AgEagle Aerial Systems, Inc.

Good day, everyone, and thank you for participating in today's conference call. Joining us today from AgEagle is Chief Executive Officer Brandon Torres-Declette and Chief Financial Officer Nicole Fernandez-McGovern. Following Brandon's prepared remarks, both company officers will respond to questions that were previously submitted via email by analysts and investors. Before I introduce Brandon, I remind you that during today's call, including the question and answer session, statements that are not historical facts, including any projections, statements regarding future events or future financial performance, or statements of intent or belief are forward-looking statements and are covered by the safe harbor disclaimers contained in the company's public filings with the SEC. Actual outcomes and results may differ materially from what is expressed in or implied by these forward-looking statements. With that said, I'll turn the call over to AgEagle's CEO. Brandon, please go ahead.

Thank you, Tom. It's a pleasure to be joining you all on my first formal quarterly update as the CEO of AgEagle. Since my appointment by the board in May, I've been working closely with the leadership team to complete a top-to-bottom review of the company. The primary objective was to refine our strategic direction for the remainder of 2021, and more importantly, put us in an even stronger position to achieve success in 2022 and beyond. I traveled the country visiting key team members and facilities in Florida, Texas, Kansas, and Washington. Through this process, my team and I evaluated every aspect of the business, from people to product to process. We ran a competitive analysis of our current products. We spoke with our customers. took stock of our assets, and identified the unique skill sets of our team. Let me be clear. We intend to grow our business and preserve our leadership position by developing new drone sensors and software and capturing a significant share of the global drone market. In addition, we expect to accelerate our growth and expansion through strategic acquisitions. When it comes to our people, we've made key additions to our leadership team, including our new SVP of Sales and Business Development, Scott Loomish, and our new Director of Marketing, Andrea Sink-Mars. Scott is a seasoned senior executive with over 20 years of sales experience in enterprise software. He is a pioneer in the drone industry, formerly VP of Business Development at DroneDeploy, and most recently, CEO of Hangar Technology, which was acquired by AirMap. Andrea has led marketing teams for the past 15 years, developing and implementing innovative strategies to drive revenue. Moving forward, we intend to nearly double the size of our team bringing in proven talent. We expect AgEagle to be comprised of vibrant and, most importantly, diverse individuals that are passionate about developing new drones, sensors, and software. Our product portfolio is strong. At Micasense, we intend to continue to drive sensor sales through new product launches, which you should begin to see this year. You should also see new Micasense sensors targeted at the energy and construction verticals with bundled software from measure, that should further enhance the value proposition of these unique products. Measure is rapidly developing new capabilities like the integration of ground control with the Parrot Anafi drone platform. Our customers can also expect to see the accelerated deployment of new software features. Measure recently gained third-party validation of its software platform by achieving SOC 2 compliance. The team ran an extensive six-month audit of our code, team, and procedures with our audit partner, Linford & Company. This designation affirms that our practices and procedures meet the rigorous SOC 2 standards for security, availability, processing integrity, privacy, and confidentiality. It is a pivotal acknowledgment that confirms we have a secure product, and in the age of cyber attacks, it's an increasingly important recognition for enterprises and government agencies using drones to collect sensitive data. I'm incredibly proud of the work our team did to ensure we met and will continuously meet these standards, providing a high level of security for our customers. While we have the utmost confidence in the standalone growth potential of both Micasense and Measure, we believe the largest growth driver in the near term will come from the tight integration of Micasense and Measure products to ensure efficient, high-quality data capture for our customers. Our decision to further integrate our Micasense sensor and Measure software products is partly driven by the knowledge and experience our Measure team gained when we owned and operated one of the largest drone service providers in the nation. completing tens of thousands of commercial flights for a broad range of iconic enterprise customers. We know how important it is to capture data right the first time and why that is easier when you have a complete solution available. Ground control enables mission planning, fleet management compliance, enables autonomous flight, and we expect you to work seamlessly with our MicroSense sensor products, creating the most efficient turnkey drone data solution available. Finally, in Q2, we teamed with investment banking firms Stifel and Raymond James to implement an at-the-market offering, which has proven very successful thus far. We believe our strong cash position will enable us to execute on our strategy to provide the full stack, drone, sensor, and software solution across the energy, construction, agriculture, and government verticals. This means we should have the ability to invest in research and development, hire new team members, and pursue strategic acquisitions. The drone industry today remains fragmented with unique and valuable technology across a broad spectrum of use cases that can be highly beneficial to our overall strategic vision for AgEco. While I'm not in a position to speak to any of the acquisition targets we are currently evaluating, there are several potential opportunities that we believe will round out our full stack solution and accelerate growth. We will adopt the same discipline approach we have in the past, making sure any opportunity we consider has immediate near-term benefits based on the business fundamentals and aligns with our overall strategic vision of providing a full-stack drone solution. As we ensure all areas of our organization are functioning together cohesively and efficiently to drive growth, it is crucial that we properly utilize our assets to their maximum potential. We are looking at several products and services that we've historically offered to ensure it makes sense to continue dedicating resources to those areas of the business. In addition, we are currently in the process of evaluating consolidation opportunities within our footprint of facilities and office space across the United States to drive operational cost savings. Before I have Nicole review our company's Q2 financial highlights for you, one other key accomplishment of note during the quarter was having Agigo named to the Russell 2000 Index. The Russell 2000 is widely recognized as a bellwether of the U.S. economy because it shines a light on smaller, high-growth U.S. companies. we are very proud to be among the number of small-cap companies that have earned this important distinction. Our second quarter results embolden our resolve to building enduring long-term shareholder value by remaining focused on research and development, building internal talent and collaboration across brands, and driving the implementation of growth strategies aimed at bringing innovative new solutions to global enterprises, delivering high-performance, full-stack drone solutions to a broad range of industries, including energy, construction, agriculture, and government. It is our firm belief that AgU can positively disrupt and help transform how businesses within these verticals operate. Now, I'd like to turn it over to our CFO, Nicole. To conclude the webcast, we'll answer questions that have been submitted over the past several weeks. Nicole, over to you.

