EnerJex Resources, Inc. (Form: 8-K, Received: 10/20/2017 07:33:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 19, 2017

EnerJex Resources, Inc.

(Exact name of registrant as specified in its charter)

Nevada

001-36492

88-0422242

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

		4040 Broadway, Suite 425, San Antonio, Texas		78209
		(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (210) 592-1670

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ¨

Item 1.01.

Entry Into a Material Definitive Agreement.

MERGER

Merger Agreement

On October 19, 2017, EnerJex Resources, Inc., a Nevada corporation (the “Company” or “EnerJex”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with AgEagle Aerial Systems, Inc., a Nevada corporation (“AgEagle”), which designs, develops, produces, and distributes technologically advanced small unmanned aerial vehicles (UAV or drones) that are supplied to the agriculture industry, and AgEagle Merger Sub, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will be merged with and into AgEagle, Merger Sub will cease to exist and AgEagle will survive as a wholly-owned subsidiary of the Company (the “Merger”). The respective boards of directors of EnerJex and AgEagle have approved the Merger Agreement and the transactions contemplated thereby.

At the effective time of the Merger (the “Effective Time”), the shares of AgEagle capital stock will be automatically converted into the right to receive that number of shares of Company common stock as determined pursuant to the exchange ratio described in the Merger Agreement (the “Exchange Ratio”). In addition, at the Effective Time: (i) all outstanding options and warrants to purchase shares of AgEagle common stock will be assumed by the Company and converted into options and warrants to purchase shares of Company common stock. No fractional shares of Company common stock will be issued in the Merger but will be rounded to the nearest whole share. Following the consummation of the Merger, former stockholders of AgEagle with respect to the Merger are expected to own 85% of the combined company (inclusive of the AgEagle assumed stock options and warrants), and current common and Series A Preferred stockholders of the Company are expected to own 15% of the combined company, excluding shares of common stock that may be issued in connection with the conversion of the Company’s Series B Preferred Stock and Series C Preferred Stock, and also not including any additional shares which may be issued in connection with the Company’s closing obligation to provide up to $4 million in new working capital and the elimination of all liabilities currently on the Company’s balance sheet.

In connection with the Merger, the Company will also file a proxy statement seeking stockholder approval to: (a) amend the terms of its Series A Preferred Stock (as discussed below); (b) approve the issuance of the Company’s shares in connection with the Merger to the AgEagle shareholders and new investors, in excess of 19.9% of the Company’s total issued and outstanding shares of common stock; (c) approve the issuance of shares to current Company management and directors in lieu of deferred salary and fees, a majority of which will be held in escrow to secure the Company’s indemnity obligations under the Merger Agreement; and (d) change the name of the Company to “AgEagle Aerial Resources, Inc.”

The Merger Agreement provides that, immediately following the Effective Time, the existing board of directors and officers of the Company will resign and new directors and officers will be appointed by AgEagle.

The Company intends to dispose of its principal assets, consisting primarily of its Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated the Company does not have a present intention to dispose of the above described assets.

The completion of the Merger is subject to various customary conditions, including, among other things: (a) the approval of the stockholders of the Company and AgEagle; (b) the accuracy of the representations and warranties made by each of the Company and AgEagle and the compliance by each of the Company and AgEagle with their respective obligations under the Merger Agreement; (c) approval of the stockholders of the Company for the issuance of its common stock and any other securities (x) to the AgEagle stockholders in connection with the Merger and (y) in connection with the financing transactions contemplated by the Merger Agreement; (d) approval for the listing of shares of the Company’s common stock to be issued in the Merger and other related transactions on the NYSE American; and (e) all of the Company’s assets as disclosed shall have been sold, transferred or otherwise disposed of and the corresponding debt and liabilities shall have been extinguished. The Company’s existing cash resources are insufficient to satisfy all of its outstanding liabilities. Accordingly, in order to satisfy the condition and consummate the Merger, the Company will be required to raise additional funding prior to the closing of the Merger, the failure of which could result in the Company’s failure to consummate the Merger Agreement.

The Merger Agreement contains customary representations, warranties and covenants, including covenants obligating each of the Company and AgEagle to continue to conduct its respective business in the ordinary course, to provide reasonable access to each other’s information and to use reasonable best efforts to cooperate and coordinate to make any filings or submissions that are required to be made under any applicable laws or requested to be made by any government authority in connection with the Merger. The Merger Agreement also contains a customary “no solicitation” provision pursuant to which, prior to the completion of the Merger, neither the Company nor AgEagle may solicit or engage in discussions with any third party regarding another acquisition proposal unless, in the Company’s case, it has received an unsolicited, bona fide written proposal that the recipient’s board of directors determines is or would reasonably be expected to result in a superior proposal. The Company has paid AgEagle a $50,000 non-refundable fee at the signing of the Merger Agreement. The Merger Agreement contains certain termination rights in favor of each of the Company and AgEagle.

In addition, the Merger Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of breaches of representations and warranties contained therein. The aggregate maximum indemnification obligation of any indemnifying party for damages with respect to breaches of representations and warranties set forth in the Merger Agreement shall not exceed, in the aggregate, $350,000, other than fraud, intentional misrepresentation or willful breach. An indemnifying party shall satisfy its indemnification obligations with shares of Company common stock equal to the aggregate amount of losses of the indemnified party, calculated based upon the greater of (i) the value of the Company common stock as of the closing of the Merger; and (ii) the average closing price of the Company common stock on the NYSE American for the five trading days immediately prior to the date such a claim is made. The Company has agreed to deposit an aggregate of 1,215,278 shares of common stock to be issued to current officers and directors of the Company in lieu of deferred salary and fees into escrow to secure its indemnification obligations, the issuance of such shares requiring the approval of the Company’s common stockholders.

The foregoing summary of the Merger Agreement and the Merger does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1 and is incorporated by reference herein.

The Merger Agreement has been provided pursuant to applicable rules and regulations of the SEC in order to provide investors and stockholders with information regarding its terms. However, it is not intended to provide any other factual information about the Company, AgEagle, their respective subsidiaries and affiliates or any other party. In particular, the representations, warranties and covenants contained in the Merger Agreement have been made only for the purpose of the Merger Agreement and, as such, are intended solely for the benefit of the parties to the Merger Agreement. In many cases, the representations, warranties and covenants are subject to limitations agreed upon by the parties and are qualified by certain disclosures exchanged by the parties in connection with the execution of the Merger Agreement. Furthermore, many of the representations and warranties in the Merger Agreement are the result of a negotiated allocation of contractual risk among the parties and, taken in isolation, do not necessarily reflect facts about the Company, AgEagle, their respective subsidiaries and affiliates or any other party. Likewise, any reference to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement and these changes may not be fully reflected in the Company’s public disclosures.

As a result of the foregoing, investors are encouraged not to rely on the representations, warranties and covenants contained in the Merger Agreement, or on any descriptions thereof, as accurate characterizations of the state of facts or condition of the company or any other party. Investors and stockholders are likewise cautioned that they are not third-party beneficiaries under the Merger Agreement and do not have any direct rights or remedies pursuant to the Merger Agreement.

Voting Agreement

On October 19, 2017, concurrently with the execution of the Merger Agreement, a principal stockholder of AgEagle (the “Key AgEagle Stockholder”) entered into a voting agreement in favor of EnerJex (the “EnerJex Voting Agreement”). Pursuant to the EnerJex Voting Agreement, the Key AgEagle Stockholder has agreed, among other things, to vote all shares of capital stock of AgEagle beneficially owned by him in favor of the Merger and the adoption of the Merger Agreement and the approval of the transactions contemplated by the Merger Agreement, and any actions required in furtherance thereof. The AgEagle Voting Agreement will terminate upon the earliest to occur of: (i) the termination of the Merger Agreement in accordance with its terms; or (ii) the date on which the Merger becomes effective.

The foregoing summary of the EnerJex Voting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the form of EnerJex Voting Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated by reference herein.

Preferred Stock Amendment

In connection with, and as a condition to the closing of the Merger, the Company is seeking the consent of the holder of its Series A Preferred Stock (“Series A Preferred Stock”) to amend the terms thereof to: (i) allow the Company to pay all accrued but unpaid dividends up to September 30, 2017 in additional shares Series A Preferred Stock based on the value of the liquidation preference thereof, (ii) eliminate the right of the Series A Preferred Stock holders to receive any dividends accruing after September 30, 2017, and (iii) convert each share of Series A Preferred Stock into 10 shares of Company common stock. An affirmative vote of 66.7% of all shares of Series A Preferred Stock voting as a class as of the record date of the proxy statement is required to amend the terms of the Certificate of Designation to provide for these changes, as required under the Merger Agreement.

As of September 30, 2017, the Series A Preferred Stock had accrued a total of $6,039,972 in accrued but unpaid dividends, which would result in an additional 241,599 shares of Series A Preferred Stock being issued by the Company to satisfy these accrued dividends. As of the date of this Form 8-K, there were 928,238 shares of Series A Preferred Stock issued and outstanding; however, the Company is authorized under the Certificate of Designation to issue up to 2,000,000 shares of Series A Preferred Stock, and the Board of Directors has approved the issuance of additional shares of Series A Preferred Stock in the event the Company requires it to raise additional capital required for closing the Merger Agreement.

Risk Factors

The Merger, including the possibility that the Merger may not be completed, poses a number of risks to each company and its respective stockholders, including the following:

the issuance of shares of EnerJex common stock to AgEagle shareholders in connection with the Merger will substantially dilute the voting power of current EnerJex stockholders;

EnerJex stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger;

the lack of a public market for AgEagle shares makes it difficult to determine the fair market value of AgEagle, and the Merger consideration to be issued to AgEagle shareholders may exceed the actual value of AgEagle;

EnerJex stockholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Merger;

the announcement and pendency of the Merger could have an adverse effect on EnerJex’s or AgEagle’s financial condition or business prospects;

failure to complete the Merger may adversely affect EnerJex’s and AgEagle’s financial results, future business and operations, as well as the market price of EnerJex common stock;

some of the directors and executive officers of EnerJex and AgEagle have interests in the Merger that are different from, or in addition to, those of the other EnerJex stockholders and AgEagle shareholders;

EnerJex and AgEagle will incur substantial transaction-related costs in connection with the Merger;

if EnerJex fails to continue to meet all applicable NYSE American requirements and the NYSE American determines to delist EnerJex common stock, the delisting would impair EnerJex’s ability to complete the Merger;

failure to complete the Merger may result in EnerJex having insufficient funds to satisfy its existing trade payables and other liabilities, and may result in its petitioning for bankruptcy court protection; and

even if the Merger is consummated, EnerJex and AgEagle may fail to realize the anticipated benefits of the Merger.

In addition, EnerJex, AgEagle, and the combined company are subject to various risks associated with their businesses. These risks will be discussed in greater detail under the section entitled “Risk Factors” in the proxy statement. EnerJex encourages you to read and consider all of these risks carefully.

PRO-FORMA CAPITALIZATION TABLE

The following table provides the ownership of the common stock of the combined Company following the closing of the Merger, assuming the conversion of all convertible securities, as determined as of the date of the filing of this Form 8-K. The following table does not provide information on any new shares that may need to be issued in connection with a capital funding in an amount up to $4,000,000, which is a condition to closing under the Merger Agreement, and for which terms have not yet been determined by the Company or any investor.

	Number of Shares of Common Stock	% at Closing	% Fully Diluted (9)
EnerJex Shareholders
Common Stock Holders (1)	14,498,753	8.3%	7.9%
Series A Preferred Stock Holders (2)	11,798,369	6.7%	6.4%
Series B Preferred Stock Holders (3)	5,879,941	-	3.2%
Series C Preferred Stock Holders (4)	999,990	-	0.5%
EnerJex stockholders as a group	34,177,043	15%	18.2%

AgEagle Shareholders
Bret Chilcott (5)	87,488,853	49.9	48.0%
Raven Industries	4,999,363	2.9	2.7%
Greenblock Capital (6)	12,498,408	7.1	6.9%
Convertible Debt Holders (7)	16,906,356	9.6	9.3%
Stock Options and Warrants (8)	27,124,044	15.5	14.9%
AgEagle stockholders as a group	149,017,024	85%	81.8%

(1)

Common stock of the Company is inclusive of: 10,321,397 shares of common stock currently outstanding; 1,771,428 shares of common stock underlying warrants; 157,664 shares of common stock underlying employee options; and 2,248,264 shares of common stock issuable to the officers and directors of the Company in lieu of deferred salary and fees, and of which 1,215,278 will be held in escrow under the indemnity provisions of the Merger Agreement. Common stock excludes any shares of Series B Preferred Stock which may be converted into to common stock prior to the closing of the Merger.

(2)

Series A Preferred Stock includes the conversion of 938,238 plus 241,599 additional preferred shares payable in satisfaction of accrued dividends as of September 30, 2017, convertible into a total of 11,798,369 shares of common stock, assuming such amendment to the Certificate of Designation is approved by two-thirds of the Series A Preferred Stock holders. Such number excludes up to 1,061,762 additional shares of Series A Preferred Stock which the Company’s Board is authorized to issue, which would be convertible into 10,617,620 shares of common stock.

(3)

Series B Preferred Stock includes the conversion of 1,704 preferred shares into 5,879,941 shares of common stock. Per the terms of the Merger Agreement, such shares are not required, but have the right, to be converted into common shares prior to closing.

(4)

Series C Preferred Stock includes the conversion of 300 preferred shares into 999,990 shares of common stock. Per the terms of the Merger Agreement, such shares are not required, but have the right, to be converted into shares of common stock prior to closing.

(5)

Mr. Chilcott is the Chairman & CEO of AgEagle.

(6)

Excludes 125,000 shares of common stock that are underlying the stock options and warrants set forth below, which would convert into options to acquire 3,124,602 shares of the Company after the Merger closing.

(7)

Shares convertible from promissory notes in the aggregate amount of $935,000, held by Alpha Capital Anstalt (“Alpha”) and an affiliate of Alpha.

(8)

Stock options include 14,000,716 shares underlying options issued to directors and key employees of AgEagle, which vest 50% six months after closing and the balance 12 months after closing; 3,124,602 shares underlying options issued to Greenblock Capital which vest 50% six months after closing and the balance 12 months after closing; and 9,998,726 shares underlying warrants issued to one of AgEagle’s lenders. The options have an exercise of $0.10 per share and the warrants convert at $2.50 per share of AgEagle common stock.

(9)

Fully diluted shares include the conversion of Series B and C Preferred Shares, which have the right to convert to common stock prior to closing, but are not required to do so. Excludes any shares issuable in connection with the Company’s requirement to raise up to $4,000,000 in funding as a condition to closing, and the triggering of any anti-dilution provisions set forth in the Series B and C Preferred Share terms, including up to 200 additional shares of Series C Preferred which are authorized but not issued. Fully diluted also excludes any fees payable in shares of common stock or common stock equivalents to service providers and/or bankers in connection with the closing of the Merger.

AGEAGLE’S BUSINESS

Organizational History

AgEagle Aerial Systems, Inc. (“AgEagle,” “we” or us”), headquartered in Neodesha, Kansas, is a leading manufacturer of unmanned aerial vehicles focused on providing actionable data to the precision agriculture industry. AgEagle was founded in 2010 by Bret Chilcott, its President and Chief Executive Officer, as Solutions by Chilcott, LLC, a Kansas limited liability company. In April 2015, Solutions by Chilcott was converted into a corporation and then merged into AgEagle, a newly-formed Nevada corporation.

Our history is rooted in advanced composite parts manufacturing, first for commercial trucks and then as a vendor to the government manufacturing micro wind turbine blades. Around 2011, we also began applying our expertise in composite parts manufacturing on a research project at Kansas State University that was attempting to use model airplanes to monitor and analyze crops. After several months, Mr. Chilcott and the university agreed to continue the commercialization phase of this project under the auspices of AgEagle, and in 2012, we completed the first prototype of our UAV. Over the next year, Mr. Chilcott traveled throughout the mid-western United States meeting with farmers and agronomists, compiling test data, operating history, market information, and then in early 2014 AgEagle sold its first commercial UAV.

Our Products and Services

We design, develop, produce, distribute and support technologically-advanced small unmanned aerial vehicles (UAVs or drones) that we supply to the precision agriculture industry. Historically, we have derived the majority of our revenue from the sale of our AgEagle Classic and RAPID Systems. However, as a result of the development of our new product, the RX-60, we phased-out the previous two systems. In February 2016, we signed a worldwide, distribution agreement with Raven Industries, Inc. (“Raven”) under which Raven has provided and will continue to provide private label and purchase the RX-60 exclusively for the agriculture markets for resale through their network of dealers worldwide. Raven and its network of dealers offer the RX-60 system to the public, including a subscription for a software package that is provided by our strategic partner, Aerobotic Innovations, LLC, d/b/a Botlink (“Botlink”), for flight control, image processing and data delivery. The subscription for the Botlink software package is purchased by our customers directly from Botlink. Our agreement with Botlink provides that Botlink will make available for use in our drones the necessary hardware and software at least until December 30, 2020 and will provide aerial map processing and hosting to our customers who maintain a subscription at least until December 30, 2020. The first shipment of our RX-60 system to Raven occurred in March 2016.

The success we have achieved with our products, which we believe has carried over into the new RX-60, stems from our ability to invent and deliver advanced solutions utilizing our proprietary technologies and trade secrets that help farmers, agronomists and other precision agricultural professionals operate more effectively and efficiently. Our core technological capabilities, developed over five years of innovation, include a lightweight laminated shell that allows the UAV platform to perform under challenging flying conditions, a camera with a Near Infrared (NIR) filter, a rugged foot launcher, and high end software provided by Botlink that automates drone flights and provides geo-referenced data.

Our UAV, often referred to as a “flying wing,” is an advanced fixed wing model UAV whose design is based upon the years of experience our management has with aircraft and composite parts construction. We design all of our UAVs to be man-portable, thereby allowing one person to launch and operate them through a hand-held control unit or tablet. All of our UAVs are electrically powered, weigh approximately six pounds fully loaded, are capable of flying over approximately 400 acres (roughly 60 minutes of airtime) per flight from their launch location, and are configured to carry a camera with our NIR filter that uses near infrared images to capture crop data. We believe that these characteristics make our UAVs well suited for providing a complete aerial view of a farmer’s field to help precisely identify crop health and field conditions faster than any other method available.

Our UAVs were specifically designed to help farmers increase profits by pinpointing areas where nutrients or chemicals need to be applied, as opposed to traditional widespread land application processes, thus decreasing input costs and increasing yields. The RX-60 system, based on our AgEagle RAPID system, was designed for busy agriculture professionals who do not have the time to process images on their computers, which some of our competitors require, and our first generation product, the AgEagle Classic, used to do. Through a relationship with our strategic partner, Botlink, our UAV can be programmed using a tablet device to overlay a flight path over a farmer’s specific crop area. The software can automatically take pictures from the camera, stitch the photos together through the cloud, and deliver a geo-referenced, high quality aerial map to the user’s desktop or tablet device using specialty precision agriculture software such as SST or SMS. The result is a prescription or zone map that can then be used on a Raven field computer, that can typically be found in a sprayer or applicator that has been designed to drive through fields to precisely apply the amount of nutrients or chemicals required to continue or restore the production of healthy yields for farmers.

Figure 1: AgEagle Prescription Map Powered by Botlink

Partnership with Raven

In February 2016, we signed a worldwide, exclusive distribution agreement with Raven. Under this initial three-year distribution agreement, Raven private labels and purchases our fixed wing UAVs, exclusively for the agriculture markets over the initial term, for resale through their network of dealers worldwide. Raven has the right to renew the agreement after the expiration of the initial term. In 2017, we amended our agreement with Raven to make it non-exclusive and to allow us to sell our products directly into the market. The agreement contains other standard termination provisions, covenants and warranties, as more fully set forth therein.

On the date we entered into the distribution agreement with Raven, we also simultaneously entered into a stock purchase agreement with Raven whereby we sold 200,000 shares of our common stock to Raven for an aggregate purchase price of $500,000. In connection with the financing, Raven was entitled to designate one director to serve on the board. In March 2016, Raven exercised this right and we appointed Lindsay Edwards to the board. In addition, at any time until the consummation of the first public offering, Raven has the first right to participate in any offer or sale of new securities in an amount up to 50% of such securities that we may issue, which issuance excludes (a) shares or options to purchase shares under our Stock Option Plan, (b) securities upon the exercise, exchange or conversion of securities issued and outstanding as of the date of the stock purchase agreement and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of our disinterested directors. Pursuant to the stock purchase agreement, during the term of the distribution agreement, Raven has a right of first refusal on any sale of all or substantially all of our assets or a sale of AgEagle in any transaction in which there is a change in control in the holders of a majority of the voting securities after the transaction, or on an exclusive license of all of our intellectual property.

Raven is a publicly traded corporation (NASDAQ: RAVN) based in Sioux Falls, South Dakota that is a leading provider of precision agriculture products designed to reduce operating costs, decrease inputs, and improve yields of farmers through their Applied Technology division.

Consumer Products and Services

UAV Market Overview

Unmanned aerial vehicles, or UAVs, have been in use for decades, whether it be a drone for military surveillance by the U.S. Government, a commercial UAV used to scan and survey property, or by hobbyists who fly their personal devices simply to get a different view of the world. All three fall under the same burgeoning industry, one that is increasing in number and effectiveness as aircrafts, sensors and automation technologies mature. As the potential benefits of UAV technology extend beyond its traditional military use, commercial customers have started to shift resources into the drone opportunity so as to reach levels of efficiency not previously experienced. Despite the obstacles the industry will continue to face and be required to maneuver through, the first operational rules for routine commercial use of UAVs went into effect on August 20, 2016. The current landscape and targeted industries in the UAV marketplace can be seen below:

Figure 2: Industries in the UAV Marketplace

The military uses of drones are recognized and have been around for many years. The participants in this market are well entrenched at this point, with companies such as Boeing, Lockheed Martin and AeroVironment providing surveillance and attack drones to the U.S. military and Department of Defense. The growth of unmanned systems for military and civil use is projected to continue through the next decade. It is estimated that UAV spending in the civil market will increase substantially over the next decade, from $2.8 billion worldwide in 2017 to $11.8 billion in 2026, and the segment is expected to generate $73.5 billion over the next 10 years, according to The Teal Group. Commercial use is expected to be the fastest growing civil segment, rising more than twelvefold from $512 million in 2017 to $6.5 billion in 2026. This growth is forecasted to be fueled, in part, by the estimated $1.3 billion in investments in the sector by technology companies and venture capitalists since 2013.

As compared to the relatively mature military drone sector, the hobbyist and consumer market has been growing steadily over the past five plus years. Market leaders include companies such as Dajiang Innovation Technology (“DJI”), Parrot EPA and 3D Robotics, with many more players jumping into the fray. Should consumers continue to adopt this technology, not only do we believe the industry will experience its projected growth, but it will provide for a significant number of purchasing options as competition increases.

The segment of the UAV industry that has received the most attention recently is the commercial market, which was brought into the spotlight in early 2015 when the FAA released its new proposed guidelines for commercial UAV use, and then in June 2016, when the FAA announced it had finalized the first operational rules for routine commercial use of UAVs, which rules went into effect on August 20, 2016. According to CB Insights, 2016 saw a record number of investments in the drone industry, topping $454 million across 100 deals, due to venture firms and technology companies moving into the drone space with sizable investments. In Q1 of 2017, the sector saw a quarterly deals record of 32 investments worth $113 million, giving 2017 a funding run-rate of 122 deals worth over $506 million, both new records. While regulatory uncertainty has kept many on the sidelines, the new clarity from the FAA has started to help investors get more comfortable. The primary segments in the commercial market, as seen in the above chart, include Precision Agriculture, Inspection/Surveillance, Mapping/Surveying, Film/Photo/Video and Public Safety/First Responders. AgEagle falls under the precision agriculture space, which as an industry is relatively new and ripe with opportunity for those innovative solutions that solve today’s current problems.

Figure 3: Global UAV Investment History

Precision Agriculture Industry Overview

Precision agriculture is a farming management concept based on observing, measuring, and responding to inter- and intra-field variability in crops. Over the years, as farmers have been increasingly under pressure to increase profit margins and comply with new governmental regulations, entrepreneurs have been searching for solutions that present the prospect of new operational efficiencies. This has led to a number of changes in the agricultural industry, with precision agriculture being recognized by some as one of the largest technological opportunities in agriculture since the introduction of hydraulics in the 1940’s. As agriculture and technology companies realize the potential benefits from this new space, many are introducing innovative products and services to the agriculture arena, focused on helping farmers capitalize upon this new found technology.

Precision agriculture technologies provide the information and systems that allow a farmer to optimize and customize the timing, amount, and placement of inputs (seed, fertilizer, pesticides, irrigation, etc.) for any given section of a field. This allows the farmer to produce the maximum yield from the entire field at the lowest possible cost. The concept has been enabled by technologies that include:

	·	Crop yield monitors mounted on GPS-equipped combines;

	·	variable rate technology, like seeders, sprayers, etc.;

	·	an array of real-time vehicle mountable sensors that measure everything from chlorophyll levels to plant water status; and

	·	multi- and hyper-spectral aerial and satellite imagery, from which products like Normalized Difference Vegetation Index (“NDVI”) maps can be made.

The total value of U.S. crops in 2014 was estimated at $195 billion. While 2015 and 2016 saw slight downturns due to commodity pricing, even a modest improvement in yield would have a substantial aggregate economic impact for the roughly $200 billion industry. There are a few trends that drive where we believe the precision agriculture marketplace is heading: the increased use of auto steering and variable rate controls for inputs, advanced sensors and Big Data, and customers who are realizing their return on investment.

The first trend is possibly the most important. Guidance and auto steering have provided farmers with significant benefits by reducing costly application overlaps by field equipment. This, combined with variable rate application equipment, will allow farmers to break their fields into specific sections based on criteria such as soil type and historical yield. With this information available on a section by section basis, farmers are then able to minimize their costs and increase profitability across the farm as a whole.

However, it is the data behind this equipment that is going to drive this industry forward. Advanced sensors and filters allow the farmer to not only view weather and soil data, but through use of a device such as a drone, it would allow that information to be coupled with real time plant health data for in-depth analysis. This analysis supports real time predictive decision-making to drive costs lower and improve crop yields.

Finally, as farmers have begun to adopt this new technology, we believe the returns on their investments are beginning to materialize. By having this increased functionality and the expanded offerings of precision agriculture devices, integrated software, analytics, and cloud services, the hope is that the adoption rates of these new solutions continue to grow over the coming years.

Figure 4: AgEagle Crop Health Map

As the demographic for farmers shifts to a younger, more technologically-minded group, many are forecasting an increase in the rate of growth of precision agriculture. A current estimate of the precision agriculture market by Markets and Markets projects a roughly $7.9 billion global marketplace by 2022, with an estimated compound annual growth rate of 13.5% from 2016 to 2022. The growth rate outside the U.S., including developing countries where the need to improve productivity is even greater, is expected to be even higher. More and more companies, ranging from large public companies (e.g., Monsanto (biotech, seeds, chemicals) and John Deere (equipment)) to small privately owned or venture backed companies, are expected to begin focusing on this opportunity with the goal of providing specialty farm management software, cloud services, sensors, data analytics, and even drone imaging services.

Precision Agriculture UAV Market

While precision agriculture is beginning to transform traditional farming methods, we believe that the commercial UAV market is strategically placed to play a substantial role in this transformation. UAVs have many commercial applications, as described above, and many industry experts now expect one of the biggest impacts to be on the agriculture industry. Drone technology, if executed properly, can make farming more efficient, lower operating costs and reduce farming’s environmental impact. Current estimates from Zion Market Research expect the industry for drones used in agriculture to reach more than $3.0 billion by 2021, up from approximately $674 million in 2015. These estimates are in spite of the ban that was previously in place by the FAA prior to the announcement in June 2016 that the FAA finalized the first operational rules for routine commercial use of UAVs, which rules went into effect on August 20, 2016.

The use of drones for agriculture can add real time high definition imagery collected on demand, to help farmers see what is happening in the field without having to walk through the field. UAVs costs a fraction of what an airplane or a satellite costs, and at the same time, they can provide a superior set of images with a potential resolution equivalent to standing next to the plant. These small, unmanned rotary and fixed wing aircrafts can fly at low altitudes and be programmed to fly a certain pattern using a variety of software. They can take high definition images with visual and multi spectral cameras, providing specific plant health information in real time. This new imagery would need to be integrated with all the other data a farmer collects to increase productivity. Successful entrants in the UAV space will be the ones who can integrate the existing data and the science of agronomy into the images through partnering or acquisitions.

Market Size

We believe that the precision agriculture sector of the UAV market presents robust opportunities for our products. The United Nations Food and Agriculture Organization (“FAO”) projects that the world will require 70% more food production by 2050 in order to keep up with population growth. That number is nearly 100% when looking at just developing counties. To accomplish this, the agriculture sector will need to become more efficient, producing an average of 250 bushels per acre (“bpa”), possibly as much as 300, from the approximately 200 bpa that are currently produced. Farmers and agronomists are seeking ways to increase yields while lowering input costs and overall environmental impact of chemicals and water consumption. In collaboration with the precision agriculture products already available today, we believe our UAVs can accomplish this goal with the actionable data we provide them.

Recent estimates from a report published by Goldman Sachs in March 2016 further estimates the total addressable market for precision agriculture to be $1.4 billion in the U.S. and $5.9 billion globally over the next five years. Such market size translates to approximately 47,000 UAV units in the U.S. and 197,400 UAV units around the world. In addition, Goldman Sachs suggests that the commercial UAV industry has a $21 billion total addressable market with an estimated triple-digit compound annual growth rate from 2016 to 2020.

Other research firms have published their estimates for the precision agriculture market over the last couple years as well. PricewaterhouseCoopers pegs the addressable market for agriculture drones to be worth $32.4 billion, second only to the infrastructure sector. Global Market Insights sees the market surpassing $1.0 billion by 2024, with global shipments exceeding 200,000 UAV units by 2024. Markets and Markets expects the agriculture drone market to grow from $864 million in 2016 to $4.2 billion in 2022, representing a 30%+ CAGR during that period.

Our Growth Strategy

We intend to grow our business by establishing our leadership position in the growing precision agriculture marketplace for UAVs through our partnership with Raven and by creating new, easier to use and higher value products that enable us to remain a leading platform available to our customers. We may also elect to pursue additional opportunities in different industries outside of agriculture and its related areas. Key components of this strategy include the following:

Build a strong worldwide distribution network with Raven and organically to offer a best-in-class precision ag platform.

We believe we can establish our flying wing product and systems as leading technologies in the precision agriculture marketplace. Under Raven’s distribution platform, we will have access to dealers and customers in key agricultural regions worldwide, which will help make it possible for every farmer in those markets to have access to the AgEagle platform. Raven’s distributors are spread across six continents, covering a majority of the world’s major regions including the U.S., Canada, South America, Eastern and Western Europe, Southeast Asia, and Oceania. We are also building our own distribution channels in parallel with Raven, both in the US and internationally.

Continue to explore partnerships with companies that can expand our offerings.

We intend to expand our product offerings by building relationships, partnerships and possibly acquisitions of companies that have vertical, synergistic technologies. Our first venture into this concept has been and will continue to be to work with Raven to integrate our UAV system with its current precision agriculture products in order to connect the data and improve the effectiveness and efficiency of this data for farmers. In addition, other technology alliances may include the acquisition or development of other electronics, software, sensors or more advanced aerial platforms. We are constantly meeting and in discussions with groups that could fill these roles and help with additional development ideas. We see the potential to acquire such synergistic companies to be an exciting potential growth strategy for AgEagle, especially as player in the market start to consolidate over the following years.

Deliver new and innovative solutions in the precision ag space.

Our research and development efforts are the foundation of AgEagle, and we plan to continue to invest in R&D. We plan to continue innovating new and enhanced products that enable us to satisfy our customers through better, more capable products and services, both in response to and in anticipation of their needs. We believe that by investing in research and development, we can be a leader in delivering innovative products that address market needs within our current target markets, enabling us to create new opportunities for growth.

Pursue the expansion of the AgEagle platform of products into other industries besides agriculture.

We may investigate and pursue opportunities outside of agriculture as we continue to expand and grow the AgEagle platform. We are confident in the UAV product we have today, and believe that this product could provide other industries the same kind of optimization we are currently providing the agriculture industry. These industries have yet to be identified by the AgEagle team, but may include verticals such as land surveying and scanning, insurance, inspections, and search and rescue.

Competitive Strengths

We believe the following attributes and capabilities provide us with long-term competitive advantages:

Partnership with Raven . Our partnership with Raven has provided and will continue to provide broader access to our products for customers around the world through Raven and its network of dealers. Raven is a leading provider of precision agricultural products in the world, with a loyal customer base and global outreach. We will work together with Raven to provide actionable data to assist customers in making informed input and variable rate decisions. We also intend to capitalize on Raven’s expertise and knowledge within the precision agriculture industry to continue improving and advancing our products offerings.

Proprietary Technology and Trade Secrets. We believe our unique design and assembly process differentiates our product from any competition. We are confident that our UAVs are industry-leading in durability due to the lightweight laminated shell of the wing, which is made using a proprietary manufacturing process developed by our President and CEO over five years of innovating. This process, which hardens the material used to build the shell, allows the UAV to perform in harsh weather conditions (with wind speeds up to 30 miles per hour) and bring itself to an unassisted landing, all at a total weight of about six pounds. This design is an important trade secret, and we have non-disclosure agreements with our employees in order to keep it unique to AgEagle.

Product Has Global Appeal . We believe that our technology addresses a need for better data in the agriculture industry worldwide. With our new global distribution platform, we believe that we are well-positioned for our advanced products to be a viable solution for farmers worldwide.

Increased Margins for Farmers . We believe our UAVs will directly enhance margins of our customers by reducing the amount of nutrients and chemicals needed to manage their farms. The software equipped on our UAVs will deliver a high-quality aerial map upon completion of the flight, allowing the user to accurately identify the specific areas that are malnourished. This software is compatible with precision applicator tractors, which assist users in applying a precise amount of nutrients in only the necessary areas.

Empower Customers Through Our Self-Serve Platform. Our UAVs are specially designed to provide users with a portable and easy to operate device, which can be controlled with a hand-held unit or tablet. Through our partnership with Botlink, users will be able to plan and track an efficient flight path for their UAV. The UAVs are equipped with a camera and near infrared filter whose images provide a holistic aerial view of the fields along with meaningful data that is uploaded and delivered to the user within a very short time frame. As a result, this platform allows users to quickly detect any issues in their fields, which enables them to address such issues in a timely manner before any damage, or further damage affects their fields.

All Manufacturing of our Products is Completed in the United States. As of today, we manufacture all of our products at our manufacturing facility in Neodesha, Kansas, which allows us to avoid many of the potential difficulties that may arise if our manufacturing facilities were otherwise located outside the U.S. In addition, all of our research and development activities are performed in the U.S.

Government Regulation

Our products are subject to regulations of the FAA. On June 21, 2016, the FAA announced it has finalized the first operational rules for routine commercial use of small UAS, which for purposes of the regulations are unmanned aircraft weighing less than 55 pounds that are conducting non-hobbyist operations. UAS operators-for-hire will have to pass a written test and be vetted by the TSA, but no longer need to be airplane pilots as current law requires. The rules went into effect on August 20, 2016. Among other things, the new regulations require:

	·	preflight inspection by the remote pilot in command;

	·	minimum weather visibility of 3 miles from the control station;

	·	visual line-of-sight to the aircraft from the pilot and person manipulating the controls;

	·	prohibit flying the aircraft over any persons not directly participating in the operation, not under a covered structure or not inside a covered stationary vehicle;

	·	daylight or civil twilight operations (30 minutes before official sunrise to 30 minutes after official sunset, local time);

	·	maximum groundspeed of 100 mph (87 knots); and

	·	maximum altitude of 400 feet above ground level or, if higher than 400 feet above ground level, the aircraft must remain within 400 feet of a structure.

The new regulations also establish a remote pilot in command position. A person operating a small unmanned aircraft must either hold a remote pilot airman certificate with a small unmanned aircraft system rating or be under the direct supervision of a person who does hold a remote pilot certificate (remote pilot in command). A pilot’s license is no longer required. To qualify for a remote pilot certificate, a person must: demonstrate aeronautical knowledge by either passing an initial aeronautical knowledge test at an FAA-approved knowledge testing center, or hold a part 61 pilot certificate other than student pilot, complete a flight review within the previous 24 months, and complete a small UAS online training course provided by the FAA. The person must also be vetted by the TSA and be at least 16 years old. Applicants will obtain a temporary remote pilot certificate upon successful completion of TSA security vetting. The FAA anticipates that it will be able to issue a temporary remote pilot certificate within 10 business days after receiving a completed remote pilot certificate application.

The regulations do not require the use of a visual observer. In addition, FAA airworthiness certification is not required. However, the remote pilot in command must conduct a preflight check of the small UAS to ensure that it is in a condition for safe operation.

Most of the restrictions are waivable if the applicant demonstrates that his or her operation can safely be conducted under the terms of a certificate of waiver. The FAA announced it will make an online portal available to apply for these waivers in the months ahead.

Manufacturing

As of today, we manufacture all of our products at our manufacturing facility in Neodesha, Kansas. We believe our current facilities are sufficient to adapt to our growth plans for the next two to three years and we have no current plans to expand our manufacturing capabilities.

Suppliers

Currently, we have strong relationships established with companies that provide many of the parts and services necessary to construct our advanced fixed wing product, such as Botlink, GoPro and 3DR. We have relationships with these suppliers and hope to continue to build and find new relationships from which we can source cheaper and better supplies to stay ahead of the needs of the market.

Our flight planning and photo stitching software is provided by Botlink, a private company in North Dakota. We have worked closely with Botlink to optimize their software to work with our platforms. We consider our relationship with Botlink to be good; however, a loss of this relationship could have a materially adverse effect on our product offerings and results of operations.

Research and Development

Research and development activities are integral to our business and we follow a disciplined approach to investing our resources to create new technologies and solutions. A fundamental part of this approach is a well-defined screening process that helps us identify commercial opportunities that support current desired technological capabilities in the precision agriculture space. Our research includes the expansion of our wing products so as to build a portfolio of UAVs, as well as other solutions to problems with which agriculture professionals struggle.

