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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2025

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

For the transition period from _______ to ________

Commission file number: 001-36492

AGEAGLE AERIAL SYSTEMS INC.

(Exact name of registrant as specified in its charter)

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

8201 E. 34th Street N, Suite 1307 Wichita, Kansas		67226
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (620) 325-6363

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share		UAVS		NYSE American LLC

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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark 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	☐
Non-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 ☐ No ☒

As of November 14, 2025, there were 40,072,588 shares of Common Stock, par value $0.001 per share, issued and outstanding.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS:	3

	Condensed Consolidated Balance Sheets as of September 30, 2025 (unaudited) and December 31, 2024	3

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2025 and 2024 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 (unaudited)	9

	Notes to Condensed Consolidated Financial Statements (unaudited)	10

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37

ITEM 4.	CONTROLS AND PROCEDURES	37

PART II	OTHER INFORMATION	38

ITEM 1.	LEGAL PROCEEDINGS	38

ITEM 1A.	RISK FACTORS	38

ITEM 2.	RECENT SALES OF UNREGISTERED EQUITY SECURITIES AND USE OF PROCEEDS	38

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	38

ITEM 4.	MINE SAFETY DISCLOSURES	38

ITEM 5.	OTHER INFORMATION	38

ITEM 6.	EXHIBITS	39

SIGNATURES		40

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	*As of*
	*September 30, 2025*			*December 31,*
	*(unaudited)*			*2024*
ASSETS
CURRENT ASSETS:
Cash	$	16,628,558		$	3,613,996
Accounts receivable, net		2,522,013			1,432,470
Inventories, net		5,987,114			5,475,857
Prepaid and other current assets		646,085			425,182
Total current assets		25,783,770			10,947,505

Property and equipment, net		349,422			455,592
Right-of-use assets		2,082,674			2,511,572
Intangible assets, net		1,504,018			1,956,304
Goodwill		4,459,644			4,459,644
Other assets		285,754			250,937
Total assets	$	34,465,282		$	20,581,554

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Accounts payable	$	744,220		$	2,786,492
Accrued liabilities		2,650,262			2,360,775
Convertible note		—			1,333,333
Other short-term loan		—			99,735
Contract liabilities		70,602			148,054
Current portion of lease liabilities		893,906			921,038
Current portion of COVID loan		103,098			237,464
Total current liabilities		4,462,088			7,886,891

Long-term portion of lease liabilities		1,207,755			1,646,878
Long-term portion of COVID loan		206,184			274,389
Warrant liabilities		123,000			16,400,000
Defined benefit plan obligation		130,014			115,355
Total liabilities		6,129,041			26,323,513

COMMITMENTS AND CONTINGENCIES (NOTE 9)

STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Stock, $0.001 par value, 25,000,000 shares authorized:
Preferred Stock, Series F Convertible, $0.001 par value, 35,000 shares authorized, 2,697 shares issued and outstanding as of September 30, 2025, and 5,935 shares issued and outstanding as of December 31, 2024		3			6
Common Stock, $0.001 par value, 200,000,000 shares authorized, 36,734,690 and 9,661,664 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively		36,735			9,662
Additional paid-in capital		248,228,653			212,715,967
Accumulated deficit		(220,159,387	)		(218,381,218	)
Accumulated other comprehensive income (loss)		230,237			(86,376	)
Total stockholders’ equity (deficit)		28,336,241			(5,741,959	)
Total liabilities and stockholders’ equity (deficit)	$	34,465,282		$	20,581,554

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	*For the Three Months Ended*							*For the Nine Months Ended*
	*September 30,*							*September 30,*
	*2025*			*2024*				*2025*			*2024*
	(unaudited)			(unaudited)				(unaudited)			(unaudited)
Revenues	$	1,970,209		$	3,284,984			$	9,817,180		$	10,571,969
Cost of sales		1,211,232			1,650,717				4,584,507			5,428,705
Gross Profit		758,977			1,634,267				5,232,673			5,143,264

Operating expenses:
General and administrative		2,229,820			1,889,733				6,736,799			6,931,496
Research and development		1,012,354			969,402				2,559,755			3,181,638
Sales and marketing		671,579			636,292				2,161,066			1,825,645
Total operating expenses		3,913,753			3,495,427				11,457,620			11,938,779
Loss from operations		(3,154,776	)		(1,861,160	)			(6,224,947	)		(6,795,515	)

Other income (expense):
Interest expense		(27,483	)		(1,563,817	)			(134,871	)		(5,698,269	)
Loss on debt extinguishment		—			—				(125,242	)		—
Gain on change in fair value of warrant liabilities		5,000			—				8,511,000			—
Gain (loss) on disposal of fixed assets		—			11,000				—			(2,988	)
Other income (expense), net		562,096			(45,777	)			1,138,560			(208,277	)
Total other income (expense), net		539,613			(1,598,594	)			9,389,447			(5,909,534	)
Net income (loss) before provision for income taxes		(2,615,163	)		(3,459,754	)			3,164,500			(12,705,049	)
Provision for income taxes		—			—				—			—
Net income (loss)		(2,615,163	)		(3,459,754	)			3,164,500			(12,705,049	)
Accrued dividends on Series F Preferred Stock		(36,112	)		(47,879	)			(155,800	)		(158,862	)
Deemed dividends on Series F Preferred Stock and Warrants		(208,526	)		(1,450,232	)			(4,942,669	)		(6,707,687	)
Net income (loss) attributable to common stockholders	$	(2,859,801	)	$	(4,957,865	)		$	(1,933,969	)	$	(19,571,598	)

Net loss per common share - Basic	$	(0.09	)	$	(16.03	)		$	(0.10	)	$	(81.44	)
Net loss per common share - Diluted	$	(0.09	)	$	(16.03	)		$	(0.46	)	$	(81.44	)

Weighted average number of shares outstanding during the period – Basic		32,171,261			309,350		(i)		19,888,046			240,309		(i)
Weighted average number of shares outstanding during the period – Diluted		32,171,261			309,350		(i)		22,199,793			240,309		(i)

Comprehensive income (loss):
Net income (loss)	$	(2,615,163	)	$	(3,459,754	)		$	3,164,500		$	(12,705,049	)
Amortization of unrecognized periodic pension costs		(7,377	)		—				100,188			—
Foreign currency cumulative translation adjustment		24,812			140,349				216,425			(12,146	)
Total comprehensive income (loss), net of tax	$	(2,597,728	)	$	(3,319,405	)		$	3,481,113		$	(12,717,195	)

⁽ⁱ⁾	Adjusted for the effect of a 1 to 50 reverse stock split that became effective on October 14, 2024 (see Note 1)

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE three and nine months ended September 30, 2025

(UNAUDITED)

