet another AgEagle technological advancement in aerial imaging cameras, seamlessly integrating the power and performance of the RedEdge-P and the new RedEdge-P blue cameras in a single solution. The RedEdge-P dual doubles analytical capabilities with the benefit of a single camera workflow. Its coastal blue band – the first of its kind in the market – was specifically designed for vegetation analysis of water bodies; environmental monitoring; water management; habitat monitoring, protection and restoration; and vegetation species and weeds identification, including differentiating and counting plants, trees, invasive species and weeds. |
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We offer market-tested drones, sensors and software solutions that have earned the longstanding trust and fidelity of customers worldwide – Through successful execution of our acquisition integration strategy in 2021, AgEagle is now delivering a unified line of industry trusted drones, sensors and software that have been vigorously tested and consistently proven across multiple industry verticals and use cases. For instance, our line of eBee fixed wing drones have flown more than one million flights over the past decade serving customers across, among others, the surveying and mapping; engineering and construction; military/defense; mining, quarries and aggregates; agriculture humanitarian aid and environmental monitoring, industries. Featured in over 100 research publications globally, advanced sensor innovations developed and commercialized by AgEagle have served to forge new industry standards for high performance, high resolution, thermal and multispectral imaging for commercial drone applications in agriculture, plant research, land management and forestry. In addition, we have championed the development of end-to-end software solutions which power autonomous flight and deliver actionable, contextual data and analytics for numerous Fortune 500 companies, government agencies and a wide range of businesses in agriculture, energy and utilities, construction and other industry sectors. |
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AgEagle was awarded a Multiple Award Schedule (“MAS”) Contract by the U.S. federal government’s General Services Administration (“GSA”) – In April 2023, the centralized procurement arm of the federal government, the GSA, awarded us with a five-year MAS contract. The GSA Schedule Contract is a highly coveted award in the government contracting space and is the result of a rigorous proposal process involving the demonstration of products and services in-demand by government agencies, and the negotiation of their prices, qualifications, terms and conditions. Contractors selling through the GSA Contract are carefully vetted and must have a proven track record in the industry. We believe that this will serve to advance our efforts to achieve deeper penetration of the government sector over the next five years. |
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Our eBee TAC™ UAS has been approved by the Defense Innovation Unit for procurement by the Department of War– We believe that the eBee TAC is ideally positioned to become an in-demand, mission critical tool for the U.S. military, government and civil agencies and our allies worldwide; and expect that this will prove to be a major growth catalyst for our Company and positively impact our financial performance in the years ahead. eBee TAC is available for purchase by U.S. government agencies and all branches of the military on GSA Schedule Contract #47QTCA18D003G, supplied by Hexagon US Federal and partner Tough Stump Technologies as a standalone solution or as part of the Aerial Reconnaissance Tactical Edge Mapping Imagery System. Tough Stump Technologies is actively engaged in training military ground forces based in the U.S. and in Central Europe on the use of eBee TAC for mid-range tactical mapping and reconnaissance missions. |
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Our eBee™ X series of fixed wing UAS, including the eBee X, eBee Geo and eBee TAC, are the first and only drones on the market to comply with Category 3 of the sUAS Over People rules published by the Federal Aviation Administration. It is another important testament of our commitment to providing best-in-class solutions to our commercial customers, and we believe it will serve as a key driver in the growth of eBee utilization in the United States. |
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Our eBee X series of drones are the world’s first UAS in its class to receive design verification for BVLOS and OOP from European Union Aviation Safety Agency (“EASA”). The EASA design verification report ("DVR") demonstrates that the eBee X meets the highest possible quality and ground risk safety standards and, thanks to its lightweight design, effects of ground impact are reduced. As such, drone operators conducting advanced drone operations in 27 European Member States, Iceland, Liechtenstein, Norway, and Switzerland can obtain the HIGH or MEDIUM robustness levels of the M2 mitigation without additional verification from EASA.Regulatory constraints relating to limitations of BVLOS and OOP have continued to be a gating factor to widespread adoption of commercial drone technologies across a wide range of industry sectors worldwide. Being the first company to receive this DVR from EASA for M2 mitigation is a milestone for AgEagle and our industry in the European Union and will be key to fueling growth of our international customer base. |