Employees

As of September 30, 2017, we had a total of 5 employees of which are all full-time except for one which is part-time. We have not experienced a work stoppage since we commenced operations. None of such employees are represented by employee union(s). We believe relations with all of our employees are good.

Legal Proceedings

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

Property

We have one leased facility located at 117 South 4th Street, Neodesha, Kansas 66757. This serves as the corporate headquarters and manufacturing facility. The facility is a lease of 4,000 square feet at a cost of $200 per month. Monthly rent increases by $100 every year until the expiration of the lease in 2018.

AGEAGLE RISK FACTORS

An investment in our securities involves a high degree of risk. You should carefully consider the risks described below and the other information in this Current Report on Form 8-K and other filings with the SEC before investing in our securities. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

AgEagle Aerial Systems, Inc. (“AgEagle,” “we” or us”) has a limited operating history and there can be no assurance that we can achieve or maintain profitability.

We have been in operation for approximately eight years. However, we have only been in the UAV business for half of that time. We are currently in the business development stage and have limited commercial sales of our products and, accordingly, we cannot guarantee that we will become profitable. Moreover, even if we achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect our business, including our ability to raise additional funds.

We will need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, curtail or eliminate one or more of our research and development programs or commercialization efforts.

Our operations have consumed substantial amounts of cash since inception. We expect to continue to spend substantial amounts on product development. We will require additional funds to support our continued research and development activities, as well as the costs of commercializing, marketing and selling any new products resulting from those research and development activities. We have based this estimate, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect.

Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance future cash needs through equity or debt financings or corporate collaboration and strategic arrangements. We currently have no other commitments or agreements relating to any of these types of transactions and we cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital, we might have to delay, curtail or eliminate commercializing, marketing and selling one or more of our products.

Product development is a long, expensive and uncertain process.

The development of both UAV software and hardware is a costly, complex and time-consuming process, and investments in product development often involve a long wait until a return, if any, can be achieved on such investment. We might face difficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market, which might allow competing products to emerge during the development and certification process. We anticipate making significant investments in research and development relating to our products and services, but such investments are inherently speculative and require substantial capital expenditures. Any unforeseen technical obstacles and challenges that we encounter in the research and development process could result in delays in or the abandonment of product commercialization, may substantially increase development costs, and may negatively affect our results of operations.

Successful technical development of our products does not guarantee successful commercialization.

Although we have successfully completed the technical development of our two original UAV systems, as well as the new RX-60 and RX-48 systems, we may still fail to achieve commercial success for a number of reasons, including, among others, the following:

	·	failure to obtain the required regulatory approvals for their use;

	·	prohibitive production costs;

	·	competing products;

	·	rapid evolvement of the product due to new technologies;

	·	lack of product innovation;

	·	unsuccessful distribution and marketing through our sales channels;

	·	insufficient cooperation from our supply and distribution partners; and

	·	product development that does not align with or meet customer needs.

Our success in the market for the products and services we develop will depend largely on our ability to properly demonstrate their capabilities. Upon demonstration, the AgEagle platform of systems may not have the capabilities they were designed to have or that we believed they would have. Furthermore, even if we do successfully demonstrate our products’ capabilities, potential customers may be more comfortable doing business with a competitor, or may not feel there is a significant need for the products we develop. As a result, significant revenue from our current and new product investments may not be achieved for a number of years, if at all.

If we fail to protect our intellectual property rights, we could lose our ability to compete in the marketplace.

Our intellectual property and proprietary rights are important to our ability to remain competitive and successful in the development of our products and our business. Patent protection can be limited and not all intellectual property can be patented. We expect to rely on a combination of patent, trademark, copyright, and trade secret laws as well as confidentiality agreements and procedures, non-competition agreements and other contractual provisions to protect our intellectual property, other proprietary rights and our brand. As we currently do not have any granted patent, trademark or copyright protections, we must rely on trade secrets and nondisclosure agreements, which provide limited protections. Our intellectual property rights may be challenged, invalidated or circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees or competitors.

Furthermore, our competitors may independently develop technologies and products that are substantially equivalent or superior to our technologies and products, which could result in decreased revenues. Litigation may be necessary to enforce our intellectual property rights, which could result in substantial costs to us and substantial diversion of management attention. If we do not adequately protect our intellectual property, our competitors could use it to enhance their products. Our inability to adequately protect our intellectual property rights could adversely affect our business and financial condition, and the value of our brand and other intangible assets.

Other companies may claim that we infringe their intellectual property, which could materially increase our costs and harm our ability to generate future revenue and profit.

We do not believe that our technologies infringe on the proprietary rights of any third party, but claims of infringement are becoming increasingly common and third parties may assert infringement claims against us. It may be difficult or impossible to identify, prior to receipt of notice from a third party, the trade secrets, patent position or other intellectual property rights of a third party, either in the United States or in foreign jurisdictions. Any such assertion may result in litigation or may require us to obtain a license for the intellectual property rights of third parties. If we are required to obtain licenses to use any third party technology, we would have to pay royalties, which may significantly reduce any profit on our products. In addition, any such litigation could be expensive and disruptive to our ability to generate revenue or enter into new market opportunities. If any of our products were found to infringe other parties’ proprietary rights and we are unable to come to terms regarding a license with such parties, we may be forced to modify our products to make them non-infringing or to cease production of such products altogether.

The nature of our business involves significant risks and uncertainties that may not be covered by insurance or indemnification .

We have developed and sold products and services in circumstances where insurance or indemnification may not be available; for example, in connection with the collection and analysis of various types of information. In addition, our products and services raise questions with respect to issues of civil liberties, intellectual property, trespass, conversion and similar concepts, which may create legal issues. Indemnification to cover potential claims or liabilities resulting from the failure of any technologies that we develop or deploy may be available in certain circumstances but not in others. Currently, the unmanned aerial systems industry lacks a formative insurance market. We may not be able to maintain insurance to protect against all operational risks and uncertainties that our customers confront. Substantial claims resulting from an accident, product failure, or personal injury or property liability arising from our products and services in excess of any indemnity or insurance coverage (or for which indemnity or insurance coverage is not available or is not obtained) could harm our financial condition, cash flows and operating results. Any accident, even if fully covered or insured, could negatively affect our reputation among our customers and the public, and make it more difficult for us to compete effectively.

We may incur substantial product liability claims relating to our products.

As a manufacturer of UAV products, and with aircraft and aviation sector companies under increased scrutiny, claims could be brought against us if use or misuse of one of our UAV products causes, or merely appears to have caused, personal injury or death. In addition, defects in our products may lead to other potential life, health and property risks. Any claims against us, regardless of their merit, could severely harm our financial condition, strain our management and other resources. We are unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing.

We rely heavily on the industry relationships and expertise of our President and CEO, Bret Chilcott, and if he were to leave the company, our business may suffer.

Mr. Bret Chilcott is essential to our ability to continue to grow our business. Mr. Chilcott has established relationships within the industry in which we operate. We do not maintain, or intend to maintain, key man life insurance for Mr. Chilcott. If he was to leave the company, our growth strategy might be hindered, which could limit our ability to increase revenue.

If we are unable to recruit and retain key management, technical and sales personnel, our business would be negatively affected.

For our business to be successful, we need to attract and retain highly qualified technical, management and sales personnel. The failure to recruit additional key personnel when needed, with specific qualifications, on acceptable terms and with an ability to maintain positive relationships with our partners, might impede our ability to continue to develop, commercialize and sell our products and services. To the extent the demand for skilled personnel exceeds supply, we could experience higher labor, recruiting and training costs in order to attract and retain such employees. The loss of any members of our management team may also delay or impair achievement of our business objectives and result in business disruptions due to the time needed for their replacements to be recruited and become familiar with our business. We face competition for qualified personnel from other companies with significantly more resources available to them and thus may not be able to attract the level of personnel needed for our business to succeed.

If our proposed marketing efforts are unsuccessful, we may not earn enough revenue to become profitable.

Our future growth depends on our gaining market acceptance and regular production orders for our products and services. While we believe we will have an advantage in the marketplace during the term of our strategic partnership with Raven, we will need to heavily invest in marketing resources for the successful implementation of our marketing plan. Our marketing plan includes attendance at trade shows, making private demonstrations, advertising, promotional materials and advertising campaigns in print and/or broadcast media. In the event we are not successful in obtaining a significant volume of orders for our products and services, we will face significant obstacles in expanding our business. We cannot give any assurance that our marketing efforts will be successful. If they are not, revenue may not be sufficient to cover our fixed costs and we may not become profitable.

Our operating margins may be negatively impacted by reduction in sales or products sold.

Expectations regarding future sales and expenses are largely fixed in the short term. We maintain raw materials and finished goods at a volume we feel is necessary for anticipated distribution and sales. Therefore, we may not be able to reduce costs in a timely manner to compensate for any unexpected shortfalls between forecasted and actual sales.

We face a significant risk of failure because we cannot accurately forecast our future revenues and operating results.

The rapidly changing nature of the markets in which we compete makes it difficult to accurately forecast our revenues and operating results. Furthermore, we expect our revenues and operating results to fluctuate in the future due to a number of factors, including the following:

	·	the timing of sales of our products;

	·	unexpected delays in introducing new products;

	·	increased expenses, whether related to sales and marketing, or administration; and

	·	costs related to possible acquisitions of businesses.

Rapid technological changes may adversely affect the market acceptance of our products and could adversely affect our business, financial condition and results of operations.

The market in which we compete is subject to technological changes, introduction of new products, change in customer demands and evolving industry standards. Our future success will depend upon our ability to keep pace with technological developments and to timely address the increasingly sophisticated needs of our customers by supporting existing and new technologies and by developing and introducing enhancements to our current products and new products. We may not be successful in developing and marketing enhancements to our products that will respond to technological change, evolving industry standards or customer requirements. In addition, we may experience difficulties internally or in conjunction with key vendors and partners that could delay or prevent the successful development, introduction and sale of such enhancements and such enhancements may not adequately meet the requirements of the market and may not achieve any significant degree of market acceptance. If release dates of our new products or enhancements are delayed or, if when released, they fail to achieve market acceptance, our business, operating results and financial condition may be adversely affected.

Our products are subject to regulations of the Federal Aviation Administration (the “FAA”).

In August 2016, regulations from the FAA relating to the commercial use of UAVs in the United States became law. As a result, users of systems like AgEagle are only required to take a knowledge exam at an approved FAA testing station similar to an automobile driver’s license exam. Prior to the new law, users had to hold a pilot’s license, have an observer present and file various documents before flights. We saw a decrease in revenues of approximately 52% during 2016, which we believe may have been partially due to the uncertainty of the FAA regulations prior to the enactment of the new law. In the event new FAA rules or regulations are promulgated or current rules are revised that may negatively affect commercial usage of our UAVs, such rules and laws could adversely disrupt our operations and overall sales.

Our future results may be affected by various legal and regulatory proceedings and legal compliance risks, including those involving product liability, antitrust, intellectual property, environmental, regulations of the FAA, the U.S. Foreign Corrupt Practices Act and other anti-bribery, anti-corruption, or other matters.

The outcome of any future legal proceedings may differ from our expectations because the outcomes of litigation, including regulatory matters, are often difficult to reliably predict. Various factors or developments can lead us to change current estimates of liabilities and related insurance receivables where applicable, or make such estimates for matters previously not susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments or changes in applicable law. A future adverse ruling, settlement or unfavorable development could result in future charges that could have a material adverse effect on our results of operations or cash flows in any particular period. We are not currently involved in or subject to any such legal or regulatory proceedings, but we cannot guarantee that such proceedings may not occur in the future.

If we do not receive the governmental approvals necessary for the sales or export of our products, or if our products are not compliant in other countries, our sales may be negatively impacted. Similarly, if our suppliers and partners do not receive government approvals necessary to export their products or designs to us, our revenues may be negatively impacted and we may fail to implement our growth strategy.

A license may be required in the future to initiate marketing activities. We may also be required to obtain a specific export license for any hardware exported. We may not be able to receive all the required permits and licenses for which we may apply in the future. If we do not receive the required permits for which we apply, our revenues may be negatively impacted. In addition, if government approvals required under these laws and regulations are not obtained, or if authorizations previously granted are not renewed, our ability to export our products could be negatively impacted, which may have a negative impact on our revenues and a potential material negative impact on our financial results.

Our global distribution agreement with Raven leaves open the possibility that we may be left without an effective distribution platform in the event the Raven agreement is terminated or is not renewed upon completion of the initial term of the agreement.

In the event our agreement with Raven is terminated or modified, whether by triggering an early termination or reaching the completion of the initial term, we may be left without an effective platform through which we can immediately distribute our products. If there is an early termination, this could substantially impact the global rollout and market acceptance of our products. This may result in our business, operating results and financial condition being adversely affected.

Currently, Raven has a non-exclusive worldwide right to distribute our products in the agriculture market. Our agreement with Raven covers our fixed wing product, with a right of first opportunity for us to provide multirotor and other format UAVs. If we cannot provide such extended product offerings, Raven may use other suppliers for such requirements, which would compete with our market share.

In addition, upon the commencement of our agreement with Raven, we terminated other distribution arrangements with existing dealers in the agriculture industry. As a result, we may be required to repurchase any or all unsold drones in the impacted dealers’ inventory or in transit to the dealer on the effective date of termination, pursuant to those terminated dealer agreements.

On February 22, 2016, we entered into a dealer termination agreement with a certain dealer in relation to its exclusive distributor agreement for Canada. The parties mutually agreed that we will pay the dealer installments through September 1, 2016, totaling $100,000, for the termination of the dealer’s exclusive distributor agreement. As of December 31, 2016, we recorded the termination costs of $100,000 in other expense and have accrued a remaining payment due to the dealer of $20,000.

As of December 31, 2016, we determined that three UAVs have been returned and seventeen units have been converted to include components from the newer models. As a result, termination costs for the year ended December 31, 2016 of $74,715 was recorded in other expense. We believe that all the former dealers based on their right of return clause are properly accrued and at this time one dealer has the right to return one unit and convert one unit and a second dealer will upgrade four units, which would be equal to approximately $18,000, and we have included this amount in our accrued expenses.

We may pursue additional strategic transactions in the future, which could be difficult to implement, disrupt our business or change our business profile significantly.

We intend to consider additional potential strategic transactions, which could involve acquisitions of businesses or assets, joint ventures or investments in businesses, products or technologies that expand, complement or otherwise relate to our current or future business. We may also consider, from time to time, opportunities to engage in joint ventures or other business collaborations with third parties to address particular market segments. Should our relationships fail to materialize into significant agreements or should we fail to work efficiently with these companies, we may lose sales and marketing opportunities and our business, results of operations and financial condition could be adversely affected.

These activities, if successful, create risks such as, among others: (i) the need to integrate and manage the businesses and products acquired with our own business and products; (ii) additional demands on our resources, systems, procedures and controls; (iii) disruption of our ongoing business; and (iv) diversion of management’s attention from other business concerns. Moreover, these transactions could involve: (a) substantial investment of funds or financings by issuance of debt or equity securities; (b) substantial investment with respect to technology transfers and operational integration; and (c) the acquisition or disposition of product lines or businesses. Also, such activities could result in one-time charges and expenses and have the potential to either dilute the interests of our existing stockholders or result in the issuance of, or assumption of debt. Such acquisitions, investments, joint ventures or other business collaborations may involve significant commitments of financial and other resources. Any such activities may not be successful in generating revenue, income or other returns, and any resources we committed to such activities will not be available to us for other purposes. Moreover, if we are unable to access the capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so on the basis of a less than optimal capital structure. Our inability to take advantage of growth opportunities or address risks associated with acquisitions or investments in businesses may negatively affect our operating results.

Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings. Future acquisitions or joint ventures may not result in their anticipated benefits and we may not be able to properly integrate acquired products, technologies or businesses with our existing products and operations or successfully combine personnel and cultures. Failure to do so could deprive us of the intended benefits of those acquisitions.

Breaches of network or information technology security could have an adverse effect on our business.

Cyber-attacks or other breaches of network or IT security may cause equipment failures or disrupt our systems and operations. We may be subject to attempts to breach the security of our networks and IT infrastructure through cyber-attack, malware, computer viruses and other means of unauthorized access. The potential liabilities associated with these events could exceed the insurance coverage we maintain. Our inability to operate our facilities as a result of such events, even for a limited period of time, may result in significant expenses or loss of market share to other competitors in the defense electronics market. In addition, a failure to protect the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation. To date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material adverse effect on our business, operating results and financial condition.

The preparation of our financial statements involves use of estimates, judgments and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate.

Financial statements prepared in accordance with generally accepted accounting principles in the United States require the use of estimates, judgments, and assumptions that affect the reported amounts. Different estimates, judgments, and assumptions reasonably could be used that would have a material effect on the financial statements, and changes in these estimates, judgments, and assumptions are likely to occur from period to period in the future. These estimates, judgments, and assumptions are inherently uncertain, and, if they prove to be wrong, then we face the risk that charges to income will be required.

Our results could be adversely affected by natural disasters, public health crises, political crises, or other catastrophic events.

Natural disasters, such as hurricanes, tornadoes, floods, earthquakes, and other adverse weather and climate conditions; unforeseen public health crises, such as pandemics and epidemics; political crises, such as terrorist attacks, war, labor unrest, and other political instability; or other catastrophic events, such as disasters occurring at our manufacturing facilities, could disrupt our operations or the operations of one or more of our vendors. In particular, these types of events could impact our product supply chain from or to the impacted region and could impact our ability to operate. In addition, these types of events could negatively impact consumer spending in the impacted regions. Disasters occurring at our manufacturing facilities could impact our reputation and our customers’ perception of our brands. To the extent any of these events occur, our operations and financial results could be adversely affected.

Worldwide and domestic economic trends and financial market conditions, including an economic decline in the agricultural industry, may adversely affect our operating performance.

We intend to distribute in a number of countries and derive revenues from both inside and outside the United States. We expect our business will be subject to global competition and may be adversely affected by factors in the United States and other countries that are beyond our control, such as disruptions in financial markets, economic downturns in the form of either contained or widespread recessionary conditions, elevated unemployment levels, sluggish or uneven recovery, in specific countries or regions, or in the agricultural industry; social, political or labor conditions in specific countries or regions; natural and other disasters affecting our operations or our customers and suppliers; or adverse changes in the availability and cost of capital, interest rates, tax rates, or regulations in the jurisdictions in which we operate. Unfavorable global or regional economic conditions, including an economic decline in the agricultural industry, could adversely impact our business, liquidity, financial condition and results of operations.

For certain of the components included in our products there are a limited number of suppliers we can rely upon and if we are unable to obtain these components when needed we could experience delays in the manufacturing of our products and our financial results could be adversely affected.

We acquire most of the components for the manufacture of our products from suppliers and subcontractors. We have not entered into any agreements or arrangements with any potential suppliers or subcontractors. Suppliers of some of the components may require us to place orders with significant lead-times to assure supply in accordance with our manufacturing requirements. Our present lack of working capital may cause us to delay the placement of such orders and may result in delays in supply. Delays in supply may significantly hurt our ability to fulfill our contractual obligations and may significantly hurt our business and result of operations. In addition, we may not be able to continue to obtain such components from these suppliers on satisfactory commercial terms. Disruptions of our manufacturing operations would ensue if we were required to obtain components from alternative sources, which would have an adverse effect on our business, results of operations and financial condition.

We indemnify our officers and directors against liability to us and our security holders, and such indemnification could increase our operating costs.

Our bylaws allow us to indemnify our officers and directors against claims associated with carrying out the duties of their offices. Our bylaws also allow us to reimburse them for the costs of certain legal defenses. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our officers, directors or control persons, the Commission has advised that such indemnification is against public policy and is therefore unenforceable.

Risks Associated with our Securities

One of our stockholders beneficially owns a majority of our outstanding capital stock and will have the ability to control our affairs.

Our Chief Executive Officer and President, Bret Chilcott, currently owns approximately 83% of our issued and outstanding capital stock, and upon the completion of the Merger, will own approximately [49.9]% (assuming no conversion or exercise of convertible securities, but including outstanding stock options and warrants). By virtue of his holdings, he may influence the election of the members of our board of directors, our management and our affairs, and may make it difficult for us to consummate corporate transactions such as mergers, consolidations or the sale of all or substantially all of our assets that may be favorable from our standpoint or that of our other stockholders.

We do not know whether an active, liquid and orderly trading market will develop for our common stock

An active trading market for our securities may not develop or be sustained after the completion of the Merger. The lack of an active or liquid market may impair your ability to sell our securities at the time you wish to sell them or at a price that you consider reasonable.

The market price of our securities may be volatile and may fluctuate in a way that is disproportionate to our operating performance.

Following the Merger, our securities may experience substantial volatility as a result of a number of factors, including, among others:

	·	sales or potential sales of substantial amounts of our common stock;

	·	announcements about us or about our competitors or new product introductions;

	·	developments concerning our product manufacturers;

	·	the loss or unanticipated underperformance of our global distribution channel;

	·	litigation and other developments relating to our patents or other proprietary rights or those of our competitors;

	·	conditions in the UAV industry;

	·	governmental regulation and legislation;

	·	variations in our anticipated or actual operating results;

	·	changes in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations;

	·	foreign currency values and fluctuations; and

	·	overall political and economic conditions.

Many of these factors are beyond our control. The stock markets have historically experienced substantial price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market price of our securities, regardless of our actual operating performance.

We do not intend to pay cash dividends. As a result, capital appreciation, if any, will be your sole source of gain.

During the years ended December 31, 2016 and 2015, we paid cash distributions to Bret Chilcott, in the amounts of $0 and $98,591, respectively. However, we currently intend to retain future earnings, if any, to fund the development and growth of our business. In addition, the terms of existing and future debt agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Provisions in the articles of incorporation and by-laws of EnerJex, and Nevada law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of the articles of incorporation and by-laws of EnerJex, and Nevada law may have the effect of deterring unsolicited takeovers or delaying or preventing a change in control of our company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:

	·	the inability of stockholders to call special meetings; and
	·	the ability of our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors.

The existence of the forgoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our securities.

The Financial Industry Regulatory Authority, Inc. (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our securities, which may have the effect of reducing the level of trading activity, resulting in fewer broker-dealers who are willing to make a market in our securities, potentially reducing a stockholder’s ability to resell our securities.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, the price of our securities and trading volume could decline.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the price of our securities or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, the price of our securities could decline.

AGEAGLE DIRECTORS AND EXECUTIVE OFFICERS

AgEagle’s directors and executive officers (each of who we intend to hold the same position of the surviving company following the Merger), their ages and date of appointment to their respective officers as of the date of this Current Report, are as follows:

Name	Position	Age	Appointment Date
*Executive Officers* :
Bret Chilcott	Chief Executive Officer, President, Secretary and Director	58	April 2014
Nicole Fernandez-McGovern	Chief Financial Officer	44	April 2016

*Directors* :
Lindsay Edwards	Non-Executive Director	35	March 2016
Grant Begley (1)(2)(3)	Independent Director	65	June 2016
Scott Burell (1)(2)(3)	Independent Director	52	June 2016
Thomas Gardner (1)(2)(3)	Independent Director	41	June 2016

(1)

Member of the Audit Committee.

(2)

Member of the Compensation Committee.

(3)

Member of the Nominating and Corporate Governance Committee.

All of our executive officers work full-time for us. There are no family relationships between any director or executive officer. During the past five years, none of the persons identified above has been involved in any bankruptcy or insolvency proceeding or convicted in a criminal proceeding, excluding traffic violations and other minor offenses.

Bret Chilcott. Mr. Chilcott has served as a member of our board of directors and as President since the inception of the Company in April 2014 and as Chief Executive Officer since February 2016. The path to AgEagle started when Mr. Chilcott established his advanced composite manufacturing company, Solutions by Chilcott, LLC, whose manufacturing processes led the way to the initial AgEagle fixed wing design. Previously, Mr. Chilcott spent over 12 years with Cobalt Boats in Neodesha, Kansas, where he held a variety of positions from Director of Product Development and Engineering to Director of Sales and Marketing. In those positions, he was responsible for developing strategic product plans for the company as well as the management of regional sales managers. Prior to Cobalt Boats, Mr. Chilcott also spent a number of years working at the Cessna Aircraft Company and Snap-on Tools. It was at Snap-on Tools, acting as a national accounts manager, that Mr. Chilcott first established his blueprint for a dealer network, a model which he carried over successfully to AgEagle when AgEagle began selling its product. Mr. Chilcott graduated from Kansas Community College in 1982 with a degree in Sales and Marketing. We believe that Mr. Chilcott’s background and experience in composite parts manufacturing provides him with a broad familiarity of the range of issues confronting our company in the market, which makes him a qualified member of our board.

Nicole Fernandez-McGovern. Ms. Fernandez-McGovern has served as our Chief Financial Officer since April 2016. From April 2013 to January 2016, Ms. Fernandez-McGovern served as the CEO and CFO of Trunity Holdings, Inc. (OTCQB: TNTY), where she was able to lead a successful restructuring of the company by acquiring a new compounding pharmacy business and finalizing the spin-out of the legacy educational business into a newly formed private company. From January 2011 to April 2013, Ms. Fernandez-McGovern was President of RCM Financial Consulting, a consulting firm where she provided interim accounting and financial services to small and medium sized companies. Ms. Fernandez-McGovern was also a financial manager at Elizabeth Arden, Inc. (NASDAQ: RDEN) from July 2001 to October 2010, where she was involved in all aspects of the SEC and financial reporting process. Her career began with KPMG LLP in the audit and assurance practice where she managed various large scale engagements for both public and privately held companies. Ms. Fernandez-McGovern has a Master of Business Administration with a concentration in Accounting and International Business and a Bachelor of Business Administration with a concentration in accounting, both from the University of Miami. She is also a Certified Public Accountant in the State of Florida, serves on the boards of the South Florida Chapter of Financial Executives International and Pembroke Pines Charter Schools Advisory Board and is fluent in Spanish.

Lindsay Edwards. Ms. Edwards has served as a member of our board of directors since March 2016. Since September 2012, Ms. Edwards has served as in-house legal counsel for Raven Industries, Inc. (NASDAQ: RAVN). From September 2010 to September 2012, Ms. Edwards was an associate in the litigation section at May & Johnson, PC in Sioux Falls, SD. Her legal career started in 2006 in Omaha, NE, where she was an associate with Husch Blackwell LLP. Her primary practice areas were corporate litigation, employment law, corporate governance and contracting. Throughout her career, Ms. Edwards has represented an array of clients spanning from small community businesses to Fortune 500 companies. Ms. Edwards received her Juris Doctor from the University of Arkansas School of Law in 2006. Prior to attending law school, Ms. Edwards received her Bachelor of Science in Criminal Justice and Psychology from the University of South Dakota. We believe that Ms. Edwards’ legal background and experience as in-house legal counsel for Raven, along with her broad understanding of our business, are valuable resources to our board.

Grant Begley. Mr. Begley has served as a member of our board of directors since June 2016. Since July 2011, Mr. Begley has served as President of Concepts to Capabilities Consulting LLC, which advises global executive clients on competitive positioning and performance in aerospace. From August 2010 to September 2011, Mr. Begley was Corporate Senior Vice President for Alion Science and Technology. Prior to Alion, Mr. Begley served as Pentagon Senior Advisor to the Office of the Under Secretary of Defense, for Unmanned Systems, advising on critical issues and leading development of DoD’s 2011 Unmanned Systems Roadmap. Mr. Begley’s career includes defense industry leadership positions for the development of advanced capabilities with Raytheon and Lockheed Martin where he initiated and led cross-corporation unmanned systems and robotics successes. Mr. Begley served in the United States Navy for 26 years, where his duties included operational assignments flying fighter aircraft, designated Top Gun, followed by acquisition assignments for the development and management of next generation manned and unmanned aircraft systems, weapon systems and joint executive acquisition assignments. Mr. Begley holds Master’s degrees in Aerospace and Aeronautic Engineering from the Naval Post-Graduate School and a Bachelor’s degree in General Engineering from the U.S. Naval Academy. We believe that Mr. Begley’s 20 plus years of experience as a UAV industry expert, focused on UAV technologies, regulations and commercial applications, will be an invaluable resource to our board.

Scott Burell. Mr. Burell has served as a member of our board of directors since June 2016. Since November 2006, he has served as the Chief Financial Officer, Secretary and Treasurer of CombiMatrix Corporation (NASDAQ: CBMX), a publicly traded diagnostics laboratory providing DNA-based testing in the field of reproductive healthcare, located in Irvine, California. Mr. Burell served as CombiMatrix’s Vice President of Finance since November 2001 and as Controller from February 2001 to November 2001. From May 1999 to February 2001, Mr. Burell was the Controller for Network Commerce, Inc. (NASDAQ: SPNW), a publicly traded technology and information infrastructure company located in Seattle, Washington. Prior to this, Mr. Burell spent nine years with Arthur Andersen’s Audit and Business Advisory practice in Seattle. During his tenure in public accounting, Mr. Burell worked with many clients, both public and private, in the high-tech and healthcare markets, and was involved in numerous public offerings, spin-offs, mergers and acquisitions. Mr. Burell has been a licensed C.P.A. in the State of Washington since 1992 (currently inactive). Mr. Burell also serves on the Board of Directors of Microbot Medical, Inc. (NASDAQ: MBOT), an Israeli-based medical device company specializing in the researching, designing, developing and commercializing of transformational micro-robotics medical technologies. He is a member of the National Association of Corporate Directors, the Orange County chapter of the Forum for Corporate Directors and is a member of the American Institute of Certified Public Accountants. He holds Bachelor of Science degrees in both Accounting and Business Finance from Central Washington University. We believe that Mr. Burell’s background in accounting and experience as a chief financial officer of a public company, coupled with his corporate governance expertise, qualify Mr. Burell as a valuable member of our board.

Thomas Gardner. Mr. Gardner has served as a member of our board of directors since June 2016 and will be engaged as a consultant in 2017. Since May 2010, Mr. Gardner has served as COO and Director at NeuEon, Inc., a technology advisory consulting firm, where he oversees operations and provides strategic technology and business guidance to select clients. Mr. Gardner has extensive experience in the areas of business and technology leadership across many industries, including financial services, manufacturing, telecommunications and consumer goods. Within these sectors, Mr. Gardner has specific expertise in the areas of process improvement, digitization and standardization, mergers and acquisitions, system implementations, enterprise resource planning and work-force optimization. Mr. Gardner holds a dual Bachelor of Science in Accounting and Management from Bryant University. We believe that Mr. Gardner’s experience as a data analytics expert, along with his strategic technology and business expertise, brings a unique perspective to our board.

Forward Looking Statements

Statements in this Current Report on Form 8-K (the “Form 8-K”) regarding the proposed Merger, the timing, conditions to and anticipated completion of the proposed Merger, the expected ownership of the combined company and the combined company’s board of directors constitute forward-looking statements. Any statements that are not purely statements of historical fact should also be considered to constitute forward-looking statements. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including the risk that the Company and AgEagle may not be able to complete the proposed Merger and other risks and uncertainties more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC, its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed contemporaneously with this Form 8-K, as well as the other filings that the Company makes with the SEC. Investors and security holders are also urged to read the risk factors set forth in the proxy statement carefully when they are available.

In addition, the statements made in this Form 8-K reflect our expectations and beliefs as of the date of the filing of the Form 8-K. We anticipate that subsequent events and developments will cause our expectations and beliefs to change. However, while we may elect to update these forward-looking statements publicly at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events or otherwise. These forward-looking statements should not be relied upon as representing our views as of any date after the date of filing of this Form 8-K.

Important Information and Where to Find It

This Form 8-K does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. A definitive proxy statement and a proxy card will be filed with the SEC and will be mailed to the Company’s stockholders seeking any required stockholder approvals in connection with the proposed transactions. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Stockholders may obtain, free of charge, copies of the definitive proxy statement and any other documents filed by EnerJex with the SEC in connection with the proposed transactions at the SEC’s website (http://www.sec.gov), at EnerJex’ website, or by directing written request to: EnerJex Resources, Inc., 4040 Broadway, Suite 425, San Antonio, Texas 78209, Attention: Louis G. Schott, Interim CEO.

The Company and its directors and executive officers and AgEagle and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the proposed transaction. Information regarding the special interests of these directors and executive officers in the merger will be included in the proxy statement referred to above. Additional information regarding the directors and executive officers of the Company is also included in the Company’s Definitive Proxy Statement on Schedule 14A relating to the 2016 Annual Meeting of Stockholders, which was filed with the SEC on April 7, 2017. This document is available free of charge at the SEC web site (www.sec.gov), at the Company’s website, or by directing a written request to the Company as described above.

Item 3.01.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not compliance with certain NYSE American (“NYSE American”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE Company Guide (the “Company Guide”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017 advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

The Company intends to submit a plan by the November 19, 2017 deadline. The plan will be based in significant part upon the merger and the associated financing. The Company expects that its common stock will continue to be listed on the NYSE American while the Company seeks to regain compliance with the listing standard noted, subject to the Company’s compliance with other continued listing requirements. If the Company fails to submit a plan or if the Company’s plan is not accepted then the NYSE American may commence delisting procedures. Upon completion of the Merger, the Company will be required to satisfy all applicable requirements for the initial listing on the NYSE American.

Item 3.02.

Unregistered Sales of Equity Securities.

Pursuant to the Merger, the Company will issue unregistered shares of Company common stock to the stockholders of AgEagle with respect to the Merger. The number of shares to be issued, the nature of the transaction and the nature and amount of consideration received by the Company are described in Item 1.01 of this Form 8-K, which is incorporated by reference into this Item 3.02.

The shares to be issued by the Company to the stockholders of AgEagle in the Merger and related transactions will be issued exempt from registration under Section 4(a)(2) of the Securities Act of 1933 because the offer and sale of such securities does not involve a “public offering” as defined in Section 4(a)(2) of the Securities Act of 1933, and other applicable requirements were met.

Item 7.01.

Regulation FD Disclosure.

The information set forth in Item 3.01 of this Current Report on Form 8-K is incorporated herein by reference.

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits

Exhibit No.		Description

2.1		Agreement and Plan of Merger and Reorganization, dated as of October 19, 2017, by and among EnerJex Resources, Inc., AgEagle Merger Sub, Inc., and AgEagle Aerial Systems, Inc.*

10.1		Voting Agreement, dated as of October 19, 2017, by and among EnerJex Resources, Inc. and a principal stockholder of AgEagle.

23.1		Consent of D. Brooks and Associates CPA’s, P.A., independent registered public accounting firm.

99.1		Audited Financial Statements of AgEagle Aerial Systems, Inc. for the years ended December 31, 2016 and 2015.

99.2		Unaudited Financial Statements of AgEagle Aerial Systems, Inc. as of June 30, 2017.

99.3		Press Release dated October 20, 2017

The schedules to the Agreement and Plan of Merger have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally a copy of any omitted schedules to the Securities and Exchange Commission upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

October 20, 2017	EnerJex Resources, Inc.


	/s/ Louis G. Schott
	Name:	Louis G. Schott
	Title:	Interim Chief Executive Officer

Exhibit Index

Exhibit No.		Description

2.1		Agreement and Plan of Merger and Reorganization, dated as of October 19, 2017, by and among EnerJex Resources, Inc., AgEagle Merger Sub, Inc., and AgEagle Aerial Systems, Inc.*

10.1		Voting Agreement, dated as of October 19, 2017, by and among EnerJex Resources, Inc. and a principal stockholder of AgEagle.

23.1		Consent of D. Brooks and Associates CPA’s, P.A., independent registered public accounting firm.

99.1		Audited Financial Statements of AgEagle Aerial Systems, Inc. for the years ended December 31, 2016 and 2015.

99.2		Unaudited Financial Statements of AgEagle Aerial Systems, Inc. as of June 30, 2017.

99.3		Press Release dated October 20, 2017

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of October 19, 2017, is made and entered into by and among RESOURCES, INC., a Nevada corporation (the “ Parent ”), AGEAGLE MERGER SUB, INC., a Nevada corporation and a direct wholly owned subsidiary of Parent (“ Merger Sub ” and, together with Parent, the “ EnerJex Parties ” or the “ Buyer Entities ”), AGEAGLE AERIAL SYSTEMS, INC., a Nevada corporation (“ AgEagle ”), BRET CHILCOTT (the “ AgEagle Principal Shareholder ”) and the representative of the shareholders of AgEagle (the “ Shareholders’ Representative ”) set forth on Exhibit A to this Agreement (the “ AgEagle Shareholders ”), with reference to the following facts:

RECITALS:

A. The parties intend that at the Effective Time, Merger Sub shall be merged with and into AgEagle pursuant to the Merger as more fully described in this Agreement and on the terms and subject to the conditions set forth in this Agreement.

B. The Board of Directors of Parent has (a) unanimously determined that it is in the best interests of Parent and its stockholders, and declared it advisable, to enter into this Agreement, (b) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the Merger and (c) resolved to recommend that Parent stockholders approve the “ Proxy Statement Proposals ” (as defined in Section 5.7 hereof) which include, among other things, the issuance of Parent Common Stock to the AgEagle Shareholders in connection with the Merger (“ Parent Stockholder Approval ”).

C. The Board of Directors of AgEagle has (i) unanimously determined that it is in the best interests of AgEagle and the AgEagle Shareholders, and declared it advisable, to enter into this Agreement, (ii) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the Merger, and (iii) resolved to recommend that the AgEagle Shareholders adopt this Agreement (the “ AgEagle Shareholder Approval ”).

D. For U.S. federal income tax purposes, it is intended that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Treasury Regulations promulgated thereunder.

E. Parent and Merger Sub, on the one hand, and AgEagle, the AgEagle Principal Shareholder and the AgEagle Shareholders, on the other hand (each, a “ Party, ” collectively the “ Parties ”), desire to make certain representations, warranties, covenants and agreements specified herein in connection with this Agreement.

AGREEMENTS:

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the Parties hereto agree as follows:

ARTICLE I

THE TRANSACTIONS

Section 1.1 THE MERGER

(a) At the Effective Time, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the applicable provisions of Chapter 78 and 92A of the Nevada Revised Statutes (the “ NRS ”), Merger Sub shall be merged with and into AgEagle (the “ Merger ”), whereupon the separate corporate existence of Merger Sub shall cease, and AgEagle shall continue its existence under Nevada law as the surviving corporation in the Merger and a direct wholly owned subsidiary of Parent. AgEagle as the surviving corporation after the Merger is hereinafter sometimes referred to as the “ Surviving Corporation .” The name of the Surviving Corporation shall continue to be “AgEagle Aerial Systems, Inc.”