	*Par $0.001*
	*Preferred*			*Preferred*
	*Stock,*			*Stock,*										*Accumulated*
	*Series F*			*Series F*			*Par $0.001*		*Common*		*Additional*			*Other*						*Total*
	*Convertible*			*Convertible*			*Common*		*Stock*		*Paid-In*			*Comprehensive*			*Accumulated*			*Stockholders’*
	*Shares*			*Amount*			*Stock*		*Amount*		*Capital*			*Income (Loss)*			*Deficit*			*Equity*
Balance as of June 30, 2025		2,675		$	3			21,802,649	$	21,803	$	233,381,747		$	212,802		$	(217,335,698	)	$	16,280,657
Issuance of Series F Preferred Stock and warrants, net of issuance costs		4,300			4			—		—		4,299,996			—			—			4,300,000
Conversion of Preferred Stock, Series F Convertible to shares of Common Stock		(4,278	)		(4	)		3,228,799		3,229		(3,225	)		—			—			—
Series F Warrants exchanged for shares of common stock		—			—			60,000		60		(60	)		—			—			—
Dividends on Series F Preferred Stock		—			—			—		—		(36,111	)		—			—			(36,111	)
Exercise of Series A Warrants		—			—			63,017		63		(63	)		—			—			—
Exercise of Series B Warrants		—			—			7,868,924		7,869		6,518,616			—			—			6,526,485
Exercise of Series F Warrants		—			—			3,622,918		3,623		3,800,695			—			—			3,804,318
Stock-based compensation expense		—			—			—		—		149,979			—			—			149,979
Issuance of Restricted Common Stock		—			—			78,000		78		(78	)		—			—			—
Conversion of Convertible Note accrued interest into Common Stock		—			—			10,383		10		8,602			—			—			8,612
Deemed dividends on Series F Preferred Stock and Series F Warrants		—			—			—		—		208,526			—			(208,526	)		—
Debt extinguishment loss on substantial modification to convertible debt		—			—			—		—		—			—			—			—
Amended Series B warrants reclassified to stockholders' equity		—			—			—		—		—			—			—			—
Issuance costs for sale of preferred stock		—			—			—		—		(99,971	)		—			—			(99,971	)
Amortization of unrecognized periodic pension costs		—			—			—		—		—			(7,377	)		—			(7,377	)
Foreign currency cumulative translation adjustment		—			—			—		—		—			24,812			—			24,812
Net loss		—			—			—		—		—			—			(2,615,163	)		(2,615,163	)
Balance as of September 30, 2025		2,697		$	3			36,734,690	$	36,735	$	248,228,653		$	230,237		$	(220,159,387	)	$	28,336,241

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE three and nine months ended September 30, 2025

(UNAUDITED)

	*Par $0.001*
		Preferred			Preferred			10
	*Stock,*			*Stock,*										*Accumulated*						*Total*
	*Series F*			*Series F*			*Par $0.001*		*Common*		*Additional*			*Other*						*Stockholders’*
	*Convertible*			*Convertible*			*Common*		*Stock*		*Paid-In*			*Comprehensive*			*Accumulated*			*Equity*
	*Shares*			*Amount*			*Stock*		*Amount*		*Capital*			*Income (Loss)*			*Deficit*			*(Deficit)*
Balance as of December 31, 2024		5,935		$	6			9,661,664	$	9,662	$	212,715,967		$	(86,376	)	$	(218,381,218	)	$	(5,741,959	)
Issuance of Series F Preferred Stock and warrants, net of issuance costs		8,800			9			—		—		8,799,991			—			—			8,800,000
Conversion of Preferred Stock, Series F Convertible to shares of Common Stock		(12,038	)		(12	)		11,501,461		11,501		(11,489	)		—			—			—
Series F Warrants exchanged for shares of common stock		—			—			148,908		149		(149	)		—			—			—
Dividends on Series F Preferred Stock		—			—			—		—		(155,800	)		—			—			(155,800	)
Exercise of Series A Warrants		—			—			63,017		63		(63	)								—
Exercise of Series B Warrants		—			—			10,089,612		10,090		8,656,912			—			—			8,667,002
Exercise of Series F Warrants		—			—			3,622,918		3,623		3,800,695			—			—			3,804,318
Stock-based compensation expense		—			—			—		—		311,690			—			—			311,690
Issuance of Restricted Common Stock		—			—			156,615		157		(157	)		—			—			—
Conversion of Convertible Note principal and accrued interest to Common Stock		—			—			1,490,495		1,490		1,424,116			—			—			1,425,606
Deemed dividends on Series F Preferred Stock, Series B and F Warrants and warrant exchange		—			—			—		—		4,942,669			—			(4,942,669	)		—
Debt extinguishment loss on substantial modification to convertible debt		—			—			—		—		125,242			—			—			125,242
Amended Series B warrants reclassified to stockholders' equity		—			—			—		—		7,766,000									7,766,000
Issuance costs for sale of preferred stock		—			—			—		—		(146,971	)								(146,971	)
Amortization of unrecognized periodic pension costs		—			—			—		—		—			100,188			—			100,188
Foreign currency cumulative translation adjustment		—			—			—		—		—			216,425			—			216,425
Net income		—			—			—		—		—						3,164,500			3,164,500
Balance as of September 30, 2025		2,697		$	3			36,734,690	$	36,735	$	248,228,653		$	230,237		$	(220,159,387	)	$	28,336,241

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE three and nine months ended September 30, 2024

(UNAUDITED)

	*Par $0.001*
	*Preferred*			*Preferred*
	*Stock,*			*Stock,*												*Accumulated*
	*Series F*			*Series F*			*Par $0.001*			*Common*			*Additional*			*Other*						*Total*
	*Convertible*			*Convertible*			*Common*			*Stock*			*Paid-In*			*Comprehensive*			*Accumulated*			*Stockholders’*
	*Shares*			*Amount*			*Stock*			*Amount*			*Capital*			*Income (Loss)*			*Deficit*			*Equity*
Balance as of June 30, 2024		4,295		$	4			13,838,705		$	13,840		$	188,192,663		$	(46,192	)	$	(180,085,841	)	$	8,074,474
Effect on existing shares due to Reverse Split on October 14, 2024		—			-			(13,561,931	)		(13,563	)		13,563			-			-			—
Issuance of Series F Preferred Stock and warrants, net of issuance costs		1,000			1			-			-			999,999			-			-			1,000,000
Conversion of Preferred Stock, Series F Convertible to shares of Common Stock		(1,595	)		(1	)		69,635			70			(69	)		-			-			—
Dividends on Series F Preferred Stock		—			—			-			-			(47,879	)		-			-			(47,879	)
Stock-based compensation expense		—			—			-			-			16,675			-			-			16,675
Reduction of Conversion Price on Convertible note		—			—			-			-			609,537			-			-			609,537
Deemed dividend on Series F Preferred Stock and Series F Warrants		—			—			-			-			1,450,232			-			(1,450,232	)		—
Issuance costs for sale of Preferred Stock		—			—			-			-			(100,233	)		-			-			(100,233	)
Foreign currency cumulative translation adjustment		—			—			-			-			-			140,349			-			140,349
Net loss		—			—			-			-			-			-			(3,459,754	)		(3,459,754	)
Balance as of September 30, 2024		3,700		$	4			346,409		$	347		$	191,134,488		$	94,157		$	(184,995,827	)	$	6,233,169

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE three and nine months ended September 30, 2024

(UNAUDITED)

	*Par $0.001*
	*Preferred*			*Preferred*
	*Stock,*			*Stock,*												*Accumulated*
	*Series F*			*Series F*			*Par $0.001*			*Common*			*Additional*			*Other*						*Total*
	*Convertible*			*Convertible*			*Common*			*Stock*			*Paid-In*			*Comprehensive*			*Accumulated*			*Stockholders’*
	*Shares*			*Amount*			*Stock*			*Amount*			*Capital*			*Income (Loss)*			*Deficit*			*Equity*
Balance as of December 31, 2023		6,075		$	6			140,520,163		$	140,521		$	176,033,817		$	106,303		$	(165,583,091	)	$	10,697,556
Effect on existing shares due to Reverse Split on February 9, 2024		—			—			(133,493,864	)		(133,495	)		133,495			—			—			—
Effect on existing shares due to Reverse Split on October 14, 2024								(6,885,773	)		(6,886	)		6,886			—			—			—
Issuance of Series F Preferred Stock and warrants, net of issuance costs		4,100			4			—			—			4,024,996			—			—			4,025,000
Conversion of Preferred Stock, Series F Convertible to shares of Common Stock		(6,475	)		(6	)		187,009			187			(181	)		—			—			—
Conversion of Convertible Note principal to Common Stock		—			—			1,597			2			99,998			—			—			100,000
Dividends on Series F Preferred Stock		—			—			—			—			(158,862	)		—			—			(158,862	)
Exercise of warrants issued with Series F		—			—			16,590			17			497,684			—			—			497,701
Stock-based compensation expense		—			—			—			—			63,791			—			—			63,791
Issuance of Restricted Common Stock		—			—			687			1			(1	)		—			—			—
Reduction of Conversion Price of Promissory Note on Exchange Agreement		—			—			—			—			4,098,388			—			—			4,098,388
Deemed dividend on Series F Preferred Stock and Series F Warrants		—			—			—			—			6,707,687			—			(6,707,687	)		—
Issuance costs for sale of Preferred Stock		—			—			—			—			(373,210	)		—			—			(373,210	)
Foreign currency cumulative translation adjustment		—			—			—			—			—			(12,146	)		—			(12,146	)
Net loss		—			—			—			—			—			—			(12,705,049	)		(12,705,049	)
Balance as of September 30, 2024		3,700		$	4			346,409		$	347		$	191,134,488		$	94,157		$	(184,995,827	)	$	6,233,169

