Item
1.01 Entry into a Material Definitive Agreement
Securities
Purchase Agreement
On
June 26, 2022, AgEagle Aerial Systems Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Agreement”)
with an institutional investor (the “Investor”) which is an existing shareholder of the Company. Pursuant to the terms of
the Agreement, the Board of Directors of the Company (the “Board”) authorized the sale of 10,000 shares of a newly designated
series of preferred stock, the Series F 5% Convertible Preferred Stock (the “Series F Convertible
Preferred”) and warrants to purchase up to 16,129,032 shares
of the Company’s Common Stock an exercise price of $0.96 per share (the “Warrants”), for gross proceeds of approximately
$15.5 million.
The Series F Convertible Preferred will be convertible into 16,129,032 shares of the Company’s
common stock (the “Conversion Shares,” and together with the shares underlying the Warrants, the “Underlying Shares”)
at a conversion price of $0.62 per share. The Warrants are not exercisable for the first six months after issuance and have a three-year
term from the exercise date. Upon exercise of the Warrants in full by the Investor, the Company would receive additional gross proceeds
of approximately $10 million. The Investor has the right, subject to certain conditions, including shareholder approval, to purchase
up to an additional $25,000,000 of shares of Series F Convertible Preferred and warrants. That option will be available for a period
of 18 months after shareholder approval at a purchase price equal to the volume-weighted average pricings (“VWAPs”) of the
common stock for three trading days prior to the date the Investor gives notice to the Company that it will exercise the option.
Until
December 30,
2022, upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock Equivalents for cash consideration,
Indebtedness or a combination of units thereof by the Company (a “Subsequent Financing”), the Investor shall have the right
to participate in up to 50% of the Subsequent Financing (the “Participating Maximum”) on the same terms, conditions and price
provided for in the Subsequent Financing.
Unless
shareholder approval has been obtained, neither the Company nor any subsidiary shall engage in a Subsequent Financing which would cause
any adjustment of the conversion price or the exercise price to the extent the Investor would not be permitted, to convert its outstanding
shares of Series F Convertible Preferred and exercise its Warrants in full, ignoring for
such purposes the other conversion or exercise limitations therein. Notwithstanding the foregoing, the Company and its subsidiaries are
not precluded from issuing securities in a Subsequent Financing that does not require shareholder approval, but such Subsequent Financings
are not excluded from the dilutive adjustment mechanisms of Series F Convertible Preferred
or the Warrant to the extent such are otherwise applicable.
The
Preferred Stock, the Warrant and the Underlying Shares were issued pursuant to a prospectus supplement dated June 26,
2022 and filed with the Securities and Exchange Commission (the “Commission”) on the same date and the prospectus included
in the Company’s Registration Statement on Form S-3 (Registration No. 333-252801), which was initially
filed with the Commission on February
5, 2021 and was declared effective on May 6, 2021.
Lock-up
Agreement
On
June 30,
2022, as a condition to the consummation of the Agreement, the Company entered into a Lock-up Agreement with the Investor and each officer
and director of the Company (collectively, the “Shareholders”), for the benefit of the Investor, with respect to the shares
beneficially owned the Shareholders. The restrictions on the disposition of the shares is for a period of 100 days from the date of the
closing of the Agreement (the “Restricted Period”), except for up to $250,000 worth of shares sold pursuant to a 10b5-1 trading
plan.