(b) On the Closing Date, Parent, Merger Sub and AgEagle shall file with the Secretary of State of the State of Nevada articles of merger (the “ Articles of Merger ”), executed in accordance with, and containing such information as is required by, the relevant provisions of the NRS, in order to effect the Merger. The Merger shall become effective at such time as the Articles of Merger have been filed or at such other, later date and time as is agreed among the parties and specified in the Articles of Merger in accordance with the relevant provisions of the NRS (such date and time is referred to herein as the “ Effective Time ”).

Section 1.2 CLOSING . The closing of the Transactions (the “ Closing ”) shall take place either electronically or at the offices of Loeb & Loeb LLP, 345 Park Avenue, New York, New York 10154, at 10:00 a.m., local time, on such date that the conditions set forth in ARTICLE VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions) have been satisfied or waived, or at such other place, date and time as the parties may agree in writing. The date on which the Closing actually occurs is referred to as the “ Closing Date ”.

Section 1.3 EFFECT OF THE MERGER . The effects of the Merger shall be as provided in this Agreement and in the applicable provisions of the NRS. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, agreements, powers and franchises of AgEagle and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of AgEagle and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.4 ORGANIZATIONAL DOCUMENTS . At the Effective Time, the articles of incorporation and bylaws of AgEagle shall be the articles of incorporation and bylaws of the Surviving Corporation in the Merger.

Section 1.5 DIRECTORS OF SURVIVING CORPORATION . Subject to applicable Law, the directors of AgEagle immediately prior to the Effective Time shall be, as of the Effective Time, the directors of the Surviving Corporation in the Merger and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

Section 1.6 OFFICERS OF SURVIVING CORPORATION . The officers of AgEagle immediately prior to the Effective Time shall be the officers of the Surviving Corporation in the Merger and shall hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

ARTICLE II

CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES

Section 2.1 EFFECT ON CAPITAL STOCK .

(a) Effect of Effective Time. At the Effective Time, by virtue of the Merger and without any action on the part of AgEagle or the Merger Sub or the holder of any shares of the common stock, par value $0.0001, per share of AgEagle (the “ AgEagle Common Stock ”) or shares of Merger Sub Common Stock:

(i) Conversion of Merger Sub Common Stock . Each share of Merger Sub common stock, par value $0.0001 per share (“ Merger Sub Common Stock ”) shall no longer be outstanding and shall automatically be cancelled and shall cease to exist as of the Effective Time.

(ii) Conversion of AgEagle Common Stock . The shares of AgEagle Common Stock issued and outstanding immediately prior to the Effective Time (assuming conversion of the Convertible Debentures), other than any Dissenting Shares, shall immediately after the Effective Time be converted automatically into the right to receive an aggregate number of validly issued, fully paid and non-assessable shares of Parent Common Stock equal to 85% of the then issued and outstanding capital stock of the Parent on a fully diluted basis (the “ Exchange Ratio ”) subject to the assumptions in Section 2.1(a)(iv) and adjustment pursuant to Section 2.1(c) (such per share amount referred to hereinafter as the “ Merger Consideration ”).

(iii) Conversion of AgEagle Stock Options. Each AgEagle stock option issued and outstanding immediately prior to the Effective Time that had been granted pursuant to the AgEagle Stock Option Plan (the “ AgEagle Stock Option ”) or outside of such AgEagle Stock Option Plan shall be converted automatically into a stock option to purchase shares of Parent Common Stock under the Proposed Parent Equity Incentive Plan. The number of shares exercisable under the AgEagle Stock Options shall be adjusted pursuant to the Exchange Ratio, and the exercise price of each AgEagle Stock Option shall have a corresponding adjustment pursuant to the terms thereof.

(iv) Effect of Conversion of AgEagle Common Stock . Each certificate that, immediately prior to the Effective Time, represented any such shares of AgEagle Common Stock (an “ AgEagle Certificate ”) shall thereafter represent only the right to receive the shares of Parent Common Stock into which the shares of AgEagle Common Stock represented by such AgEagle Certificate have been converted (assuming conversion of the Convertible Debentures) pursuant to this Section 2.1, equal to 85% of the then issued and outstanding capital stock of the Parent on a fully diluted basis (assuming (i) the conversion of all outstanding shares of the Parent’s Series A Preferred Stock and (ii) the exercise of all outstanding Parent warrants, but excluding (x) the conversion of all outstanding shares of the Parent’s Series B and Series C Preferred Stock and the exercise of any outstanding stock options, (y) the issuance of any Parent securities in connection with the contemplated financing of the Parent to occur simultaneously with the closing of the transactions contemplated by this Agreement and (z) any securities issued in connection with the transactions contemplated by Section 5.7(f) of this Agreement).

(b) Shares of Dissenting Stockholders . Notwithstanding anything in this Agreement to the contrary, any issued and outstanding shares of AgEagle Common Stock held by a person (a “ Dissenting Stockholder ”) who has not voted in favor of, or consented to, the adoption of this Agreement and has complied with all the provisions of the NRS concerning the right of holders of shares of AgEagle Common Stock to demand appraisal of their shares (the “ Appraisal Provisions ”) of AgEagle Common Stock (such shares, the “ Dissenting Shares ”), to the extent the Appraisal Provisions are applicable, shall not be converted into the right to receive shares of Parent Common Stock as set forth in Section 2.1(a)(ii) , but instead shall become the right to receive such consideration as may be determined to be due to such Dissenting Stockholder pursuant to the procedures set forth in the NRS. If such Dissenting Stockholder withdraws its demand for appraisal or fails to perfect or otherwise loses its right of appraisal, in any case pursuant to the NRS, each of such Dissenting Stockholder’s shares of AgEagle Common Stock shall thereupon be deemed to have been converted into and to have become, as of the Effective Time, the right to receive shares of Parent Common Stock as set forth in Section 2.1(a)(ii) . AgEagle shall give Parent prompt notice of any demands for appraisal of shares received by AgEagle, withdrawals of such demands and any other instruments served pursuant to the NRS and shall give Parent the opportunity to participate in all negotiations and proceedings with respect thereto. AgEagle shall not, without the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands.

(c) Recapitalization Adjustment . If, between the date of this Agreement and the Effective Time, the outstanding shares of Parent Common Stock shall have been changed into a different number of shares or a different class of shares by reason of any stock dividend, subdivision, reorganization, reclassification, recapitalization, stock split, reverse stock split, combination or exchange of shares, or any similar event shall have occurred, then the Exchange Ratio shall be equitably adjusted, without duplication, to proportionally reflect such change; provided that nothing in this Section 2.1(c) shall be construed to permit any party to take any action with respect to its securities that is prohibited by the terms of this Agreement.

(d) No Fractional Shares . No fractional shares of Parent Common Stock shall be issued as Merger Consideration. Any fractional shares will be rounded to the nearest whole share.

Section 2.2 EXCHANGE OF CERTIFICATES .

(a) Payment of Merger Consideration . On the Closing Date, Parent shall deliver stock certificates in the name of each of the AgEagle Shareholders in the amount of the Merger Consideration due to each such AgEagle Shareholder as set forth on set forth on Exhibit A .

(b) Surrender of Certificates . On the Closing Date, each AgEagle Shareholder shall surrender all of its shares of AgEagle Common Stock to Parent for cancellation. In the event of a transfer of ownership of shares of AgEagle Common Stock that is not registered in the transfer or stock records of AgEagle, any dividends or other distributions to be paid upon, or Merger Consideration to be issued upon due surrender of the AgEagle Certificate formerly representing such shares of AgEagle Common Stock may be paid or issued, as the case may be, to such a transferee if such AgEagle Certificate is presented to the Parent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer or other similar Taxes have been paid or are not applicable. No interest shall be paid or shall accrue on dividends or other distributions upon surrender of any AgEagle Certificate. Until surrendered as contemplated by this Section 2.2 , each AgEagle Certificate shall be deemed at any time after the Effective Time to represent only the right to receive, with respect to Certificates, upon such surrender, the Merger Consideration deliverable in respect of the shares represented by such AgEagle Certificates pursuant to this Agreement, together with and any dividends or other distributions to which such holder of Certificates becomes entitled in accordance with Section 2.2(e) .

(c) Treatment of Unexchanged Shares . No dividends or other distributions, if any, with a record date after the Effective Time with respect to Merger Consideration, shall be paid to the holder of any unsurrendered AgEagle Certificate until such holder shall surrender such AgEagle Certificates in accordance with this Section 2.2 . After the surrender in accordance with this Section 2.2 of such AgEagle Certificates, the holder thereof shall be entitled to receive any such dividends or other distributions, without any interest thereon, which theretofore had become payable with respect to the Merger Consideration to be issued in exchange for such Certificates.

(d) No Further Ownership Rights in Exchanged Shares . The Merger Consideration delivered in accordance with the terms of this Section 2.2 upon conversion of any shares of AgEagle Common Stock delivered in accordance with the terms of this Section 2.2 , shall be deemed to have been delivered and paid in full satisfaction of all rights pertaining to such shares of AgEagle Common Stock. From and after the Effective Time, (i) all holders of AgEagle Certificates shall cease to have any rights as stockholders of AgEagle other than the right to receive the Merger Consideration into which the shares represented by such AgEagle Certificates have been converted pursuant to this Agreement upon the surrender of such AgEagle Certificate in accordance with Section 2.2(d) (together with any dividends or other distributions to which such AgEagle Certificates become entitled in accordance with Section 2.2(c) ), without interest, and (ii) the stock transfer books of AgEagle shall be closed with respect to all shares of AgEagle Common Stock outstanding immediately prior to the Effective Time. If, after the Effective Time, any AgEagle Certificates formerly representing shares of AgEagle Common Stock are presented to the Parent for any reason, such AgEagle Certificates shall be cancelled and exchanged as provided in this Section 2.2 , subject to applicable Law in the case of Dissenting Shares.

(e) Lost Certificates . If any AgEagle Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit and indemnification of that fact by the person claiming such AgEagle Certificate to be lost, stolen or destroyed, the transfer agent of Parent shall deliver, in exchange for such lost, stolen or destroyed AgEagle Certificate, the Merger Consideration, and any dividends and distributions deliverable in respect thereof pursuant to this Agreement.

(f) Deductions and Withholding . Each AgEagle Shareholder shall provide Parent with an Internal Revenue Service Form W-9 certifying that the AgEagle Shareholder is not subject to backup withholding. If the AgEagle Shareholder does not provide such certification to the reasonable satisfaction of Parent, Parent shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable pursuant to this Agreement to the Stockholder such amounts as may be required by applicable Law. To the extent any amount is so deducted or withheld, such amount shall be treated for all purposes under this Agreement as having been paid to the AgEagle Shareholder.

Section 2.3 FURTHER ASSURANCES . If at any time before or after the Effective Time, any party reasonably believes or is advised that any further instruments, deeds, assignments or assurances are reasonably necessary or desirable to consummate the Merger or any other transaction contemplated by this Agreement (the “ Transactions ”) or to carry out the purposes and intent of this Agreement at or after the Effective Time, then the parties and their respective officers and directors shall execute and deliver all such proper instruments, deeds, assignments or assurances and do all other things reasonably necessary or desirable to consummate the Transactions and to carry out the purposes and intent of this Agreement.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF AGEAGLE

Except as disclosed in the disclosure schedule delivered by AgEagle to Parent immediately prior to the execution of this Agreement (the “ AgEagle Disclosure Schedules ”) (each section of which qualifies the correspondingly numbered representation, warranty or covenant if specified therein and such other representations, warranties or covenants where its relevance as an exception to (or disclosure for purposes of) such other representation, warranty or covenant is reasonably apparent), AgEagle and the AgEagle Principal Shareholder hereby represent and warrant to Parent as follows:

Section 3.1 QUALIFICATION, ORGANIZATION, ETC.

(a) AgEagle is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted, except where the failure to have such power or authority would not have, individually or in the aggregate, a Material Adverse Effect. AgEagle is duly qualified or licensed, and has all necessary governmental approvals, to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such approvals, qualification or licensing necessary, except where the failure to be so duly approved, qualified or licensed and in good standing would not have, individually or in the aggregate, a Material Adverse Effect.

(b) AgEagle has made available prior to the date of this Agreement a true and complete copy of its articles of incorporation and bylaws (collectively, the “ AgEagle Organizational Documents ”).

Section 3.2 CAPITAL STOCK, SUBSIDIARIES .

(a) The authorized capital stock of AgEagle consists of 95,000,000 shares of AgEagle Common Stock and 5,000,000 shares of preferred stock. As of the date of this Agreement, AgEagle has (i) 4,200,000 shares of AgEagle Common Stock issued and outstanding; (ii) no shares of preferred stock issued and outstanding; (iii) 1,000,000 shares of AgEagle Common Stock reserved for issuance under the 2016 AgEagle Stock Option Plan of which 560,100 have been issued plus an additional 125,000 options that have been issued outside of the 2016 AgEagle Stock Option Plan; (iv) 486,461 shares reserved for issuance under the Convertible Debentures and a promissory note per accrued interest as of September 30, 2017; and (v) 400,000 shares reserved for issuance upon the exercise of warrants issued to a noteholder in February 2017. All outstanding shares of AgEagle Common Stock are, and shares of AgEagle Common Stock reserved for issuance with respect to AgEagle Stock Options and the Convertible Debentures, when issued in accordance with the respective terms thereof, will be, duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights. All capital stock of AgEagle has been issued in compliance with applicable state and federal securities laws.

(b) Except as set forth in Section 3.2(a) or on Schedule 3.2(b ) of the AgEagle Disclosure Schedule, there are no outstanding subscriptions, options, warrants, calls, convertible securities, exchangeable securities or other similar rights, agreements or commitments to which AgEagle is a party (i) obligating AgEagle to (A) issue, transfer, exchange, sell or register for sale any shares of capital stock or other equity interests of AgEagle or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, or (D) make any payment to any person the value of which is derived from or calculated based on the value of AgEagle Common Stock, or (ii) granting any preemptive or antidilutive or similar rights with respect to any security issued by AgEagle.

(c) AgEagle does not have outstanding bonds, debentures (other than the Convertible Debentures), notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of AgEagle on any matter.

(d) There are no voting trusts or other agreements or understandings to which AgEagle is a party with respect to the voting or registration of the capital stock or other equity interest of AgEagle.

(e) AgEagle does not own, directly or indirectly, any equity interest in any person (or any security or other right, agreement or commitment convertible or exercisable into, or exchangeable for, any equity interest in any person). AgEagle has no obligation to acquire any equity interest in, any person.

Section 3.3 CORPORATE AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION .

(a) AgEagle has the requisite corporate power and authority to execute and deliver this Agreement and each other document to be entered into by AgEagle in connection with the Transactions (together with this Agreement, the “ Transaction Documents ”) and, subject to the adoption of this Agreement and the AgEagle Shareholder Approval, to consummate the Transactions. Bret Chilcott, who owns approximately 83% of the issued and outstanding shares of common stock of AgEagle, has executed and delivered to the Parent a voting agreement pursuant to which Mr. Chilcott has agreed to vote such shares in favor of the Proxy Statement Proposals. The execution and delivery of this Agreement and the other Transaction Documents and the consummation of the Transactions have been duly and validly authorized by the Board of Directors of AgEagle and, except for the AgEagle Shareholder Approval, no other corporate proceedings on the part of AgEagle or vote of any shareholders are necessary to authorize the consummation of the Transactions. The Board of Directors of AgEagle have (i) resolved to recommend that the AgEagle Shareholders adopt this Agreement (the “ Recommendation ”), (ii) determined that this Agreement and the Merger are advisable and fair to and in the best interests of the AgEagle Shareholders, (iii) approved this Agreement and the Merger, and (iv) directed that the adoption of this Agreement be submitted to the AgEagle Shareholders for approval. Each of the Transaction Documents has been duly and validly executed and delivered by AgEagle and, assuming each such Transaction Document constitutes the legal, valid and binding agreement of the counterparty thereto, each of the Transaction Documents constitutes the legal, valid and binding agreement of AgEagle and is enforceable against AgEagle in accordance with its terms, except as such enforcement may be subject to (A) the effect of bankruptcy, insolvency, reorganization, receivership, conservatorship, arrangement, moratorium or other Laws affecting or relating to creditors’ rights generally or (B) the rules governing the availability of specific performance, injunctive relief or other equitable remedies and general principles of equity, regardless of whether considered in a proceeding in equity or at law (the “ Remedies Exception ”).

(b) Other than in connection with or in compliance with (i) the filing of the Articles of Merger with the Secretary of State of Nevada, (ii) the Securities Act , and (iii) applicable state securities, takeover and “blue sky” Laws, (collectively, the “ Approvals ”), no authorization, consent, order, license, permit or approval of, or registration, declaration, notice or filing with, any United States, state of the United States or foreign governmental or regulatory agency, commission, court, body, entity or authority (each, a “ Governmental Entity ”) is necessary, under applicable Law, for the consummation by AgEagle of the Transactions, except for such authorizations, consents, orders, licenses, permits, approvals or filings that are not required to be obtained or made prior to consummation of the Transactions or that, if not obtained or made, would not have, individually or in the aggregate, a Material Adverse Effect.

(c) The execution and delivery by AgEagle of this Agreement does not, and (assuming the Approvals are obtained) the consummation of the Transactions and compliance with the provisions hereof will not (i) result in any loss, or suspension, limitation or impairment of any right of AgEagle to own or use any assets required for the conduct of their business or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, first offer, first refusal, modification or acceleration of any material obligation or to the loss of a benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract, instrument, permit, concession, franchise, right or license binding upon AgEagle or by which or to which any of its respective properties, rights or assets are bound or subject, or result in the creation of any liens, claims, mortgages, encumbrances, pledges, security interests, equities or charges of any kind (each, a “ Lien ”) other than Permitted Liens, in each case, upon any of the properties or assets of AgEagle, (ii) conflict with or result in any violation of any provision of the articles of incorporation or bylaws or other equivalent organizational document, in each case as amended or restated, of AgEagle or (iii) conflict with or violate any applicable Laws, except in the case of clauses (i) and (iii) for such losses, suspensions, limitations, impairments, conflicts, violations, defaults, terminations, cancellation, accelerations, or Liens as would not have, individually or in the aggregate, a Material Adverse Effect.

Section 3.4 FINANCIAL STATEMENTS . Schedule 3.4 of the AgEagle Disclosure Schedule sets forth (i) AgEagle’s audited financial statements (balance sheet, profit and loss statement, statement of stockholders’ equity and statement of cash flows) for the fiscal years ended December 31, 2015 and 2016, (ii) AgEagle’s unaudited financial statements (balance sheet, profit and loss statement, statement of stockholders’ equity and statement of cash flows) for the six-month period ended June 30, 2017 (the “ Balance Sheet Date “), and (iii) a reasonable estimate of AgEagle’s cash and cash equivalent balances and current liabilities as of the date of this Agreement (together with (i) and (ii), the “ AgEagle Financial Statements ”). The AgEagle Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the interim financial statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes (that, if presented, would not differ materially from those presented in the audited financial statements). The AgEagle Financial Statements are based on the books and records of AgEagle, and fairly present in all material respects the financial condition as of the respective dates they were prepared and the results of the operations for the periods indicated. The unaudited balance sheet of AgEagle as of the Balance Sheet Date is referred to hereinafter as the “Current Balance Sheet”.

Section 3.5 [INTENTIONALLY OMITTED] .

Section 3.6 NO UNDISCLOSED LIABILITIES . There are no liabilities or obligations of AgEagle, whether accrued, absolute, determined or contingent, that would be required by GAAP to be reflected on a balance sheet of AgEagle (including the notes thereto) except for (i) liabilities or obligations disclosed and provided for in the balance sheets included in the AgEagle Financial Statements (or in the notes thereto), (ii) liabilities or obligations incurred in accordance with or in connection with this Agreement, (iii) liabilities or obligations incurred since December 31, 2016 in the ordinary course of business, (iv) liabilities or obligations that have been discharged or paid in full, and (v) liabilities or obligations that have not had and would not have, individually or in the aggregate, a Material Adverse Effect. Except as disclosed in the AgEagle Financial Statements, AgEagle is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation.

Section 3.7 COMPLIANCE WITH LAW; PERMITS .

(a) AgEagle has been and is in compliance with, and is not in default under or in violation of, any applicable federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, settlement or agency requirement of any Governmental Entity (collectively, “ Laws ” and each, a “ Law ”), except where such non-compliance, default or violation have not had and would not have, individually or in the aggregate, a Material Adverse Effect. Since December 31, 2015, AgEagle has not received any written notice or, to AgEagle’s knowledge, other communication from any Governmental Entity regarding any actual or possible violation of, or failure to comply with, any Law, none of which is a liability resulting from non-compliance in any material respect with any applicable laws or permits, breach of contract, breach of warranty, tort infringement, claim or lawsuit.

(b) AgEagle is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals, clearances, permissions, qualifications and registrations and orders of all applicable Governmental Entities, necessary for AgEagle to own, lease and operate its properties and assets and to carry on its businesses as it’s now being conducted (the “ Permits ”), except where the failure to have any of the Permits or to have filed for such Permits would not have, individually or in the aggregate, a Material Adverse Effect. All Permits are valid and in full force and effect and are not subject to any administrative or judicial proceeding that could result in modification, termination or revocation thereof, except where the failure to be in full force and effect or any modification, termination or revocation thereof would not have, individually or in the aggregate, a Material Adverse Effect. AgEagle is in compliance with the terms and requirements of all Permits, except where the failure to be in compliance would not have, individually or in the aggregate, a Material Adverse Effect.

(c) Since December 31, 2015, (i) none of AgEagle, nor any director, officer, employee, auditor, accountant or representative of AgEagle, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding accounting, internal accounting controls or auditing practices, procedures, methodologies or methods of AgEagle or any material concerns from employees of AgEagle regarding questionable accounting or auditing matters with respect to AgEagle, and (ii) no attorney representing AgEagle, whether or not employed by AgEagle, has reported in writing evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by AgEagle, or its officers, directors, employees or agents to the Board of Directors of AgEagle or any committee thereof, or to the Chief Executive Officer of AgEagle.

Section 3.8 [INTENTIONALLY OMITTED] .

Section 3.9 EMPLOYEE BENEFIT PLANS . Other than as set forth on Schedule 3.9 of the AgEagle Disclosure Schedules, AgEagle does not and has never maintained, administered or contributed to any employee benefit plan.

Section 3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS .

(a) From January 1, 2017 through the date of this Agreement, the businesses of AgEagle has been conducted in all material respects in the ordinary course of business, and AgEagle has not undertaken any action that would be prohibited by Section 5.1(b) of this Agreement if such section were in effect at all times since January 1, 2017.

(b) Since January 1, 2017, there has not been any event, change, effect, development or occurrence that, individually or in the aggregate, has had a Material Adverse Effect.

Section 3.11 INVESTIGATIONS; LITIGATION . (a) there is no investigation or review pending (or, to the knowledge of AgEagle, threatened) by any Governmental Entity with respect to AgEagle, (b) there are no actions, suits (or, to the knowledge of AgEagle, inquiries), investigations, proceedings, subpoenas, civil investigative demands or other requests for information by any Governmental Entity or any other Person relating to potential violations of Law pending (or, to the knowledge of AgEagle, threatened) against or affecting AgEagle, or any of its properties and (c) there are no orders, judgments, awards or decrees of any Governmental Entity against AgEagle. To AgEagle’s knowledge, no event has occurred or circumstances exist that may reasonably give rise to or serve as a basis for a claim for any such action.

Section 3.12 INFORMATION SUPPLIED . The information supplied or to be supplied by AgEagle in writing expressly for inclusion in the Parent SEC Documents and in the Proxy Statement will not, at the time of filling of any such Parent SEC Documents, or when the Proxy Statement is first mailed to the stockholders of Parent, and at the time of the Parent Stockholder Meeting , contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by AgEagle with respect to statements made or incorporated by reference therein based on information supplied by any Buyer Entity in writing expressly for inclusion therein. The Proxy Statement (solely with respect to the portion thereof based on information supplied or to be supplied by AgEagle in writing expressly for inclusion therein but excluding any portion thereof based on information supplied by any Buyer Entity in writing expressly for inclusion therein, with respect to which no representation or warranty is made by AgEagle) will comply as to form in all material respects with the provisions of the Exchange Act.

Section 3.13 REGULATORY MATTERS . AgEagle is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the U.S. Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

Section 3.14 TAX MATTERS . Except as would not have, individually or in the aggregate, a Material Adverse Effect:

(a) (A) AgEagle has timely filed all Tax Returns with the appropriate Taxing Authority required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct in all material respects, and (B) all Taxes due and owing by AgEagle (whether or not shown on such filed Tax Returns), including Taxes required to be collected or withheld from payments to employees, independent contractors, creditors, shareholders or other third parties, have been paid, except in each case of clause (A) and (B) for amounts being contested in good faith by appropriate proceedings or for which adequate reserves have been maintained in accordance with GAAP and in each case reflected on the AgEagle Financial Statements or in the Notes thereto.

(b) (A) No deficiencies for Taxes with respect to AgEagle have been claimed, proposed or assessed by any Taxing Authority that have not been settled and paid or adequately reserved in accordance with GAAP, (B) as of the date hereof, there are no pending, or to AgEagle’s knowledge, threatened, audits, assessments or other actions for or relating to any liability in respect of Taxes of AgEagle, and (C) AgEagle has not waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(d) AgEagle has not participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

(e) No claim has been made by any Taxing Authority in a jurisdiction where AgEagle does not file Tax Returns that AgEagle is or may be subject to taxation by that jurisdiction, other than any such claims that have been resolved.

(f) AgEagle is not a party to any Tax allocation, sharing, indemnity, or reimbursement agreement or arrangement (excluding any such agreements pursuant to customary provisions in contracts not primarily related to Taxes).

(g) No foreign, federal, state or local Tax audits, examinations, investigations, suits, claims, administrative or judicial Tax proceedings or other actions are, outstanding, pending or being conducted, or, to AgEagle’s knowledge, threatened against or with respect to, and there are no Tax matters under discussion with any Taxing Authority concerning any Tax return or Tax reasonably expected to result in a Tax liability of, AgEagle.

(h) AgEagle has not received from any foreign, federal, state or local Taxing Authority (including jurisdictions where AgEagle has not filed Tax returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (ii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any Taxing Authority against AgEagle.

(i) AgEagle has not been a member of an affiliated group within the meaning of Section 1504(a) of the Code (or any similar group defined under a similar provision of foreign, state or local Law), , and AgEagle does not have any liability for Taxes of any other person under Treasury Regulation Section 1.1502-6 (or any similar provision of foreign, state or local Law), as a transferee or successor, by contract or otherwise.

(j) Within the last two years AgEagle has not been a party to any transaction intended to qualify under Section 355 of the Code.

(k) AgEagle is not aware of any fact, nor has AgEagle taken or agreed to take any action that would reasonably be expected to prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

Section 3.15 EMPLOYMENT AND LABOR MATTERS . As of the date hereof, AgEagle is not, and has not been, a party to any collective bargaining agreement, labor union contract, or trade union agreement (each a “ Collective Bargaining Agreement ”), and no employee is represented by a labor organization for purposes of collective bargaining with respect to AgEagle. To the knowledge of AgEagle, as of the date hereof, there are no activities or proceedings of any labor or trade union to organize any employees of AgEagle. As of the date hereof, no Collective Bargaining Agreement is being negotiated by AgEagle. As of the date hereof, there is no strike, lockout, slowdown, or work stoppage against AgEagle pending or, to the knowledge of AgEagle, threatened, that may interfere in any material respect with the business activities of AgEagle taken as a whole. Except as would not have, individually or in the aggregate, a Material Adverse Effect, there is no pending charge or complaint against AgEagle by the National Labor Relations Board or any comparable Governmental Entity, and AgEagle is not a party, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating to employees or employment practices. Except as would not have, individually or in the aggregate, a Material Adverse Effect, AgEagle has complied with all applicable Laws regarding employment and employment practices, terms and conditions of employment and wages and hours (including classification of employees) and other applicable Laws in respect of any reduction in force, including notice, information and consultation requirements. There are no outstanding assessments, penalties, fines, Liens, charges, surcharges, or other amounts due or owing by AgEagle pursuant to any workplace safety and insurance/workers’ compensation Laws.

Section 3.16 INTELLECTUAL PROPERTY . Except as would not have, individually or in the aggregate, a Material Adverse Effect, AgEagle owns, or is licensed or otherwise possesses valid rights to use, free and clear of Liens other than Permitted Liens, all trademarks, trade names, service marks, service names, mark registrations, logos, assumed names, domain names, registered and unregistered copyrights, patents or applications and registrations, trade secrets and other intellectual property rights necessary to their respective businesses as currently conducted (collectively, the “ Intellectual Property ”). Schedule 3.16 of the AgEagle Disclosure Schedule sets forth all of AgEagle’s Intellectual Property. Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) there are no pending or, to the knowledge of AgEagle, threatened claims by any person alleging infringement, misappropriation or other violation by AgEagle of any intellectual property rights of any person, (ii) the conduct of the business of AgEagle does not infringe, misappropriate or otherwise violate any intellectual property rights of any person, (iii) AgEagle has not made any claim of a violation, infringement or misappropriation by others of AgEagle’s rights to or in connection with the Intellectual Property, and (iv) to the knowledge of AgEagle, no person is infringing, misappropriating or otherwise violating any Intellectual Property.

Section 3.17 PROPERTIES .

(a) AgEagle has a good and valid leasehold interest in each material lease, sublease and other agreement under which AgEagle uses or occupies or has the right to use or occupy any material real property (or real property at which material operations of AgEagle are conducted) (such property subject to a lease, sublease or other agreement, the “ AgEagle Leased Real Property ” and such leases, subleases and other agreements are, collectively, the “ AgEagle Real Property Leases ”), in each case, free and clear of all Liens other than any Permitted Liens, and other than any conditions, encroachments, easements, rights-of-way, restrictions and other encumbrances that do not adversely affect the existing use of the real property subject thereto by the owner (or lessee to the extent a leased property) thereof in the operation of its business. Each AgEagle Real Property Lease is valid, binding and in full force and effect, subject to the Remedies Exception, and (B) no uncured default of a material nature on the part of AgEagle or, to the knowledge of AgEagle, the landlord thereunder, exists under any AgEagle Real Property Lease, and no event has occurred or circumstance exists which, with or without the giving of notice, the passage of time, or both, would constitute a material breach or default under a AgEagle Real Property Lease. Schedule 3.17(a) of the AgEagle Disclosure Schedule sets forth the AgEagle Real Property Leases.

(b) Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) there are no leases, subleases, licenses, rights or other agreements affecting any portion of the AgEagle Leased Real Property that would reasonably be expected to adversely affect the existing use of such AgEagle Leased Real Property by AgEagle in the operation of its business thereon, and (iii) AgEagle is not currently subleasing, licensing or otherwise granting any person the right to use or occupy a material portion of a AgEagle Leased Real Property that would reasonably be expected to adversely affect the existing use of such AgEagle Leased Real Property by AgEagle in the operation of its business thereon.

Section 3.18 INSURANCE . AgEagle maintains insurance in such amounts and against such risks as is reasonably customary for the industry in which it operates and as the management of AgEagle has in good faith determined to be prudent and appropriate. All insurance policies maintained by or on behalf of AgEagle as of the date of this Agreement are in full force and effect, and all premiums due on such policies have been paid by AgEagle. Except as would not have, individually or in the aggregate, a Material Adverse Effect, AgEagle are in compliance with the terms and provisions of all insurance policies maintained by or on behalf of AgEagle as of the date of this Agreement, and AgEagle is not in breach or default under, nor has taken any action that would permit termination or material modification of, any material insurance policies.

Section 3.19 INVENTORY . All Inventory, whether or not reflected in the AgEagle Financial Statements, consists of a quality and quantity usable and salable in the ordinary course of business consistent with past practice, except for obsolete, damaged, defective or slow-moving items that have been written off or written down to fair market value or for which adequate reserves have been established. All Inventory is owned by AgEagle free and clear of all Liens, and no Inventory is held on a consignment basis. The quantities of each item of Inventory (whether raw materials, work-in-process or finished goods) are not excessive, but are reasonable in the present circumstances of AgEagle.

Section 3.20 MATERIAL CONTRACTS .

(a) Each Material Contract is a valid and binding agreement, and is in full force and effect, and AgEagle is not, and to the knowledge of AgEagle, no other party thereto, is in breach or default (whether with or without the passage of time or the giving of notice or both) under the terms of any such Material Contract. AgEagle has not assigned, delegated, or otherwise transferred any of its rights or obligations with respect to any Material Contracts, or granted any power of attorney with respect thereto or to AgEagle’s assets. Except as listed on Schedule 3.20 of the AgEagle Disclosure Schedules, no Material Contract (i) requires AgEagle to post a bond or deliver any other form of security or payment to secure its obligations thereunder or (ii) imposes any non-competition covenants that may be binding on, or restrict the Business. AgEagle has given to Parent true and correct (A) fully executed copies of each written Material Contract and (B) written summaries of each oral Material Contract, if any. Schedule 3.20 of the AgEagle Disclosure Schedule sets forth a list of each Material Contract.

(b) Except for this Agreement, and the agreements set forth on Schedule 3.20 of the AgEagle Disclosure Schedules, as of the date of this Agreement, AgEagle is not a party to or bound by:

(i) any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC);

(ii) any Contract that (A) expressly imposes any restriction on the right or ability of AgEagle to compete with any other person or acquire or dispose of the securities of another person, or (B) contains an exclusivity or “most favored nation” clause that restricts the business of AgEagle in a material manner;

(iii) any mortgage, note, debenture, indenture, security agreement, guaranty, pledge or other agreement or instrument evidencing indebtedness for borrowed money or any guarantee of such indebtedness of AgEagle in an amount in excess of $100,000;

(iv) any Contract that provides for the acquisition, disposition, license, use, distribution or outsourcing of assets, services, rights or properties with a value, or requiring the payment of an annual amount by AgEagle, in excess of $100,000;

(v) any joint venture, partnership or limited liability company agreement or other similar Contract relating to the formation, creation, operation, management or control of any joint venture, partnership or limited liability company;

(vi) any Contract expressly limiting or restricting the ability of AgEagle to make distributions or declare or pay dividends in respect of their capital stock, partnership interests, membership interests or other equity interests, as the case may be; or

(vii) any Contract that obligates AgEagle to make any loans, advances or capital contributions to, or investments in, any person.

All contracts of the types referred to in clauses (i) through (vii) above are referred to herein as “ AgEagle Material Contracts ”.

(c) Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) AgEagle is not in breach of or default under the terms of any AgEagle Material Contract, (ii) to the knowledge of AgEagle, no other party to any AgEagle Material Contract is in breach of or default under the terms of any AgEagle Material Contract and (iii) each AgEagle Material Contract is a valid and binding obligation of AgEagle that is party thereto and, to the knowledge of AgEagle, of each other party thereto, and is in full force and effect, subject to the Remedies Exception.

Section 3.21 FINDERS OR BROKERS . Except as set forth on Schedule 3.21 of the AgEagle Disclosure Schedules, AgEagle has not employed any investment banker, broker or finder in connection with the Transactions who would be entitled to any fee or any commission in connection with or upon consummation of the Merger.

Section 3.22 FULL DISCLOSURE . No representation or warranty by AgEagle or the AgEagle Shareholders in this Agreement and no statement contained in the AgEagle Disclosure Schedules to this Agreement or any certificate or other document furnished or to be furnished to the Buyer Entities pursuant to this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in light of the circumstances in which they are made, not misleading.

Section 3.24 NO ADDITIONAL REPRESENTATIONS .

(a) AgEagle acknowledges that no Buyer Entity makes any representation or warranty as to any matter whatsoever except as expressly set forth in ARTICLE IV or in any certificate delivered by Parent to AgEagle in accordance with the terms hereof, and specifically (but without limiting the generality of the foregoing) that no Buyer Entity makes any representation or warranty with respect to (i) any projections, estimates or budgets delivered or made available to AgEagle (or any of its affiliates, officers, directors, employees or Representatives) of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of Parent and its respective Subsidiaries or (ii) the future business and operations of Parent and its respective Subsidiaries, and AgEagle has not relied on such information or any other representation or warranty not set forth in ARTICLE IV .

(b) AgEagle has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of Parent and its Subsidiaries and acknowledges that AgEagle has been provided access for such purposes. Except for the representations and warranties expressly set forth in ARTICLE IV or in any certificate delivered to AgEagle by Parent in accordance with the terms hereof, in entering into this Agreement, AgEagle has relied solely upon its independent investigation and analysis, and AgEagle acknowledges and agrees that it has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made by Parent or any of its respective Subsidiaries, affiliates, stockholders, controlling persons or Representatives that are not expressly set forth in ARTICLE IV or in any certificate delivered by Parent to AgEagle, whether or not such representations, warranties or statements were made in writing or orally. AgEagle acknowledges and agrees that, except for the representations and warranties expressly set forth in ARTICLE IV or in any certificate delivered by Parent to AgEagle: (i) Buyer Entities do not make, and have not made, any representations or warranties relating to themselves or their businesses or otherwise in connection with the Transactions and AgEagle is not relying on any representation or warranty except for those expressly set forth in this Agreement, (ii) no person has been authorized by any of the Buyer Entities to make any representation or warranty relating to themselves or their business or otherwise in connection with the Transactions, and if made, such representation or warranty must not be relied upon by AgEagle as having been authorized by such party, and (iii) any estimates, projections, predictions, data, financial information, memoranda, presentations or any other materials or information provided or addressed to AgEagle or any of its Representatives are not and shall not be deemed to be or include representations or warranties unless any such materials or information is the subject of any express representation or warranty set forth in ARTICLE IV .

ARTICLE IIIA

REPRESENTATIONS AND WARRANTIES OF AGEAGLE SHAREHOLDERS

Each AgEagle Shareholder, including the AgEagle Principal Shareholder, severally, but not jointly, and only with respect to itself or himself, represents and warrants to the Buyer Entities on the date hereof, that the statements in this Article IIIA are true and correct.