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	*For the Nine Months Ended*
	*September 30,*
	*2025*			*2024*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	3,164,500		$	(12,705,049	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Stock-based compensation		311,690			63,791
Depreciation and amortization		816,538			815,285
Loss on disposal of fixed assets		—			2,988
Interest added to convertible note payable		—			771,445
Interest expense for reduction in convertible note conversion price		—			4,098,388
Defined benefit plan obligation		—			(73,099	)
Amortization of debt discount and warrant modification		35,265			768,000
Gain on change in fair value of warrant liabilities		(8,511,000	)		—
Loss on debt extinguishment		125,242			—
Changes in operating assets and liabilities:
Accounts receivable, net		(951,818	)		(41,322	)
Inventories, net		(742,773	)		1,035,334
Prepaid expenses and other assets		345,081			151,675
Accounts payable		(2,100,335	)		366,162
Accrued expenses and other liabilities		265,001			745,348
Contract liabilities		(92,493	)		(240,646	)
Other		—			185,000
Net cash used in operating activities		(7,335,102	)		(4,056,700	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(38,338	)		(34,985	)
Proceeds of sales of asset		—			11,000
Capitalization of internal use software costs		—			(72,102	)
Net cash used in investing activities		(38,338	)		(96,087	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of Series B warrants		8,317,002			—
Proceeds from the sale of Series F preferred stock and warrants		8,800,000			4,025,000
Proceeds from the exercise of Series F warrants		3,804,318			497,701
Repayments on COVID loans		(254,885	)		(212,392	)
Payment to convertible note		—			(325,117	)
Proceeds (repayments) on other short-term loans		(135,000	)		(4,500	)
Issuance costs for sale of Series F preferred stock and warrants		(146,971	)		(373,210	)
Net cash provided by financing activities		20,384,464			3,607,482

Effects of foreign exchange rates on cash flows		3,538			(8,593	)

Net change in cash		13,014,562			(553,898	)
Cash at beginning of period		3,613,996			819,024
Cash at end of period	$	16,628,558		$	265,126

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest cash paid	$	35,265		$	852,141
Income taxes paid	$	—		$	—
NON-CASH OPERATING AND FINANCING ACTIVITIES:
Conversion of Preferred Stock Series F to Common Stock		11,501			9,350
Series F Warrants exchanged for shares of Common Stock		149			—
Issuance of vested restricted Common Stock		157			35
Amended Series B warrants reclassified to stockholders' equity	$	7,766,000		$	—
Conversion of Promissory Note and accrued interest to shares of Common Stock	$	1,425,606		$	—
Accrued dividends on Series F Preferred Stock	$	155,800		$	158,862
Deemed dividends on Series F Preferred Stock, Series B and F Warrants and warrant exchange	$	4,942,669		$	6,707,687
Accrued expense settled with Series B Warrant exercise	$	350,000		$	—

See accompanying notes to these unaudited condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 1 – Description of the Business and Basis of Presentation

Description of Business – AgEagle™ Aerial Systems Inc. and its wholly-owned subsidiaries (“AgEagle” or the “Company”, “we”, “our”), is actively engaged in designing and delivering best-in-class drones and sensors that solve important problems for its customers in a wide range of industry verticals, including energy/utilities, infrastructure, agriculture and government.

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 unmanned aerial systems (“UAS”) which drive revenue at the intersection of flight hardware, sensors and software for industries that include agriculture, military/defense, public safety, surveying/mapping and utilities/engineering, among others. AgEagle has also achieved numerous regulatory firsts, including earning governmental approvals for its commercial and tactical drones to fly Beyond Visual Line of Sight (“BVLOS”) and/or Operations Over People in the United States, Canada, Brazil and the European Union and being awarded Blue UAS certification from the Defense Innovation Unit of the U.S. Department of Defense.

The Company is currently headquartered in Wichita, Kansas, where we house our sensor 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. With over one million global flights, record-setting contracts, and industry-first regulatory approvals, EagleNXT is well positioned to expand its leadership in rapidly growing markets including defense, public safety, agriculture, and environmental monitoring and research.

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.

Reverse Stock Splits - On February 8, 2024, the Company filed a Certificate of Amendment to its Articles of Incorporation, as amended to date, effecting a 1-for-20 reverse stock split (the “February Reverse Stock Split”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”) (the “Reverse Split Amendment”). The Reverse Split Amendment was approved by the Board of the Directors of the Company (the “Board”) and became effective on February 9, 2024. On October 3, 2024, the Board approved another reverse stock split of the Company’s authorized, issued and outstanding shares of Common Stock, par value $0.001 per share, at a ratio of one (1) share of common stock for every fifty (50) shares of Common Stock (the “October Reverse Stock Split”). The Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effectuate the October Reverse Stock Split. The October Reverse Stock Split was effective on October 14, 2024. All share and per share amounts have been retrospectively adjusted for the effect of the February and October Reverse Stock Splits.

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 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, 2024, included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 31, 2025. The results for the three and nine months ended September 30, 2025 and 2024 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, and senseFly. All significant intercompany balances and transactions have been eliminated in consolidation.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(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 nine months ended September 30, 2025, the Company had net income of $3,164,500 due to non-cash warrant valuation gain of $8,511,000 and used cash in operating activities of $7,335,102. As of September 30, 2025, the Company has a working capital of $21,321,682, an accumulated deficit of $220,159,387, and a cash balance of approximately $16,629,000. As disclosed in Note 11, we closed on a Securities Purchase Agreement for the sale and issuance of up to 100,000 shares of Series G preferred stock with a state value of $1,000 on November 10, 2025. At the closing, we issued a total of 12,000 shares and received net proceeds of approximately $11,500,000.

We believe our current cash balance, working capital, Securities Purchase Agreement and the initial Series G closing, help alleviate previous doubt regarding our ability to continue as a going concern. As of September 30, 2025, our cash balance is sufficient enough to meet our financial obligations for at least the next twelve months from the date these condensed consolidated financial statements are issued and we have access to sufficient capital to implement our business strategy while meeting our financial obligations via the Securities Purchase Agreement.

Note 2 – Summary of Significant Accounting Policies

Risks and Uncertainties – Global economic challenges, including the impact of the war in Ukraine, 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 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, 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.

Accounts Receivable and Credit Policy – Trade receivables due from customers are uncollateralized customer obligations due under normal and customary trade terms. Trade receivables are stated at the amount billed to the customer. As of September 30, 2025, December 31, 2024, and January 1, 2024, the Company had an accounts receivable balance of approximately $2.5 million, $1.4 million and $2.1 million, respectively. The Company generally does not charge interest on overdue customer account balances. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

Allowance for Credit Losses - We establish allowances for credit losses on accounts receivable, under 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 September 30, 2025, December 31, 2024 and January 1, 2024, the Company had an allowance for credit losses balance of $0.22 million, $0.02 million and $0.16 million, respectively.