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In August 2022, we announced that the eBee X, eBee GEO and eBee AG were the first commercial drones to be designated with the C2 class identification label in accordance with EASA regulations. As of August 22, 2022, drone operators flying C2 labeled eBees are able to conduct missions in the “Open Category” with all the advantages that this entails. The C2 certification allows the eBee X series, with correct labelling, to fly at a horizontal distance of 30 meters from uninvolved people. By contrast, heavy drones like VTOLs or quadcopters must maintain a distance of 150 meters from people and any residential, commercial, industrial and recreational areas, limiting their operational capabilities to remote zones. |
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In early October 2023, the eBee X series of drones were designated with the C6 class identification label in accordance with European Union regulations. As of January 1, 2024, drone operators of C6-labeled eBees are able to conduct BVLOS operations with airspace observers over a controlled ground area in a sparsely populated environment throughout Europe. Operators simply need to submit a required declaration with their applicable National Aviation Authority indicating whether they intend to fly missions in accordance with the European Standard Scenario- (“STS-”) 01 or STS-02. The inclusion of the C6 marking alongside our C2-labeled eBee drones will significantly enhance the market advantages for our European customers. It grants access to areas and operational modes restricted to drones weighing over 4 kilograms, all without the requirement for formal permissions or regulatory waivers. |
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Our global reseller network currently has more than 200 drone solutions providers in over 75+ countries – By leveraging our relationships with the specialty retailers that comprise our global reseller network, AgEagle benefits from enhanced brand-building, lower customer acquisition costs and increased reach, revenues and geographic and vertical market penetration. With the integration of our 2021 strategic acquisitions, we can now leverage our collective reseller network to accelerate our revenue growth by educating and encouraging our partners to market AgEagle’s full suite of airframes, sensors and software as bundled solutions in lieu of marketing only previously siloed products or product lines to end users. |
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In late 2022, we partnered with government contractor Darley to expand the market reach of AgEagle’s high performance fixed wing drones and sensors to the U.S. first responder and tactical defense markets. Distinguished as one of the nation’s longest standing government contracting organizations, Darley is expected to become a key contributor to AgEagle’s success in delivering best-in-class UAS solutions to a wide range of state and federal agencies. Providing our best-in-class autonomous flight solutions for public safety applications through trusted resellers like Darley represents an entirely new market opportunity for AgEagle and one we intend to vigorously pursue in the coming year. |
Impact of the Risks and Uncertainties On Our Business Operations
Global economic challenges, including the impact of wars, pandemics, rising inflation and supply-chain disruptions, regulatory investigations, and adverse labor and capital market conditions could cause economic uncertainty and volatility. The aforementioned risks and their respective impacts on the UAV industry and our operational and financial performance remain uncertain and outside of our control. Specifically, because of the aforementioned continuing risks, our ability to access components and parts needed in order to manufacture its proprietary drones and sensors, and to perform quality testing have been, and continue to be, impacted. If either we or any of our third parties in the supply chain for materials used in our manufacturing and assembly processes continue to be adversely impacted, our supply chain may be further disrupted, limiting our ability to manufacture and assemble products.
Critical Accounting Estimates
The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these condensed consolidated financial statements 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 condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include the reserve for obsolete inventory, stock options and consideration, valuation of intangible assets, fair value of derivative liabilities, and deemed dividends resulting from the triggering of down round provisions and modifications to equity-linked instruments.
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 may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting estimates affect the more significant judgments and estimates used in preparing our condensed consolidated financial statements. Please see Note 2 to our condensed consolidated financial statements, which are included in this Quarterly Report on Form 10-Q. There have been no material changes made to the critical accounting estimates during the periods presented in the condensed consolidated financial statements.