Section 3A.1 Title . The AgEagle Shareholder has good and valid title to the shares of AgEagle Common Stock described as owned by that AgEagle Shareholder on Exhibit A , free and clear of any and all Liens. The AgEagle Shareholder does not owe any Indebtedness to AgEagle that arises from the AgEagle Shareholder’s purchase of any shares of AgEagle Common Stock.

Section 3A.2 Authority . The AgEagle Shareholder has the full right, power, legal capacity and authority to enter into and perform its obligations under this Agreement, to vote its shares of AgEagle Common Stock for the transactions contemplated by this Agreement, to transfer and deliver to the Parent at the Closing its respective AgEagle Certificate for the shares of AgEagle Common Stock set forth on Exhibit A as owned by the AgEagle Shareholder and, upon consummation of the Merger contemplated hereby, the Parent will acquire from the AgEagle Shareholder good and valid title to the AgEagle Certificates (and all rights represented thereby).

Section 3A.3 Authorization. The execution, delivery and performance by the AgEagle Shareholder if it is a business entity of (to the extent a party thereto) this Agreement, any other agreements contemplated hereby and the Transactions contemplated hereby or thereby have been duly and validly authorized by the AgEagle Shareholder, and no other act or proceeding on the part of the AgEagle Shareholder, its board of directors, managers, or its stockholders, members or partners is necessary to authorize the execution, delivery or performance by AgEagle Shareholder to this Agreement or any other agreement contemplated hereby or the consummation of the Transactions contemplated hereby or thereby and it has duly executed and delivered this Agreement.

Section 3A.4 No Impediment . The AgEagle Shareholder is not a party to, subject to or bound by any stockholder, voting, or other agreement, or any judgment, order, writ, prohibition, injunction or decree of any court or other Governmental Entity which would prevent the execution or delivery of this Agreement by the AgEagle Shareholder, its authorization or consummation of the Transactions contemplated herein, or the performance by the AgEagle Shareholder of the AgEagle Shareholders’ obligations under this Agreement and the agreements and documents contemplated hereby.

Section 3A.5 Adverse Proceedings . No action or proceeding by or before any court or other Governmental Entity has been instituted or threatened against the AgEagle Shareholder by any Governmental Entity or Person whatsoever seeking to restrain, prohibit or invalidate the Merger or any other transactions contemplated by this Agreement, affecting the right of the Parent to own AgEagle or operate the business after the Closing, or affecting the performance by the AgEagle Shareholder of the AgEagle Shareholders’ obligations under this Agreement and the agreements and documents contemplated hereby.

Section 3A.6 Enforceability . The execution, delivery and performance by the AgEagle Shareholder of this Agreement and the consummation by the AgEagle Shareholder of the Merger or other transactions contemplated hereby will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any Law, applicable to the AgEagle Shareholder or its assets, if such AgEagle Shareholder is an entity, (b) violate any judgment, decree, order or award of any court, Governmental Entity or arbitrator; or (c) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any Lien upon the properties or assets of any AgEagle Shareholder, under or pursuant to, any Contract, indenture, mortgage, deed of trust or other instrument or agreement to which the AgEagle Shareholder is a party. This Agreement has been duly executed and delivered by the Shareholders’ Representative on behalf of each AgEagle Shareholder, and constitutes the legal valid and binding obligation of each AgEagle Shareholder enforceable against each such AgEagle Shareholder in accordance with its terms. The other documents and agreements contemplated by this Agreement to which the AgEagle Shareholder is or will become a party, when executed and delivered by the Shareholders’ Representative on behalf of each AgEagle Shareholder, shall constitute the legal, valid and binding agreements of each AgEagle Shareholder, enforceable against each AgEagle Shareholder in accordance with their terms.

Section 3A.7 Status of AgEagle Shareholders . Each AgEagle Shareholder is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, or such AgEagle Shareholder has sufficient knowledge and experience in financial and business matters to make such AgEagle Shareholder capable of evaluating the merits and risks of the issuance of the securities in the Merger.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARIES

Except as disclosed in Parent SEC Documents filed prior to the date hereof (excluding any disclosures set forth in any such Parent SEC Document in any risk factor section, any forward-looking disclosure in any section relating to forward-looking statements or any other statements that are non-specific, predictive or primarily cautionary in nature other than historical facts included therein), where the relevance of the information as an exception to (or disclosure for purposes of) a particular representation is reasonably apparent on the face of such disclosure, or in the disclosure schedule delivered by Parent to AgEagle immediately prior to the execution of this Agreement (the “ Parent Disclosure Schedule ”) (each section of which qualifies the correspondingly numbered representation, warranty or covenant if specified therein and such other representations, warranties or covenants where its relevance as an exception to (or disclosure for purposes of) such other representation, warranty or covenant is reasonably apparent), Parent represents and warrants to AgEagle as follows:

Section 4.1 QUALIFICATION, CAPITALIZATION

(a) Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Nevada and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted. Each of Parent’s Subsidiaries is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted, except where the failure to have such power or authority would not have, individually or in the aggregate, a Material Adverse Effect. Each of Parent and its Subsidiaries is duly qualified or licensed, and has all necessary approvals, to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such approvals, qualification or licensing necessary, except where the failure to be so duly approved, qualified or licensed and in good standing would not have, individually or in the aggregate, a Material Adverse Effect.

(b) Parent has made available prior to the date of this Agreement a true and complete copy of its articles of incorporation and bylaws (the “ Parent Organizational Documents ”).

(c) The authorized capital stock of Parent consists of 250,000,000 shares of Parent Common Stock and 25,000,000 shares of Preferred Stock. As of the date of this Agreement, (i) 10,321,397 shares of Parent Common Stock were issued and outstanding, (ii) 938,238 shares of Parent Series A Preferred Stock issued and outstanding, (iii) 1,764 shares of Parent Series B Preferred Stock issued and outstanding; (iv) 450 shares of Parent Series C Preferred Stock were issued and outstanding with an additional 150 shares reserved for issuance as of June 30, 2017 for funds received from an investor, and (v) 6,000,000 shares of Parent Common Stock were reserved for issuance under the Parent Stock Option Plan, of which reserved shares a total of 157,664 shares of Parent Common Stock are issuable upon the exercise of outstanding Parent Stock Options. All outstanding shares of Parent Common Stock are, and shares of Parent Common Stock reserved for issuance with respect to Parent Stock Options, when issued in accordance with the respective terms thereof, will be, duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights.

(d) Except as set forth in Section 4.1(b) (and other than (i) the shares of Parent Common Stock issuable pursuant to the terms of outstanding Parent Stock Options, Parent Series A Preferred Stock, Parent Series B Preferred Stock and Parent Series C Preferred Stock, and (ii) the right of the Parent Series A Preferred Stock, Parent Series B Preferred Stock and Parent Series C Preferred Stock to receive priority cash distributions), there are no outstanding subscriptions, options, warrants, calls, convertible securities, exchangeable securities or other similar rights, agreements or commitments to which Parent or any of its Subsidiaries is a party (i) obligating Parent or any of its Subsidiaries to (A) issue, transfer, exchange, sell or register for sale any shares of capital stock or other equity interests of Parent or any Subsidiary or securities convertible into or exchangeable for such shares or equity interests, (B) grant, extend or enter into any such subscription, option, warrant, call, convertible securities or other similar right, agreement or arrangement, (C) redeem or otherwise acquire any such shares of capital stock or other equity interests, (D) provide a material amount of funds to, or make any material investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary or (E) make any payment to any person the value of which is derived from or calculated based on the value of Parent Common Stock, or (ii) granting any preemptive or antidilutive or similar rights with respect to any security issued by Parent or its Subsidiaries. No Subsidiary of Parent owns any shares of capital stock of Parent.

(e) Neither Parent nor any of its Subsidiaries has outstanding bonds, debentures, notes or other indebtedness, the holders of which have the right to vote (or which are convertible or exchangeable into or exercisable for securities having the right to vote) with the stockholders of Parent on any matter.

(f) There are no voting trusts or other agreements or understandings to which Parent or any of its Subsidiaries is a party with respect to the voting or registration of the capital stock or other equity interest of Parent or any of its Subsidiaries.

(g) Parent or a Subsidiary of Parent owns, directly or indirectly, all of the issued and outstanding shares of capital stock or other equity interests of each Subsidiary of Parent, free and clear of any preemptive rights and any Liens other than Permitted Liens, and all of such shares of capital stock or other equity interests are duly authorized, validly issued, fully paid and nonassessable and free of preemptive rights. Except for equity interests in Parent’s Subsidiaries and for the interests described in Section 4.1(g) of the Disclosure Schedule, neither Parent nor any of its Subsidiaries owns, directly or indirectly, any equity interest in any person (or any security or other right, agreement or commitment convertible or exercisable into, or exchangeable for, any equity interest in any person). Neither Parent nor any of its Subsidiaries has any obligation to acquire any equity interest in, any person.

Section 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT; NO VIOLATION .

(a) Each of the EnerJex Parties has all necessary power and authority to execute and deliver this Agreement and each other Transaction Document to be entered into by Parent and Merger Sub, subject, in the case of Parent, to the Parent Stockholder Approval of the Proxy Statement Proposals at the Parent Stockholder Meeting at which a quorum is present. The execution, delivery and performance by EnerJex Parties of this Agreement and the other Transaction Documents and the consummation by each of them of the Merger and the other transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of each Buyer Entity, and no other action on the part of any Buyer Entity is necessary to authorize the execution and delivery by any Buyer Entity of this Agreement and the other Transaction Documents and the consummation of the Merger. The Board of Directors of Parent, acting in accordance with the recommendation of the Special Committee of the Board of Directors of Parent, if any, has approved this Agreement and the Transactions, including the Merger. This Agreement has been duly executed and delivered by each Buyer Entity and, assuming due and valid authorization, execution and delivery hereof by AgEagle, is the valid and binding obligation of each Buyer Entity enforceable against each of them in accordance with its terms, subject to the Remedies Exception.

(b) Other than in connection with or in compliance with (i) the filing of the Articles of Merger with the Secretary of State of the State of Nevada, (ii) the Exchange Act, (iii) the Securities Act, (iv) applicable state securities, takeover and “blue sky” Laws, (v) the rules and regulations of FINRA or the NYSE American, and (vi) the approvals set forth in Section 4.2(b) of Parent Disclosure Schedule (collectively, the “ Parent Approvals ”), and, subject to the accuracy of the representations and warranties of AgEagle in Section 3.3(b) , no authorization, consent, order, license, permit or approval of, or registration, declaration, notice or filing with, any Governmental Entity is necessary, under applicable Law, for the consummation by any Buyer Entity of the Transactions, except for such authorizations, consents, orders, licenses, permits, approvals or filings that are not required to be obtained or made prior to consummation of the Transactions or that, if not obtained or made, would not materially impede or delay the consummation of the Merger and the other Transactions or have, individually or in the aggregate, a Material Adverse Effect.

(c) The execution and delivery by EnerJex Parties of this Agreement do not, and (assuming Parent Approvals are obtained) the consummation of the Transactions and compliance with the provisions hereof will not (i) result in any loss, or suspension, limitation or impairment of any right of a Buyer Entity or its Subsidiaries to own or use any assets required for the conduct of its business or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation, first offer, first refusal, modification or acceleration of any material obligation or to the loss of a benefit under any loan, guarantee of indebtedness or credit agreement, note, bond, mortgage, indenture, lease, agreement, contract (including any Oil and Gas Lease or Oil and Gas Contract), instrument, permit, concession, franchise, right or license binding upon a Buyer Entity or any of its Subsidiaries or by which or to which any of its properties, rights or assets are bound or subject, or result in the creation of any Liens other than Permitted Liens, in each case, upon any of the properties or assets of a Buyer Entity or any of its Subsidiaries, (ii) conflict with or result in any violation of any provision of the certificate of incorporation, certificate of formation, bylaws, limited liability company agreement or other equivalent organizational document, in each case as amended or restated, of a Buyer Entity or any of its Subsidiaries or (iii) conflict with or violate any applicable Laws, except in the case of clauses (i) and (iii) for such losses, suspensions, limitations, impairments, conflicts, violations, defaults, terminations, cancellation, accelerations, or Liens as would not have, individually or in the aggregate, a Material Adverse Effect.

Section 4.3 REPORTS AND FINANCIAL STATEMENTS .

(a) Each of EnerJex Parties and each of its Subsidiaries has filed or furnished all forms, documents and reports required to be filed or furnished prior to the date hereof by it with the SEC since January 1, 2014 (all such documents and reports filed or furnished by a Buyer Entity or any of its Subsidiaries, the “ Parent SEC Documents ”). As of their respective dates or, if amended, as of the date of the last such amendment, Parent SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and none of Parent SEC Documents contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except that information set forth in Parent SEC Documents as of a later date (but before the date of this Agreement) will be deemed to modify information as of an earlier date.

(b) The consolidated financial statements (including all related notes and schedules) of each Buyer Entity included in the applicable Parent SEC Documents (the “ Parent Financial Statements ”) (i) fairly present in all material respects the consolidated financial position of such Buyer Entity and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended, (ii) were prepared in conformity with GAAP (except, in the case of the unaudited statements, subject to normal year-end audit adjustments and the absence of footnote disclosure) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto), (iii) comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act.

(c) As of the date hereof, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by Parent relating to Parent SEC Documents.

Section 4.4 INTERNAL CONTROLS AND PROCEDURES . Parent has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. Parent’s disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Parent in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Parent’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. Parent’s management has completed an assessment of the effectiveness of Parent’s internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2016, and such assessment concluded that such controls were effective.

Section 4.5 UNDISCLOSED LIABILITIES . Except as set forth on Schedule 4.5 to the Parent Disclosure Schedule, there are no liabilities or obligations of Parent or any of its Subsidiaries, whether accrued, absolute, determined or contingent, that would be required by GAAP to be reflected on a consolidated balance sheet of Parent and its consolidated Subsidiaries (including the notes thereto), except for (i) liabilities or obligations disclosed and provided for in the balance sheets included in Parent Financial Statements included in the applicable Parent SEC Documents filed and publicly available prior to the date of this Agreement, (ii) liabilities or obligations incurred in accordance with or in connection with this Agreement, (iii) liabilities or obligations that have been discharged or paid in full, (iv) liabilities or obligations incurred since December 31, 2016 in the ordinary course of business, and (v) liabilities or obligations that, individually or in the aggregate, have not had and would not have a Material Adverse Effect.

Section 4.6 COMPLIANCE WITH LAW; PERMITS .

(a) Each Buyer Entity and its Subsidiaries are in compliance with, and are not in default under or in violation of, any Laws, except where such non-compliance, default or violation would not have, individually or in the aggregate, a Material Adverse Effect. Since December 31, 2016, neither Parent nor any of its Subsidiaries has received any written notice or, to the knowledge of EnerJex Parties, other communication from any Governmental Entity regarding any actual or possible material violation of, or material failure to comply with, any Law, except as would not have, individually or in the aggregate, a Material Adverse Effect.

(b) EnerJex Parties and their Subsidiaries are in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals, clearances, permissions, qualifications and registrations and orders of all applicable Governmental Entities, and all rights under any Material Contract with all Governmental Entities, and have filed all tariffs, reports, notices and other documents with all Governmental Entities necessary for each of EnerJex Parties and their respective Subsidiaries to own, lease and operate their properties and assets and to carry on their businesses as they are now being conducted (the “ Parent Permits ”), except where the failure to have any of Parent Permits or to have filed such tariffs, reports, notices or other documents would not, individually or in the aggregate, have a Material Adverse Effect. All Parent Permits are valid and in full force and effect and are not subject to any administrative or judicial proceeding that could result in modification, termination or revocation thereof, except where the failure to be in full force and effect or any modification, termination or revocation thereof would not have, individually or in the aggregate, a Material Adverse Effect. Each Buyer Entity and each of its Subsidiaries is in compliance with the terms and requirements of all Parent Permits, except where the failure to be in compliance would not have, individually or in the aggregate, a Material Adverse Effect.

(c) Since December 31, 2016, (i) no Buyer Entity or any of its Subsidiaries nor, to the knowledge of Parent, any director, officer, employee, auditor, accountant or representative of either Buyer Entity or any of its Subsidiaries, has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding accounting, internal accounting controls or auditing practices, procedures, methodologies or methods of such Buyer Entity or any material concerns from employees of such Buyer Entity or any Subsidiary of such Buyer Entity regarding questionable accounting or auditing matters with respect to such Buyer Entity or any Subsidiary of such Buyer Entity, and (ii) to the knowledge of EnerJex Parties, no attorney representing either Buyer Entity or any of its Subsidiaries, whether or not employed by such Buyer Entity or any such Subsidiary, has reported in writing evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by such Buyer Entity, any Subsidiary of such Buyer Entity or any of their respective officers, directors, employees or agents to the Board of Directors of such Buyer Entity or any committee thereof, or to the Chief Executive Officer of such Buyer Entity.

Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS .

(a) From January 1, 2017 through the date of this Agreement, the businesses of each Buyer Entity and its Subsidiaries have been conducted in all material respects in the ordinary course of business, and no Buyer Entity or any Subsidiary of a Buyer Entity has undertaken any action that would be prohibited by Section 5.2 of this Agreement if such section were in effect at all times since January 1, 2017.

(b) Since January 1, 2017, there has not been any event, change, effect, development or occurrence that, individually or in the aggregate, has had a Material Adverse Effect.

Section 4.8 ENVIRONMENTAL LAWS AND REGULATIONS . Except as would not, individually or in the aggregate, have a Material Adverse Effect: (i) there are no investigations, actions, suits or proceedings (whether administrative or judicial) pending, or, to the knowledge of EnerJex Parties, threatened against any Buyer Entity or any of its Subsidiaries or any person or entity whose liability any Buyer Entity or any of its Subsidiaries has retained or assumed either contractually or by operation of Law, alleging non-compliance with or other liability under any Environmental Law and, to the knowledge of EnerJex Parties, there are no existing facts or circumstances that would reasonably be expected to give rise to any such action, suit or proceeding, (ii) each Buyer Entity and its Subsidiaries are, and except for matters that have been fully resolved with the applicable Governmental Entity, since December 31, 2014 have been, in compliance with all Environmental Laws (which compliance includes the possession by such Buyer Entity and each of its Subsidiaries of all Parent Permits required under applicable Environmental Laws to conduct their respective business and operations, and compliance with the terms and conditions thereof), (iii) there have been no releases at any location of Hazardous Materials by any Buyer Entity or any of its Subsidiaries that would reasonably be expected to give rise to any fine, penalty, remediation, investigation, obligation, injunction or liability of any kind to such Buyer Entity or its Subsidiaries, (iv) neither any Buyer Entity nor any of their Subsidiaries nor, to the knowledge of EnerJex Parties, any third-party operator of any of the Oil and Gas Interests of EnerJex Parties or any predecessor of any of them, is subject to any Order or any indemnity obligation or other Contract with any other person that would reasonably be expected to result in obligations or liabilities under applicable Environmental Laws or concerning Hazardous Materials or releases, and (v) no Buyer Entity nor any of its Subsidiaries has received any unresolved claim, notice, complaint or request for information or contribution from a Governmental Entity or any other person relating to actual or alleged noncompliance with or liability under applicable Environmental Laws (including any such liability or obligation arising under, retained or assumed by contract or by operation of Law).

Section 4.9 INVESTIGATIONS ; LITIGATION . Except as would not have, individually or in the aggregate, a Material Adverse Effect, or as set forth on Schedule 4.9 to the Parent Disclosure Schedule, (a) there is no investigation or review pending (or, to the knowledge of EnerJex Parties, threatened) by any Governmental Entity with respect to any Buyer Entity or any of its Subsidiaries, (b) there are no actions, suits (or, to the knowledge of EnerJex Parties, inquiries), investigations, proceedings, subpoenas, civil investigative demands or other requests for information by any Governmental Entity relating to potential violations of Law pending (or, to the knowledge of EnerJex Parties, threatened) against or affecting any Buyer Entity or any of its Subsidiaries, or any of their respective properties and (c) there are no orders, judgments or decrees of any Governmental Entity against any Buyer Entity or any of its Subsidiaries.

Section 4.10 INFORMATION SUPPLIED . The information supplied or to be supplied by EnerJex Parties in writing expressly for inclusion in the Proxy Statement shall not, at the time the Proxy Statement is first mailed to the stockholders of Parent, and at the time of any meeting of Parent stockholders to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by EnerJex Parties with respect to statements made or incorporated by reference therein based on information supplied by AgEagle in writing expressly for inclusion therein. The Proxy Statement (solely with respect to the portion thereof based on information supplied or to be supplied by a Buyer Entity in writing expressly for inclusion therein, but excluding any portion thereof based on information supplied by AgEagle in writing expressly for inclusion therein, with respect to which no representation or warranty is made by either Buyer Entity) will comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act.

Section 4.11 REGULATORY MATTERS .

(a) Neither Buyer Entity is (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the U.S. Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder or (ii) a “holding company,” a “subsidiary company” of a “holding company,” an affiliate of a “holding company,” a “public utility” or a “public-utility company,” as each such term is defined in the U.S. Public Utility Holding Company Act of 2005.

(b) All natural gas pipeline Systems and related facilities constituting EnerJex Parties’ and their Subsidiaries’ properties are (i) “gathering facilities” that are exempt from regulation by the U.S. Federal Energy Regulatory Commission under the Natural Gas Act of 1938, as amended, and (ii) not subject to rate regulation or comprehensive nondiscriminatory access regulation under the Laws of any state or other local jurisdiction.

(c) Except as set forth on Schedule 4.11(c) to the Parent Disclosure Schedule, Parent is in compliance with all continued listing standards and has not received a notice of delisting or failure to satisfy a continued listing rule or standard from the NYSE American, and Parent is current in payment of all NYSE American fees for continued listing.

Section 4.12 PROPERTIES .

(a) Except as would not have, individually or in the aggregate, a Material Adverse Effect, or as set forth on Schedule 4.17 to the Parent Disclosure Schedule, each Buyer Entity and its Subsidiaries have good and defensible title to all of the Oil and Gas Interests reflected in Parent Reserve Reports as attributable to interests owned by any Buyer Entity or any of their Subsidiaries, except for such Oil and Gas Interests sold, used, farmed out or otherwise disposed of since December 31, 2014 in the ordinary course of business, in each case free and clear of all Liens other than Permitted Liens and Production Burdens. Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) each Oil and Gas Lease to which any Buyer Entity or any of its Subsidiaries is a party is valid and in full force and effect, (ii) except for violations, acts or omissions that would not, individually or in the aggregate, have a Material Adverse Effect upon Parent, none of any Buyer Entity or any of their Subsidiaries has violated any provision of, or taken or failed to take any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of such Oil and Gas Lease, and (iii) none of EnerJex Parties or any of their Subsidiaries has received written notice from the other party to any such Oil and Gas Lease that a Buyer Entity or any of its Subsidiaries, as the case may be, has breached, violated or defaulted under any Oil and Gas Lease.

(b) Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) either Parent or a Subsidiary of Parent has good and valid title to each material real property (and each real property at which material operations of any Buyer Entity or any of its Subsidiaries are conducted) owned by any Buyer Entity or any Subsidiary (but excluding the Oil and Gas Interests of EnerJex Parties), other than Parent Real Property Leases (such owned property collectively, the “ Parent Owned Real Property ”) and (ii) either a Buyer Entity or a Subsidiary of a Buyer Entity has a good and valid leasehold interest in each material lease, sublease and other agreement under which any Buyer Entity or any of their Subsidiaries uses or occupies or has the right to use or occupy any material real property (or real property at which material operations of any Buyer Entity or any of their Subsidiaries are conducted) (but excluding the Oil and Gas Interests of EnerJex Parties) (such property subject to a lease, sublease or other agreement, the “ Parent Leased Real Property ” and such leases, subleases and other agreements are, collectively, the “ Parent Real Property Leases ”), in each case, free and clear of all Liens other than any Permitted Liens, and other than any conditions, encroachments, easements, rights-of-way, restrictions and other encumbrances that do not adversely affect the existing use of the real property subject thereto by the owner (or lessee to the extent a leased property) thereof in the operation of its business. Except as would not have, individually or in the aggregate, a Material Adverse Effect, (A) each Real Property Lease is valid, binding and in full force and effect, subject to the Remedies Exceptions and (B) no uncured default of a material nature on the part of any Buyer Entity or, if applicable, its Subsidiary or, to the knowledge of EnerJex Parties, the landlord thereunder, exists under any Parent Real Property Lease, and no event has occurred or circumstance exists which, with or without the giving of notice, the passage of time, or both, would constitute a material breach or default under a Parent Real Property Lease.

(c) Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) there are no leases, subleases, licenses, rights or other agreements affecting any portion of Parent Owned Real Property or Parent Leased Real Property that would reasonably be expected to adversely affect the existing use of such Parent Owned Real Property or Parent Leased Real Property by any Buyer Entity or its Subsidiaries in the operation of its business thereon, (ii) except for such arrangements solely among a Buyer Entity and its Subsidiaries or among any Buyer Entity’s Subsidiaries, there are no outstanding options or rights of first refusal in favor of any other party to purchase any Parent Owned Real Property or any portion thereof or interest therein that would reasonably be expected to adversely affect the existing use of Parent Owned Real Property by EnerJex Parties in the operation of their business thereon, and (iii) neither a Buyer Entity nor any of its Subsidiaries is currently subleasing, licensing or otherwise granting any person the right to use or occupy a material portion of a Parent Owned Real Property or Parent Leased Real Property that would reasonably be expected to adversely affect the existing use of such Parent Owned Real Property or Parent Leased Real Property by EnerJex Parties or their Subsidiaries in the operation of its business thereon.

(d) Except as would not have, individually or in the aggregate, a Material Adverse Effect, all proceeds from the sale of Hydrocarbons produced from the Oil and Gas Interests of EnerJex Parties are being received by EnerJex Parties in a timely manner and are not being held in suspense for any reason other than awaiting preparation and approval of division order title opinions for recently drilled Wells.

(e) All of the Wells and all water, CO ₂ or injection wells located on the Oil and Gas Leases or Units of EnerJex Parties and their Subsidiaries or otherwise associated with an Oil and Gas Interest of a Buyer Entity or its Subsidiaries have been drilled, completed and operated within the limits permitted by the applicable Oil and Gas Contracts and applicable Law, and all drilling and completion (and plugging and abandonment) of the Wells and such other wells and all related development, production and other operations have been conducted in compliance with all applicable Laws except, in each case, as would not have, individually or in the aggregate, a Material Adverse Effect.

(f) All Oil and Gas Interests operated by EnerJex Parties and their Subsidiaries have been operated in accordance with reasonable, prudent oil and gas field practices and in compliance with the applicable Oil and Gas Leases and applicable Law, except where the failure to so operate would not have, individually or in the aggregate, a Material Adverse Effect.

(g) None of the material Oil and Gas Interests of EnerJex Parties or their Subsidiaries is subject to any preferential purchase, consent or similar right that would become operative as a result of the Transactions, except for any such preferential purchase, consent or similar rights that would not have, individually or in the aggregate, a Material Adverse Effect.

(h) None of the Oil and Gas Interests of Parent or its Subsidiaries are subject to any Tax partnership agreement or provisions requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Code.

Section 4.13 INSURANCE . EnerJex Parties and their Subsidiaries maintain insurance in such amounts and against such risks substantially as EnerJex Parties believe to be customary for the industries in which they and their Subsidiaries operate and as the management of EnerJex Parties has in good faith determined to be prudent and appropriate. Except as would not have, individually or in the aggregate, a Material Adverse Effect, all insurance policies maintained by or on behalf of EnerJex Parties or any of their Subsidiaries as of the date of this Agreement are in full force and effect, and all premiums due on such policies have been paid by EnerJex Parties or their Subsidiaries. Except as would not have, individually or in the aggregate, a Material Adverse Effect, EnerJex Parties and their Subsidiaries are in compliance with the terms and provisions of all insurance policies maintained by or on behalf of any Buyer Entity or any of their Subsidiaries as of the date of this Agreement, and neither a Buyer Entity nor any of their Subsidiaries is in breach or default under, or has taken any action that could permit termination or material modification of, any material insurance policies.

Section 4.14 OPINION OF FINANCIAL ADVISOR . The Special Committee of the Board of Directors of Parent has received the opinion of Northland Securities, Inc. (“ Northland ”) to the effect that, as of the date thereof and subject to the assumptions, limitations, qualifications and other matters contained therein, the Merger Consideration to be paid by Parent is fair, from a financial point of view, to Parent, and (b) the consent from Northland to include such opinion and a summary of such opinion (subject to such summary being in a form reasonably acceptable to Northland and its counsel and consistent with similar descriptions in transactions of the same type as the Merger) in the Proxy Statement.

Section 4.15 MATERIAL CONTRACTS .

(a) Except for this Agreement, any agreements set forth on Schedule 4.15 to the Parent Disclosure Schedule and agreements filed as exhibits to Parent’s SEC Documents, as of the date of this Agreement, no Buyer Entity nor any of their Subsidiaries is a party to or bound by any “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) (a “ Buyer Entity Material Contract ”).

(b) Except as would not have, individually or in the aggregate, a Material Adverse Effect, no Buyer Entity nor any of its Subsidiaries is in breach of or default under the terms of any Buyer Entity Material Contract and, to the knowledge of EnerJex Parties, no other party to any Buyer Entity Material Contract is in breach of or default under the terms of any Buyer Entity Material Contract. Each Buyer Entity Material Contract is a valid and binding obligation of the applicable Buyer Entity or the Subsidiary of a Buyer Entity that is party thereto and, to the knowledge of EnerJex Parties, of each other party thereto, and is in full force and effect, subject to the Remedies Exceptions.

Section 4.16 RESERVE REPORTS . EnerJex Parties have delivered or otherwise made available to AgEagle true and correct copies of all written reports requested or commissioned by any Buyer Entity or its Subsidiaries and delivered to a Buyer Entity or its Subsidiaries in writing on or before the date of this Agreement estimating EnerJex Parties’ and such Subsidiaries’ proved oil and gas reserves prepared by any unaffiliated person (each, a “ Parent Report Preparer ”) concerning the Oil and Gas Interests of EnerJex Parties and such Subsidiaries as of December 31, 2014 (the “ Parent Reserve Reports ”). The factual, non-interpretive data provided by EnerJex Parties and their Subsidiaries to each Parent Report Preparer in connection with the preparation of Parent Reserve Reports that was material to such Parent Report Preparer’s estimates of the proved oil and gas reserves set forth in Parent Reserve Reports was, as of the time provided (or as modified or amended prior to the issuance of Parent Reserve Reports) accurate in all material respects. The oil and gas reserve estimates of EnerJex Parties set forth in Parent Reserve Reports are derived from reports that have been prepared by the petroleum consulting firm as set forth therein, and such reserve estimates fairly reflect, in all material respects, the oil and gas reserves of EnerJex Parties at the dates indicated therein and are in accordance with SEC guidelines applicable thereto applied on a consistent basis throughout the periods involved. Except for changes generally affecting the oil and gas exploration, development and production industry (including changes in commodity prices) and normal depletion by production, there has been no change in respect of the matters addressed in Parent Reserve Reports that, individually or in the aggregate, has had or would have a Material Adverse Effect.

Section 4.17 FINDERS OR BROKERS . Except as set forth on Schedule 4.17 to the Parent Disclosure Schedule, no Buyer Entity nor any of its Subsidiaries has employed any investment banker, broker or finder in connection with the Transactions who would be entitled to any fee or any commission in connection with or upon consummation of the Merger.

Section 4.18 TAX MATTERS .

(a) Except as would not have, individually or in the aggregate, a Material Adverse Effect:

(i) (A) Each of EnerJex Parties and its Subsidiaries has timely filed all Tax Returns with the appropriate Taxing Authority required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct, and (B) all Taxes due and owing by each of EnerJex Parties and its Subsidiaries (whether or not shown on such filed Tax Returns), including Taxes required to be collected or withheld from payments to employees, creditors, shareholders or other third parties, have been paid, except in each case of clause (A) and (B) for amounts being contested in good faith by appropriate proceedings or for which adequate reserves have been maintained in accordance with GAAP.

(ii) (A) No deficiencies for Taxes with respect to a Buyer Entity or any of its Subsidiaries have been claimed, proposed or assessed by any Taxing Authority that have not been settled and paid or adequately reserved in accordance with GAAP, (B) as of the date hereof, there are no pending or threatened audits, assessments or other actions for or relating to any liability in respect of Taxes of a Buyer Entity or any of its Subsidiaries, and (C) none of EnerJex Parties or any of their respective Subsidiaries have waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(iii) There are no Liens for Taxes upon any property or assets of a Buyer Entity or any of its Subsidiaries other than Permitted Liens.

(iv) Neither of the EnerJex Parties nor any of their respective Subsidiaries has participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011-4(b).

(v) No claim has been made by any Taxing Authority in a jurisdiction where a Buyer Entity or any of its Subsidiaries does not file Tax Returns that such Buyer Entity or any of its Subsidiaries is or may be subject to taxation by that jurisdiction, other than any such claims that have been resolved.

(vi) Neither of the EnerJex Parties nor any of their respective Subsidiaries is a party to any Tax allocation, sharing, indemnity, or reimbursement agreement or arrangement (excluding any such agreements pursuant to customary provisions in contracts not primarily related to Taxes).

(vii) No foreign, federal, state or local Tax audits, examinations, investigations, suits, claims, administrative or judicial Tax proceedings or other actions are, outstanding, pending or being conducted, or, to Parent’s knowledge, threatened against or with respect to, and there are no Tax matters under discussion with any Taxing Authority concerning any Tax return or Tax reasonably expected to result in a Tax liability of, the EnerJex Parties nor any of their respective Subsidiaries.

(viii) Neither of the EnerJex Parties nor any of their respective Subsidiaries has received from any foreign, federal, state or local Taxing Authority (including jurisdictions where the EnerJex Parties or any of their respective Subsidiaries has not filed Tax returns) any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (ii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any Taxing Authority or against the EnerJex Parties or any of their respective Subsidiaries.

(ix) Neither of the EnerJex Parties nor any of their respective Subsidiaries has been a member of an affiliated group within the meaning of Section 1504(a) of the Code (or any similar group defined under a similar provision of foreign, state or local Law), other than a group of which a Buyer Entity or any of its Subsidiaries is or was the common parent, and none of EnerJex Parties or any of their respective Subsidiaries has any liability for Taxes of any other person (other than Taxes of a Buyer Entity or such Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar provision of foreign, state or local Law), as a transferee or successor, by contract or otherwise.

(b) Neither of the EnerJex Parties nor any of their respective Subsidiaries is aware of any fact, or has taken or agreed to take any action, that would reasonably be expected to prevent or impede the Merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code.

Section 4.19 EMPLOYEE BENEFIT PLANS .

(a) For purposes of this Agreement, “ Parent Benefit Plan ” means each employee benefit plan, program, agreement or arrangement, including pension, retirement, profit-sharing, deferred compensation, stock option, change in control, retention, equity or equity-based compensation, stock purchase, employee stock ownership, severance pay, vacation, bonus or other incentive plans, medical, retiree medical, vision, dental or other health plans, life insurance plans, and each other employee benefit plan or fringe benefit plan, including any “employee benefit plan” as that term is defined in Section 3(3) of ERISA, in each case, whether oral or written, funded or unfunded, or insured or self-insured, maintained by a Buyer Entity or any Subsidiary of a Buyer Entity, or to which a Buyer Entity or any Subsidiary of a Buyer Entity contributes or is obligated to contribute for the benefit of any current or former employees, directors, consultants or independent contractors of a Buyer Entity or any Subsidiary of a Buyer Entity.

(b) Except as would not have, individually or in the aggregate, a Material Adverse Effect, (i) each Parent Benefit Plan has been established, operated and administered in all material respects in accordance with its terms and the requirements of all applicable Laws, including ERISA and the Code, and (ii) all contributions required to be made to any Parent Benefit Plan by applicable Law or by any plan document or other contractual undertaking, and all premiums due or payable with respect to insurance policies funding any Parent Benefit Plan, have been timely made or paid in full or, to the extent not required to be made or paid on or before the date hereof, have been fully reflected on the books and records of the applicable Buyer Entity.

(c) Neither of the EnerJex Parties nor any of their Subsidiaries nor any of their respective ERISA Affiliates has, at any time during the last six years, maintained, established, contributed to or been obligated to contribute to any employee benefit plan that is subject to Title IV or Section 302 of ERISA or Section 412, 430 or 4971 of the Code.

(d) Neither of the EnerJex Parties nor any of their Subsidiaries nor any of their respective ERISA Affiliates has, at any time during the last six years, maintained, established, contributed to or been obligated to contribute to any plan that is a Multiemployer Plan or a Multiple Employer Plan, and, except as would not have, individually or in the aggregate, a Material Adverse Effect, none of EnerJex Parties and their Subsidiaries nor any of their respective ERISA Affiliates has incurred any liability to a Multiemployer Plan or a Multiple Employer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan or Multiple Employer Plan.

Section 4.20 EMPLOYMENT AND LABOR MATTERS . As of the date hereof, no Buyer Entity nor any of its Subsidiaries is, or since December 31, 2014 has been, a party to any Collective Bargaining Agreement, and no employee is represented by a labor organization for purposes of collective bargaining with respect to any Buyer Entity or any of its Subsidiaries. To the knowledge of EnerJex Parties, as of the date hereof, there are no activities or proceedings of any labor or trade union to organize any employees of the any Buyer Entity or any of its Subsidiaries. As of the date hereof, no Collective Bargaining Agreement is being negotiated by any Buyer Entity or, to the knowledge of EnerJex Parties, any of their respective Subsidiaries. As of the date hereof, there is no strike, lockout, slowdown, or work stoppage against any Buyer Entity or any of its Subsidiaries pending or, to the knowledge of EnerJex Parties, threatened, that may interfere in any material respect with the business activities of any Buyer Entity and its Subsidiaries taken as a whole. Except as would not have, individually or in the aggregate, a Material Adverse Effect, there is no pending charge or complaint against any Buyer Entity or any of its Subsidiaries by the National Labor Relations Board or any comparable Governmental Entity, and none of EnerJex Parties and their Subsidiaries are a party, or otherwise bound by, any consent decree with, or citation by, any Governmental Entity relating to employees or employment practices. Except as would have, individually or in the aggregate, a Material Adverse Effect, EnerJex Parties and their Subsidiaries have complied with all applicable Laws regarding employment and employment practices, terms and conditions of employment and wages and hours (including classification of employees) and other applicable Laws in respect of any reduction in force, including notice, information and consultation requirements. Except as would not have, individually or in the aggregate, a Material Adverse Effect, there are no outstanding assessments, penalties, fines, Liens, charges, surcharges, or other amounts due or owing by any Buyer Entity pursuant to any workplace safety and insurance/workers’ compensation Laws.