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 controls transfer 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 September 30, 2025, December 31, 2024, and January 1, 2024 we have $70,602, $148,054 and $226,316 of advanced customer payments presented as contract liabilities on the accompanying consolidated balance sheets, respectively. Contract liabilities are short term in nature and are expected to be recognized in the next fiscal year. During the nine months ended September 30, 2025, we recognized $96,781 of revenue that was deferred as a contract liability as of December 31, 2024.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(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, 2025, with the SEC on Form 10-K for the year ended December 31, 2024. 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, equivalents (if dilutive) related to warrants, options, and convertible instruments.

For the nine months ended September 30, 2025, the Company has excluded all common equivalent shares outstanding for restricted stock units (“RSUs”), warrants and options to purchase Common Stock and convertible instruments from the calculation of diluted net loss per share, because these securities are anti-dilutive for the three month period due to the net loss incurred. As of September 30, 2025, the Company had 106,797 unvested RSUs, 2,710,369 warrants and no options outstanding to purchase shares of Common Stock, and 2,143,977 of issuable shares upon the conversion of Series F preferred stock that have been excluded from diluted earnings per share as their inclusion would be anti-dilutive.

For the three and nine months ended September 30, 2024, the Company has excluded all common equivalent shares outstanding for restricted stock units (“RSUs”), options and warrants to purchase Common Stock and convertible instruments from the calculation of diluted net loss per share, because these securities are anti-dilutive for the periods presented which consisted of 7,325 unvested RSUs, 174,807 warrants, 55 options, 183,259 shares issuable upon the conversion of convertible preferred stock and 242,707 shares issuable upon the conversion of convertible debt.

For the three months ended September 30, 2025 and the three and nine months ended September 30, 2024, no adjustments were made to the numerator or denominator in our computation of diluted earnings per share due to the net loss incurred during these periods. Therefore, any such adjustments would have an anti-dilutive effect.

Net income (loss) per common share basic and dilutive is as follows for the three and nine months ended September 30, 2025 and 2024:

		Three Months Ended September 30,						Nine Months Ended September 30,
	*2025*			*2024*			*2025*			*2024*
Numerator:
Net income (loss)	$	(2,615,163	)	$	(3,459,754	)	$	3,164,500		$	(12,705,049	)
Accrued dividends on Series F Preferred Stock		(36,112	)		(47,879	)		(155,800	)		(158,862	)
Deemed dividends		(208,526	)		(1,450,232	)		(4,942,669	)		(6,707,687	)
Numerator for basic EPS - net income (loss) available to common stockholders		(2,859,801	)		(4,957,865	)		(1,933,969	)		(19,571,598	)

Effect of convertible securities and liability classified equity instrument:
Accrued dividends on Series F Preferred Stock		—			—			155,800			—
Interest expense on convertible note payable		—			—			45,150			—
Gain on change in fair value of warrant liabilities		—			—			(8,511,000	)		—
Numerator for diluted EPS - net loss available to common stockholders	$	(2,859,801	)	$	(4,957,865	)	$	(10,244,019	)	$	(19,571,598	)

Denominator:
Denominator for basic EPS - weighted average shares		32,171,261			309,350			19,888,046			240,309

Effect of dilutive securities:
Incremental shares for outstanding warrants		—			—			—			—
Convertible Series F Preferred Stock		—			—			2,143,977			—
Series A Warrants outstanding alternate cashless exercise		—			—			60,973			—
Unvested restricted stock units		—			—			106,797			—
Denominator for diluted EPS - weighted average shares		32,171,261			309,350			22,199,793			240,309

Net loss per common share - basic	$	(0.09	)	$	(16.03	)	$	(0.10	)	$	(81.44	)

Net loss per common share - diluted	$	(0.09	)	$	(16.03	)	$	(0.46	)	$	(81.44	)

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(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 impacts of the improvements to our disclosure.

In December 2023, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The ASU focuses on income tax disclosures around effective tax rates and cash income taxes paid. ASU 2023-09 requires public business entities to disclose, on an annual basis, a rate reconciliation presented in both dollars and percentages. The guidance requires the rate reconciliation to include specific categories and provides further guidance on disaggregation of those categories based on a quantitative threshold equal to 5% or more of the amount determined by multiplying pretax income (loss) from continuing operations by the applicable statutory rate. For entities reconciling to the U.S. statutory rate of 21%, this would generally require disclosing any reconciling items that impact the rate by 1.05% or more. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 (generally, calendar year 2025) and effective for all other business entities one year later. Entities should adopt this guidance on a prospective basis, though retrospective application is permitted. The adoption of ASU 2023-09 is expected to have a financial statement disclosure impact only and is not expected to have a material impact on the Company’s condensed consolidated financial statements.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 2 – Summary of Significant Accounting Policies – Continued

In November 2024, the FASB issued 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

Inventories, Net

As of September 30, 2025 and December 31, 2024, inventories, net consist of the following:

	*September 30, 2025*			*December 31, 2024*
Raw materials	$	3,901,573		$	3,488,703
Work in process		836,163			912,397
Finished goods		1,749,754			1,527,975
Gross inventories		6,487,490			5,929,075
Less: Provision for obsolescence		(500,376	)		(453,218	)
Inventories, net	$	5,987,114		$	5,475,857

Note 4 – 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 senseFly Acquisition Date, the fair value of the COVID Loan was $1,440,046 (“senseFly COVID Loans”). For the three and nine months ended September 30, 2025, senseFly S.A. made the required payments on the senseFly COVID Loans, including principal and accrued interest, aggregating approximately $92,115 and $254,885 respectively. As of September 30, 2025, the Company’s outstanding obligations under the senseFly COVID Loans are $309,282.

As of September 30, 2025, scheduled principal payments due under the senseFly COVID Loans are as follows:

Year ending December 31,
2025 (remaining)	$	—
2026		103,098
2027		206,184
Total	$	309,282

Note 5 – Convertible Note

The Company had a Convertible Note outstanding with Alpha Capital Anstalt (“Alpha”) which was due January 8, 2025 (the “Note”) and was considered in default. The Note was a result of an exchange agreement executed on February 8, 2024 in which the parties agreed to exchange the then outstanding promissory note into a convertible note. The Note accrued interest at 12% per annum and would increase to the lesser of 18% or the maximum rate permitted under applicable law upon an Event of Default as defined under the Note.

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 5 – Convertible Note – Continued

During the nine months ended September 30, 2025, the conversion price of the Note was reduced from $1.10 to $0.8294 pursuant to dilution protection provisions and due to the sale of Series F preferred stock and Series F warrants with a conversion price and exercise price of $0.8294 (see Note 8). The Company recognized a loss on debt extinguishment of $125,242 for the incremental value of the conversion feature due to the reduced conversion price. The incremental value was determined using a Black-Scholes pricing model pre and post modification and the following inputs: expected term 0.50 years, risk free rate of 4.27%, volatility of 203.53%, and dividend rate of 0.00%.

During the nine months ended September 30, 2024, the conversion price of the Note was reduced from $62.50 to $30.00 pursuant to dilution protection provisions and due to the reduction in warrant exercise prices to $30.00 to induce exercise (see Note 7). The Company recognized in interest expense the amount of $3,488,851 for the incremental value of the conversion feature due to the reduced conversion price. The incremental value was determined using a Black-Scholes pricing model pre and post modification and the following inputs: expected term 0.92 years, risk free rate of 4.83%, volatility of 89.60%, and dividend rate of 0.00%.

During the three months ended September 30, 2025, $8,612 accrued interest was converted into 10,383 shares of common stock at a conversion price of $.8294. During the nine months ended September 30, 2025 and 2024, Alpha converted $1,425,606 and $100,000 of outstanding principal and accrued interest into 1,490,495 and 1,597 shares of Common Stock, respectively.

As of September 30, 2025, the company no longer had outstanding principal and accrued interest on the Note. As of September 30,2025, and December 31, 2024, the outstanding principal and accrued interest were $1,333,333 and $47,123, respectively.

For the nine months ended September 30, 2025 and 2024, we recognized interest expense on the Note of $92,273 and $778,874, respectively.