Three Months Ended March 31, 2026 as Compared to Three Months Ended March 31, 2025
Revenues
For the three months ended March 31, 2026, revenues were $1,401,207 as compared to $3,649,410 for the three months ended March 31, 2025, a decrease of $2,248,203, or 61.6%. The decrease of $2,248,203 was attributable to a decrease of $1,591,882 in revenues from our drone products related to the timing of national contracts and additional time each contract takes to close. The federal government shutdown in the United States along with delayed approved defense funding bills, also contributed to the decrease in drone revenue. A decrease of $656,321 in the sensor revenues was due to sales mix, product repricing, and international growing seasons.
Cost of Sales and Gross Profit
For the three months ended March 31, 2026, cost of sales was $816,278 as compared to $1,515,592 for the three months ended March 31, 2025, a decrease of $699,314 or 46.1%. For the three months ended March 31, 2026, gross profit was $584,929 as compared to $2,133,818 for the three months ended March 31, 2025, a decrease of $1,548,889, or 72.6%. The primary factors contributing to the decrease in our cost of sales and gross profit margin were reduced revenue and fixed costs, salaries and rent that were not offset by revenue.
General and Administrative Expenses
For the three months ended March 31, 2026, general and administrative expenses were $2,754,030 as compared to $1,972,811 for the three months ended March 31, 2025, representing an increase of $781,219, or 39.6%. The increase was primarily attributable to higher compensation expenses related to the hiring of additional employees, relocation costs, and increased professional fees, including legal and accounting expenses. These increases were partially offset by lower amortization expense in 2026, primarily due to impairment charges recorded during the year ended December 31, 2025.
Research and Development
For the three months ended March 31, 2026, research and development expenses were $1,763,142 as compared to $736,411 for the three months ended March 31, 2025, an increase of $1,026,731, or 139.4%. The increase was primarily attributable to the engagement of consultants to improve our sensors and release new products. The Company also hired additional employees for its engineering team for the further development of its drone products, resulting in higher salary expenses.
Sales and Marketing
For the three months ended March 31, 2026, sales and marketing expenses were $1,165,829 as compared to $427,141 for the three months ended March 31, 2025, an increase of $738,688, or 172.9%. The increase was primarily attributable to higher department headcount, increased public relations expenses, and greater travel activity by our sales and marketing team.
Other Income (Expense), net
For the three months ended March 31, 2026, other income was $6,518,434 as compared to $8,062,584 for the three months ended March 31, 2025, a decrease of $1,544,150. The decrease was primarily attributable to the recognition of a $7,780,000 gain from changes in the fair value of outstanding warrant liabilities, $250,000 from the sale of the Measure domain name, and approximately $93,000 from an employee retention tax credit refund, all of which were recorded during the three months ended March 31, 2025. These items were partially offset by an unrealized gain on investment in marketable securities of $6,477,682 recognized during the three months ended March 31, 2026.
Net Income
For the three months ended March 31, 2026, we generated a net income of $1,420,362 as compared to a net income of $7,060,039 for the three months ended March 31, 2025, a decrease of $5,639,677 or 79.9%. The decrease in our net loss is primarily attributable to the above-mentioned changes in our cost of sales, general and administrative, research and development, sales and marketing, and other net income (expense).
Cash Flow
Three Months Ended March 31, 2026 as Compared to the Three Months Ended March 31, 2025
As of March 31, 2026, cash on hand was $26,911,440, as compared to $ 29,858,655 as of December 31, 2025, a decrease of $2,947,215 or 9.9%.
For the three months ended March 31, 2026, cash used in operations was $2,360,255, an increase of $1,065,699 or 82.3%, as compared to cash used of $1,294,556 for the three months ended March 31, 2025. The increase in cash used in operating activities was principally driven by the reduction in our net income, after adjusting for non-cash operating activities, due to increases in operating expenses related to consulting, salary expense and the opening of the Texas facility, partially offset by an increase in operating cash flows from changes in operating assets and liabilities, primarily the reduction of outstanding accounts payable. All of which resulted in an increase in cash used in operating activities.
For the three months ended March 31, 2026, cash used in investing activities was $3,356,982, an increase of $3,346,558, or 32104.4%, as compared to cash used of $10,424 for the three months ended March 31, 2025. The increase is related to fewer purchases of property and equipment and $3,000,000 used in the investment in marketable securities.