Section 4.21 CASH PAYMENT . On or prior to the date hereof, the Parent shall have made the Cash Payment to AgEagle.

Section 4.22 NO ADDITIONAL REPRESENTATIONS .

(a) Parent acknowledges that AgEagle does not make any representation or warranty as to any matter whatsoever except as expressly set forth in ARTICLE III or in any certificate delivered by AgEagle to a Parent in accordance with the terms hereof, and specifically (but without limiting the generality of the foregoing) that AgEagle makes no representation or warranty with respect to (a) any projections, estimates or budgets delivered or made available to Parent (or any of their respective affiliates, officers, directors, employees or Representatives) of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of AgEagle or (b) the future business and operations of AgEagle, and Parent has not relied on such information or any other representations or warranties not set forth in ARTICLE III .

(b) Parent has conducted its own independent review and analysis of the business, operations, assets, liabilities, results of operations, financial condition and prospects of AgEagle and acknowledges that it has been provided access for such purposes. Except for the representations and warranties expressly set forth in ARTICLE III or in any certificate delivered to Parent by AgEagle in accordance with the terms hereof, in entering into this Agreement, Parent has relied solely upon their independent investigation and analysis of AgEagle, and Parent acknowledges and agrees that they have not been induced by and have not relied upon any representations, warranties or statements, whether express or implied, made by AgEagle, or any of their respective affiliates, stockholders, controlling persons or other Representatives that are not expressly set forth in ARTICLE III or in any certificate delivered by AgEagle to Parent, whether or not such representations, warranties or statements were made in writing or orally. Parent acknowledges and agrees that, except for the representations and warranties expressly set forth in ARTICLE III or in any certificate delivered by AgEagle to Parent: (i) AgEagle does not make, or has not made, any representations or warranties relating to itself or its business or otherwise in connection with the Transactions and Parent is not relying on any representation or warranty except for those expressly set forth in this Agreement, (ii) no person has been authorized by AgEagle E to make any representation or warranty relating to itself or its business or otherwise in connection with the Transactions, and if made, such representation or warranty must not be relied upon by Parent as having been authorized by AgEagle, and (iii) any estimates, projections, predictions, data, financial information, memoranda, presentations or any other materials or information provided or addressed to Parent or any of its Representatives are not and shall not be deemed to be or include representations or warranties of AgEagle unless any such materials or information is the subject of any express representation or warranty set forth in ARTICLE III . To the knowledge of Parent, nothing contained in the representations and warranties set forth in ARTICLE III as modified by the AgEagle Disclosure Schedules is inaccurate.

ARTICLE V

COVENANTS AND AGREEMENTS

Section 5.1 CONDUCT OF BUSINESS BY AGEAGLE .

(a) From and after the date hereof until the earlier of the Effective Time or the date, if any, on which this Agreement is terminated pursuant to Section 7.1 (the “ Termination Date ”), and except (i) as may be required by applicable Law or the regulations or requirements of any stock exchange or regulatory organization applicable to Parent or any of its Subsidiaries, (ii) with the prior written consent of Parent (which consent shall not be unreasonably withheld), (iii) as may be contemplated or required by this Agreement or (iv) as set forth in Section 5.1(a) of the Disclosure Schedule, AgEagle covenants and agrees that the business of AgEagle shall be conducted in the ordinary course of business, and shall use commercially reasonable efforts to preserve intact its present lines of business, maintain its rights, franchises and Permits and preserve its relationships with customers and suppliers; provided , however , that no action by AgEagle with respect to matters specifically addressed by any provision of Section 5.1(b) shall be deemed a breach of this sentence unless such action would constitute a breach of such other provision.

(b) AgEagle agrees with EnerJex Parties, that from the date hereof and prior to the earlier of the Effective Time and the Termination Date, except (i) as may be required by applicable Law or the regulations or requirements of any stock exchange or regulatory organization applicable to Parent or any of its Subsidiaries, (ii) as may be consented to by Parent (which consent shall not be unreasonably withheld), (iii) as may be contemplated or required by this Agreement, or (iv) as set forth in Section 5.1(b) of the Disclosure Schedule, AgEagle:

(i) shall not adopt any amendments to its articles of incorporation or bylaws or similar applicable organizational documents;

(ii) shall not, split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock;

(iii) except in the ordinary course of business, shall not authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, stock or other securities of AgEagle);

(iv) shall not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization, other than the Merger, or take any action with respect to any securities owned by such person that would reasonably be expected to prevent, materially impede or materially delay the consummation of the Merger or any other transaction contemplated by this Agreement;

(v) shall not, to the extent any expenditures exceed, in the aggregate, $100,000, sell, lease, license, transfer, exchange or swap, or otherwise dispose of or encumber any properties or non-cash assets in, except (1) sales, transfers and dispositions of obsolete or worthless equipment, or (2) sales, transfers and dispositions of inventory in the ordinary course of business;

(vi) except as required by applicable Law or the terms of any AgEagle benefit plan existing and as in effect on the date of this Agreement, shall not, establish, adopt, amend, modify, commence participation in or terminate (or commit to establish, adopt, amend, modify, commence participation in or terminate) any bonus, profit-sharing, thrift, pension, retirement, deferred compensation, stock option, restricted stock agreement, plan or arrangement covering any current or former directors, officers, employees, consultants, independent contractors or other service providers of AgEagle or other existing AgEagle benefit plan (other than amendments or modifications to broad-based AgEagle benefit plans in the ordinary course of business that do not materially increase the cost or expense to AgEagle of providing or administering such benefits), (2) increase in any manner the compensation, severance or benefits of any of the current or former directors, officers, employees, consultants, independent contractors or other service providers of AgEagle, other than increases in base salary to employees of AgEagle in the ordinary course of business consistent with past practice or in connection with a promotion of such employee in the ordinary course of business consistent with past practice, provided that such increases in base salary shall not exceed 5% in the aggregate (on an annualized basis) or (3) pay or award, or commit to pay or award, any bonuses or incentive compensation, other than in the ordinary course of business, (4) enter into any new or modify any existing employment, severance, termination, retention or consulting agreement with any current or former directors, officers, employees, consultants, independent contractors or other service providers of AgEagle, (5) accelerate any rights or benefits, (6) hire or terminate the employment or services of (other than for cause) any officer, employee, independent contractor or consultant who has annual base compensation greater than $150,000; provided that AgEagle may hire any officer, employee, independent contractor or consultant with an annual base compensation greater than $150,000, so long as the annual base compensation of such new hire is on market terms, in order to replace any officer, employee, independent contractor or consultant whose employment or services with AgEagle has been terminated;

(vii) shall not materially change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by GAAP, SEC rule or policy or applicable Law;

(viii) shall not, issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of its capital stock or other ownership interest in AgEagle or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire any such shares of capital stock, ownership interest or convertible or exchangeable securities or take any action to cause to be exercisable any otherwise unexercisable option under any existing AgEagle benefit plans (except as otherwise provided by the terms of this Agreement or the express terms of any unexercisable or unexercised options outstanding on the date hereof), other than (1) the sale of shares of AgEagle Common Stock pursuant to the exercise of AgEagle Stock Options if necessary to effectuate an option direction upon exercise or for withholding of Taxes, and (2) shares of AgEagle Common Stock issued pursuant to the conversion of the Convertible Debentures as contemplated in Section 6.3(d) ;

(ix) shall not, directly or indirectly, purchase, redeem or otherwise acquire any shares of the capital stock of any of them or any rights, or options to acquire any such shares, other than the acquisition of shares of AgEagle Common Stock from a holder of an AgEagle Stock Option in satisfaction of withholding obligations or in payment of the exercise price thereof;

(x) shall not incur, assume, guarantee or otherwise become liable for any indebtedness for borrowed money or any guarantee of such indebtedness, except for any indebtedness incurred in the ordinary course of business, which indebtedness is incurred in compliance with this Section 5.1(b) ; provided, however , such indebtedness does not impose or result in any additional restrictions or limitations that would be material to AgEagle, or, following the Closing, AgEagle, other than any obligation to make payments on such indebtedness and other than any restrictions or limitations to which AgEagle is currently subject under the terms of any indebtedness outstanding as of the date hereof;

(xi) other than in the ordinary course of business, which includes, to the extent deemed necessary and appropriate by the Board of Directors and/or management of AgEagle, modifying terms of AgEagle’s Distribution Agreement with Raven Industries, shall not modify, amend or terminate, or waive any rights under any AgEagle Material Contract or under any AgEagle Permit, or enter into any new Contract which would be an AgEagle Material Contract, in each case in a manner or with an effect that is adverse to AgEagle, taken as a whole; or

(xii) shall not make, change or revoke any Tax election outside the ordinary course of business, change any Tax accounting method, file any amended Tax Return, enter into any closing agreement, request any Tax ruling, settle or compromise any Tax proceeding, or surrender any claim for a refund of Taxes, in each case, if such action would reasonably be expected to increase by a material amount the Taxes of AgEagle.

Section 5.2 CONDUCT OF BUSINESS BY ENERJEX PARTIES .

(a) Ordinary Course . From and after the date hereof until the earlier of the Effective Time or the Termination Date, and except (i) as may be required by applicable Law or the regulations or requirements of any stock exchange or regulatory organization applicable to EnerJex Parties or any of their Subsidiaries, (ii) with the prior written consent of AgEagle (which consent shall not be unreasonably withheld), (iii) as may be contemplated or required by this Agreement or (iv) as permitted under Section 5.2(c) , below, or as set forth in Section 5.2(a) of Parent Disclosure Schedule, Parent covenants and agrees that the business of Parent and its Subsidiaries shall be conducted in the ordinary course of business, and shall use commercially reasonable efforts to preserve intact their present lines of business, maintain their rights, franchises and Parent Permits and preserve their relationships with customers and suppliers; provided , however , that no action by Parent or its Subsidiaries with respect to matters specifically addressed by any provision of Section 5.2(b) shall be deemed a breach of this sentence unless such action would constitute a breach of such other provision.

(b) Pre-Effective Time Operations . Each of EnerJex Parties agrees with AgEagle, on behalf of themselves and their Subsidiaries, that from the date hereof and prior to the earlier of the Effective Time and the Termination Date, except (i) as may be required by applicable Law or the regulations or requirements of any stock exchange or regulatory organization applicable to EnerJex Parties or any of their Subsidiaries, (ii) as may be consented to by AgEagle (which consent shall not be unreasonably withheld), (iii) as may be contemplated or required by this Agreement, or (iv) as is permitted under Section 5.2(c) , below, or as set forth in Schedule 5.2 of Parent Disclosure Schedule, EnerJex:

(i) shall not adopt or agree to adopt any amendments its certificate of incorporation or bylaws or similar applicable organizational documents, and shall not permit any of its Subsidiaries to adopt any amendments to its articles of incorporation or bylaws or similar applicable organizational documents;

(ii) shall not, and shall not permit any of its Subsidiaries to, split, combine or reclassify any of its equity securities or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its equity securities, except for any such transaction by a wholly owned Subsidiary of a Buyer Entity which remains a wholly owned Subsidiary after consummation of such transaction;

(iii) except in the ordinary course of business, shall not, and shall not permit any of its Subsidiaries that is not wholly owned by a Buyer Entity or wholly owned Subsidiaries of any such Subsidiaries to, authorize or pay any dividends on or make any distribution with respect to its outstanding equity securities (whether in cash, assets, stock or other securities of a Buyer Entity or its Subsidiaries), except (1) dividends or distributions by any Subsidiaries only to a Buyer Entity or to any Subsidiary of a Buyer Entity in the ordinary course of business, and (2) dividends or distributions required under the applicable organizational documents of such entity in effect on the date of this Agreement;

(iv) shall not, and shall not permit any of its Subsidiaries to, adopt a plan of complete or partial liquidation, dissolution, restructuring, merger, consolidation, recapitalization or other reorganization, other than the Merger and other than any mergers, consolidations, restructurings or reorganizations solely among a Buyer Entity and its Subsidiaries or among their Subsidiaries, or take any action with respect to any securities owned by such person that would reasonably be expected to prevent, materially impede or materially delay the consummation of the Merger or any other transaction contemplated by this Agreement;

(v) shall not, and shall not permit any Buyer Entity or its Subsidiaries to, make any acquisition (whether through merger, consolidation or otherwise) of any other person or business or make any loans, advances or capital contributions to, or investments in, any other person that would reasonably be expected to prevent, materially impede or materially delay the consummation of the Merger;

(vi) shall not, and shall not permit any Buyer Entity or its Subsidiaries to, issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any share of capital stock or other ownership interest in a Buyer Entity or any of its Subsidiaries or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire any such shares of capital stock, ownership interest or convertible or exchangeable securities or take any action to cause to be exercisable any otherwise unexercisable option under any existing Parent Stock Option Plan (except as otherwise provided by the terms of this Agreement or the express terms of any unexercisable or unexercised options or warrants outstanding on the date hereof), other than (1) as contemplated by this Agreement, (2) the sale of Parent Common Stock pursuant to the exercise of Parent Stock Options if necessary to effectuate an option direction upon exercise or for withholding of Taxes, (3) for transactions among a Buyer Entity and its wholly owned Subsidiaries or among its wholly owned Subsidiaries, or (4) completing grants to officers, directors and employees of compensatory stock options to purchase Parent Common Stock under the existing Parent Stock Option Plan adopted for such purpose to the extent such grants do not exceed the number of options referenced in Section 4.1(b) ;

(viii) shall not, and shall not permit any of the Buyer Entities or their Subsidiaries to issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of its capital stock or other ownership interest in the Buyer Entity or any Subsidiary of a Buyer Entity or any securities convertible into or exchangeable for any such shares or ownership interest, or any rights, warrants or options to acquire any such shares of capital stock, ownership interest or convertible or exchangeable securities or take any action to cause to be exercisable any otherwise unexercisable option under any existing Parent Stock Option Plans (except as otherwise provided by the terms of this Agreement or the express terms of any unexercisable or unexercised options outstanding on the date hereof), other than the sale of shares of Parent Common Stock pursuant to the exercise of Parent Stock Options if necessary to effectuate an option direction upon exercise or for withholding of Taxes;

(ix) shall not, and shall not permit any Buyer Entity or any Subsidiary of a Buyer Entity to, directly or indirectly, purchase, redeem or otherwise acquire any shares of the capital stock of any of them or any rights, warrants or options to acquire any such shares, except for the acquisition of shares of Parent Common Stock from a holder of a Parent Stock Option in satisfaction of withholding obligations or in payment of the exercise price thereof;

(x) shall not, and shall not permit any Buyer Entity or any Subsidiary of a Buyer Entity to, incur, assume, guarantee or otherwise become liable for any indebtedness for borrowed money or any guarantee of such indebtedness;

(xi) other than in the ordinary course of business, shall not modify, amend or terminate, or waive any rights under any Buyer Entity Material Contract or under any Parent Permit, or enter into any new Contract which would be a Buyer Entity Material Contract, in each case in a manner or with an effect that is adverse to a Buyer Entity or its Subsidiaries, taken as a whole;

(xii) shall not, and shall not permit any Buyer Entity or any Subsidiary of a Buyer Entity to, waive, release, assign, settle or compromise any claim, action or proceeding, other than waivers, releases, assignments, settlements or compromises equal to or lesser than the amounts reserved with respect thereto on the most recent consolidated balance sheet of June 30, 2017; and

(xiii) shall not make, change or revoke any Tax election outside the ordinary course of business, change any Tax accounting method, file any amended Tax Return, enter into any closing agreement, request any Tax ruling, settle or compromise any Tax proceeding, or surrender any claim for a refund of Taxes, in each case, if such action would reasonably be expected to increase by a material amount the Taxes of a Buyer Entity or any of its Subsidiaries.

(c) Sale of Assets . The parties hereby (i) acknowledge that Parent and its Subsidiaries may desire to sell certain of their respective existing assets (including interests in Subsidiaries and other assets held by Parent and each of its Subsidiaries) in order to generate working capital that would be deployed to develop the assets of AgEagle after the Effective Time, and (ii) agree that notwithstanding the foregoing provisions of this Section 5.2 or any other provision of this Agreement to the contrary, during the period from and after the date of this Agreement and prior to the Effective Time, Parent and its Subsidiaries (and each of their respective Subsidiaries) may sell or otherwise dispose of any of their respective assets (without regard to whether such sales or other dispositions may be outside the ordinary course of business for Parent or such respective Subsidiary), including but not limited to oil and gas leases, working interests, development rights, and ownership interests in any Subsidiary, to any unrelated third party for fair market value, provided such the timing of sale would not jeopardize Parent’s listing on the NYSE American.

Section 5.4 MUTUAL ACCESS .

(a) For purposes of furthering the Transactions, each of AgEagle and Parent shall afford the other party and (i) the officers and employees and (ii) the accountants, consultants, legal counsel, financial advisors, financing sources and agents and other Representatives of each such party reasonable access during normal business hours, throughout the period prior to the earlier of the Effective Time and the Termination Date, to its and its Subsidiaries’ personnel and properties, contracts, commitments, books and records and any report, schedule or other document filed or received by it pursuant to the requirements of applicable Laws and with such additional accounting, financing, operating, environmental and other data and information regarding such party and its Subsidiaries, as such other party may reasonably request. Notwithstanding the foregoing, no party shall be required to afford such access if it would unreasonably disrupt the operations of the other party or any of its Subsidiaries, would cause a violation of any agreement to which such party or any of its Subsidiaries is a party, would cause a risk of a loss of privilege to such party or any of its Subsidiaries or would constitute a violation of any applicable Law.

(b) The parties acknowledge that AgEagle and Parent have previously executed that certain letter of intent, dated June 30, 2017,which included certain binding confidentiality provisions (the “ Confidentiality Provisions ”). Such provisions will continue in full force and effect in accordance with their terms. The AgEagle Principal Shareholder hereby agrees to be bound by the terms and conditions of the Confidentiality Provisions to the same extent as though the AgEagle Principal Shareholder was a party thereto. Confidential information shall include information relating to the Merger or this Agreement received by AgEagle, Parent, and the AgEagle Principal Shareholder after the Closing or relating to the period after the Closing

Section 5.5 EXCLUSIVITY . Parent, Merger Sub and AgEagle recognize that a great deal of time, effort and expense has been and will be undertaken by each of the parties in connection with the negotiation of this Agreement and the transactions contemplated hereby, and therefore each of the parties agrees that for the period commencing on the date hereof and ending on January 31, 2018, they will negotiate exclusively with the other party, and it will not (nor will they permit any of their respective, subsidiaries’ or affiliates’ stockholders, managers, members, directors, officers, employees, partners or representatives to), directly or indirectly, take any of the following actions with any third-party other than Parent, Merger Sub and AgEagle and their respective officers, directors, managers, members, partners, officers, employees, representatives and other affiliates: (a) solicit or encourage inquiries or proposals with respect to, furnish any information relating to, participate in any negotiations or discussions concerning, or cooperate in any manner relating to, any possible acquisition of or by the parties or any of their respective subsidiaries or affiliates or investments (all the foregoing, whether by way of merger, purchase of equity interests, a loan, purchase of assets, exclusive license or otherwise) (each matter referred to in this clause (a), “ Other Transaction ”); (b) provide information with respect to any party or any of their subsidiaries or affiliates to any Person relating to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any Person with regard to, any possible Other Transaction; or (c) enter into any Other Transaction or understanding with any Person providing for or regarding an Other Transaction or possible Other Transaction. Each of the parties represent and warrant to each other that (i) it has ceased and caused to be terminated any and all existing contacts or negotiations with third parties, that neither it nor any of its representative are presently engaged in any negotiations or discussions concerning any Other Transaction with any Person other than the Buyer Entities and AgEagle; and (ii) each party will notify the other party within 48 hours of receipt of another offer, and will inform the other party if such offer is superior to the transaction contemplated by this Agreement in terms of economics, but will not otherwise be obligated to divulge any details regarding such offer. Each party acknowledges and agrees that the foregoing provisions constitute an essential and necessary inducement to each party’s willingness to continue discussions regarding the Merger and the Transactions contemplated hereby.

Section 5.6 RECOMMENDATION OF THE BOARD OF DIRECTORS OF PARENT .

(a) Except as expressly permitted by Section 5.6(b) , the Board of Directors of Parent shall not make a Parent Adverse Recommendation Change.

(b) Nothing in this Agreement shall prohibit or restrict the Board of Directors of Parent from making a Parent Adverse Recommendation Change in response to a Parent Intervening Event if the Board of Directors of Parent determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that the failure of the Board of Directors of Parent to effect a Parent Adverse Recommendation Change would be inconsistent with the fiduciary duties of the Board of Directors of Parent under applicable Law; provided, however , that, prior to making such Parent Adverse Recommendation Change, (i) Parent has given AgEagle at least three business days’ prior written notice of its intention to take such action (which shall specify the reasons therefor), (ii) Parent has negotiated, and has caused its Representatives to negotiate, in good faith with AgEagle during such notice period, to the extent AgEagle wishes to negotiate, to enable AgEagle to propose revisions to the terms of this Agreement as would not permit the Board of Directors of Parent to make a Parent Adverse Recommendation Change pursuant to this Section 5.6(b) , and (iii) the Board of Directors of Parent shall have considered any revisions to the terms of this Agreement proposed in writing by AgEagle and, at the end of such notice period, shall have determined, after consultation with its outside financial advisors and outside legal counsel, that the failure of the Board of Directors of Parent to effect a Parent Adverse Recommendation Change in response to a Parent Intervening Event would reasonably likely to be inconsistent with the fiduciary duties of the Board of Directors of Parent under applicable Law.

Section 5.7 FILINGS; OTHER ACTIONS .

(a) As promptly as reasonably practicable following the date of this Agreement, Parent shall prepare and file with the SEC the Proxy Statement to convene the Parent Stockholders Meeting to vote on and approve (i) the issuance of Parent Common Stock to the AgEagle Shareholders in excess of 20% of Parent’s total issued and outstanding Parent Common Stock and the issuance of Parent Common Stock in connection with any financing as contemplated by Section 6.1(e); (ii) an amendment to Parent’s articles of incorporation to change Parent’s name to AgEagle Aerial Systems, Inc.; (iii) approval of an amendment to the Certificate of Designation of the Parent’s Series A Preferred Stock to (A) remove the right of the holders thereof to receive dividends, (B) remove the right of the holders thereof to any liquidation preference, and (C) provide for the ability to convert the Series A Preferred Stock into shares of Parent Common Stock; and (v) the Proposed Parent Equity Incentive Plan; and (v) any other matters to be properly brought before the Parent Stockholders as determined by the Board of Directors of Parent and the Board of Directors or AgEagle (the “ Proxy Statement Proposals ”).

(b) No filing of, or amendment or supplement to, the Proxy Statement will be made by Parent, without AgEagle’s prior consent (which shall not be unreasonably withheld) and without providing the other party a reasonable opportunity to review and comment thereon. Parent will advise AgEagle promptly after it receives oral or written notice that the Proxy Statement has been cleared, or any supplement or amendment thereto has been filed, the issuance of any stop order, the suspension of the qualification of the shares of Parent Common Stock issuable in connection with the Merger for offering or sale in any jurisdiction, or any oral or written request by the SEC for amendment of the Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information, and will promptly provide the other with copies of any written communication from the SEC or any state securities commission. If at any time prior to the Effective Time any information relating to Parent or AgEagle, or any of their respective affiliates, officers or directors, is discovered by Parent or AgEagle which should be set forth in an amendment or supplement to the Proxy Statement, so that any of such documents would not include a misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party that discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by Law, disseminated to the Parent Stockholders and AgEagle, as applicable. Parent shall use reasonable best efforts to have the Proxy Statement cleared by the SEC as promptly as reasonably practicable after such filing.

(c) As promptly as reasonably practicable following the clearance of the Proxy Statement by the SEC, Parent shall take all action necessary to cause the Proxy Statement to be mailed to Parent stockholders in accordance with applicable Law and its organizational documents to duly give notice of, convene and hold the Parent Stockholder’s Meeting, and not postpone or adjourn Parent Stockholders’ Meeting except to the extent required by applicable Law or to solicit additional proxies and votes in favor of the Merger; provided , that , unless otherwise agreed to by the parties, Parent Stockholders’ Meeting may not be postponed or adjourned to a date that is more than 20 days after the date for which Parent Stockholders’ Meeting was originally scheduled (excluding any adjournments or postponements required by applicable Law). Parent will, through its Board of Directors, except in the case of a Parent Adverse Recommendation Change, recommend that the Parent Stockholders approve each of the Proxy Statement Proposals and will use reasonable best efforts to solicit from its stockholders proxies in favor of the Merger and to take all other action necessary or advisable to secure the vote or consent of its shareholders required by the rules of FINRA or applicable Law to obtain such approvals.

(d) Within 24 hours after the execution of this Agreement by the parties, the AgEagle Principal Stockholder shall execute a stockholder action by written consent in favor of adoption of this Agreement. AgEagle will, through its Board of Directors, recommend that the AgEagle Shareholders adopt this Agreement and will use reasonable best efforts to solicit from the AgEagle Shareholders written consents in favor of the adoption of this Agreement and to take all other action necessary or advisable to secure the vote or consent of the AgEagle Shareholders to obtain such approvals.

(e) As soon as is reasonably practicable after the date hereof, Parent shall take all action necessary to obtain the approval of the Merger, including the Merger Consideration, by the NYSE American.

(f) Parent will retain a third party consulting firm to ensure: (i) settlement of all payables, liabilities and debt of Parent (the “ Parent Debt ”) that are outstanding prior to Closing; (ii) efficient and orderly use of cash funds for operations prior to Closing; and (iii) a streamlined Closing. Parent agrees that such consulting firm shall not be a registered broker-dealer, and any consideration paid to such consulting firm will not be based or conditioned on the Closing.

Section 5.8 EMPLOYEE MATTERS .

(a) Following the Closing Date, Parent shall, or shall cause its applicable affiliate to, cause any employee benefit plans sponsored or maintained by Parent or its applicable affiliate in which the employees of AgEagle (the “ AgEagle Employees ”) are eligible to participate following the Closing Date (collectively, the “ Post-Closing Plans ”) to recognize the service of each AgEagle Employee with AgEagle and their respective predecessors prior to the Closing Date for purposes of eligibility, vesting, benefit levels and benefit accrual rates or contribution rates under such Post-Closing Plans, in each case, to the same extent such service was recognized immediately prior to the Effective Time under a comparable AgEagle benefit plan in which such AgEagle Employee was eligible to participate immediately prior to the Effective Time; provided that such recognition of service shall not (i) apply for purposes of any defined benefit retirement plan or plan that provides retiree welfare benefits, (ii) operate to duplicate any benefits of a AgEagle Employee with respect to the same period of service, (iii) apply for purposes of any plan, program or arrangement (x) under which similarly situated employees of Parent or its applicable affiliate do not receive credit for prior service or (y) that is grandfathered or frozen, either with respect to level of benefits or participation.

(b) Parent hereby acknowledges that a “change of control” (or similar phrase) within the meaning of the AgEagle Stock Option Plan will occur at or prior to the Effective Time, as applicable.

(c) Nothing in this Agreement shall confer upon any AgEagle Employee or other service provider any right to continue in the employ or service of Parent or any of its affiliates, or shall interfere with or restrict in any way the rights of Parent, the Surviving Company, AgEagle or any of their affiliates, which rights are hereby expressly reserved, to discharge or terminate the services of any AgEagle Employee at any time for any reason whatsoever, with or without cause. In no event shall the terms of this Agreement be deemed to (i) establish, amend, or modify any AgEagle benefit plan or any “employee benefit plan” as defined in Section 3(3) of ERISA, or any other benefit plan, program, agreement or arrangement maintained or sponsored by Parent, the Surviving Company, AgEagle (including, after the Closing Date, AgEagle) or affiliates; or (ii) alter or limit the ability of Parent, the Surviving Company or any of their Subsidiaries (including, after the Closing Date AgEagle) or affiliates to amend, modify or terminate any AgEagle benefit plan, employment agreement or any other benefit or employment plan, program, agreement or arrangement after the Closing Date. Notwithstanding any provision in this Agreement to the contrary, nothing in this Section 5. shall create any third party beneficiary rights in any AgEagle Employee or current or former service provider of AgEagle or its affiliates (or any beneficiaries or dependents thereof).

Section 5.9 REGULATORY APPROVALS; EFFORTS .

(a) Prior to the Closing, the parties shall use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under any applicable Laws to consummate and make effective the Transactions as promptly as practicable, including (i) the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger, (ii) the satisfaction of the conditions to consummating the Transactions, (iii) taking all reasonable actions necessary to obtain (and cooperating with each other in obtaining) any consent, authorization, Order or approval of, or any exemption by, any third party, including any Governmental Entity required to be obtained or made by the parties or any of their respective Subsidiaries in connection with the Transactions or the taking of any action contemplated by this Agreement, (iv) defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Merger contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any Governmental Entity vacated or reversed, and (v) the execution and delivery of any additional instruments necessary to consummate the Transactions and to fully carry out the purposes of this Agreement. In the event that any litigation, administrative or judicial action or other proceeding is commenced challenging the Merger or any of the other Transactions contemplated by this Agreement, the parties shall cooperate with each other and use their respective reasonable best efforts to contest and resist any such litigation, action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the Merger or the other Transactions contemplated by this Agreement, provided Parent and AgEagle shall be obligated to equally pay any funds or sell or transfer any assets to vacate, lift, reverse or overturn any action, judgment, injunction or order. Additionally, each of the parties shall use reasonable best efforts to fulfill all conditions precedent to the Transactions and shall not take any action after the date of this Agreement that would reasonably be expected to materially hinder or delay the obtaining of, or result in not obtaining, any permission, approval or consent from any such Governmental Entity necessary to be obtained prior to Closing or to materially hinder or delay the expiration of the required waiting period under any applicable Law. To the extent that transfers of any permits issued by any Governmental Entity are required as a result of the execution of this Agreement or the consummation of the Transactions, the parties hereto shall use reasonable best efforts to effect such transfers.

(b) The parties shall each keep the other apprised of the status of matters relating to the completion of the Transactions and the regulatory approvals and work cooperatively in connection with obtaining all required consents, authorizations, Orders or approvals of, or any exemptions by, any Governmental Entity undertaken pursuant to the provisions of this Section 5.9 . In that regard, prior to the Closing, each party shall promptly consult with the other parties to this Agreement with respect to, provide any necessary information with respect to (and, in the case of correspondence, provide the other parties (or their counsel) copies of), all filings made by such party with any Governmental Entity or any other information supplied by such party to, or correspondence with, a Governmental Entity in connection with this Agreement and the Transactions. Each party to this Agreement shall promptly inform the other parties to this Agreement, and if in writing, furnish the other party with copies of (or, in the case of oral communications, advise the other party orally of) any communication from any Governmental Entity regarding the Transactions, and permit the other party to review and discuss in advance, and consider in good faith the views of the other party in connection with, any proposed communication with any such Governmental Entity. If any party to this Agreement or any Representative of such parties receives a request for additional information or documentary material from any Governmental Entity with respect to the Transactions, then such party will use reasonable best efforts to make, or cause to be made, as promptly as practicable and after consultation with the other parties to this Agreement, an appropriate response in substantial compliance with such request. No party shall participate in any meeting or teleconference with any Governmental Entity (other than teleconferences with respect to non-substantive or ministerial matters) in connection with this Agreement and Transactions unless it consults with the other parties in advance and, to the extent not prohibited by such Governmental Entity, gives the other parties the opportunity to attend and participate thereat. Each party shall furnish the other parties with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and any such Governmental Entity with respect to the Transactions, and furnish the other parties with such necessary information and reasonable assistance as such other parties may reasonably request in connection with its preparation of necessary filings or submissions of information to any such Governmental Entity; provided , however , that materials provided pursuant to this Section 5.9 may be redacted (i) to remove references concerning the valuation of Parent and Transactions or other confidential information, (ii) as necessary to comply with contractual arrangements and (iii) as necessary to address reasonable privilege concerns.

Section 5.10 TAKEOVER STATUTES . If any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transactions” or “business combination statute or regulation” or other similar state anti-takeover Laws and regulations may become, or may purport to be, applicable to the Merger or any of the other Transactions, each party shall grant such approvals and take such actions as are reasonably necessary so that the Transactions may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of such statute or regulation on the Transactions.

Section 5.11 PUBLIC ANNOUNCEMENTS . The parties shall use reasonable best efforts to develop a joint communications plan and each party shall use reasonable best efforts to ensure that all press releases and other public statements with respect to the Transactions, to the extent they have not been previously issued or disclosed, shall be consistent with such joint communications plan. Unless otherwise required by applicable Law or by obligations pursuant to any listing agreement with or rules of any securities exchange, each party shall consult with each other before issuing any press release or public statement with respect to the Transactions and, subject to the requirements of applicable Law or the rules of any securities exchange, shall not issue any such press release or public statement prior to such consultation. The parties agree to issue a mutually acceptable initial joint press release announcing this Agreement.

Section 5.12 DIRECTORS AND OFFICERS INSURANCE . For a period of six (6) years from the Effective Time, Parent shall cause to be maintained in effect the coverage provided by the policies of directors’ and officers’ liability insurance and fiduciary liability insurance in effect as of the date hereof by AgEagle with respect to matters existing or arising on or before the Effective Time. In addition, Parent shall, prior to the Effective Time and at AgEagle’s expense, purchase a “tail policy” with respect to acts or omissions occurring or alleged to have occurred prior to the Effective Time that were committed or alleged to have been committed by its directors and officers, in their capacity as such.

Section 5.13 CONTROL OF OPERATIONS . Without in any way limiting any party’s rights or obligations under this Agreement, the parties understand and agree that (a) nothing contained in this Agreement shall give either Parent or AgEagle, directly or indirectly, the right to control or direct the other Party’s operations prior to Effective Time and (b) prior to the Effective Time, each of Parent and AgEagle shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its operations.

Section 5.14 Section 16 Matters . PRIOR TO THE EFFECTIVE TIME, PARENT AND AGEAGLE SHALL TAKE ALL SUCH STEPS AS MAY BE REQUIRED TO CAUSE ANY ACQUISITIONS OF Parent Common Stock (including derivative securities with respect to Parent Common Stock) resulting from the Transactions by each individual who is or will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to Parent or will become subject to such reporting requirements with respect to Parent, to be exempt under Rule 16b-3 promulgated under the Exchange Act.

ARTICLE VI

CONDITIONS TO THE TRANSACTION

Section 6.1 CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE TRANSACTIONS . The respective obligations of each party to effect the Merger, shall be subject to the fulfillment (or waiver by all parties, to the extent permissible under applicable Law) at or prior to the Effective Time of the following conditions:

(a) The Proxy Statement shall have been prepared, filed with the SEC and mailed to the Parent’s Stockholders and the Parent Stockholder Meeting shall have been held;

(b) The Parent Stockholder Approval shall have been obtained;

(d) The NYSE American shall have approved the Merger and the Transactions contemplated hereby, including notification that the Parent post-Closing will satisfy the NYSE American’s continued listing standards; and

(e) Prior to the Closing Date, definitive documentation with respect to the sale of Parent Common Stock or convertible equity resulting in gross proceeds of no less than $2,500,000 and up to $4,000,000, unless such other amount is either agreed by AgEagle or required for NYSE qualification, shall have been submitted to AgEagle’s legal counsel for review and approval, which closing of the sale of such shares of Parent Common Stock or convertible equity shall occur immediately prior to the Effective Time.

Section 6.2 CONDITIONS TO OBLIGATION OF AGEAGLE TO EFFECT THE MERGER . The obligation of AgEagle to effect the Merger is further subject to the fulfillment (or waiver by AgEagle) at or prior to the Effective Time of the following conditions:

(a) The representations and warranties of the Buyer Entities set forth in this Agreement qualified by Material Adverse Effect shall be true and correct both at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, (ii) the representations and warranties of the Buyer Entities set forth in Section 4.1(b) and Section 4.1(c) shall be true and correct at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, and (iii) the other representations and warranties of Buyer Entities set forth in this Agreement shall be true and correct both at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, except where such failures to be so true and correct would not, individually or in the aggregate, have a Material Adverse Effect; provided , however , that representations and warranties that are made as of a particular date or period shall be true and correct (in the manner set forth in clauses (i), (ii) and (iii), as applicable) only as of such date or period;

(b) Parent shall have in all material respects performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it prior to the Effective Time;

(c) Parent shall have filed an amendment to the Certificate of Designation of the Parent’s Series A Preferred Stock to (i) remove the right of the holders thereof to receive dividends, (ii) remove the right of the holders thereof to any liquidation preference, and (iii) provide for the ability to convert of the Series A Preferred Stock into shares of Parent Common Stock;

(d) All consolidated assets of Parent set forth on Schedule 6.2 of the Parent Disclosure Schedule (the “ Parent Assets ”), shall have been sold, transferred or otherwise disposed of, or will be sold, transferred or otherwise disposed of, immediately prior to the Closing, and the corresponding debt and liabilities related to the Parent Assets (the “ Related Debt ”) shall have been extinguished concurrently with the Closing;

(e) Other that the Parent Assets and Related Debt, Parent shall have paid and satisfied in full Parent Debt in the amount of approximately $760,000 plus any additional payables accrued after the date of this Agreement, as of the date of the Closing, such that there are no continuing liabilities of Parent subsequent to the Closing;

(f) Parent shall have received an opinion of Northland to the effect that, as of the date thereof and subject to the assumptions, limitations, qualifications and other matters contained therein, the Merger Consideration to be issued in the Merger pursuant to this Agreement is fair, from a financial point of view;

(g) Parent shall deliver the written resignation of each of the existing officers and directors of the Parent and its Subsidiaries effective as of the Closing Date;

(h) Parent shall be current in payment of all NYSE American fees for continued listing and shall not have received notice of delisting or failure to satisfy a continued listing rule or standard, in each such case which notice or failure has not been satisfied prior to the Effective Time;

(i) Parent shall have delivered to AgEagle (i) a certificate, dated the Closing Date and signed by the Chief Executive Officer or another senior officer of Parent, certifying to the effect that the conditions set forth in this Section 6.2(a) and (b) have been satisfied, (ii) Articles of Merger to be filed in accordance with the NRS as of the Effective Time; (iii) a certificate of good standing or equivalent under NV law for each Buyer Entity, and (iv) such other documents as AgEagle may reasonably request for the purpose of facilitating the consummation of any of the transactions contemplated by this Agreement;

(j) Since the date of this Agreement, there must not have been commenced or threatened against any of the Buyer Entities or their respective Subsidiaries, or against any affiliate thereof, any proceeding (which proceeding remains unresolved as of the Effective Time) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Transactions contemplated hereby;

(k) The Escrow Agreement shall have been executed and delivered by the applicable parties thereto; and

(l) There shall not have occurred any Material Adverse Effect on Buyer Entities or their respective Subsidiaries, or any change that has a Material Adverse Effect on Buyer Entities or their respective Subsidiaries.