Note 6 – Fair Value Measurements

We closed on an offering of units consisting of Common Stock, Series A and 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 (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 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 $7,766,000 from warrant liability to additional paid-in capital. See Note 8 for further disclosures regarding the Series A and B warrants.

The following tables present information about the Company’s derivative liabilities that are measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value:

	*Fair Value Measurements at September 30, 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 warrants	$	—	$	—	$	123,000	$	123,000
Total	$	—	$	—	$	123,000	$	123,000

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 6 – Fair Value Measurements – Continued

	*Fair Value Measurements at December 31, 2024*
	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 and B warrants	$	—	$	—	$	16,400,000	$	16,400,000
Total	$	—	$	—	$	16,400,000	$	16,400,000

The fair value of the warrants was determined by using a Black-Scholes pricing model and the following assumptions:

	*September 30, 2025*			*December 31, 2024*
Exercise price	$	—		$	1.9445
Stock price	$	2.01		$	3.47
Expected term		4.00			4.75
Volatility		137.15	%		133.00	%
Risk-free rate		3.74	%		4.28	%
Dividend yield		0.00	%		0.00	%
Probability of capital raise below exercise price		0.00	%		100	%

As of September 30, 2025 and December 31, 2024, 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 $123,000 and $16,400,000, respectively. Inherent in option pricing models are assumptions related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The Company estimates the volatility of its Common Stock based on historical volatility. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero. As of December 31, 2024, the probability of a capital raise below the Warrants’ current exercise price was a significant unobservable input based on management’s estimate factoring in the Company’s capital needs and the Company’s stock price, which is volatile. As of September 30, 2025, this estimate was no longer relevant as the Series A warrants include an alternate cashless exercise which allows the holder to exercise the warrant for no consideration and receive two shares of common stock. This settlement provision was given a 100% probability in the Black-Scholes computation as it is the most economically beneficial settlement scenario to the holder.

During the nine months ended September 30, 2025, we recognized a gain on the change in the fair value of the warrant liabilities of $8,511,000. A reconciliation of the warrant liabilities is below:

	*Amount*
Balance as of December 31, 2024	$	16,400,000
Amended Series B warrants reclassified to stockholders' equity		(7,766,000	)
Change in fair value of warrant liabilities		(8,511,000	)
Balance as of September 30, 2025	$	123,000

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AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit)

Preferred Series F Convertible Stock

Purchase History

On June 26, 2022, the Company entered into a Securities Purchase Agreement (the “Series F Agreement”) with 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 5% Preferred Convertible Stock (“Series F”), and authorized the sale and issuance of up to 35,000 shares of Series F with a stated value of $1,000 per share. Pursuant to the Series F Agreement, sales of Series F are accompanied by warrants equal to the number of issuable shares upon conversion of the Series F to Common Stock (the “Series F Warrants”).

Additional Investment Right

The Series F Agreement provides Alpha the right to purchase up to an additional $25,000,000 stated value of Series F, after their initial 10,000 Series F purchased on June 26, 2022, and accompanying warrants (the “Additional Investment Right” or “AIR”). Under the AIR, the Series F and Series F warrants are initially convertible and exercisable at a conversion and exercise price equal to the volume-weighted average price of the Company’s Common Stock for three trading days prior to the date Alpha gives notice to the Company that it will exercise its AIR. Under the terms of the AIR, conversion and exercise prices are subject to downward adjustment for any equity instrument or equity-linked instrument sold or granted at an effective price per share that is lower than the initial conversion and exercise price (“Down Round Provision”). See Note 8 for warrant related disclosures.

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 additionally fund, 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 6,500,000 shares of Common Stock which became effective by the Securities and Exchange Commission on April 25, 2025.

During the nine months ended September 30, 2025, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

	●	On February 7, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into 450,390 shares of Common Stock at an initial conversion price of $2.2203 and Series F Warrants to purchase up to 450,390 shares of Common Stock at an initial exercise price of $2.2203. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

	●	On March 17, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 415,420 shares of Common Stock at an initial conversion price of $1.2036 and Series F Warrants to purchase up to 415,420 shares of Common Stock at an initial exercise price of $1.2036. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “March 2025 Down Round Trigger”), including the Series F and Series F Warrants issued on February 7, 2025. See Down Round Triggers and Deemed Dividends in Note 7 below.

	●	On May 5, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 602,846 shares of Common Stock at an initial conversion price of $0.8294 and Series F Warrants to purchase up to 602,846 shares of Common Stock at an initial exercise price of $0.8294. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series B and F Warrants being triggered (the “May 2025 Down Round Trigger”). See Down Round Triggers and Deemed Dividends in Note 7 below.

●

On June 6, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into an aggregate of 418,831 shares of Common Stock at an initial conversion price of $1.1938 and Series F Warrants to purchase up to 418,831 shares of Common Stock at an initial exercise price of $1.1938. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On June 9, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 838,364 shares of Common Stock at an initial conversion price of $1.1928 and Series F Warrants to purchase up to 838,364 shares of Common Stock at an initial price of $1.1928. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On June 17, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 797,067 shares of Common Stock at an initial conversion price of $1.2546 and Series F Warrants to purchase up to 797,067 shares of Common Stock at an initial price of $1.2546. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On July 11, 2025, we issued 800 Series F to Alpha upon the exercise of their AIR and received $800,000 of gross proceeds. The Series F are initially convertible into an aggregate of 671,818 shares of Common Stock at an initial conversion price of $1.1908 and Series F Warrants to purchase up to 671,818 shares of Common Stock at an initial price of $1.1908. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and F Warrants being triggered (the “July 2025 Down Round Trigger”), specifically the issuances on June 6, 9, and 17, which reduced the conversion and exercise prices on all of these issuances down to $1.1908. See Down Round Triggers and Deemed Dividends in Note 7 below.

●

On July 18, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 714,286 shares of Common Stock at an initial conversion price of $1.400 and Series F Warrants to purchase up to 714,286 shares of Common Stock at an initial price of $1.400. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On July 21, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into an aggregate of 357,143 shares of Common Stock at an initial conversion price of $1.400 and Series F Warrants to purchase up to 357,143 shares of Common Stock at an initial price of $1.400. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On July 24, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into an aggregate of 456,621 shares of Common Stock at an initial conversion price of $2.19 and Series F Warrants to purchase up to 456,621 shares of Common Stock at an initial price of $2.19. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

●

On August 22, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into an aggregate of 275,497 shares of Common Stock at an initial conversion price of $1.8149 and Series F Warrants to purchase up to 275,497 shares of Common Stock at an initial price of $1.8149. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and F Warrants being triggered (the “August 2025 Down Round Trigger”), specifically the issuances on July 24, 2025 which reduced the conversion and exercise prices on these issuances down to $1.8149 from $2.19. See Down Round Triggers and Deemed Dividends in Note 7 below.

●

On September 19, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into an aggregate of 272,599 shares of Common Stock at an initial conversion price of $1.8342 and Series F Warrants to purchase up to 272,599 shares of Common Stock at an initial price of $1.8342. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

During the nine months ended September 30, 2024, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

● On March 6, 2024, we issued 1,000 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $950,000 of net proceeds after deducting equity issuance costs for legal fees of $50,000. The Series F were initially convertible into 16,588 shares of Common Stock at an initial conversion price of $60.29 and warrants to purchase up to 16,588 shares of Common Stock at an initial exercise price of $60.29 and exercisable immediately for a period of three years.

● On April 12, 2024, we issued 1,050 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $1,050,000 of net proceeds. The Series F were initially convertible into 28,378 shares of Common Stock at an initial conversion price of $37.00 and warrants to purchase up to 28,378 shares of Common Stock at an initial exercise price of $37.00 and exercisable immediately for a period of three years.

