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Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements

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 due to variability in the ultimate settlement of the Warrants caused by various settlement provisions embedded within the Warrants. Therefore, these Warrants meet the definition of a derivative liability requiring the Warrants to be reported at fair value upon issuance and subsequently at each reporting period.

 

The following tables present information about the Company’s derivative liabilities that are measured at fair value on a recurring basis as of March 31, 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 March 31, 2025 
   Quoted Prices in Active Markets for Identical Assets   Other Observable Inputs   Significant Unobservable Inputs     
   (Level 1)   (Level 2)   (Level 3)   Total 
Derivative liabilities - warrants  $—   $—   $8,620,000   $8,620,000 
Total  $—   $—   $8,620,000   $8,620,000 

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(UNAUDITED)

 

                 
   Fair Value Measurements at December 31, 2024 
   Quoted Prices in Active Markets for Identical Assets   Other Observable Inputs   Significant Unobservable Inputs     
   (Level 1)   (Level 2)   (Level 3)   Total 
Derivative liabilities - warrants  $—   $—   $16,400,000   $16,400,000 
Total  $—   $—   $16,400,000   $16,400,000 

 

Note 6 – Fair Value Measurements – Continued

 

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

 

   March 31, 2025   December 31, 2024 
Exercise price  $1.2036   $1.9445 
Stock price  $1.29   $3.47 
Expected term   4.50    4.75 
Volatility   123.00%   133.00%
Risk-free rate   3.86%   4.28%
Dividend yield   0.00%   0.00%
Probability of capital raise below exercise price   100%   100%

 

As of March 31, 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 approximately $8.6 and $16.4 million, respectively. Inherent in a 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. The probability of a capital raise below the Warrants’ current exercise price is 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. Fluctuations to this estimate could significantly impact the fair value.

 

During the three months ended March 31, 2025, we recognized a gain on the change in the fair value of the warrant liabilities of $7,780,000. A reconciliation of the warrant liabilities is below:

 

   Amount 
Balance as of December 31, 2024  $16,400,000 
Warrant liabilities at issuance   — 
Change in fair value of warrant liabilities   (7,780,000)
Balance as of March 31, 2025  $8,620,000 

 

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(UNAUDITED)