Section 6.3 CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE MERGER . The obligation of Parent to effect the Merger is further subject to the fulfillment (or the waiver by Parent) at or prior to the Effective Time of the following conditions:

(a) (i) The representations and warranties of AgEagle set forth in this Agreement shall be true and correct both at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, (ii) the representations and warranties of AgEagle set forth in Section 3.2(a) shall be true and correct at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, except for any de minimis inaccuracies, and (iii) the other representations and warranties of AgEagle set forth in this Agreement shall be true and correct both at and as of the date of this Agreement and at and as of the Closing Date as though made at and as of the Closing Date, except where such failures to be so true and correct would not, individually or in the aggregate, have a Material Adverse Effect; provided , however , that representations and warranties that are made as of a particular date or period shall be true and correct (in the manner set forth in clauses (i), (ii) and (iii), as applicable) only as of such date or period.

(b) AgEagle shall have in all material respects performed all obligations and complied with all covenants required by this Agreement to be performed or complied with by it prior to the Effective Time.

(c) AgEagle shall have delivered to Parent (i) a certificate, dated the Closing Date and signed by its Chief Executive Officer or another senior officer of AgEagle, certifying to the effect that the conditions set forth in Section 6.3(a) and Section 6.3(b) have been satisfied, (ii) Articles of Merger to be filed in accordance with the NRS as of the Effective Time; (iii) a certificate of good standing or equivalent under NV law, and (iv) such other documents as Parent may reasonably request for the purpose of facilitating the consummation of any of the transactions contemplated by this Agreement.

(d) AgEagle shall have issued to the Debenture Holders 693,333 shares of AgEagle Common Stock in complete satisfaction of all amounts due to the Debenture Holders under the Convertible Debenture (with such final amount to be determined by AgEagle and the Debenture Holders at the date of such issuance and satisfaction), which the Convertible Debentures shall have been discharged in full, and the Debenture Holders shall execute and deliver to Parent a certificate confirming that the Convertible Debentures have been discharged in full.

(e) Since the date of this Agreement, there must not have been commenced or threatened against AgEagle, or against any affiliate thereof, any proceeding (which proceeding remains unresolved as of the Effective Time) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Transactions contemplated hereby.

(f) There shall not have occurred any Material Adverse Effect on AgEagle or any change that has a Material Adverse Effect AgEagle.

Section 6.4 FRUSTRATION OF CLOSING CONDITIONS . No party may rely, either as a basis for not consummating the Transactions or terminating this Agreement and abandoning the Transactions, on the failure of any condition set forth in Section 6.1 , Section 6.2 or Section 6.3 , as the case may be, to be satisfied if such failure was caused by such party’s material breach of this Agreement.

ARTICLE VII

TERMINATION

Section 7.1 TERMINATION OR ABANDONMENT . Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated and abandoned at any time prior to the Effective Time, whether before or after any approval of the matters presented in connection with the Merger by the stockholders of Parent or AgEagle:

(a) by the mutual written consent of Parent and AgEagle;

(b) by Parent or AgEagle, if the Merger shall not have been consummated on or prior to January 31, 2018 (the “ End Date ”); provided , however , that if all of the conditions to Closing shall have been satisfied or shall be capable of being satisfied at such time, the End Date may be extended by either AgEagle or Parent from time to time by written notice to the other party up to a date not beyond March 31, 2018, the latest of any of which dates shall thereafter be deemed to be the End Date; and provided , further , that the right to terminate this Agreement pursuant to this Section 7.1(b) shall not be available to a party if the failure of the Closing to occur by such date shall be due to the material breach by such party of any representation, warranty, covenant or other agreement of such party set forth in this Agreement;

(c) by Parent or AgEagle, if an injunction shall have been entered permanently restraining, enjoining or otherwise prohibiting the consummation of the Transactions and such injunction shall have become final and nonappealable; provided , however , that the right to terminate this Agreement under this Section 7.1(c) shall not be available to a party if such injunction was due to the failure of such party to perform any of its obligations under this Agreement;

(d) by Parent or AgEagle, if (i) Parent Stockholders’ Meeting (including any adjournments or postponements thereof) shall have concluded and Parent Stockholder Approval shall not have been obtained, or (ii) AgEagle has not received the AgEagle Shareholder Approval;

(e) by AgEagle, if Parent shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) if it occurred or was continuing to occur on the Closing Date, would result in a failure of a condition set forth in Section 6.2(a) or Section 6.2(b) and (ii) by its nature, cannot be cured prior to the End Date or, if such breach or failure is capable of being cured by the End Date, Parent does not diligently attempt or ceases to diligently attempt to cure such breach or failure after receiving written notice from AgEagle describing such breach or failure in reasonable detail ( provided that AgEagle is not then in material breach of any representation, warranty, covenant or other agreement contained herein, which would itself result in a failure of a condition set forth in Section 6.3(a) or Section 6.3(b) );

(f) by Parent, if AgEagle shall have breached or failed to perform any of its representations, warranties, covenants or other agreements contained in this Agreement, which breach or failure to perform (i) if it occurred or was continuing to occur on the Closing Date, would result in a failure of a condition set forth in Section 6.3(a) or Section 6.3(b) and (ii) by its nature, cannot be cured prior to the End Date or, if such breach or failure is capable of being cured by the End Date, AgEagle does not diligently attempt or ceases to diligently attempt to cure such breach or failure after receiving written notice from any Buyer Entity describing such breach or failure in reasonable detail ( provided that Parent is not then in material breach of any representation, warranty, covenant or other agreement contained herein, which would itself result in a failure of a condition set forth in Section 6.2(a) or Section 6.2(b) ).

Section 7.2 EFFECT OF TERMINATION . In the event of termination of this Agreement pursuant to Section 7.1 , this Agreement shall terminate (except for the provisions of ARTICLE IV ), and there shall be no other liability on the part of any party to any other party except any liability arising out of or the result of, fraud or any willful or intentional breach of any covenant or agreement occurring prior to termination or as provided for in the Confidentiality Agreement, in which case the aggrieved party shall be entitled to all rights and remedies available at law or in equity.

ARTICLE VIII

SURVIVAL, INDEMNIFICATION

Section 8.1 SURVIVAL . The representations and warranties of the parties contained in this Agreement shall survive for twelve (12) months (the “ Survival Date ”) after the Closing Date. The parties acknowledge that the time period set forth in this Section 8.1 and elsewhere in this Agreement for the assertion of claims and notices under this Agreement are the result of arms’ length negotiation among the parties and that they intend for the time period to be enforced as agreed by the parties. The parties further acknowledge that the time periods set forth in this Section 8.1 and elsewhere in the Agreement may be shorter or longer than otherwise provided by law.

Section 8.2 INDEMNIFICATION .

a) Indemnification Provisions for AgEagle Shareholders’ Benefit . In the event the Parent or the Parent Principal Stockholders breach any of their representations, warranties, covenants or agreements contained herein, and provided that the Shareholders’ Representative makes a written claim for indemnification against the Parent or the Parent Principal Stockholders pursuant to the notice provisions set forth in Section 9.6 below within the applicable survival period (as referenced in Section 8.1 above), then the Parent Principal Stockholders (“ Parent Indemnifying Party ”) agrees to indemnify and hold harmless the AgEagle Shareholders, including the AgEagle Principal Shareholder, and their respective officers, directors, Affiliates, employees, agents and representatives, if any (the “ AgEagle Indemnified Parties ”), in accordance with their ownership proportion from and against the entirety of any Losses suffered by the AgEagle Indemnified Parties resulting from, arising out of, relating to, or caused by (i) any breach or inaccuracy of a representation or warranty of any of the Buyer Entities and their respective Subsidiaries contained in this Agreement, any related agreement or any certificate or instrument delivered by any of the Buyer Entities pursuant to this Agreement (the “ Closing Certificates ”), (ii) any failure by any of the Buyer Entities to perform or comply with any covenant, obligation or agreement applicable to it in this Agreement, any related agreement or any Closing Certificate, and (iii) any fraud, intentional misrepresentation or willful breach by any of the Buyer Entities with respect to this Agreement, any related agreement or any Closing Certificate. If Parent fails to indemnify the AgEagle Indemnified Parties after the Shareholders’ Representative delivers written notice as provided above, then the AgEagle Indemnified Parties shall have the right to bring an action for indemnification for such claim including after the end of the applicable Survival Period, subject to the limitations set forth in Section 8.3 . Notwithstanding the foregoing to the contrary, this Section 8.2(a) shall not apply in the event of any claim arising out of, relating to, or caused by any fraud, intentional misrepresentation or willful breach of the Parent committed by any of the former officers or directors of the Parent that occurred at a time when the current officers or directors did not serve in such capacities (or other like positions of the Buyer Entities), provided that the Parent or any of the Parent Principal Stockholders had no knowledge of such fraud, intentional misrepresentation or willful breach (or was not reasonably aware such fraud, intentional misrepresentation or willful breach was taking place).

b) Indemnification Provisions for Parent . By virtue of the Merger the AgEagle Principal Shareholder agrees to indemnify and hold harmless Parent and its former officers, directors, Affiliates, employees, agents and representatives (the “ Parent Indemnified Parties ”) against all Losses incurred or sustained by Parent Indemnified Parties, or any of them, directly or indirectly, based upon, arising out of, with respect to or by reason of: (i) any breach or inaccuracy of a representation or warranty of AgEagle contained in this Agreement, any related agreement or any certificate or instrument delivered by AgEagle pursuant to this Agreement (the “ AgEagle Closing Certificates ”), (ii) any failure by AgEagle or the AgEagle Principal Shareholder to perform or comply with any covenant, obligation or agreement applicable to it in this Agreement, any related agreement or any Closing Certificate, (iii) any fraud, intentional misrepresentation or willful breach of AgEagle or the AgEagle Principal Shareholder with respect to this Agreement, any related agreement or any AgEagle Closing Certificate and (iv) any claims by or purportedly on behalf of any holder or former holder of any shares of AgEagle’s capital stock or rights to acquire AgEagle’s capital stock, which relate or purport to relate to the Merger or any of the other transactions contemplated hereby, including appraisal or dissenters’ rights proceedings, claims in connection with appraisal rights notices, or claims alleging violations of fiduciary duty (excluding cash payments to such holders of Dissenting Shares not in excess of the consideration to which they would have been entitled for their shares of AgEagle Common Stock had they received Merger Consideration payable pursuant to this Agreement rather than exercising dissenters’ rights, but not excluding the costs and expenses incurred in connection with the proceedings relating to such exercise of dissenters’ rights).

Section 8.3 MAXIMUM PAYMENTS; LIMITATIONS .

(a) From and after the Closing Date, the indemnification provisions of this ARTICLE VIII shall be the sole and exclusive remedy for monetary damages of any indemnified party and their respective affiliates with respect to breaches of representations and warranties set forth in this Agreement other than Losses resulting from a claim based on fraud, intentional misrepresentation or willful breach, which shall not be so limited.

(b) There shall be no recovery for claims under clause (i) of Section 8.2 unless and until the aggregate amount of Losses of an indemnified party that may be claimed thereunder exceeds $25,000 (the “ Threshold ”), and once such Threshold has been reached, such indemnifying party shall be liable to the indemnified parties for the full amount of all Losses, including those which comprised any portion of the Threshold.

(c) The aggregate maximum indemnification obligation of any indemnifying party for Losses with respect to breaches of representations and warranties set forth in this Agreement shall not exceed, in the aggregate, $350,000, other than fraud, intentional misrepresentation or willful breach committed with the AgEagle Principal Shareholder’s or the Parent Principal Stockholders’ knowledge, as applicable, which shall not be so limited (except for the limitations set forth in Section 8.2(a) ).

(d) An indemnifying party shall satisfy its indemnification obligations hereunder by the surrender for cancellation of such number of Escrow Shares held by the Parent Principal Stockholders or the number of shares of Parent Common Stock held by the AgEagle Principal Shareholder, as applicable, equal to the aggregate amount of Losses of the indemnified party. Such number of Escrow Shares or shares of Parent Common Stock, as applicable, to be surrendered shall be calculated based upon the greater of (x) the value of the Parent Common Stock as of the Closing; and (y) the average closing price of the Parent Common Stock on the NYSE American for the five trading days immediately prior to the date such a claim is made.

(e) Notwithstanding anything to the contrary herein, the parties hereto agree and acknowledge that any indemnified party may bring a claim for indemnification for any Loss under this ARTICLE VIII notwithstanding the fact that such indemnified party had actual or constructive knowledge (regardless of whether such knowledge was obtained through such indemnified party’s own investigation or through disclosure by the other party or any third party) of the breach, event or circumstance giving rise to such Loss prior to the Closing or waived any condition to the Closing related thereto. No indemnified party shall be required to take any action to obtain payments from any third party, including an indemnitor, insurer or Taxing Authority, with respect to, or for the purposes of offsetting, any Losses. AgEagle and the AgEagle Principal Shareholder have no knowledge of any such breach.

(f) Notwithstanding anything to the contrary in this Article VIII , no Parent Indemnified Party shall be entitled to seek or obtain indemnification, advancement of expenses or exculpation pursuant to the articles of incorporation, bylaws (or other organizational document of the Parent or its subsidiaries) or indemnification agreement with any member of the Parent or its subsidiaries, and the Parent shall not be required to provide any indemnification, advancement of expenses or exculpation to any Parent Indemnified Party pursuant to the articles of incorporation, bylaws (or other organizational document of the Parent or its subsidiaries) or indemnification agreement with any Parent Indemnified Party, in connection with any claim for indemnification properly brought by any Parent Indemnified Party pursuant to Article VIII .

Section 8.4 DEFINITION OF LOSSES . For purposes of this ARTICLE VIII , the term “Losses” shall mean losses, Taxes, liabilities, damages, deficiencies, claims, actions, proceedings, deficiencies, costs, interest, awards, judgments, penalties and expenses, including reasonable attorneys’ and consultants’ fees and expenses (and including any such reasonable out-of-pocket expenses incurred in connection with investigating, defending against or settling any of the foregoing). In the event of any such breach or inaccuracy, for purposes of determining the amount of any Losses (but not whether a breach, inaccuracy or failure occurred), no effect will be given to any qualification as to “materiality,” a Material Adverse Effect, or “in all material respects” qualification contained in any representation, warranty or covenant.

Section 8.5 CLAIMS FOR INDEMNIFICATION .

(a) Procedure .

(i) For the purposes hereof, “Indemnity Certificate” shall mean a certificate signed by the AgEagle Principal Shareholder or the Parent Principal Stockholders, as applicable: (A) stating that such indemnified party has paid, sustained, incurred, or accrued, or reasonably anticipates that it will have to pay, sustain, incur, or accrue Losses, (B) specifying in reasonable detail the individual items of Losses included in the amount so stated, the date each such item was paid, sustained, incurred, or accrued, or the basis for such anticipated liability and (in each case to the extent ascertainable) the method of computation of all such amounts, and (C) describing in reasonable detail, to the extent known to such indemnified party, the facts giving rise to the claim for indemnification and the nature of the misrepresentation, breach of warranty or covenant or other indemnifiable claim to which such item is related, provided that any Indemnity Certificate may be updated and amended from time to time by such indemnified party by delivering an updated or amended Indemnity Certificate to the indemnifying party.

(ii) In case the Parent Principal Stockholders or the AgEagle Principal Shareholder, as applicable, shall object in writing to any claim or claims made in any Indemnity Certificate within thirty (30) days after delivery of such Indemnity Certificate, the Parent Principal Stockholders and the AgEagle Principal Shareholder shall attempt in good faith to agree upon the rights of the respective parties with respect to each of such claims.

(iii) If no such agreement can be reached after good faith negotiation and prior to sixty (60) days after delivery of an Indemnity Certificate, the AgEagle Principal Shareholder or the Parent Principal Stockholders, as applicable, may demand arbitration of the matter unless the amount of the Loss is at issue in pending litigation with a third Person, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration, and in either such event the matter shall be settled by arbitration conducted by one arbitrator mutually agreeable to the AgEagle Principal Shareholder and the Parent Principal Stockholders. In the event that, within thirty (30) days after submission of any dispute to arbitration, the AgEagle Principal Shareholder and the Parent Principal Stockholders cannot mutually agree on one arbitrator, then the parties agree that the arbitration will be conducted by one arbitrator selected in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

(iv) Any such arbitration shall be held under the rules then in effect of the American Arbitration Association. The arbitrator shall determine how all expenses relating to the arbitration shall be paid, including the respective expenses of each party, the fees of the arbitrator and the administrative fee of the American Arbitration Association. The arbitrator shall set a limited time period and establish procedures designed to reduce the cost and time for discovery while allowing the parties an opportunity, adequate in the sole judgment of the arbitrator to discover relevant information from the opposing parties about the subject matter of the dispute. The arbitrator shall rule upon motions to compel or limit discovery and shall have the authority to impose sanctions, including attorneys’ fees and costs, to the same extent as a competent court of law or equity, should the arbitrator determine that discovery was sought without substantial justification or that discovery was refused or objected to without substantial justification. The decision of the arbitrator as to the validity and amount of any claim in such Indemnity Certificate shall be final, binding, and conclusive upon the parties to this Agreement. Such decision shall be written and shall be supported by written findings of fact and conclusions which shall set forth the award, judgment, decree or order awarded by the arbitrator(s).

(v) Any such arbitration proceeding, as well as all related materials, shall be governed by the Confidentiality Provisions and shall constitute “Confidential Information” as contemplated thereby. Notwithstanding the foregoing, judgment upon any award rendered by the arbitrator may be entered in any court having jurisdiction, subject to Section 9.4 . The foregoing arbitration provision shall apply to any dispute between the indemnifying party, on one hand, and any indemnified party, on the other hand, under this ARTICLE VIII hereof.

(vi) In the event an indemnified party becomes aware of an action, suit or proceeding initiated by a third party (a, “ Third-Party Claim ”) which such indemnified party believes may result in a demand against the indemnifying party under this ARTICLE VIII , such indemnified party shall notify the indemnifying party of such Third Party Claim, and the indemnifying party shall be entitled, at his or its expense, to participate in any defense of such Third Party Claim. An indemnified party may not effect the settlement of any such claim without the consent of the indemnifying party, which consent shall not be unreasonably withheld. In the event that the indemnifying party has consented to any such settlement, the indemnifying party shall have no power or authority to object to the amount of any claim by such indemnified party against the indemnifying party for indemnity with respect to such settlement, unless such claim is in an amount in excess of any amount consented to by the indemnifying party. For the avoidance of doubt, this ARTICLE VIII provides for indemnification of Losses for damages incurred by an indemnified party as well as any Third-Party Claim.

(vii) Notwithstanding anything to the contrary in this ARTICLE VIII , the Parent Indemnifying Party shall not be entitled to seek or obtain indemnification, advancement of expenses or exculpation pursuant to any Parent Organizational Document (or AgEagle Organizational Document) or any indemnification agreement with the Parent that was entered into either prior to or, post-Closing. Post-closing, Parent shall not be required to provide any indemnification, advancement of expenses or exculpation to any Parent Indemnifying Party pursuant to any Company Organizational Document (or AgEagle Organizational Document) or indemnification agreement with any Parent Indemnifying Party, in connection with any claim for indemnification properly brought pursuant to ARTICLE VIII .

ARTICLE IX

MISCELLANEOUS

Section 9.1 EXPENSES . Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger, this Agreement and the Transactions shall be paid by the party incurring or required to incur such expenses.

Section 9.2 COUNTERPARTS; EFFECTIVENESS . This Agreement may be executed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument, and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by telecopy, electronic delivery or otherwise) to the other parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

Section 9.3 GOVERNING LAW . This Agreement, and all claims or causes of action (whether at Law, in contract or in tort or otherwise) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance hereof, shall be governed by and construed in accordance with the Laws of the State of Nevada, without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Nevada.

Section 9.4 JURISDICTION; SPECIFIC ENFORCEMENT . The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed, or were threatened to be not performed, in accordance with their specific terms or were otherwise breached. It is accordingly agreed that, in addition to any other remedy that may be available to it, including monetary damages, each of the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement exclusively in the Southern District of New York and courts of the State of New York located in Manhattan, New York, and all such rights and remedies at law or in equity shall be cumulative. The parties further agree that no party to this Agreement shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referred to in this Section 9.4 and each party waives any objection to the imposition of such relief or any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument. In addition, each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the Southern District of New York and courts of the State of New York located in Manhattan, New York. Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the Transactions in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above named courts, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable Law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts. To the fullest extent permitted by applicable Law, each of the parties hereto hereby consents to the service of process in accordance with Section 9.6 ; provided , however , that nothing herein shall affect the right of any party to serve legal process in any other manner permitted by Law.

Section 9.5 WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 9.6 NOTICES . All notices and other communications hereunder shall be in writing and shall be deemed given (a) upon personal delivery to the party to be notified; (b) when received when sent by email or facsimile by the party to be notified, provided , however , that notice given by email or facsimile shall not be effective unless either (i) a duplicate copy of such email or fax notice is promptly given by one of the other methods described in this Section 9.6 or (ii) the receiving party delivers a written confirmation of receipt for such notice either by email or fax or any other method described in this Section 9.6 ; or (c) when delivered by courier (with confirmation of delivery); in each case to the party to be notified at the address, facsimile number, or email address for such party set forth on the signature page hereto or such other address, facsimile number or email address as such party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated or personally delivered. Any party to this Agreement may notify any other party of any changes to the address or any of the other details specified in this paragraph; provided , however , that such notification shall only be effective on the date specified in such notice or five business days after the notice is given, whichever is later. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver.

Section 9.7 ASSIGNMENT; BINDING EFFECT . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned or delegated by any of the parties hereto without the prior written consent of the other parties. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns. Any purported assignment not permitted under this Section 9.7 shall be null and void.

Section 9.8 SEVERABILITY . Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision shall be interpreted to be only so broad as is enforceable.

Section 9.9 ENTIRE AGREEMENT . This Agreement together with the exhibits hereto, schedules hereto and the Confidentiality Agreement constitute the entire agreement, and supersede all other prior agreements and understandings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and thereof, and this Agreement is not intended to grant standing to any person other than the parties hereto.

Section 9.10 AMENDMENTS; WAIVERS . At any time prior to the Effective Time, any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each party hereto, including the Shareholders’ Representative acting for all the AgEagle Shareholders (pursuant to the authority granted in Section 9.15 below); provided , however , that after receipt of Parent Stockholder Approval, if any such amendment or waiver shall by applicable Law or in accordance with the rules and regulations of FINRA require further approval of the Parent Stockholders, the effectiveness of such amendment or waiver shall be subject to the approval of the Parent Stockholders. Notwithstanding the foregoing, no failure or delay by any party hereto in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any other right hereunder.

Section 9.11 HEADINGS . Headings of the Articles and Sections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretive effect whatsoever. The table of contents to this Agreement is for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.12 No Third-Party Beneficiaries . Each of Parent and AgEagle agrees that (a) their respective representations, warranties, covenants and agreements set forth herein are solely for the benefit of the other party hereto, in accordance with and subject to the terms of this Agreement, and (b) after the Effective Time, except for (i) the provisions of Section 5.11 and (ii) the right of AgEagle’s Shareholders to receive the Merger Consideration on the terms and conditions of this Agreement, this Agreement is not intended to, and does not, confer upon any person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and warranties set forth herein.

Section 9.13 INTERPRETATION . When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, unless the context otherwise requires. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. References in this Agreement to specific laws or to specific provisions of laws shall include all rules and regulations promulgated thereunder, and any statute defined or referred to herein or in any agreement or instrument referred to herein shall mean such statute as from time to time amended, modified or supplemented, including by succession of comparable successor statutes. Each of the parties has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.

Section 9.14 DEFINITIONS . All capitalized terms that appear in this Agreement and are not defined herein shall have the respective meanings ascribed thereto in Appendix 1 hereto. References in this Agreement to “ Subsidiaries ” of any party means any corporation, partnership, limited liability company, association, trust or other form of legal entity of which (i) fifty percent (50%) or more of the voting power of the outstanding voting securities are on the date hereof directly or indirectly owned by such party or (ii) such party or any Subsidiary of such party is a general partner or managing member on the date hereof. References in this Agreement (except as specifically otherwise defined) to “ affiliates ” means, as to any person, any other person which, directly or indirectly, controls, or is controlled by, or is under common control with, such person. As used in this definition, “ control ” (including, with its correlative meanings, “ controlled by ” and “ under common control with ”) means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise. References in this Agreement (except as specifically otherwise defined) to “ person ” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity, group (as such term is used in Section 13 of the Exchange Act) or organization, including a Governmental Entity, and any permitted successors and assigns of such person. As used in this Agreement, “ knowledge ” means (i) with respect to Parent, the actual knowledge of the individuals listed in Section 9.14(a) of Parent Disclosure Schedule and (ii) with respect to AgEagle, the actual knowledge of the individuals listed on Section 9.14(a) of the AgEagle Disclosure Schedule. As used in this Agreement, “ business day ” means any day other than a Saturday, Sunday or other day on which the banks in New York are authorized by Law to remain closed.

Section 9.15 SHAREHOLDERS’ REPRESENTATIVE.

(a) The Shareholders’ Representative confirms that each AgEagle Shareholder has signed a Letter of Transmittal in the form attached as Exhibit B prior to the execution and delivery of this Agreement pursuant to which each AgEagle Shareholder hereby has appointed Bret Chilcott as the Shareholders’ Representative and as agent and attorney-in-fact for and on behalf of each AgEagle Shareholder, with full powers of substitution, to give and receive notices and communications, to agree to, negotiate, enter into settlements and compromises of, and demand dispute resolution and comply with orders of arbitrators, courts, tribunals or other Governmental Entities and awards of arbitrators, courts, tribunals or other Governmental Entities with respect to any claims or other matters that may arise under this Agreement or the other ancillary transaction documents, and to take all actions and execute all such documents necessary or appropriate in the good faith discretion of the Shareholders’ Representative for the accomplishment of the transactions contemplated by this Agreement and the other ancillary transactions, including, without limitation, the power:

(i) to agree with Parent and Merger Sub with respect to any matter or thing required by or deemed necessary by Shareholders’ Representative in connection with this Agreement, including without limitation any amendments to this Agreement;

(ii) to receive and hold the Merger Consideration and to distribute the same to the AgEagle Shareholders;

(iii) to establish an account to hold a reasonable portion of the Merger Consideration and to use such portion of the Merger Consideration for out-of-pocket costs and expenses in connection herewith;

(iv) to execute and deliver any and all other agreements, documents and other papers which the Shareholders’ Representative deems necessary or appropriate in connection with this Agreement, or any of the Transactions contemplated hereby or thereby;

(v) to terminate, amend, waive or interpret any provision of this Agreement;

(vi) to act for each AgEagle Shareholder and all AgEagle Shareholders with regard to the indemnification matters referred to in this Agreement;

(vii) to retain attorneys, accountants and other professionals to provide services to the Shareholders’ Representative in fulfillment of his obligations under this Agreement and as otherwise deemed appropriate in connection with the Closing of the transactions contemplated by this Agreement or related matters arising thereafter; and

(viii) to do or refrain from doing any further act or deed on behalf of each AgEagle Shareholder which the Shareholders’ Representative deems necessary or appropriate in his sole discretion relating to the subject matter of this Agreement as fully and completely as such AgEagle Shareholder could if personally present.

(c) No bond shall be required of the Shareholders’ Representative, and the Shareholders’ Representative shall receive no compensation for his services.

(d) Neither the Shareholders’ Representative nor any of his agents or employees shall be liable to any AgEagle Shareholder of any error of judgment, or any action taken, suffered or omitted to be taken, under this Agreement except in the case of its gross negligence, willful misconduct or fraud. The Shareholders’ Representative may consult with legal counsel, independent public accountants or other experts selected by him and shall not be liable for any action taken or omitted to be taken in good faith by him in accordance with the advice of such counsel, accounts or experts.

(e) In the Letter of Transmittal, each AgEagle Shareholder hereby agrees to indemnify and hold the Shareholders’ Representative harmless from any and all liability, loss, cost, damage or expense (including attorneys’ fees) reasonably incurred or suffered as a result of the performance of his duties under this Agreement, except such that arises from the gross negligence or willful misconduct or fraud of the Shareholders’ Representative.

(f) A decision, act, consent or instruction of the Shareholders’ Representative shall constitute a decision of all AgEagle Shareholders and shall be final, binding and conclusive upon each AgEagle Shareholder.

[Signatures begin on following page]

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written.

“ EnerJex Parties :”

“ Parent :”

EnerJex Resources, Inc ., a Nevada corporation


By	/s/ Louis G. Schott
	Louis G. Schott,
	Interim Chief Executive Officer

Address, Facsimile No., & Email for Notices:

EnerJex Resources, Inc.
4040 Broadway, Suite 508
San Antonio, TX 78209
Facsimile No.: (210) 829-1224
Email: lschott@enerjexresources.com

With a copy to:

Dickinson Wright PLLC
Joel D. Mayersohn, Esq.
350 East Las Olas Blvd., Suite 1750
Ft. Lauderdale, FL 33301
Facsimile No. (844) 670-6009 Email: JMayersohn@DickinsonWright.com

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

“ MERGER SUB :”

AGEAGLE Merger Sub, Inc. , a Nevada corporation


By	/s/ Louis G. Schott
	Name: Louis G. Schott
	Title: President

Address, Facsimile No., & Email for Notices:

4040 Broadway, Suite 508
San Antonio, TX 78209
Facsimile No.: (210) 829-1224
Email: lschott@enerjexresources.com

With a copy to:

Dickinson Wright PLLC
Joel D. Mayersohn, Esq.
350 East Las Olas Blvd., Suite 1750
Ft. Lauderdale, FL 33301
Facsimile No. (844) 670-6009 Email: JMayersohn@DickinsonWright.com

[SIGNATURES CONTINUED ON FOLLOWING PAGE]

Acknowledged and agreed with respect to Article VIII hereof:

“ Parent Principal Stockholders :”


By	/s/ Atticus Lowe
	Atticus Lowe

By	/s/ Jim Miller
	Jim Miller

By	/s/ Lance Helfert
	Lance Helfert

By	/s/ Richard Menchaca
	Richard Menchaca

By	/s/ Louis Schott
	Louis Schott

By	/s/ Bob Schleizer
	Bob Schleizer

Address, Facsimile No., & Email for Notices:

c/o 4040 Broadway, Suite 508
San Antonio, TX 78209
Facsimile No.: (210) 829-1224
Email: lschott@enerjexresources.com

With a copy to:

Dickinson Wright PLLC
Joel D. Mayersohn, Esq.
350 East Las Olas Blvd., Suite 1750
Ft. Lauderdale, FL 33301
Facsimile No. (844) 670-6009 Email: JMayersohn@DickinsonWright.com

“ AgEagle Parties :”

“ AgEagle :”

AgEagle Aerial Systems, Inc., a Nevada corporation


By	/s/ Bret Chilcott
	Bret Chilcott
	Chief Executive Officer

Address & Email for Notices:

117 South 4th Street
Neodesha, Kansas 66757
Tel: (316) 202-2076
Email: bretc@ageagle.com

With a copy to:

Mitchell S. Nussbaum, Esq.
Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154
Facsimile No. (212) 407-4990
Email: mnussbaum@loeb.com

“ AgEagle Principal Stockholder :”


By	/s/ Bret Chilcott
	Bret Chilcott

Address & Email for Notices:

117 South 4th Street
Neodesha, Kansas 66757
Tel: (316) 202-2076
Email: bretc@ageagle.com

“ Shareholders’ representative :”


By	/s/ Bret Chilcott
	Bret Chilcott

Address & Email for Notices:

117 South 4th Street
Neodesha, Kansas 66757
Tel: (316) 202-2076
Email: bretc@ageagle.com

APPENDIX 1

DEFINITIONS

For purposes of the foregoing Agreement, the following terms shall have the following respective meanings (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined):

“ AgEagle Stock Option Plan ” means the AgEagle Aerial Systems, Inc. 2016 Employees Option Plan.

“ Cash Payment ” means a cash payment from the Parent to AgEagle of $50,000 payable in immediately available funds upon the signing of this Agreement.

“ Contract ” means any contract, note, bond, mortgage, indenture, deed of trust, license, lease, agreement, arrangement, commitment or other instrument or obligation, whether oral or written.

“ Convertible Debentures ” means (i) those certain 8% Convertible Debentures in the aggregate amount of $500,000 due on November 6, 2017, convertible into shares of AgEagle Common Stock at a conversion rate of $1.00, and (ii) those certain 8% Convertible Debentures in the aggregate amount of $300,000 due on November 6, 2017, convertible into shares of AgEagle Common Stock at a conversion rate of $3.00.

“ Debenture Holders ” means Alpha Capital Anstalt and Lane Ventures, Inc., the holders of the Convertible Debentures.

“ Environmental Law ” means any Law relating to the protection, preservation or restoration of the environment (including air, surface water, groundwater, drinking water supply, surface land, subsurface land, plant and animal life or any other natural resource), or any exposure to or release of, or the management of (including the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production or disposal of any Hazardous Materials), in each case as in effect as of the date of this Agreement.

“ ERISA Affiliate ” means, with respect to any entity, trade or business, any other entity, trade or business that is, or was at the relevant time, a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA that includes or included the first entity, trade or business, or that is, or was at the relevant time, a member of the same “controlled group” as the first entity, trade or business pursuant to Section 4001(a)(14) of ERISA.

“ Escrow Agent ” means Loeb & Loeb LLP.

“ Escrow Agreement ” means the Escrow Agreement to be entered into by and among the Shareholders’ Representative, the Parent and the Escrow Agent, substantially in the form attached hereto as Exhibit C , pursuant to which the Escrow Shares shall be deposited by the Parent Principal Stockholders with the Escrow Agent to secure the Special Indemnity Obligation .

“ Escrow Shares ” means an aggregate of 1,215,278 shares of Parent Common Stock which shall be deposited by the Parent Principal Stockholders with the Escrow Agent pursuant to the Escrow Agreement to secure the Special Indemnity Obligation.

“ Hazardous Material ” means any pollutant, toxic substance, including asbestos and asbestos-containing materials, hazardous waste, hazardous material, hazardous substance, contaminant, petroleum or petroleum-containing materials, radiation and radioactive materials, other harmful biological agents, and polychlorinated biphenyls as defined in, the subject of, or that could give rise to liability under any Environmental Law.

“ Material Adverse Effect ” means an event, change, effect, development or occurrence that has had, or would be reasonably likely to have, a material adverse effect on the business, financial condition or continuing results of operations of a Party or its Subsidiaries, taken as a whole, other than any event, change, effect, development or occurrence resulting from or arising out of: (1) changes in general economic, financial or other capital market conditions (including prevailing interest rates), (2) any changes or developments generally in the industries in which such Party or any of its Subsidiaries conducts its business, (3) the announcement or the existence of, compliance with or performance under, this Agreement or the Transactions, including the impact thereof on the relationships, contractual or otherwise, of such Party or any of their respective Subsidiaries with employees, labor unions, customers, suppliers or partners, and including any lawsuit, action or other proceeding with respect to any of the Transactions (provided, however, that the exceptions in this clause (3) shall not apply to any representation or warranty contained in Sections 3.3 or 4.2 (or any portion thereof) to the extent that the purpose of such representation or warranty (or portion thereof) is to address the consequences resulting from the execution and delivery of this Agreement or the performance of obligations or satisfaction of conditions under this Agreement), (4) any taking of any action at the request of the other Party; (5) any adoption, implementation, promulgation, repeal, modification, reinterpretation or proposal of any rule, regulation, ordinance, order, protocol or any other Law of or by any national, regional, state or local Governmental Entity, or market administrator, (6) any changes in GAAP or accounting standards or interpretations thereof, or (7) earthquakes, any weather-related or other force majeure event or natural disasters or outbreak or escalation of hostilities or acts of war or terrorism, or (8) any changes in the share price or trading volume of the such Party’s stock or its credit ratings (provided that the exception in this clause (8) shall not prevent or otherwise affect a determination that any event, change, effect, development or occurrence underlying such change has resulted in, or contributed to, a Material Adverse Effect so long as it is not otherwise excluded by this definition); except, in each case with respect to clauses (1), (2), (5), (6) and (7), to the extent disproportionately affecting such Party and its Subsidiaries, taken as a whole, relative to other similarly situated companies in the industries in which such and its Subsidiaries operate.

“ Order ” means any charge, order, writ, injunction, judgment, decree, ruling, determination, directive, award or settlement, whether civil, criminal or administrative and whether formal or informal.

“ Parent Adverse Recommendation Change ” means (A) the failure by Parent to include a Parent Recommendation in the Proxy Statement, or (B) to change, qualify, withhold, withdraw or modify, or authorize or publicly propose to change, qualify, withhold, withdraw or modify, in a manner adverse to AgEagle.

“ Parent Common Stock ” means shares of the Parent’s common stock, par value $0.001 per share.