● On May 31, 2024, we issued 1,050 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $1,050,000 of net proceeds. The Series F were initially convertible into 32,659 shares of Common Stock at an initial conversion price of $32.15 and warrants to purchase up to 32,659 shares of Common Stock at an initial exercise price of $32.15 and exercisable immediately for a period of three years.

● On July 25, 2024, we issued 500 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $500,000 of net proceeds. The Series F were initially convertible into 21,598 shares of Common Stock at an initial conversion price of $23.15 and warrants to purchase up to 21,598 shares of Common Stock at an initial exercise price of $23.15 and exercisable immediately for a period of three years.

● On August 26, 2024, we issued 500 Series F to Alpha or assignees of Alpha upon the exercise of their AIR and received $500,000 of net proceeds. The Series F were initially convertible into 24,765 shares of Common Stock at an initial conversion price of $20.19 and warrants to purchase up to 24,765 shares of Common Stock at an initial exercise price of $20.19 and exercisable immediately for a period of three years.

As of December 31, 2024, the conversion and exercise prices on the above issuances were reduced to $1.10 in connection with the October 2024 Offering. The May 2025 Down Round Trigger further reduced the conversion and exercise price on all outstanding Series F and Series F warrants from the issuances above from $1.10 to $0.8294.

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.

A summary of the Series F activity for the nine months ended September 30, 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*			*September 30, 2025*		*September 30, 2025*			*September 30, 2025*
November 15, 2023		1,850	$	1,850,000	$	1,850,000	$	124.7000		150		—		—			150	$	0.8294	(ii)		180,854
March 6, 2024		1,000		1,000,000		950,000		60.2900		435		—		(335	)		100		0.8294	(ii)		120,569
April 12, 2024		1,050		1,050,000		1,050,000		37.0000		1,050		—		(1,050	)		—		0.8294			—
May 31, 2024		1,050		1,050,000		1,025,000		32.1500		1,050		—		(525	)		525		0.8294	(ii)		632,988
July 25, 2024		500		500,000		500,000		23.1500		500		—		(500	)		—		0.8294			—
August 27, 2024		500		500,000		500,000		20.1900		500		—		(500	)		—		0.8294			—
October 1, 2024 (i)		1,500		—		—		12.0000		1,500		—		(1,500	)		—		0.8294			—
December 18, 2024		750		750,000		750,000		5.2500		750		—		(750	)		—		0.8294			—
February 7, 2025		1,000		1,000,000		1,000,000		2.2203		—		1,000		(1,000	)		—		0.8294			—
March 17, 2025		500		500,000		500,000		1.2036		—		500		(500	)		—		0.8294			—
May 5, 2025		500		500,000		500,000		0.8294		—		500		(500	)		—		0.8294			—
June 6, 2025		500		500,000		500,000		1.1938		—		500		(500	)		—		1.1938			—
June 9, 2025		1,000		1,000,000		1,000,000		1.1928		—		1,000		(1,000	)		—		1.1928			—
June 17, 2025		1,000		1,000,000		1,000,000		1.2546		—		1,000		(1,000	)		—		1.2546			—
July 11, 2025		800		800,000		800,000		1.1908		—		800		(800	)		—		1.1908	(iii)		—
July 18, 2025		1,000		1,000,000		1,000,000		1.4000		—		1,000		(578	)		422		1.4000			301,428
July 21, 2025		500		500,000		500,000		1.4000		—		500		—			500		1.4000			357,143
July 24, 2025		1,000		1,000,000		1,000,000		2.1900		—		1,000		—			1,000		1.8149			550,995
August 22, 2025		500		500,000		500,000		1.8149		—		500		(500	)		—		1.8149	(iv)		—
September 19, 2025		500		500,000		500,000		1.8342		—		500		(500	)		—		1.8342			—
Total September 30, 2025		17,000	$	15,500,000	$	15,425,000	$	—		5,935		8,800		(12,038	)		2,697	$	—			2,143,977

(i) - These shares were issued as consideration for executing the Omnibus Agreement in connection with the October 2024 Offering.
(ii) - Reflects the conversion price after the May 2025 Down Round Trigger that was triggered with the Sale of Series F and Series F warrants on May 5, 2025.
(iii) - Reflects the conversion price after the July 2025 Down Round Trigger that was triggered with the Sale of Series F and Series F warrants on July 11, 2025.
(iv) - Reflects the conversion price after the August 2025 Down Round Trigger that was triggered with the Sale of Series F and Series F warrants on August 22, 2025.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

A summary of the Series F activity for the nine months ended September 30, 2024, 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, 2023*		*Issued*		*Converted*			*September 30, 2024*		*September 30, 2024*			*September 30, 2024*
June 26, 2022		10,000	$	10,000,000	$	9,920,000	$	620.0000		2,925				(2,925	)		—	$	20.1900	(i)		—
March 10, 2023		3,000		3,000,000		3,000,000		420.0000		3,000				(3,000	)		—		20.1900	(i)		—
November 15, 2023		1,850		1,850,000		1,850,000		124.7000		150				—			150		20.1900	(i)		7,429
March 6, 2024		1,000		1,000,000		950,000		60.2900		—		1,000		(550	)		450		20.1900	(i)		22,288
April 12, 2024		1,050		1,050,000		1,050,000		37.0000		—		1,050		—			1,050		20.1900	(i)		52,006
May 31, 2024		1,050		1,050,000		1,025,000		32.1500		—		1,050		—			1,050		20.1900	(i)		52,006
July 25, 2024		500		500,000		500,000		23.1500		—		500					500		20.1900	(i)		24,765
August 26, 2024		500		500,000		500,000		20.1900		—		500					500		20.1900			24,765
Total September 30, 2024		18,950	$	18,950,000	$	18,795,000	$	—		6,075		4,100		(6,475	)		3,700	$	—			183,259

(i) - Reflects the conversion price after the August 2024 Down Round Trigger that was triggered with the Sale of Series F and Series F warrants on August 27, 2024.

During the three months ended September 30, 2025 and 2024, the dividends accrued for the Series F were $36,111 and $47,879, respectively. During the nine months ended September 30, 2025 and 2024, the dividends accrued for series F were $155,800 and $158,862. As of September 30, 2025 and December 31, 2024, accrued dividends on the Series F total $902,466 and $746,666 which are included in accrued expenses on the unaudited consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the purchase date.

Common Stock Issuances

Conversions

During the three months ended September 30, 2025 and 2024, a total of 10,383 and 0 shares of Common Stock were issued for the conversion of $8,612 and $0 of outstanding accrued interest on a convertible note at an average conversion rate of $0.8294 and $0, respectively. During the nine months ended September 30, 2025 and 2024, a total of 1,490,495 and 1,597 shares of Common Stock were issued for the conversion of $1,425,606 and $100,000 of outstanding principal and accrued interest on a convertible note at an average conversion rate of $0.9573 and $62.6235, respectively (see Note 5).

During the three months ended September 30, 2025 and 2024, a total of 4,278 and 1,595 Series F were converted into a total of 3,228,799 and 69,635 shares of Common Stock, respectively. During the nine months ended September 30, 2025 and 2024, a total of 12,038 and 6,475 Series F were converted into a total of 11,501,461 and 187,009 shares of Common Stock, respectively.

Warrant Exercises

During the three months ended September 30, 2025, we issued 7,868,924 shares of Common Stock for the exercise of Series B warrants with an exercise price of $0.8294 and received aggregate cash proceeds of $6,526,485 During the nine months ended September 30, 2025, we issued 10,089,612 shares of Common Stock for the exercise of Series B warrants with exercise prices ranging from $0.8294 to $1.10 and received aggregate cash proceeds of $8,317,002. In connection with one of the Series B exercises, the Company agreed to credit $350,000 of the aggregate exercise price pursuant to a settlement reached with the Series B warrant holder over a dispute.