For the three months ended March 31, 2026, cash provided by financing activities was $2,690,596, an increase of $1,255,693 or 87.5%, as compared to cash provided of $1,434,903 for the three months ended March 31, 2025. The increase in cash provided by our financing activities was due to an increase in net proceeds from the exercise of Series F Warrants, issuance of Series F and Series F Warrants, sales of Series G offset by dividend payments.
Liquidity, Capital Resources and Going Concern
As of March 31, 2026, we had a working capital of $39,104,590 and cash on hand of $26,911,440. For the three months ended March 31, 2026, we incurred a loss from operations of $5,098,072, an increase of $4,095,527, or 408.5%, as compared to $1,002,545 for the three months ended March 31, 2025. During the three months ended March 31, 2026, we used cash in our operating activities of $2,360,255. As of March 31, 2026, we have sufficient cash on hand to meet our financial obligations for the next twelve months.
Off-Balance Sheet Arrangements
On March 31, 2026, we 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 the use of structured finance, special purpose entities or variable interest entities. We have 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 are material to stockholders.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.
| CONTROLS AND PROCEDURES |
Evaluation of Disclosure and Control Procedures
The Company’s Chief Executive Officer and the Company’s Chief Financial Officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2026 and concluded that the 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 that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated, recorded, processed, summarized and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure to be reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There 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 months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| OTHER INFORMATION |
| LEGAL PROCEEDINGS |
None.
| RISK FACTORS |
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, and are not required to provide the information under this item.
| RECENT SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS |
None.
| DEFAULTS UPON SENIOR SECURITIES |
None.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
| EXHIBITS |
| Exhibit No. |
Description |
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| 3.1 |
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| 3.2 |
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| 3.3 |
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| 3.4 |
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| 3.5 |
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| 3.6 |
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| 3.7 |
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| 3.8 |
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| 3.9 |
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| 3.10 |
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| 3.11 |
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| 3.12 |
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| 3.13 |
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| 3.14 |
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| 3.15 |
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| AGEAGLE AERIAL SYSTEMS INC. |
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| Dated: May 15, 2026 |
By: |
/s/ William Irby |
| William Irby |
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| Chief Executive Officer and Director of the Company |
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| Dated: May 15, 2026 |
By: |
/s/ Alison Burgett |
| Alison Burgett |
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| Chief Financial Officer |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signatures |
Title |
Date |
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| /s/ William Irby |
Chief Executive Officer and Director of the Company |
May 15, 2026 |
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| William Irby |
(Principal Executive Officer) |
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| /s/ Alison Burgett |
Chief Financial Officer |
May 15, 2026 |
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| Alison Burgett |
(Principal Financial and Accounting Officer) |
EXHIBIT 31.1
CERTIFICATION
I, William Irby, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q for the three months ended March 31, 2026 of AgEagle Aerial Systems Inc. (the “registrant”); |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 15, 2026 |
/s/ William Irby |
|
William Irby |
|
|
Chief Executive Officer and Director |
EXHIBIT 31.2
CERTIFICATION
I, Alison Burgett, certify that:
|
1. |
I have reviewed this Quarterly Report on Form 10-Q for the three months ended March 31, 2026 of AgEagle Aerial Systems Inc. (the “registrant”); |
|
|
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
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|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
|
|
4. |
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
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|
b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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|
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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|
b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 15, 2026 |
/s/ Alison Burgett |
|
Alison Burgett |
|
|
Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AgEagle Aerial Systems, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Irby, Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 15, 2026
|
/s/ William Irby |
|
|
Willian Irby |
|
|
Chief Executive Officer (Principal Executive Officer) and Director |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of AgEagle Aerial Systems, Inc. (the “Company”) on Form 10-Q for the three months ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alison Burgett, Chief Financial Officer (Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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|
|
||
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 15, 2026
|
/s/ Alison Burgett |
|
|
Alison Burgett |
|
|
Chief Financial Officer (Principal Financial Officer) |