“ Parent’s Credit Agreement ” means that certain Amended and Restated Credit Agreement dated as of October 3, 2011, by and among Parent, certain of its Subsidiaries, Texas Capital Bank, N.A., a national banking association (as a Bank, L/C Issuer, and Administrative Agent), and the “Banks” identified therein, as amended by the First Amendment thereto dated December 14, 2011, the Second Amendment thereto dated August 31, 2012, the Third Amendment thereto dated November 2, 2012, the Fourth Amendment thereto dated December 31, 2012, the Fifth Amendment thereto dated September 30, 2013, the Sixth Amendment thereto dated November 19, 2013, the Seventh Amendment thereto dated June 16, 2014, the Eighth Amendment thereto dated August 13, 2014, the Ninth Amendment thereto dated April 29, 2015, the Tenth Amendment thereto dated effective as of August 12, 2015, the Eleventh Amendment thereto dated effective as of November 13, 2015; the loans under said Credit Agreement were transferred to PWCM Investment Company IC LLC (“ PWCM ”), RES Investment Group, LLC (“ RES ”), Round Rock Development Partners, LP (“ Round Rock ”), Cibolo Holdings, LLC (“ Cibolo Holdings ,” and together with PWCM, RES and Round Rock, “ Successor Lender ”) in Loan Sale Agreement dated February 17, 2017; pursuant to that certain Agency Appointment Agreement and Modification of Loan Documents dated as of April 25, 2017, Interim Lenders removed Texas Capital Bank, N.A., as administrative agent under the Existing Loan Agreement and appointed Administrative Agent as successor administrative agent; said Credit Agreement being amended and restated in the Second Amended and Restated Credit Agreement dated effective as of May 10, 2017.

“ Parent Intervening Event ” means a material event, fact, circumstance, development or occurrence that is unknown to or by the Board of Directors of Parent as of the date of this Agreement (or if known, the magnitude or material consequences of which were not known or understood by the Board of Directors Parent as of the date of this Agreement), which event, fact, circumstance, development, occurrence, magnitude or material consequences becomes known to or by the Board of Directors of Parent prior to obtaining Parent Stockholder Approval, provided, however , (A) if Parent Intervening Event relates to an event, fact, circumstance, development or occurrence involving Parent, then such event, fact, circumstance, development or occurrence shall not constitute a Parent Intervening Event if such event, change, effect, development or occurrence: (i) generally affects the economy, the financial or securities markets, or political, legislative or regulatory conditions, in each case in the United States or elsewhere in the world; or (ii) results from or arises out of (a) any changes or developments in the industries in which Parent or its respective Subsidiaries conduct business, (b) any changes or developments in prices for oil, natural gas or other commodities or for raw material inputs and end products, (c) the announcement or the existence of, compliance with or performance under, this Agreement or the transactions contemplated hereby (including the impact thereof on the relationships, contractual or otherwise, of Parent or any of its respective Subsidiaries with employees, labor unions, customers, suppliers or partners, and including any lawsuit, action or other proceeding with respect to the Merger or any of the other transactions contemplated by this Agreement), or (d) any adoption, implementation, promulgation, repeal, modification, reinterpretation or proposal of any rule, regulation, ordinance, order, protocol or any other Law of or by any national, regional, state or local Governmental Entity, and (B) if Parent Intervening Event relates to an event, fact, circumstance, development or occurrence involving AgEagle, then such event, fact, circumstance, development or occurrence shall not constitute a Parent Intervening Event unless it has a Material Adverse Effect.

“ Parent’s Lender ” means CORTLAND CAPITAL MARKET SERVICES LLC, a Delaware limited liability company, as administrative agent (in such capacity and together with its successors and permitted assigns in such capacity the “Administrative Agent”), and the several banks and financial institutions from time to time parties to this Credit Agreement, currently being Pass Creek Resources LLC, a Delaware limited liability company.

“ Parent Principal Stockholders ” means, collectively, Atticus Lowe, Jim Miller, Lance Helfert, Richard Menchaca, Louis Schott and Bob Schleizer.

“ Parent Stockholder Approval ” the approval by the Parent Stockholders at a Parent Stockholder Meeting of the Proxy Statement Proposals.

“ Parent Stockholder Meeting ” means the special meeting of the Parent Stockholders to be held by Parent to approve the Proxy Statement Proposals.

“ Parent Stock Option Plan ” means the Amended and Restated EnerJex Resources, Inc. Stock Incentive Plan.

“ Permitted Lien ” means (A) any Lien for Taxes or governmental assessments, charges or claims of payment not yet delinquent, being contested in good faith or for which adequate accruals or reserves (based on good faith estimates of management) have been set aside for the payment thereof, (B) vendors’, mechanics’, materialmens’, carriers’, workers’, landlords’, repairmen’s, warehousemen’s, construction and other similar Liens arising or incurred in the ordinary course of business or with respect to liabilities that are not yet due and payable or, if due, are not delinquent or are being contested in good faith or for which adequate accruals or reserves (based on good faith estimates of management) have been set aside for the payment thereof, (C) Liens imposed or promulgated by applicable Law or any Governmental Entity with respect to real property, including zoning, building or similar restrictions, (D) pledges or deposits in connection with workers’ compensation, unemployment insurance, and other social security legislation, (E) Liens arising under or pursuant to the organizational documents of AgEagle, or (G) as applied to Parent and its Subsidiaries, the lien of the mortgages, deeds of trust, and security agreements pledged to Parent’s Lender as collateral security for the obligations of Parent to Parent’s Lender under Parent’s Credit Agreement as represented in the two Promissory Notes, the Promissory Note dated May 10, 2017 in the amount of $105,805.74 and the Amended and Restated Note dated May 10, 2017 in the amount of $4,500,000.00 by Parent and its Subsidiaries to Parent’s Lender.

“ Proposed Parent Equity Incentive Plan ” means that certain omnibus equity incentive plan adopted by the Board of Directors of Parent to be included as a Proxy Statement Proposal.

“ Proxy Statement ” means the proxy statement pursuant to Section 14(a) of the Exchange Act to be prepared by Parent and filed with the SEC in connection with the Parent Stockholders’ Meeting to approve the Proxy Statement Proposals.

“ Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Special Indemnity Obligation ” means the indemnity obligation of the Parent and the Parent Principal Stockholders pursuant to Article VIII hereof, which indemnity obligation is secured by the Escrow Shares.

“ Superior Proposal ” means a bona fide, unsolicited written Takeover Proposal (A) that if consummated would result in a third party (or in the case of a merger in which a parent entity issues stock to such third party, the stockholders of such third party) acquiring, directly or indirectly, 75% or more of the outstanding AgEagle Common Stock or more than 75% of the assets (based on the fair market value thereof) of AgEagle (B) that the Board of Directors of AgEagle determines in good faith, after consultation with its outside financial advisor and outside legal counsel, is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal, including all conditions contained therein and the person making such Takeover Proposal and (C) that the Board of Directors of AgEagle determines in good faith, after consultation with its outside financial advisor and outside legal counsel (taking into account at the time of determination any changes to this Agreement irrevocably offered by Parent in response to such Takeover Proposal, and all financial, legal, regulatory and other aspects of such Takeover Proposal, including all conditions contained therein and the person making such proposal, and this Agreement and any other factors deemed relevant by the Board of Directors of AgEagle), is more favorable to the stockholders of AgEagle than the Merger.

“ Takeover Proposal ” means any bona fide proposal or offer made by a third party (other than any offer or proposal by Parent or its affiliates) for or with respect to any acquisition, whether by a merger, purchase, consolidation, tender offer, exchange offer, business combination, recapitalization, binding share exchange, joint venture or other similar transaction, of (A) more than 25% or more of AgEagle’s assets (based on the fair market value thereof), or (B) more than 25% of the outstanding AgEagle Common Stock or securities of AgEagle representing more than 25% of the voting power of AgEagle.

“ Tax ” or “ Taxes ” means any and all federal, state, local or foreign taxes, imposts, levies, duties, fees or other assessments, including all net income, gross receipts, branch profits, capital, sales, use, ad valorem, value added, transfer, registration, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, disability, excise, severance, stamp, occupation, premium, windfall profits, environmental, real property, personal property, alternative, add-on minimum and estimated taxes, customs duties, and other taxes of any kind whatsoever, including any and all interest, penalties, additions to tax or additional amounts imposed by any Taxing Authority in connection with respect thereto, whether disputed or not.

“ Taxing Authority ” means, with respect to any Tax, the Governmental Entity that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Governmental Entity.

“ Tax Return ” means any return, report or similar filing (including any attached schedules, supplements and additional or supporting material) filed or required to be filed with respect to Taxes, including any information return, claim for refund, or declaration of estimated Taxes (and including any amendments with respect thereto).

Exhibit A

AgEagle Shareholders

AgEagle Shareholders	Number of Shares Owned		% of Merger Consideration to be Received
Bret Chilcott		3,500,000		60.2	%
Green Block Capital		500,000		8.6	%
Raven Industries		200,000		3.4	%
Convertible Debt Holders (1)		531,833		9.1	%
Stock Options and Warrants		1,085,100		18.7	%
		5,816,933

(1)

Includes Alpha Capital Anstalt and an affiliate of Alpha

Exhibit B

Form of Letter of Transmittal

Exhibit C

Form of Escrow Agreement

Exhibit 10.1

Voting Agreement

This Voting Agreement (this “ Agreement ”), dated as of October 19, 2017 between the undersigned stockholder (“ Stockholder ”) of AgEagle Aerial Systems, Inc., a Nevada corporation (the “ Company ”), and EnerJex Resources, Inc., a Nevada corporation (“ Parent ”).

WHEREAS, concurrently with or following the execution of this Agreement, the Company, Parent and AgEagle Merger-Sub, Inc., a Nevada corporation and wholly owned subsidiary of Parent (“ Merger Sub ”), have entered, or will enter, into an Agreement and Plan of Merger (as the same may be amended from time to time, the “ Merger Agreement ”), providing for, among other things, the merger (the “ Merger ”) of Merger Sub and the Company pursuant to the terms and conditions of the Merger Agreement;

WHEREAS, as a condition to its willingness to enter into the Merger Agreement, Parent has required that Stockholder execute and deliver this Agreement; and

WHEREAS, in order to induce Parent to enter into the Merger Agreement, Stockholder is willing to make certain representations, warranties, covenants and agreements with respect to the shares of common stock, par value $.0001 per share, of the Company (“ Company Common Stock ”) beneficially owned by Stockholder and set forth below Stockholder’s signature on the signature page hereto (the “ Original Shares ” and, together with any additional shares of Company Common Stock pursuant to Section 6 hereof, the “ Shares ”).

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Definitions .

For purposes of this Agreement, capitalized terms used and not defined herein shall have the respective meanings ascribed to them in the Merger Agreement.

Representations of Stockholder .

Stockholder represents and warrants to Parent that:

(a) (i) Stockholder owns beneficially (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934 (the “Exchange Act”) all of the Original Shares free and clear of all liens (other than those imposed under federal and state securities laws), and (ii) there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Stockholder is a party relating to the pledge, disposition or voting of any of the Original Shares and there are no voting trusts or voting agreements with respect to the Original Shares.

(b) Stockholder does not beneficially own any shares of Company Common Stock other than (i) the Original Shares and (ii) any options, warrants or other rights to acquire any additional shares of Company Common Stock or any security exercisable for or convertible into shares of Company Common Stock, set forth on the signature page of this Agreement (collectively, “ Options ”).

(c) Stockholder has full corporate power and authority and legal capacity to enter into, execute and deliver this Agreement and to perform fully Stockholder’s obligations hereunder (including the proxy described in Section 3(b) below). This Agreement has been duly and validly executed and delivered by Stockholder and constitutes the legal, valid and binding obligation of Stockholder, enforceable against Stockholder in accordance with its terms.

(d) None of the execution and delivery of this Agreement by Stockholder, the consummation by Stockholder of the transactions contemplated hereby or compliance by Stockholder with any of the provisions hereof will conflict in any material respect with or result in a material breach, or constitute a material default (with or without notice of lapse of time or both) under any provision of, any trust agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument or law applicable to Stockholder or to Stockholder’s property or assets.

(e) No consent, approval or authorization of, or designation, declaration or filing with, any Governmental Entity or other person or entity on the part of Stockholder is required in connection with the valid execution and delivery of this Agreement. No consent of Stockholder’s spouse is necessary under any “community property” or other laws in order for Stockholder to enter into and perform its obligations under this Agreement.

Agreement to Vote Shares; Irrevocable Proxy .

(a) Stockholder agrees during the term of this Agreement to vote the Shares, and to cause any holder of record of Shares to vote or execute a written consent or consents if stockholders of the Company are requested to vote their shares through the execution of an action by written consent in lieu of any such annual or special meeting of stockholders of the Company: (i) in favor of the Merger and the Merger Agreement, at every meeting (or in connection with any action by written consent) of the stockholders of the Company at which such matters are considered and at every adjournment or postponement thereof; (ii) against (1) any other transaction, (2) any action, proposal, transaction or agreement which could reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under the Merger Agreement or of Stockholder under this Agreement and (3) any action, proposal, transaction or agreement that could reasonably be expected to impede, interfere with, delay, discourage, adversely affect or inhibit the timely consummation of the Merger or the fulfillment of Parent’s, the Company’s or Merger Sub’s conditions under the Merger Agreement or change in any manner the voting rights of any class of shares of the Company (including any amendments to the Company’s Articles of Incorporation).

(b) Stockholder hereby appoints Parent and any designee of Parent, and each of them individually, its proxies and attorneys-in-fact, with full power of substitution and resubstitution, to vote or act by written consent during the term of this Agreement with respect to the Shares in accordance with Section 3(a) . This proxy and power of attorney is given to secure the performance of the duties of Stockholder under this Agreement. Stockholder shall take such further action or execute such other instruments as may be reasonably necessary to effectuate the intent of this proxy. This proxy and power of attorney granted by Stockholder shall be irrevocable during the term of this Agreement, shall be deemed to be coupled with an interest sufficient in law to support an irrevocable proxy and shall revoke any and all prior proxies granted by Stockholder with respect to the Shares. The power of attorney granted by Stockholder herein is a durable power of attorney and shall survive the dissolution, bankruptcy, death or incapacity of Stockholder. The proxy and power of attorney granted hereunder shall terminate upon the termination of this Agreement.

No Voting Trusts or Other Arrangement .

Stockholder agrees that Stockholder will not, and will not permit any entity under Stockholder’s control to, deposit any of the Shares in a voting trust, grant any proxies with respect to the Shares or subject any of the Shares to any arrangement with respect to the voting of the Shares other than agreements entered into with Parent.

Transfer and Encumbrance .

Stockholder agrees that during the term of this Agreement, Stockholder will not, directly or indirectly, transfer, sell, offer, exchange, assign, pledge or otherwise dispose of or encumber (“ Transfer ”) any of the Shares or enter into any contract, option or other agreement with respect to, or consent to, a Transfer of, any of the Shares or Stockholder’s voting or economic interest therein. Any attempted Transfer of Shares or any interest therein in violation of this Section 5 shall be null and void; provided, however, the Stockholder shall be permitted to transfer all or a portion of the Shares (i) to family members of the Stockholder, (ii) to the Stockholder’s affiliated entities, (the “ Permitted Transferee ” and collectively the “ Permitted Transferees ”); provided further that in each case the Permitted Transferee(s) shall hold such Shares subject to the same restrictions that are applicable hereunder and shall agree in writing to be bound by the terms of this Agreement prior to any such transfer.

Additional Shares .

Stockholder agrees that all shares of Company Common Stock that Stockholder purchases, acquires the right to vote or otherwise acquires beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of after the execution of this Agreement shall be subject to the terms of this Agreement and shall constitute Shares for all purposes of this Agreement.

Waiver of Appraisal and Dissenters’ Rights .

Stockholder hereby waives, and agrees not to assert or perfect, any rights of appraisal or rights to dissent from the Merger that Stockholder may have by virtue of ownership of the Shares.

Termination .

This Agreement shall terminate upon the earliest to occur of (i) the Effective Time and (ii) the date on which the Merger Agreement is terminated in accordance with its terms.

No Agreement as Director or Officer .

Stockholder makes no agreement or understanding in this Agreement in Stockholder’s capacity as a director or officer of the Company or any of its subsidiaries (if Stockholder holds such office), and nothing in this Agreement: (a) will limit or affect any actions or omissions taken by Stockholder in stockholder’s capacity as such a director or officer, including in exercising rights under the Merger Agreement, and no such actions or omissions shall be deemed a breach of this Agreement or (b) will be construed to prohibit, limit or restrict Stockholder from exercising Stockholder’s fiduciary duties as an officer or director to the Company or its stockholders.

10.

Specific Performance .

Each party hereto acknowledges that it may be impossible to measure in money the damage to the other party if a party hereto fails to comply with any of the obligations imposed by this Agreement and that, in the event of any such failure, the other party may not have an adequate remedy at law or damages. Accordingly, each party hereto agrees that injunctive relief or other equitable remedy, in addition to remedies at law or damages, may be an appropriate remedy for any such failure.

11.

Entire Agreement .

This Agreement supersedes all prior agreements, written or oral, between the parties hereto with respect to the subject matter hereof and contains the entire agreement between the parties with respect to the subject matter hereof. This Agreement may not be amended or supplemented, and no provisions hereof may be modified or waived, except by an instrument in writing signed by both of the parties hereto. No waiver of any provisions hereof by either party shall be deemed a waiver of any other provisions hereof by such party, nor shall any such waiver be deemed a continuing waiver of any provision hereof by such party.

12.

Notices .

All notices, requests, claims, demands, and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient, or (d) on the third business day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 12 ):

If to Parent:

EnerJex Resources, Inc.

4040 Broadway Street, Suite 425

San Antonio, TX 78209

Phone: (210) 592-1670

Attention: Louis G. Schott

Email: lschott@enerjexres.com

Copy to:

Dickinson Wright PLLC

350 E. Las Olas Blvd., Suite 1750

Ft. Lauderdale, FL 33301

Phone: (954-991-5421)

Attention: Joel D. Mayersohn

Email: JMayersohn@Dickinsonwright.com

If to Stockholder, to the address or electronic mail address set forth for Stockholder on the signature page hereof.

Copy to:

Loeb & Loeb LLP
345 Park Avenue
New York, NY 10154

Phone: (954-991-5421)

Attention: Mitchell S. Nussbaum

Email: mnussbaum@loeb.com

13.

Miscellaneous .

(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of laws of any jurisdiction other than those of the State of Nevada.

(b) Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns shall be brought and determined exclusively in the State Courts located in Nevada, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the Federal Courts located in Nevada. Each of the parties hereto agrees that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 12 or in such other manner as may be permitted by applicable laws, will be valid and sufficient service thereof. Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court or tribunal other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement and the rights and obligations arising hereunder (i) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve process in accordance with this Section 13(b) , (ii) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), and (iii) to the fullest extent permitted by the applicable law, any claim that (x) the suit, action or proceeding in such court is brought in an inconvenient forum, (y) the venue of such suit, action or proceeding is improper, or (z) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 13(c) .

(d) If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

(e) This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

(f) Each party hereto shall execute and deliver such additional documents as may be reasonably necessary or desirable to effect the transactions contemplated by this Agreement.

(g) All Section headings herein are for convenience of reference only and are not part of this Agreement, and no construction or reference shall be derived therefrom.

(h) The obligations of Stockholder set forth in this Agreement shall not be effective or binding upon Stockholder until after such time as the Merger Agreement is executed and delivered by the Company, Parent and Merger Sub, and the parties agree that there is not and has not been any other agreement, arrangement or understanding between the parties hereto with respect to the matters set forth herein.

(i) Neither party to this Agreement may assign any of its rights or obligations under this Agreement without the prior written consent of the other party hereto. Any assignment contrary to the provisions of this Section 13(i) shall be null and void.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above.

ENERJEX RESOURCES, INC.


By	/s/ Louis G. Schott
	Name: Louis G. Schott
	Title: Interim CEO


STOCKHOLDER


/s/ Bret Chilcott
Name: Bret Chilcott

Number of Shares of Company Common Stock Beneficially Owned as of the Date of this Agreement: 3,500,000

Number of Options Beneficially Owned as of the Date of this Agreement: 0

117 South 4th Street
Neodesha, Kansas 66757
Tel: (316) 202-2076
Email: bretc@ageagle.com

Exhibit 23.1

D. Brooks and Associates CPA’s, P.A.

Certified Public Accountants Certified Valuation Analysts

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated May 12, 2017, with respect to the financial statements of AgEagle Aerial Systems, Inc. contained in the 8-K filed by EnerJex Resources, Inc.

We hereby consent to the use of the aforementioned report, dated May 12, 2017, except for the effects of the 1-for-2 reverse stock split described in Note 11, as to which the date is June 7, 2016, on our audit of the financial statements of AgEagle Aerial Systems, Inc., which is contained in the 8-K filed by EnerJex Resources, Inc.

D. Brooks and Associates CPA’s, P.A.

West Palm Beach, FL

October 19, 2017

Exhibit 99.1

AGEAGLE AERIAL SYSTEMS, INC.

Audited financial statements as of December 31, 2016 and 2015

FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets as of December 31, 2016 and 2015	F-3
Statements of Operations for the years ended December 31, 2016 and 2015	F-4
Statement of Changes in Stockholder’s Equity (Deficit) for the years ended December 31, 2016 and 2015	F-5
Statements of Cash Flows for the years ended December 31, 2016 and 2015	F-6
Notes to Financial Statements	F-7

F- 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of AgEagle Aerial Systems, Inc.

We have audited the accompanying balance sheets of AgEagle Aerial Systems, Inc. as of December 31, 2016 and 2015, and the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2016. AgEagle Aerial Systems, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of AgEagle Aerial Systems, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations and has a working capital deficit. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan regarding these matters is also described in Note 3 to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

D. Brooks and Associates CPA’s, P.A.

West Palm Beach, Florida

May 15, 2017

D. Brooks and Associates CPA’s, P.A. 319 Clematis Street, Suite 318, West Palm Beach, FL 33401 – (561) 429-6225

See accompanying notes to financial statements.

F- 2

AGEAGLE AERIAL SYSTEMS, INC.
BALANCE SHEETS

	As of December 31,
	2016			2015
ASSETS
CURRENT ASSETS:
Cash	$	15,887		$	79,875
Accounts receivable, net		18,886			44,790
Inventories, net		148,404			142,129
Prepaid expense		2,156			2,068
Total current assets		185,333			268,862

Property and equipment, net		44,380			73,518

Total assets	$	229,713		$	342,380

LIABILITIES AND STOCKHOLDERS’DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	76,425		$	23,493
Accrued expenses		127,063			17,292
Accrued interest		79,019			25,444
Payroll liabilities		13,818			9,020
Convertible notes payable		800,000			500,000
Promissory note – related party		30,000			—
Customer deposits		—			45,586
Total current liabilities		1,126,325			620,835
Total liabilities		1,126,325			620,835

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT:
Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,200,000 shares issued and outstanding at December 31, 2016; 3,500,000 shares issued and outstanding at December 31, 2015		420			350
Additional paid-in capital		1,902,161			707,873
Accumulated deficit		(2,799,193	)		(986,678	)
Total stockholders’ deficit		(896,612	)		(278,455	)
Total liabilities and stockholders’ deficit	$	229,713		$	342,380

See accompanying notes to financial statements.

F- 3

AGEAGLE AERIAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2016			2015

Revenues	$	373,324		$	773,945
Cost of revenues		338,244			601,365
Gross profit		35,080			172,580

OPERATING EXPENSES:
Selling expense		56,340			106,587
General and administrative		363,787			242,865
Professional fees		554,043			118,767
Consulting fees – related party		694,356			763,972
Research and development		7,019			14,448
Total operating expenses		1,675,545			1,246,639
LOSS FROM OPERATIONS		(1,640,465	)		(1,074,059	)

OTHER EXPENSE:
Interest expense		(53,575	)		(25,445	)
Dealer termination expenses		(114,728	)		—
Loss on disposal of fixed assets		(3,747	)		—
Total other expense		(172,050	)		(25,445	)
LOSS BEFORE INCOME TAXES		(1,812,515	)		(1,099,504	)

INCOME TAXES		—			—
NET LOSS	$	(1,812,515	)	$	(1,099,504	)

BASIC AND DILUTED LOSS PER SHARE	$	(0.44	)	$	(0.31	)

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		4,099,167			3,500,000

See accompanying notes to financial statements.

F- 4

AGEAGLE AERIAL SYSTEMS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

								Retained
					Additional			Earnings
	Common Stock				Paid In			(Accumulated
	Shares		Amount		Capital			Deficit)			Total
Balance at December 31, 2014		3,500,000	$	350	$	42,492		$	112,826		$	155,668

Issuance of stock options for consulting services-related party		—		—		69,528			—			69,528

Award of common stock for consulting services-related party		—		—		694,444			—			694,444

Distributions		—		—		(98,591	)		—			(98,591	)

Net loss		—		—		—			(1,099,504	)		(1,099,504	)

Balance at December 31, 2015		3,500,000		350		707,873			(986,678	)		(278,455	)
Sales of common stock		200,000		20		499,980			—			500,000
Issuance of common stock for consulting services-related party		500,000		50		555,506			—			555,556
Issuance of stock options for consulting services-related party		—		—		138,802			—			138,802
Net loss		—		—		—			(1,812,515	)		(1,812,515	)
Balance at December 31, 2016		4,200,000	$	420	$	1,902,161		$	(2,799,193	)	$	(896,612	)

See accompanying notes to financial statements.

F- 5

AGEAGLE AERIAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,812,515	)	$	(1,099,504	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of fixed assets		3,747			—
Depreciation		22,549			22,513
Issuance of stock options for consulting services-related party		138,802			69,528
Issuance of common stock for consulting services-related party		555,556			694,444
Changes in assets and liabilities:
Accounts receivable		25,903			(41,314	)
Prepaid expense		(88	)		173
Inventories		(6,275	)		19,821
Accounts payable		7,346			19,733
Accrued expenses		114,570			(33,104	)
Accrued interest		53,575			25,444
Net cash used in operating activities		(896,829	)		(322,265	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed asset		2,841			—
Purchases of property and equipment		—			(52,514	)
Net cash provided by (used in) investing activities		2,841			(52,514	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of note payable		—			75,000
Re-payment of note payable		—			(75,000	)
Distributions		—			(98,591	)
Issuance of convertible notes payable		300,000			500,000
Issuance of promissory note – related party		30,000			—
Sale of common stock		500,000			—
Net cash provided by financing activities		830,000			401,409

Net (decrease) increase in cash		(63,988	)		26,630
Cash at beginning of year		79,875			53,245
Cash at end of year	$	15,887		$	79,875

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	—		$	—
Income taxes	$	—		$	—

See accompanying notes to financial statements.

F- 6

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS

AgEagle Aerial Systems, Inc. (the “Company” or “AgEagle”), headquartered in Neodesha, Kansas, was organized in 2011 as Solutions by Chilcott, LLC, a Kansas company. The Company began operations in 2011, building composite parts for truck companies, and in 2012, moved into advanced composite parts as a Tier 1 vendor to the U.S. government manufacturing micro wind turbine blades. The Company then worked with a research project at Kansas State University (“KSU”) that was trying to use model airplanes to monitor and analyze crops. During the initial phase of the project, KSU and the Company came to the conclusion that this business opportunity would be better as its own entity, so the project was taken on by Solutions by Chilcott, LLC. Solutions by Chilcott, LLC was converted into AgEagle Aerial Systems, Inc., a Nevada Corporation, on April 22, 2015, and 3,500,000 shares of AgEagle common stock were issued to the Company’s sole member. The Company develops and manufactures unmanned aerial vehicles (“UAV”) for sale to the precision agriculture industry. The Company’s products include the AgEagle Classic and RAPID Systems. The Company primarily sells products in the United States but also in Canada and Australia, through one exclusive distributor in the agricultural industry. Prior to the execution of the exclusive distributor agreement in February 2016 the Company sold their product through various dealers in the US and Canada all these agreements have since been terminated.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States. The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 fiscal year end.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for bad debt, warranty and dealer termination costs, obsolete inventory, valuation of stock issued for services and stock options and the valuation of deferred tax assets.

Fair Value of Financial Instruments

Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, convertible debt, and accounts payable and accrued expenses approximates their carrying values due to their short-term maturities.

Cash and Cash Equivalents

Cash and cash equivalents includes any highly liquid investments with an original maturity of three months or less.

Receivables and Credit Policy

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. In 2016 and 2015, the Company generally did 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.

The Company estimates an allowance for doubtful accounts based upon an evaluation of the current status of receivables, historical experience, and other factors as necessary. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. The Company determined that no allowance was necessary as of December 31, 2016 and 2015.

F- 7

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Inventories

Inventories, which consist of raw materials, finished goods and work-in-process, are stated at the lower of cost or net realizable value, with cost being determined by the average-cost method, which approximates the first-in, first-out method. At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. This evaluation primarily includes an analysis of forecasted demand in relation to the inventory on hand, among consideration of other factors. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the respective inventories.

Research and Development

The Company expenses in the period incurred research and development costs, which totaled $7,019 and $14,448 for the years ended December 31, 2016 and 2015, respectively.

Property and Equipment

Property and equipment are recorded at cost, and are being depreciated using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Leasehold improvements are recorded at cost and amortized on a straight- line basis over the shorter of their estimated lives or the remaining lease term. Significant renewals and betterments are capitalized. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the cost and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are reflected in the statements of operations.

Shipping Costs

Shipping costs, which total $12,088 and $27,966, respectively, for the years ended December 31, 2016 and 2015, are recorded as cost of revenue and any amounts billed to customers for shipping costs, which total $2,204 and $2,860, respectively, for the years ended December 31, 2016 and 2015, are recorded as revenue.

Revenue Recognition

The Company recognizes revenues for the sale of its products in the period when persuasive evidence of an arrangement with a customer, distributor or dealer exists, product delivery and acceptance have occurred and title has transferred to the customer, dealer or the distributor, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured.

The Company generally ships FOB Shipping Point terms. Shipping documents are used to verify delivery and customer acceptance. The Company assesses whether the sales price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund. The Company assesses collectability based on the creditworthiness of the customer as determined by evaluations and the customer’s payment history. Additionally, dealers are required to place a deposit on each drone ordered. The Company has executed various agreements to sell its products, including one exclusive worldwide distributor agreement in the current year whereby the dealers agreed to purchase AgEagle drones and other related products. Under the terms of the dealer agreements except the recently executed agreement with our distributor, the dealer takes ownership of the products, and the Company deems the items sold upon release of shipment to the dealer. To maintain their exclusivity as a distributor, they are expected to attain certain sales thresholds over the course of the distribution agreement and they have the right of return within twelve months of purchase up to a certain percentage of the annual sales volume less a restocking fee. Prior to the execution of the exclusive distributor agreement in February 2016 the Company sold their product through various dealers in the US and Canada all these agreements have since been terminated.

F- 8

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs amounted to $10,257 and $57,827 for the years ended December 31, 2016 and 2015, respectively.

Provisions for Inventory Obsolescence

The Company recorded a provision for estimated obsolescence and shrinkage of inventory in 2015. Our estimates consider the cost of inventory, forecasted demand, the estimated market value, the shelf life of the inventory and our historical experience. During 2016, during our inventory observations we recorded permanent adjustments for all inventory considered to be obsolete. If demand for a product declines or a change in the features of our products changes the components required to build it is reasonably likely that circumstances may cause the estimate to change, which would result in additional charges to net income.

Contingencies

The Company provides a one-year warranty for all units sold to a customer through their exclusive dealer agreement that is included in the price of the product. Based on historical experience, the Company has recorded as an estimate for the warranty accrual expense $4,398 in 2016 which represents 1.5% of sales revenue for the year. The warranty accrual will remain until the product contractual warranty period is over or the Company is required to perform product maintenance on the product as contractually required.

Under the terms of the agreement, the Company agreed to terminate all existing dealer agreements, which triggered both the “Termination for Convenience” clause and the right of return clause in the existing dealer agreements. The dealer agreements stipulate that if any such dealer agreement is terminated by the Company without cause, the Company will, at the dealer’s option, repurchase any or all unsold drones in the dealer’s inventory or in transit to the dealer on the effective date of termination and any other marketing material. The purchase price for such unsold products and other material will be the actual net invoice price paid by dealer less any prior credits. The dealer will return the product undamaged and in merchantable condition.

On February 22, 2016, the Company entered into a dealer termination agreement with a certain dealer in relation to its exclusive distributor agreement for Canada. The parties mutually agreed that the Company will pay the dealer installments through September 1, 2016, totaling $100,000 for the termination of the dealer’s exclusive distributor agreement. As of December 31, 2016, the Company has recorded the termination costs of $100,000 in other expense and has accrued a remaining payment due to the dealer of $20,000.

As of December 31, 2016, management has determined that three UAVs have been returned and seventeen units have been converted to include components from the newer models. As a result, termination costs for the year ended December 31, 2016 of $74,715 were recorded in other expense. Management believes that all the former dealers based on their right of return clause are properly accrued and at this time there is one dealer that has the right to return one unit and convert one unit, and a second dealer that will return four units, which would be equal to approximately $18,000 in cost to the Company.

Earnings Per Share

The Company computes earnings per share in accordance with FASB ASC Topic 260 Earnings Per Share, which requires the Company to present basic earnings per share and diluted earnings per share when the effect is dilutive.

F- 9

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Potentially Dilutive Securities

Options and convertible debt were all considered anti-dilutive for the year ended December 31, 2016 and 2015 due to net losses that the Company reported. The following table sets forth the securities that were not included for the year ended December 31, 2016 and 2015in the diluted net loss per share calculation because their effect was anti-dilutive:

	2016		2015

Options		125,000		125,000
Convertible Debt and Accrued Interest		669,933		525,444

Total Potentially Dilutive Securities		794,933		650,444

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes. This topic requires an asset and liability approach for accounting for income taxes.

The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. As of December 31, 2016 and 2015, the unrecognized tax benefit accrual was $0. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All years are subject to Federal and state tax examinations by tax authorities.

Recently Issued Accounting Pronouncements

In May 2014, FASB issued Accounting Standards Update 2014-09 establishing Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (ASC 606). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange from those goods and services and requires enhanced revenue disclosures. The standard was recently amended to make it effective for public companies for annual reporting periods beginning after December 15, 2017, and interim periods within the reporting period. The Company is still assessing the impact of this accounting standard on its financial statements.

In January 2016, FASB issued Account Standards Update 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation and disclosure of financial statements. This guidance will be effective in the first quarter of fiscal year 2019 and early adoption is not permitted. The Company is currently evaluating the impact that this guidance will have on its financial statements

In February, 2016, FASB issued Account Standards Update 2016-02 – Leases (Topic 842) intended to improve financial reporting of leasing transaction whereby lessees will need to recognize a right-of-use asset and a lease liability for virtually all of their leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current Generally Accepted Accounting Principles (GAAP), the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP—which requires only capital leases to be recognized on the balance sheet—the new ASU will require both types of leases to be recognized on the balance sheet.

F- 10

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

In March 2016, FASB issued Account Standards Update 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which addresses certain aspects of accounting for share-based payment award transactions. This guidance will be effective in the first quarter of fiscal year 2017 and early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on its 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 or future financial statements.

NOTE 3 — GOING CONCERN

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplates continuation of the Company as a going concern which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has experienced negative cash flows from operations, has net losses from continuing operations of $1,640,465 and $1,074,059 for the years ended December 31, 2016, and 2015, respectively, and has a working capital deficit of $940,992 and an accumulated deficit of $2,799,193 at December 31, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern and to operate in the normal course of business. The Company has funded its activities to date almost exclusively from equity financings, loans from a related party and the issuance of secured long-term debt.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Cash on hand is not sufficient to fund operations for the next twelve months. While there can be no guarantees the Company is currently pursuing an initial public offering, in which it anticipates raising additional capital through the sale of its securities. .

NOTE 4 — INVENTORIES

Inventories consist of the following at December 31:

	2016		2015

Raw materials	$	98,918	$	107,506
Work-in-process		23,866		23,352
Finished goods		25,620		11,271
	$	148,404	$	142,129

During the years ended December 31, 2016 and 2015, the Company identified write-downs that were considered adjustments to the cost basis of the respective inventories of $10,544 and $14,479, respectively.

NOTE 5 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

	2016			2015

Furniture and equipment	$	95,888			113,638
Less accumulated depreciation		(51,508	)		(40,120	)
	$	44,380		$	73,518

Depreciation expense for the years ended December 31, 2016 and 2015 was $22,549 and $22,513, respectively.

F- 11

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 6 — DEBT

Convertible Promissory Notes

On May 6, 2015, the Company closed a private placement pursuant to a subscription agreement whereby two institutional investors (the “2015 Holders”) purchased convertible notes having an aggregate principal amount of $500,000, convertible into common stock of the Company at $1.00 per share and maturing on November 6, 2016. Interest on the notes accrues at a rate of 8% annually and is payable quarterly. On or about March 4, 2016, the Company and the 2015 Holders entered into extension and modification agreements whereby the 2015 Holders agreed to extend the maturity date of the notes to November 6, 2017 and permanently waive all rights and remedies, of whatever nature, with respect to the various defaults that occurred under this subscription agreement and notes, including, without limitation, (i) the Company’s failure to become a public SEC reporting company on or before September 30, 2015, (ii) the Company’s failure to pay interest on the notes, and (iii) modifying and waiving certain participation rights in future financings. For the years ended December 31, 2016 and 2015, the Company recorded $40,000 and $25,444 of interest expense, respectively. As a result of non-payment of the interest due, the Company has accrued interest as of December 31, 2016 of $65,444.

On June 6, 2016, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor (the “2016 Holder”) purchased a convertible note having a principal amount of $300,000, convertible into common stock of the Company at $3.00 per share and maturing on June 30, 2017. Interest on the notes accrues at a rate of 8% annually and is payable quarterly. For the year ended December 31, 2016 the Company recorded interest expense of $13,467. As a result of non-payment of the interest due the Company has accrued interest as of December 31, 2016 of $13,467.