During the three and nine months ended September 30, 2025, we issued 3,622,918 shares of common stock for the exercise of Series F warrants with exercise prices ranging from $0.8294 to $1.4000 and received aggregate cash proceeds of $3,804,318. Further, during the three and nine months ended September 30, 2025 we issued 60,000 shares of common stock for the cashless exercise of 142,857 Series F warrants with an exercise price of $0.8294.

During the three and nine months ended September 30, 2025, we issued 63,017 shares of common stock for the alternate cashless exercise of Series A warrants with an exercise price of $1.9445.

During the three and nine months ended September 30, 2024, we issued 16,590 shares of common stock for the exercise of Series F warrants with an exercise price of $30.00 and received cash proceeds of $497,701.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

Warrant Exchange

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 as disclosed in Note 6. As consideration for the holder amending the contractual terms of the Series B warrants, we issued to the holder 88,908 shares of Common Stock for no consideration in exchange for 125,362 Series F warrants with a weighted average exercise price of $1.10 (see Note 8). We have included the fair value of these shares issued of $108,468, based on the market price of our stock on the date of the exchange, within stockholders' equity as a deemed dividend.

Restricted Common Stock

During the three months ended September 30, 2025 and 2024, we issued 78,000 and 0 shares of fully vested restricted Common Stock to certain employees and service providers. During the nine months ended September 30, 2025 and 2024, we issued 156,615 and 687 shares of fully vested restricted Common Stock to certain employees and service providers, respectively.

Down Round Triggers and Deemed Dividends

Below is a summary of the deemed dividends resulting from the March 2025, May 2025, July 2025 and August 2025 Down Round Triggers that reduced the conversion and exercise price of outstanding Series F Preferred Stock, Series F Warrants and Series B Warrants during the nine months ended September 30, 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		5,025	$	2.22 - 5.25	$	1.2000	$	976,637
May 5, 2025	May 2025 Down Round Trigger		1,045,402	$	1.10	$	0.8294		1,105,871
July 11, 2025	July 2025 Down Round Trigger		1,551,243	$	1.19 - 1.25	$	1.1908		55,202
August 22, 2025	August 2025 Down Round Trigger		456,621	$	2.19	$	1.8149		130,710
	Deemed Dividends on Series F Preferred Stock							$	2,268,420


*Deemed Dividends on Series F Warrants*
March 17, 2025	March 2025 Down Round Trigger		593,247	$	2.22 - 5.25	$	1.2000	$	79,695
May 5, 2025	May 2025 Down Round Trigger		593,247	$	1.10	$	0.8294		36,504
July 11, 2025	July 2025 Down Round Trigger		2,054,762	$	1.19 - 1.26	$	1.1908		6,555
August 22, 2025	August 2025 Down Round Trigger		456,621	$	2.19	$	1.8149		16,059
	Deemed Dividends on Series F Warrants							$	138,813


*Deemed Dividends on Series B Warrants (see Note 8)*
May 5, 2025	May 2025 Down Round Trigger		6,777,101	$	1.9445	$	0.8294		2,426,968
	Deemed Dividends on Series B Warrants							$	2,426,968
	Warrant Modification (i)							$	108,468
	Total Deemed Dividends Series F PS, Series B and F Warrants							$	4,942,669

(i) Reflects the fair value of 88,908 shares of common stock issued for no consideration in exchange for 125,362 Series F warrants in connection with the Series B Amendment (see Note 6).

Below is a summary of the deemed dividends resulting from the March and August 2024 Down Round Trigger that reduced the conversion and exercise price of outstanding Series F Preferred Stock and Series F Warrants during the nine months ended September 30, 2024:

*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 6, 2024	March 2024 Down Round Trigger		3,945	$	60.29 - 124.50	$	30.00	$	5,102,674
August 27, 2024	August 2024 Down Round Trigger		143,803	$	23.15 - 37.00	$	20.19	$	1,233,686
	Deemed Dividends on Series F Warrants							$	6,336,360


*Deemed Dividends on Series F Warrants*
March 6, 2024	March 2024 Down Round Trigger		54,695	$	60.29 - 124.50	$	30.00	$	147,030
August 27, 2024	August 2024 Down Round Trigger		137,334	$	23.15 - 37.00	$	20.19		216,546
	Deemed Dividends on Series F Warrants							$	363,576
	Total Deemed Dividends Series F PS and Series F Warrants							$	6,699,936
	Warrant Modification (ii)							$	7,751
	Total Deemed Dividends							$	6,707,687

(ii) On May 31, 2024, the Company agreed to reduce the exercise price of a warrant held by Alpha originally issued in June 2023 from $380.00 to $30.00. As result, the Company recorded a deemed dividend of $7,751 for the incremental value due to the modification

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

Deemed dividends are reflected as an increase to additional paid in capital and an increase to accumulated deficit and as an increase to 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 (loss).

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 (loss).

Restricted Stock Units (“RSUs”)

For the nine months ended September 30, 2025, a summary of RSU activity is as follows:

				*Weighted Average*
				*Grant Date*
	*Shares*			*Fair Value*
Outstanding as of December 31, 2024		7,293		$	324.64
Granted		258,730			1.40
Cancelled		(1,158	)		284.01
Vested		(147,825	)		3.28
Outstanding as of September 30, 2025		117,040			16.40
Vested as of September 30, 2025		10,243			166.50
Unvested as of September 30, 2025		106,797		$	2.01

For the nine months ended September 30, 2025, the aggregate fair value of RSU awards at the time of grant was $362,945 based on the market price of our Common Stock on the date of grant.

For the three and nine months ended September 30, 2025, the Company recognized $149,979 and $311,690 of stock-based compensation expense and had approximately $87,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately twelve months. As of September 30, 2025, 210 fully vested restricted Common Stock shares have not been issued and released.

For the nine months ended September 30, 2024, a summary of RSU activity is as follows:

				*Weighted Average*
				*Grant Date*
	*Shares*			*Fair Value*
Outstanding as of December 31, 2023		3,054		$	901.50
Granted		7,981			16.50
Cancelled		(43	)		504.50
Vested and released		(687	)		753.00
Outstanding as of September 30, 2024		10,306			233.00
Vested as of September 30, 2024		2,981			820.00
Unvested as of September 30, 2024		7,325		$	25.50

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

For the nine months ended September 30, 2024, the aggregate fair value of RSU awards at the time of vesting was $131,504.

For the three and nine months ended September 30, 2024, the Company recognized $16,675 and $47,749 of stock compensation expense, respectively, and had approximately $104,809 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately twenty-one months.

Stock Options

For the nine months ended September 30, 2025 a summary of the options activity is as follows:

								*Weighted Average*
								*Remaining*		*Aggregate*
				*Weighted Average*		*Weighted Average*		*Contractual Term*		*Intrinsic*
	*Shares*			*Exercise Price*		*Fair Value*		*(Years)*		*Value*
Outstanding as of December 31, 2024		56		$	5,342	$	2,874		1.23	$	—
Granted		—			—		—		—		—
Exercised		—			—		—		—		—
Expired/Forfeited		(56	)		5,342		2,874		—		—
Outstanding as of September 30, 2025		—		$	—	$	—		—	$	—
Exercisable as of September 30, 2025		—		$	—	$	—		—	$	—

As of September 30, 2025, the Company had no unrecognized compensation cost related to stock options.

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or as of September 30, 2025 (for outstanding options), less the applicable exercise price.

For the three and nine months ended September 30, 2025, there was no stock compensation expense related to the stock options.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 7 – Stockholders’ Equity (Deficit) – Continued

For the nine months ended September 30, 2024, a summary of the options activity is as follows:

								*Weighted Average*
								*Remaining*		*Aggregate*
				*Weighted Average*		*Weighted Average*		*Contractual Term*		*Intrinsic*
	*Shares*			*Exercise Price*		*Fair Value*		*(Years)*		*Value*
Outstanding as of December 31, 2023		2,505		$	2,000	$	1,080.00		1.49	$	2,294
Granted		—			—		—		—		—
Exercised		—			—		—		—		—
Expired/Forfeited		(2,450	)		1,956		1,062		—		—
Outstanding as of September 30, 2024		55		$	5,298	$	2,851		1.78	$	—
Exercisable as of September 30, 2024		55		$	5,298	$	2,851		1.78	$	—

For the three and nine months ended September 30, 2024, the Company recognized $0 and $16,042, respectively, of stock compensation expense.