Thanks, Brandon, and thank you all for joining us this morning. This afternoon, we will file our 10-Q with the SEC, which will be accessible on the SEC.gov. and on the investor relations section of the AgEagle website. Additionally, this morning, we announced some key highlights from the report, which I'd like to recap here. For the three months ended June 30th, 2021, revenue increased significantly to approximately 1.9 million from approximately 16,000 in the prior year period. This significant increase was largely due to new revenue contributions from Micasense and Measure, which were acquired in January and April of this year, respectively. Drilling deeper into the revenue results, sales of MicaSense sensors totaled approximately $1.7 million. Drone manufacturing revenue totaled approximately $60,000, and software subscriptions accounted for approximately $173,000 of our total sales. Our net loss totaled $4.7 million, or $0.777 loss per share, for the three months ended June 30, 2021. compared to a net loss of $10.3 million or $0.31 loss per share for the same three months in the previous year. It's important to note that the net loss for the three months ended June 30, 2020, were negatively impacted by non-cash charges of approximately $9.1 million associated with the company's financing activities in that quarter. Now, looking at the results, For the six months ended June 30th, 2021, revenues increased nearly 800% to $3.64 million when compared to $408,000 in the prior year's first six-month period. This significant sales growth was largely due to new revenue contributions from Micasense and Measure acquisitions. Our revenues were also positively impacted by new and expanding revenue stemming from the licensing of our hemp overview software solution by state departments of agriculture in Iowa and Florida. Drilling deeper into the six-month revenue results, sales of MicaSense sensors totaled $3.38 million, drone and custom manufacturing revenue totaled $60,000, and software subscriptions accounted for approximately $195,000 of our total sales. Now, moving to the bottom line, despite higher costs and expenses related to the acquisition and integration of the Micasense and Measure businesses, AgEagle's net loss declined to $7.6 million, or $0.21 loss per share, for the six months ended June 30, 2021, as compared to a net loss of $10.77 million, or $0.44 loss per share, for the same six-month period in 2020. Our cash position as of June 30, 2021, was $39.2 million, up from approximately $20.23.9 million as of the end of 2020. As Brandon briefly mentioned, in late May of this year, we entered into a sales agreement to sell up to $100 million in common stock through our investment banking partners, Stiefel and Raymond James. During the three months into 2021, capital raised in at-the-market transactions with Stiefel and Raymond James totaled $28.6 million at stock prices ranging from $0.052 to $0.063 per share. I'm pleased to share that our strengthened balance sheet and increased financial flexibility. AgEagle is well-positioned to drive growth for our business and value for our shareholders in the quarters ahead. With that, let's move to questions that we have received from investors, kicking it off with our first question. This is a question we've received many times over the past two years, but can you provide any update on the e-commerce client or go-forward plans with the contract? Brandon?