Note 8 – Warrants

Equity Classified Warrants

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 8 – Warrants – Continued

During the nine months ended September 30, 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 450,390 shares of Common Stock at an initial exercise price of $2.2203. The Series F Warrants are immediately exercisable upon issuance and have a three-year term.

	●	On March 17, 2025, we issued Series F Warrants to purchase up to 415,420 shares of Common Stock at an initial exercise price of $1.2036. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “March 2025 Down Round Trigger”), including the Series F Warrants issued on February 7, 2025. See the deemed dividends resulting from the March 2025 Down Round Trigger above. See Down Round Triggers and Deemed Dividends in Note 7 above.

	●	On May 5, 2025, we issued Series F warrants to purchase up to 602,846 shares of Common Stock at an initial exercise price of $0.8294. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “May 2025 Down Round Trigger”). See Down Round Triggers and Deemed Dividends in Note 7 above.

	●	On June 6, 2025, we issued Series F warrants to purchase up to 418,831 shares of Common Stock at an initial conversion price of $1.1938. The Series F warrants are immediately exercisable upon issuance and have a three-year term.

	●	On June 9, 2025, we issued Series F warrants to purchase up to 838,364 shares of Common Stock at an initial conversion price of $1.1928. The Series F warrants are immediately exercisable upon issuance and have a three-year term.

	●	On June 17, 2025, we issued Series F warrants to purchase up to 797,067 shares of Common Stock at an initial conversion price of $1.2546. The Series F warrants are immediately exercisable upon issuance and have a three-year term.


	●	On July 11, 2025, we issued Series F warrants to purchase up to 671,818 shares of Common Stock at an initial exercise price of $1.1908. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “July 2025 Down Round Trigger”), specifically impacting the issuances on June 6, 9, and 17, resulting in these exercise prices of $1.1938, $1.1928, and $1.2546, respectively, being reduced to $1.1908. See summary of Down Round Triggers and Deemed Dividends in Note 7 above.

	●	On July 18 and 21, 2025, we issued Series F warrants to purchase up to 714,286 and 357,143, respectively, shares of Common Stock at an initial conversion price of $1.4000 The warrants are immediately exercisable upon issuance and have a three-year term.

	●	On July 24, 2025, we issued Series F warrants to purchase up to 456,621 shares of Common Stock at an initial conversion price of $2.1900. The warrants are immediately exercisable upon issuance and have a three-year term.

	●	On August 22, 2025, we issued Series F warrants to purchase 275,497 shares of Common Stock at an initial conversion price of $1.8149. The warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “August 2025 Down Round Trigger”), specifically impacting the issuance on July 24, 2025, resulting in the exercise price of $2.1900 being reduced to $1.8149. See summary of Down Round Triggers and Deemed Dividends in Note 7 above.

	●	On September 19, 2025, we issued Series F warrants to purchase 272,598 shares of Common Stock at an initial conversion price of $1.8342. The warrants are immediately exercisable upon issuance and have a three-year term.

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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, 2024		317,664		$	4.9600			2.60
Series F Issued – February 7, 2025		450,390			0.8294	*		—
Series F Issued – March 17, 2025		415,420			0.8294	*		—
Series F Issued - May 5, 2025		602,846			0.8294			—
Series F Issued - June 2025		2,054,262			1.2169	**		—
Series F Issued - July 11, 2025		671,818			1.1908			—
Series F Issued - July 18, 2025		714,286			1.4000			—
Series F Issued - July 21, 2025		357,143			1.4000			—
Series F Issued - July 24, 2025		456,621			1.8149	***		—
Series F Issued - August 22, 2025		275,497			1.8149			—
Series F Issued - September 19, 2025		272,599			1.8342			—
Series F warrants exchanged for common stock - April		(125,362	)		1.1000			—
Series F warrants exchanged for common stock - July		(142,857	)		0.8294			—
Exercise of Series F Warrants		(3,622,918	)		1.0400			—
Reclassification of Series B Warrants		7,881,884			0.8294	*		—
Exercise of Series B Warrants		(7,868,924	)		0.8294	*		—
Outstanding as of September 30, 2025		2,710,369		$	1.7296	*		2.81
Exercisable as of September 30, 2025		2,710,369		$	1.7296	*		2.81

*	Reflects the exercise price after the May 2025* Down Round Trigger on May 5, 2025 as described above.*
**	Reflects the exercise price after the July 2025* Down Round Trigger on July 11, 2025 as described above.*
***	Reflects the exercise price after the August 2025* Down Round Trigger on August 22, 2025 as described above.*

In connection with the execution of the Series B Amendment (see Note 6), the total Series B common stock warrants outstanding as of September 30, 2025, of 12,960 with an exercise price of $0.8294, are reflected as equity-classified warrants.

During the three and nine months ended September 30, 2025, 3,622,918 Series F warrants were exercised, and the Company issued 3,622,918 shares of common stock and received cash proceeds of $3,804,318. During the three months ended September 30, 2025, 7,868,924 Series B warrants were exercised and the Company issued 7,868,924 shares of common stock and received cash proceeds of $6,526,485. During the nine months ended September 30, 2025, 10,089,612 Series B warrants were exercised and the Company issued 10,089,612 shares of common stock and received cash proceeds of $8,317,002. During the nine months ended September 30, 2025, the Company agreed to credit $350,000 of the aggregate exercise price, at the time of exercise, associated with 267,849 Series B warrants, pursuant to a settlement reached with the Series B warrant holder over a dispute.

As of September 30, 2025, the intrinsic value of the warrants was $1,365,692 based on the market price of our stock and the warrant exercise price.

Liability Classified Warrants

The Series A and B warrants issued in October 2024, pursuant to an offering, have the following contractual terms.

Each Series A Warrant and B Warrant was immediately exercisable on the date of issuance and expires five 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 $1.20 and further adjusted down to $0.8294 with the March 2025 Down Round Trigger and May 2025 Down Round Triggers, respectively, and an additional 2,582,234 and 3,057,622, respectively warrants were issued in connection with the reduction so that the aggregate exercise price remains unchanged. During the nine months ended September 30, 2025, we recognized a deemed dividend of $4,942,669 which has been included on the statement of stockholders' equity as a reduction of accumulated deficit and as additional paid-in capital for the incremental value due to the May, July, and August 2025 Down Round Triggers. The March 2025 Down Round Trigger was included in the change in fair value of warrant liabilities as the Series B Warrants were liability classified until April 2, 2025 (see Note 6).

Table of Contents

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE nine months ended September 30, 2025 and 2024

(UNAUDITED)

Note 8 – Warrants – Continued

A summary of activity related to the Series A and B warrants, initially classified as liabilities, for the nine months ended September 30, 2025 is as follows:

						*Weighted Average*
				*Weighted Average*		*Remaining*
	*Shares*			*Exercise Price*		*Contractual Term*
Outstanding as of December 31, 2024		4,628,312		$	1.9445		4.75
Issued – March 2025 Down Round Trigger		2,582,234			1.2036		—
Issued – May 2025 Down Round Trigger		3,057,622			0.8294		—
Exercise of Series A Warrants		(63,017	)		1.9445		—
Exercise of Series B Warrants		(2,220,688	)		0.9639		—
Reclassification of Series B Warrants		(7,881,884	)		0.8294		—
Outstanding as of September 30, 2025		102,579		$	1.9445		4.00
Exercisable as of September 30, 2025		102,579		$	1.9445		4.00

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 two shares of common stock for each warrant exercised.&n

AgEagle Aerial Systems Inc. 10-Q