Thanks, Nicole. I certainly understand this question remains top of mind for investors. Yes, we work with a high-profile e-commerce customer. While I'm not at liberty to disclose the details of our work, I would like to provide our views on this relationship going forward. This is an important contract for AgEagle and the company's early days as a public entity, bolstering revenue and serving as an important proof of concept. However, the regulatory environment here and abroad simply does not support this particular application at scale. Since it was a proof of concept, we no longer view it as material to our business. Moving forward, we are focused on those applications and industry verticals to generate revenue at scale. We are diligently focused on driving revenue growth through offering a full-stack drone solution applicable for a variety of industries across the globe. We are dedicating our resources towards that strategic plan accordingly.

Great. Next question. Can you provide an update on your relationship with Valkyrie?

Sure. As part of my strategic evaluation of AgEagle, I was able to reassess all the companies' relationships and determine which ones aligned with our near-term and mid-term growth strategies. While we were pleased with the contract manufacturing services we provided, we decided to terminate this relationship as we determined it was not accretive to our growth strategy and that our resources would be better allocated elsewhere.

Next question. What is the status of the shareholder lawsuits that you've been dealing with over the past few weeks?

As you may have seen in the press release we put out last week, we're proud to announce that all of the lawsuits have been dismissed. As we've communicated from day one, The claims from these short sellers were frivolous, inaccurate, and misleading, and were clearly a blatant attempt to manipulate AgEagle's stock price. We're all really happy about this outcome and look forward to putting this matter to rest and don't expect further lawsuits on any of these matters. Wonderful.

Any update on Hemp Overview and progress with additional states' organizations?

We are eager to continue to grow the Hemp Overview platform and this service for our existing customers. The hemp industry will continue to grow globally, and our software platform is going to take advantage of this growth. Florida and Iowa, in my opinion, are only the start. The Florida Department of Agriculture and Consumer Services expanding its licensing with Hemp Overview enables them to leverage the full breadth and power of the Hemp Overview platform to manage hemp farm registration, real-time best management practices, oversight and enforcement, and reporting functions. The Florida Department of Agriculture and Consumer Services contracted AgEagle to develop a custom registration software platform to enhance communications, licensing, and general compliance relating to the oversight and protection of more than 500 endangered and commercially exploited wild plants native to the state of Florida.

So this is our last question for the day. Is AgEagle currently working on new drone models that you can provide any details on?

Great question, Nicole. In the near and mid-term, we are focused on providing our customers with a full stack, including drone, sensor, and software across a number of verticals I mentioned earlier, including energy, agriculture, construction, and government. A launch of a new drone airframe may come through our work of our talented team or from an acquisition. So this concludes our Q&A session. Before I turn the call and webcast back over to the operator, I want to reiterate how excited I am to be at the helm of AgEagle as we have ample growth opportunities in front of us and a strong leadership position within the drone industry to build from. Additionally, I'd like to thank all of the employees, customers, partners, and shareholders that I've gotten to know in my first couple of months as CEO, and I look forward to sharing our success with all of you. I have the utmost confidence in this company, and I believe we now have the necessary plan in place to capitalize on both the near and long-term opportunities within the global drone industry. As always, we will continue to provide all pertinent and material updates via press release to the market to share our wins and progress along the way. We have a strong foundation in place, and this is only just the beginning. Let's go. Thanks again for joining our webcast today. Operator, back to you.

Thank you, sir. And ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.