On or about February 2, 2017, the Company, the 2015 Holders and the 2016 Holder entered into a consent and waiver agreement whereby such holders, as applicable, agreed to permanently waive all rights and remedies, of whatever nature, with respect to the defaults that occurred under all of the subscription agreements and notes, including, without limitation, (i) the Company’s failure to become a public SEC reporting company on or before September 30, 2016, and (ii) waiving certain participation rights in future financings, most favored nation rights, and restrictions on future issuances of Company securities. In addition, on March 24, 2017, the Company and the 2016 Holder entered into a modification agreement whereby the Company agreed to accrue and pay interest to the 2016 Holder on the aggregate unconverted and then outstanding principal amount of the note issued in 2016 at a rate of 8% per annum, irrespective of any late fees that may be (or have been) incurred in connection with such failure, payable on the earlier of the newly extended maturity date of November 6, 2017 or the date the Company becomes a public SEC reporting company.

Promissory Note-Related Party

On December 15, 2016, the Company issued a promissory note with an aggregate principal amount of $30,000 to a related party. The promissory note accrues interest at an annual rate of 2% and matures on June 30, 2017. For the year ended December 31, 2016 the Company recorded interest expense of $108.

NOTE 7 — INCOME TAXES

Prior to April 15, 2015, AgEagle Aerial Systems, Inc. was treated as a disregarded entity for income tax purposes. Income taxes, if any, were the responsibility of the sole member. In April 2015, the Company was converted to a corporation.

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards. At December 31, 2016 and 2015, the total of all deferred tax assets was $663,676 and $418,226, respectively. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established a valuation allowance of $1,081,902 and $418,226 for the years ended December 31, 2016 and 2015, respectively. The change in the valuation allowance for the years ended December 31, 2016 and 2015 was $663,676 and $418,226, respectively.

F- 12

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 7 — INCOME TAXES-CONTINUED

The components of income tax benefit for the years ended December 31, 2016 and 2015 consist of the following:

	2016			2015
Deferred tax benefit:
Federal	$	(615,857	)	$	(388,092	)
State		(47,819	)		(30,134	)
Increase in valuation allowance	$	(663,676	)	$	(418,226	)

A reconciliation of income tax expense at the federal statutory rate to income tax expense at the Company’s effective rate for the years ended December 31 is as follows:

	2016						2015
	Amount			Rate			Amount			Rate
Computed tax at the expected statutory rate	$	(616,255	)		34.00	%	$	(388,557	)		35.34	%
State and local income taxes, net of federal		(47,819	)		2.64			(30,134	)		2.74
Other non-deductible expenses		398			(0.02	)		465			(0.04	)
Change in valuation allowance		663,676			(36.62	)		418,226			(38.04	)
Income tax benefit	$	—			0.00	%	$	—			0.00	%

The temporary differences, tax credits and carryforwards that gave rise to the following deferred tax assets at December 31 is as follows:

	2016			2015
Deferred tax assets:
Depreciation	$	5,815		$	2,754
Stock options for consulting services-related party		19,630			—
Common stock for consulting services-related party		458,000			254,445
Stock options		76,332			25,475
Net operating loss carryforward		552,125			135,552
Total Deferred tax assets		1,081,902			418,226
Valuation allowance		(1,081,092	)		(418,226	)
Net Deferred tax assets	$	—		$	—

NOTE 8 — EQUITY

Issuance of Common Stock and Stock Split

From inception through April 10, 2015, the Company was a member-managed limited liability company (LLC) solely owned by its Chief Executive Officer. On April 22, 2015, the Company issued 3,500,000 shares of common stock to its sole member upon conversion of the Company from an LLC to a corporation. The financial statements have been retroactively stated to give effect to the issuance of 3,500,000 shares of common stock on April 22, 2015.

F- 13

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 8 — EQUITY – CONTINUED

On February 22, 2016, the Company issued 500,000 shares of the Company’s common stock to a related party in connection with the strategic consulting agreement executed in March 2015 for service to be rendered over eighteen months. The value of the shares was based on the estimated fair value of the stock per the most recent sales price of our stock on February 25, 2016 since there was no dis-incentive for non-performance. During the year ended December 31, 2015, $694,444 of expense was recorded to reflect the pro rata portion of the stock earned during 2015. During the year ended December 31, 2016, $555,506 of expense was recorded to reflect the pro rata portion of the stock earned during 2016.

On February 25, 2016, the Company signed a Securities Purchase Agreement with its worldwide exclusive distributer partner whereby the Company agreed to sell 200,000 shares of Common Stock for $500,000, and a representative of the purchaser of the common stock was appointed to the Board of Directors of the Company.

On June 7, 2016, the Company effected a 1-for-2 reverse stock split of its common stock. The financial statements give a retrospective effect to the reverse stock split.

Distributions

During the year ended December 31, 2015, the shareholder of the Company received cash distributions of $98,591. No distributions were made during the year ended December 31, 2016.

Stock Options

In June 2016, the Board authorized the issuance of 724,181 options to employees and directors to be issued in connection with the public offering. As a result of the public offering not being completed the options were forfeited during the year ended December 31, 2016, resulting in no compensation expense.

On March 1, 2015, the Company entered into a strategic consulting agreement with a related party and granted 125,000 stock options exercisable over five years from the grant date at an exercise price per share of $2.60.

The fair value of options granted were determined using the Black-Scholes option valuation model and a revaluation was performed at each reporting period. The significant weighted average assumptions relating to the valuation of the Company’s stock options during the year ended December 31, 2016 were as follows:

		2016
Dividend yield		0%
Remaining Contractual Term (Years)		4.38 to 4.79 yrs.
Volatility		47.09 to 92.34
Risk-free interest rate		1.01 % to 1.21%

The fair value of options granted during the year ended December 31, 2015 were determined using the Black-Scholes option valuation model. The significant weighted average assumptions relating to the valuation of the Company’s stock options for the year ended December 31, 2015 were as follows:

		2015
Dividend yield		0%
Remaining Contractual Term (Years)		5.04 yrs.
Volatility		44.82
Risk-free interest rate		1.76%

F- 14

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 8 — EQUITY – CONTINUED

A summary of the option activity for the year ended December 31, 2016 is as follows:

	For the Year Ended December 31, 2016
						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding at beginning year		125,000		$	2.60		5.0 years	$	—
Granted		724,181			—		—		—
Exercised		—			—		—		—
Forfeited		(724,181	)		—		—		—
Outstanding at end of the year		125,000			2.60		4.0 years	$	—
Exercisable at end of the year		125,000		$	2.60		4.0 years	$	—

A summary of the option activity for the year ended December 31, 2015 is as follows:

	For the Year Ended December 31, 2015
					Weighted
			Weighted		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value
Outstanding at beginning year		—	$	—		—	$	—
Granted		125,000		2.60		5.0 years		—
Exercised		—		—		—		—
Canceled/Expired/Forfeited		—		—		—		—
Outstanding at end of the year		125,000	$	2.60		5.0 years	$	—
Exercisable at end of the year		—	$	—		—	$	—

The total intrinsic value of options exercised as of December 31, 2016 and 2015 was $0. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at December 31, 2016 and 2015 (for outstanding options), less the applicable exercise price.

During the years 2016 and 2015, the Company recorded $138,802 and $69,528, respectively, of non-cash compensation expense related to the vested stock options issued to a related party consultant.

F- 15

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leased office space in Neodesha, Kansas for $100 a month from August 2014 to September 2015, $200 a month from October 2015 to September 2016, and $300 a month from October 2016 to December 31, 2016. The lease terminates on September 30, 2018 with no option to renew unless approved by the city commission. Rent expense was $2,578 and $1,500 for the years ended December 31, 2016 and 2015, respectively.

The future minimum lease payments for non-cancelable operating leases having remaining terms in excess of one year as of December 31, 2016 are as follows:

Year ending December 31:	Lease Payments
2017		3,900
2018		3,600
Thereafter		—
Total Minimum Lease Payments	$	7,500

Line of Credit

The Company had an $80,000 open line of credit with Community National Bank. The line of credit matured on December 3, 2015. The line of credit was secured by the majority shareholder of the Company as of December 31, 2015. The bank charges interest at a rate of 6% and the balance on the line of credit as of December 31, 2015 was $0.

F- 16

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 9 — COMMITMENTS AND CONTINGENCIES- CONTINUED

Exclusive Distribution Agreement

On February 17, 2016, the Company signed a long-term distribution agreement with a third party to be the worldwide exclusive distribution partner (“distributor”) for the Company. Under this agreement, the distributor will private label and purchase the Company’s fixed wing UAVs, exclusively for the agriculture markets over an initial term, for resale through their network of dealers worldwide. To maintain their exclusivity as a distributor, the third party is expected to attain certain sales thresholds over the course of the distribution agreement. The distributor also has the first right of refusal to be the exclusive or non-exclusive distributor of any future Company systems in the agricultural industry, including any multicopter, rotor wing or unmanned aerial spraying systems. Under the terms of the agreement, the Company agreed to terminate all existing dealer agreements, which triggered both the “Termination for Convenience” clause and the right of return clause in the existing dealer agreements.

The dealer agreements stipulate that if any such dealer agreement is terminated by the Company without cause, the Company will, at the dealer’s option, repurchase any or all unsold drones in the dealer’s inventory or in transit to the dealer on the effective date of termination and any other marketing material. The purchase price for such unsold products and other material will be the actual net invoice price paid by dealer less any prior credits. The dealer will return the product undamaged and in merchantable condition.

As of December 31, 2016, management determined that three UAV’s have been returned and seventeen units have been converted to include components from the newer models. As a result, termination costs for the year ended December 31, 2016 of $74,715 were recorded in other expense. Management believes that all the former dealers based on their right of return clause are properly accrued and at this time only one dealer has the right to return one unit and convert one unit and a second dealer will upgrade four units, which would be equal to approximately $18,000 and the Company has included this amount in accrued expense as of December 31, 2016.

Service Agreements

On January 26, 2016, the Company engaged the services of an institutional banker to act as a firm commitment underwriter assisting the Company with listing its securities on a national stock exchange. In exchange, the Company would pay an underwriting discount equal to 8% of the aggregate price upon closing the offering. Also, at closing, for the price of $50, the Company would sell to the institutional banker a warrant to purchase shares of the Company’s common stock equal to 6% of the shares sold in the offering. The exercise price shall be 115% of the public offering price of the securities. See Note 11, Subsequent Events, for a description of a revised agreement with the current institutional banker executed in 2017 due to a new capital offering as a result of the 2016 offering not being completed.

On March 31, 2016, the Company signed a long-term agreement with a third party to deliver a cloud-based drone operations platform providing data processing and delivery, automated drone control airspace awareness, manned aircraft locations, weather overlays and redundancy of radio and cellular connection for the Company. Under this agreement, the third party will provide hardware and software availability, aerial map processing and hosting, and private labeling of all customer touch points. The costs of the subscriptions will be provided at a discounted rate from the standard pricing of the third party at least until December 30, 2020.

F- 17

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 10 — RELATED PARTY TRANSACTIONS

The following reflects the related party transactions during the years ended December 31, 2016 and 2015.

Consulting Agreement

On March 1, 2015, the Company entered into a strategic consulting agreement to assist it with raising capital and strategic positioning in an effort to increase its valuation. Under the terms of the agreement, the Company agreed to issue 250,000 shares of the Company’s common stock on May 1, 2015, an additional 250,000 shares of common stock on January 15, 2016 and 125,000 stock options exercisable for five years from the issuance date. As of December 31, 2015, no shares had been issued to the consultant. The Company recognized $694,444 of consulting expense during 2015 related to the value of the shares earned, which was based on the estimated fair value of the stock as of December 31, 2015, based on the terms of a transaction which ultimately closed in February 2016, as there was no dis-incentive for non-performance. Additionally, the Company recognized $69,528 of consulting expense related to the granting of the stock options during 2015.

On February 22, 2016, the Company issued 500,000 shares of its common stock in connection with the strategic consulting agreement executed in March 2015. During 2016, the Company recognized $555,556 of consulting expense related to the issuance of the common stock and $138,802 related to the stock options.

On December 2016, the Company issued a promissory note with the consultants of the strategic consulting agreement for $30,000 which accrues interest at a rate of 2% annually. The interest is payable upon maturity of the note together with the principal amount of $30,000 on June 30, 2017.

NOTE 11 — SUBSEQUENT EVENTS

On January 10, 2017, the Company engaged the services of an institutional banker to act as an underwriter assisting the Company with listing its securities on a national stock exchange or other quotation system. In exchange, the Company will pay an underwriting discount equal to 10% of the aggregate price upon closing the offering. Also, at closing, for the price of $50, the Company will sell to the institutional banker a warrant to purchase shares of the Company’s common stock equal to 5% of the shares sold in the offering. The exercise price shall be 115% of the public offering price of the securities.

On January 24, 2017, the Company issued a promissory note with an aggregate principal amount of $30,000 to a related party. The promissory note accrues interest at an annual rate of 2% and matures on July 31, 2017.

On February 3, 2017, the Company closed a private placement pursuant whereby a bridge loan agreement was executed with an accredited investor (the “2017 Holder”) to purchase a convertible promissory note with an aggregate principal amount of $175,000, an original issue discount of $25,000, convertible into common stock of the Company at $2.50 per share and maturing 90 days following issuance, or May 4, 2017. After payment of a finder’s fee and other expenses, the Company received net proceeds of $101,250. In addition, the Company also issued to the 2017 Holder a warrant to purchase 200,000 shares of the Company’s common stock at an exercise price per share of $2.50. To the extent the entire unpaid principal balance of the note is not paid in full on the maturity date, (i) interest on the unpaid principal balance will accrue from the maturity date at the rate of 18% per annum, and will continue until the date the note is paid in full, and (ii) the Company will issue to the 2017 Holder an additional warrant to purchase 100,000 shares of common stock for each ninety (90) calendar day period that the unpaid principal balance of the note and any accrued interest is not paid in full by such date. The Company has not paid the unpaid balance thereby resulting in a default of the loan and an additional warrant to purchase 100,000 shares of common stock issued.

F- 18

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 11 — SUBSEQUENT EVENTS-CONTINUED

This note is senior in right of payment to all secured and unsecured debt of the Company now existing or hereafter incurred. In addition, the Company agreed that until the unpaid principal balance of the note and any accrued interest is paid in full, it will not incur or guarantee any indebtedness for borrowed money of any kind or repay, repurchase or offer to repay any indebtedness existing as of the issuance date, other than regularly scheduled principal and interest payments as such terms are in effect as of the issuance date. The Company may not prepay the note without the consent of the 2017 Holder.

On the closing (the “Event Date”) of the first transaction or series of related transactions in which the Company sells any of its equity securities with total proceeds to the Company of at least $175,000 (the “Qualified Financing”), all of the outstanding principal and interest accrued to the Event Date, if applicable, shall be paid with the proceeds from such Qualified Financing, it being understood that the Company shall make such payment before using the net proceeds from the Qualified Financing for any other purpose.

If the principal balance of the note is not paid by the maturity date, the Company shall file with the Securities and Exchange Commission, as promptly as reasonably practicable following the earlier of nine months after the date of the closing of the sale of the note and warrant or 90 days following the Company’s initial public offering, a registration statement covering the resale of the 200,000 shares of common stock underlying the warrant and, to the extent applicable, any shares of common stock the 2017 Holder may have been granted the right to purchase pursuant to the note. The 2017 Holder was also granted standard piggyback registration rights.

The Company has evaluated subsequent events through May 15, 2017, which is the date these financial statements were available for issuance.

F- 19

Exhibit 99.2

AGEAGLE AERIAL SYSTEMS, INC.

Unaudited financial statements as of June 30, 2017

AGEAGLE AERIAL SYSTEMS, INC.
CONDENSED Balance Sheets

( UNAUDITED )

	As of
	June 30, 2017			December 31, 2016

ASSETS

CURRENT ASSETS:
Cash	$	5,179		$	15,887
Accounts receivable		6,676			18,886
Inventories		147,179			148,404
Prepaid expense		1,352			2,156
Total current assets		160,386			185,333

Property and equipment, net		47,703			44,380

Total assets	$	208,089		$	229,713

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES:
Accounts payable	$	118,321		$	76,425
Accrued expenses		42,203			127,063
Accrued interest		125,004			79,019
Payroll liabilities		10,853			13,818
Convertible notes payable		975,000			800,000
Promissory notes – related party		128,050			30,000
Total current liabilities		1,399,431			1,126,325
Total liabilities		1,399,431			1,126,325

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT:
Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,200,000 shares issued and outstanding at June 30, 2017 and December 31, 2016 respectively		420			420
Additional paid-in capital		1,913,485			1,902,161
Accumulated deficit		(3,105,247	)		(2,799,193	)
Total stockholders’ deficit		(1,191,342	)		(896,612	)
Total liabilities and stockholders’ deficit	$	208,089		$	229,713

The accompanying notes are an integral part of the condensed financial statements.

F- 1

AGEAGLE AERIAL SYSTEMS, INC.

Condensed Statements of Operations

(UNAUDITED)

	For the Three Months Ended						For the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2017			2016			2017			2016
Revenues	$	47,192		$	164,301		$	82,391		$	319,928
Cost of sales		42,200			127,462			52,636			253,949
Gross Profit		4,992			36,839			29,755			65,979

Operating Expenses:
Selling expenses		8,376			26,189			14,850			41,669
General and administrative		70,703			98,534			133,172			169,502
Professional fees		15,578			243,168			101,550			563,783
Consulting fees – related party		6,397			211,142			7,992			438,870
Research and development		1,564			1,000			5,880			2,953
Total operating expenses		102,618			580,033			263,444			1,216,777
Loss from Operations		(97,626	)		(543,194	)		(233,689	)		(1,150,798	)

Other Income (Expenses):
Other income (expense)		535			(11,562	)		5,189			(142,444	)
Interest expense		(36,383	)		(11,467	)		(77,554	)		(21,467	)
Loss on sale of equipment		—			—			—			(3,747	)
Total other expenses, net		(35,848	)		(23,029	)		(72,365	)		(167,658	)
Loss before Income Taxes		(133,474	)		(566,223	)		(306,054	)		(1,318,456	)
Provision for income taxes		—			—			—			—
Net Loss	$	(133,474	)	$	(566,223	)	$	(306,054	)	$	(1,318,456	)

Net Loss Per Share – Basic and Diluted	$	(0.03	)	$	(0.13	)	$	(0.07	)	$	(0.33	)

Weighted Average Number of Shares Outstanding During the Period - Basic and Diluted		4,200,000			4,200,000			4,200,000			4,200,000

The accompanying notes are an integral part of the condensed financial statements.

F- 2

AGEAGLE AERIAL SYSTEMS, INC.

Condensed Statement of Changes in Stockholders’ Deficit

(UNAUDITED)

					Additional
	Common Stock				Paid In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance at December 31, 2016		4,200,000	$	420	$	1,902,161	$	(2,799,193	)	$	(896,612	)
Stock-based compensation		—		—		6,397		—			6,397
Warrants issued with convertible promissory note		—		—		4,927		—			4.927
Net loss		—		—		—		(306,054	)		(306,054	)
Balance at June 30, 2017 (unaudited)		4,200,000	$	420	$	1,913,485	$	(3,105,247	)	$	(1,191,342	)

The accompanying notes are an integral part of the condensed financial statements.

F- 3

AGEAGLE AERIAL SYSTEMS, INC.

Condensed Consolidated Statements of Cash Flows

(UNAUDITED)

	Six Months Ended June 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(306,054	)	$	(1,318,456	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on sale of equipment		—			3,747
Depreciation		9,452			13,806
Stock compensation expenses - non-employee -related party		6,397			121,638
Accretion for debt discounts, warrants and issuance costs		25,000			—
Warrants issued with convertible promissory note		4,927			—
Common stock issued for consulting services – related party		—			414,390
Changes in assets and liabilities:
Accounts receivable		12,210			19,539
Inventories		1,225			(50,210	)
Prepaid expenses and other assets		805			(10,536	)
Accounts payable		41,897			379
Accrued liabilities		(84,861	)		125,398
Accrued interest		45,985			21,467
Accrued payroll liabilities		(2,966	)		(1,651	)
Net cash used in operating activities		(245,983	)		(660,489	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(12,775	)		—
Proceeds from sale of equipment		—			5,341
Net cash (used in) provided by investing activities		(12,775	)		5,341

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of convertible notes payable		248,050			300,000
Proceeds from sale of common stock		—			500,000
Net cash provided by financing activities		248,050			800,000

Net (decrease) increase in cash		(10,708	)		144,852
Cash at beginning of period		15,887			79,875
Cash at end of period	$	5,179		$	224,727

The accompanying notes are an integral part of the condensed financial statements.

F- 4

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 1 – Description of Business

AgEagle Aerial Systems, Inc. (the “Company” or “AgEagle”), headquartered in Neodesha, Kansas, was organized in 2011 as Solutions by Chilcott, LLC, a Kansas company. The Company began operations in 2011, building composite parts for truck companies, and in 2012, moved into advanced composite parts as a Tier 1 vendor to the U.S. government manufacturing micro wind turbine blades. The Company then worked with a research project at Kansas State University (“KSU”) that was trying to use model airplanes to monitor and analyze crops. During the initial phase of the project, KSU and the Company came to the conclusion that this business opportunity would be better as its own entity, so the project was taken on by Solutions by Chilcott, LLC. Solutions by Chilcott, LLC was converted into AgEagle Aerial Systems, Inc., a Nevada Corporation, on April 22, 2015, and 3,500,000 shares of AgEagle common stock were issued to the Company’s sole member. The Company develops and manufactures unmanned aerial vehicles (“UAV”) for sale to the precision agriculture industry. The Company’s products include the AgEagle RX-60 and RX-48 Systems. The Company primarily sells products in the United States but also in Canada and Australia, through one exclusive distributor in the agricultural industry. Prior to the execution of the exclusive distributor agreement in February 2016 the Company sold their product through various dealers in the US and Canada. All of the dealer agreements have since been terminated.

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation - These financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States. The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 fiscal year end.

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, these condensed financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at June 30, 2017 and 2016, the results of operations for the six months ended June 30, 2017 and 2016, and cash flows for the six months ended June 30, 2017 and 2016. The results for the six months ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the Company’s audited financial statements and management’s discussion and analysis included the Company’s annual financial statements for the years ended December 31, 2016 and 2015 included as part of the Reg. A Form DOS filed May 15, 2017.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the allowance for bad debt, warranty and dealer termination costs, obsolete inventory, valuation of stock issued for services and stock options and the valuation of deferred tax assets. Therefore, the determination of estimates requires the exercise of judgment.

Fair Value of Financial Instruments - Unless otherwise disclosed, the fair value of the Company’s financial instruments including cash, accounts receivable, convertible debt, accounts payable and accrued expenses approximates their recorded values due to their short-term maturities.

Cash and Cash Equivalents - Cash and cash equivalents includes any highly liquid investments with an original maturity of three months or less.

F- 5

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 2 – Summary of Significant Accounting Policies – Continued

Receivables and Credit Policy - Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Terms with our distributor allow for payment terms of 45 days from the invoice date. Trade receivables are stated at the amount billed to the customer. 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.

Inventories - Inventories, which consist of raw materials, finished goods and work-in-process, are stated at the lower of cost or net realizable value, with cost being determined by the average-cost method, which approximates the first-in, first-out method. At each balance sheet date, the Company evaluates its ending inventories for excess quantities and obsolescence. This evaluation primarily includes an analysis of forecasted demand in relation to the inventory on hand, among consideration of other factors. Based upon the evaluation, provisions are made to reduce excess or obsolete inventories to their estimated net realizable values. Once established, write-downs are considered permanent adjustments to the cost basis of the respective inventories.

Research and Development - The Company expenses research and development costs during the period incurred, which totaled $1,564 and $5,880 for the three and six months ended June 30, 2017, respectively and $1,000 and $2,953 for the three and six months ended June 30, 2016, respectively.

Property and Equipment - Property and equipment are recorded at cost, and are being depreciated using the straight-line method over the estimated useful lives of the related assets, ranging from three to seven years. Leasehold improvements are recorded at cost and amortized on a straight- line basis over the shorter of their estimated lives or the remaining lease term. Significant renewals and betterments are capitalized. Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed. At the time property and equipment are retired or otherwise disposed of, the cost and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are reflected in the statements of operations.

Shipping Costs - Shipping costs for the three and six months ended June 30, 2017 totaled $1,904 and $2,553, respectively and $1,215 and $3,866 for the three and six months ended June 30, 2016. All shipping costs billed directly to the customer are directly offset to shipping costs resulting in a net expense to the Company.

Revenue Recognition and Concentration - The Company recognizes revenues for the sale of its products in the period when persuasive evidence of an arrangement with a customer, distributor or dealer exists, product delivery and acceptance have occurred and title has transferred to the customer, dealer or the distributor, the sales price is fixed or determinable and collectability of the resulting receivable is reasonably assured.

F- 6

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 2 – Summary of Significant Accounting Policies – Continued

The Company generally ships FOB Shipping Point terms. Shipping documents are used to verify delivery and customer acceptance. The Company assesses whether the sales price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund. The Company assesses collectability based on the creditworthiness of the customer as determined by evaluations and the customer’s payment history. Additionally, dealers are required to place a deposit on each drone ordered. The Company has executed various dealer agreements, including one significant non-exclusive worldwide distributor agreement in 2016 whereby the dealers agreed to purchase AgEagle drones and other related products. Under the terms of the dealer agreements except the one significant worldwide distributor agreement, the dealers take ownership of the products, with no right of return, and the Company deems the items sold upon release of shipment to the dealer. The non-exclusive worldwide distributor has the right of return within twelve months of purchase up to a certain percentage of the annual sales volume less a restocking fee.

Sales to customers comprising more than 10% of our total net sales concentration information for such customers is summarized below:

	Percent of total sales for period ended June 30,
Customers	2017			2016
Customer A		15.1	%		91.4	%
Customer B		12.5	%		*
Customer C		10.2	%		*

- represents less than 10%

Advertising costs – Advertising costs are expensed as incurred. Advertising costs amounted to $5,043 and $6,078 for the three and six months ended June 30, 2017 are and $3,412 and $7,697 for the three and six months ended June 30, 2016, respe ctively.

Earnings Per Share - Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options and convertible instruments.

Potentially Dilutive Securities - The Company has excluded all common equivalent shares outstanding for warrants, options and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of June 30, 2017, the Company had 300,000 warrants, 125,000 options, and 476,285 potential shares which may be issued resulting from the provisions of convertible notes.. As of June 30, 2016, the Company had no warrants, 125,000 options, and 395,933 potential shares which may be issued resulting from the provisions of convertible notes.

Income Taxes - The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes. This topic requires an asset and liability approach for accounting for income taxes. The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. As of June 30, 2017, the unrecognized tax benefit accrual was $0. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All years are subject to Federal and state tax examinations by tax authorities.

F- 7

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 2 – Summary of Significant Accounting Policies – Continued

Recently Issued Accounting Standards -In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers . This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The updated guidance is effective for interim and annual periods beginning after December 15, 2016, and early adoption is not permitted. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 until December 15, 2017. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company is currently evaluating which transition method it will adopt and the expected impact of the updated guidance, but does not believe the adoption of the updated guidance will have a significant impact on its financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities , which addresses certain aspects of recognition, measurement, presentation and disclosure of financial statements. This guidance will be effective in the first quarter of fiscal year 2019 and early adoption is not permitted. The Company is currently evaluating which transition method it will adopt and the expected impact of the updated guidance, but does not believe the adoption of the updated guidance will have a significant impact on its consolidated financial statements.

In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” which changes the way that employers present net periodic pension cost ("NPPC") and net periodic postretirement benefit cost ("NPPBC") within the income statement. The amendment requires an employer to present the service cost component of NPPC and NPPBC in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. The other components of NPPC and NPPBC would be presented separately from this line item and below any subtotal of operating income; companies will need to disclose the line items used to present these other components of NPPC and NPPBC, if not separately presented. In addition, only the service cost component would be eligible for capitalization in assets. This guidance is effective retrospectively for annual and quarterly periods beginning after December 15, 2017, with early adoption permitted. The Company expects to adopt ASU No. 2017-07 beginning as of January 1, 2018, and does not expect this new guidance will have an impact on the Company’s results of operations, financial condition and/or financial statement disclosures.

Other recent accounting pronouncements issued by FASB did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

Note 3 — Going Concern

F- 8

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 3 — Going Concern – Continued

These factors raise substantial doubt about the Company’s ability to continue as a going concern and to operate in the normal course of business. The Company has funded its activities to date almost exclusively from equity financings, loans from a related party and the issuance of secured long-term debt.

Note 4 — Inventories

Inventories consist of the following at:

	June 30, 2017		December 31, 2016

Raw materials	$	97,623	$	98,918
Work-in-process		22,516		23,866
Finished goods		27,040		25,620
	$	147,179	$	148,404

Note 5 — Property and Equipment

Property and equipment consist of the following at:

	June 30, 2017			December 31, 2016

Property and equipment	$	108,663			95,888
Less accumulated depreciation		(60,960	)		(51,508	)
	$	47,703		$	44,380

Depreciation expense for the three and six months ended June 30, 2017 was $5,295 and $9,452 and, respectively and three and six months ended June 30, 2016 was $6,903 and $13,806.

F- 9

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 6 — Debt

Convertible Notes Payable

On May 6, 2015, the Company closed a private placement pursuant to a subscription agreement whereby two institutional investors (the “2015 Holders”) purchased convertible notes having an aggregate principal amount of $500,000, convertible into common stock of the Company at $2.00 per share (adjusted from $1.00 per share due to stock-split) and maturing on November 6, 2016. Interest on the notes accrues at a rate of 8% annually and is payable quarterly. On or about March 4, 2016, the Company and the 2015 Holders entered into extension and modification agreements whereby the 2015 Holders agreed to extend the maturity date of the notes to November 6, 2017 and permanently waive all rights and remedies, of whatever nature, with respect to the various defaults that occurred under this subscription agreement and notes, including, without limitation, (i) the Company’s failure to become a public SEC reporting company on or before September 30, 2015, (ii) the Company’s failure to pay interest on the notes, and (iii) modifying and waiving certain participation rights in future financings. For the three and six months ended June 30, 2017, the Company recorded $10,000 and $ 20,000 of interest expense, respectively and for the three and six months ended June 30, 2016 the Company recorded $10,000 and $ 20,000 of interest expense, respectively. As a result of non-payment of the interest due, the Company has accrued interest as of June 30, 2017 of $85,444.

On June 6, 2016, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor (the “2016 Holder”) purchased a convertible note having a principal amount of $300,000, convertible into common stock of the Company at $3.00 per share and maturing on June 30, 2017. Interest on the note accrues at a rate of 8% annually and is payable quarterly. For the three and six months ended June 30, 2017, the Company recorded $6,000 and $12,000 of interest expense, respectively and for the three and six months ended June 30, 2016 the Company recorded $1,467of interest expense. As a result of non-payment of the interest due, the Company has accrued interest as of June 30, 2017 of $25,467.

On February 3, 2017, the Company closed a private placement pursuant whereby a bridge loan (the “2017 Note A”) agreement was executed with an accredited investor (the “2017 Holder Series A”) to purchase a convertible promissory note with an aggregate principal amount of $175,000, an original issue discount of $25,000, convertible into common stock of the Company at $2.50 per share and maturing 90 days following issuance, or May 4, 2017. After payment of a finder’s fee and other expenses, the Company received net proceeds of $101,250. In addition, the Company also issued to the 2017 Holder a warrant to purchase 200,000 shares of the Company’s common stock at an exercise price per share of $2.50. To the extent the entire unpaid principal balance of the note is not paid in full on the maturity date, (i) interest on the unpaid principal balance will accrue from the maturity date at the rate of 18% per annum, and will continue until the date the note is paid in full, and (ii) the Company will issue to the 2017 Holder an additional warrant to purchase 100,000 shares of common stock for each ninety (90) calendar day period that the unpaid principal balance of the note and any accrued interest is not paid in full by such date. The Company has not paid the unpaid balance thereby resulting in a default of the loan and an additional warrant to purchase 100,000 shares of common stock issued.

F- 10

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 6 — Debt-Continued

The Company allocated the face value of the 2017 Note A to the warrants and the promissory note based on their relative fair values, allocated $4,927 to the warrants, and determined that there were no aggregate beneficial conversion features. The fair value of the warrants was determined using the Black-Scholes-Merton valuation model and the following assumptions: volatility – 74.80%, risk free rate – 2.27 %, dividend rate – 0.00%. The amount allocated to the warrants was recorded as a discount against the 2017 Note A, with offsetting entry to additional paid-in capital. The warrant expense has been fully amortized into interest expense over the term of the 2017 bridge loan.

Promissory Notes-Related Parties

On December 15, 2016, the Company issued a promissory note with an aggregate principal amount of $30,000 to a related party. On January 24, 2017, the Company issued a 2 ^nd promissory note with an aggregate principal amount of $30,000 to the same related party. On June 14, 2017, the Company issued a 3 ^rd promissory note with an aggregate principal amount of $16,050 to the same related party. All three promissory notes accrue interest at an annual rate of 2% and mature on November 6, 2017. For the three and six months ended June 30, 2017 the Company recorded $317 and $1,188 of interest expense, respectively. As a result of non-payment of the interest due, the Company has accrued interest as of June 30, 2017 of $1,296.

Between the dates of March 15 and June 22, 2017 the Company issued six new promissory notes totaling an aggregate amount of $52,000 with a related party that is part of management of the Company. The promissory notes accrue interest at an annual rate of 2% and mature on December 31, 2017. For the three and six months ended June 30, 2017 the Company recorded $84 and $111 of interest expense, respectively. As a result of non-payment of the interest due, the Company has accrued interest as of June 30, 2017 of $111.

Note 7 — Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards. At June 30, 2016, the total of all deferred tax assets was $1,194,018. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established a valuation allowance of $1,194,018 as of June 30, 2017. The change in the valuation allowance for the six months ended June 30, 2017 was $112,115.

F- 11

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 8 – Equity

On February 25, 2016, the Company signed a Securities Purchase Agreement with its worldwide exclusive distributer partner whereby the Company agreed to sell 200,000 shares of Common Stock for $500,000, and a representative of the purchaser of the common stock will be appointed to the Board of Directors of the Company.

On February 22, 2016, the Company issued 500,000 shares of the Company’s common stock to a related party in connection with the strategic consulting agreement executed in March 2015 for service to be rendered over eighteen months. The value of the shares was based on the estimated fair value of the stock based on the most recent sales price of our stock on February 25, 2016 since there was no dis-incentive for non-performance. As of December 31, 2016 all expense related to this agreement was recorded through the end of the contract term.

Stock Options

The Company has one Employee, Director and Consultant Stock Option Plan. Stock options typically vest over a three-year period and have a life of ten years from the date granted. As of June 30, 2017 there no issuances under this plan.

The fair value of options granted were determined using the Black-Scholes option valuation model and a revaluation was performed at each reporting period through August 2017 which represented the expiration of the consulting agreement. The expected term of options granted is based on the simplified method in accordance with Securities and Exchange Commission Staff Accounting Bulletin 107, and represents the period of time that options granted are expected to be outstanding. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk free rate by selecting the U.S. Treasury with maturities similar to the expected terms of grants, quoted on an investment basis in effect at the time of grant for that business day.

Upon completion of the valuation of the warrants issued in connection with 2017 Bridge Loan the Company revalued the existing outstanding options to acquire 125,000 shares of common stock, reducing the then-applicable exercise price from $2.60 per share, to $0.10 per share. The Company compared the fair value of the options immediately prior to the modification to their fair value immediately after the modification and determined that the option holders received incremental compensation of $6,397, of which the full amount of $6,397 was related to fully vested options and recognized as expense on the date of modification.

The significant weighted average assumptions relating to the valuation of the Company’s stock options for the six months ended June 30, 2017 and 2016 were as follows:

	June 30, 2017			June 30, 2016
Dividend yield		0	%		0	%
Expected life		3.55 yrs.			4.55 yrs.
Expected volatility		74.80			94.96
Risk-free interest rate		1.89	%		1.01	%

F- 12

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 8 – Equity-continued

The fair value of the Company’s stock used in estimating the fair value of the stock options was estimated using a discounted cash flow method.

A summary of the status of options activity at June 30, 2017, and changes during the period then ended are as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of period		125,000	$	2.60	4.79 years	$	—
Outstanding at end of period		125,000		0.10	3.55 years		—
Exercisable at end of period		125,000		0.10	3.55 years		—
Weighted average fair value of options granted		125,000	$	0.10	3.55 years	$	—

The total intrinsic value of options as of June 30, 2017 was $0. Intrinsic value is measured using the fair value at the date of exercise (for shares exercised) or at June 30, 2017 (for outstanding options), less the applicable exercise price.

Note 9 – Warrants to Purchase Common Stock

During the six months ended June 30, 2017, the Company issued, in connection with the issuance of debentures, warrants to purchase 300,000 shares of the Company’s Common Stock at an exercise price of $2.50. All warrants outstanding as of June 30, 2017 are scheduled to expire February 2, 2024.

The grant-date fair value of warrants is estimated using the BSM valuation model. The per share weighted average fair value of the warrants granted during 2017 was $0.17 and was determined using the following assumptions: expected price volatility 74.80%, risk-free interest rate ranging between 2.27%, zero expected dividend yield, and 7.0-year life of warrants. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk-free rate by selecting the U.S. Treasury with maturities similar to the expected terms of grants, quoted on an investment basis in effect at the time of grant for that business day. The fair value of the Company’s stock used in estimating the fair value of the stock options was estimated using a discounted cash flow method.

A summary of activity related to warrants for the nine months ended June 30, 2017 follows:

	Shares		Weighted- Average Exercise Price ($)		Weighted- Average Remaining Contractual Term
Outstanding at December 31, 2016		—	$	—		—
Issued		300,000		2.50		7.00
Outstanding at June 30, 2017		300,000	$	2.50		6.60

Exercisable at June 30, 2017		300,000	$	2.50		6.60

F- 13

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 10 – Commitments and Contingencies

Operating Leases

The Company leased office space in Neodesha, Kansas for $100 a month from August 2014 to September 2015, $200 a month from October 2015 to September 2016, and $300 a month from October 2016 to December 31, 2016. The lease terminates on September 30, 2018 with no option to renew unless approved by the city commission. Rent expense was $1,800 and $878 for the years ended June 30, 2017 and 2016, respectively.

Exclusive Distribution Agreement

As of June 30, 2017, management determined that four UAV’s have been returned and thirteen units have been converted to include components from the newer models. All termination costs were accrued as of December 31, 2016 therefore no additional expense was recorded for the six months ended June 30, 2017. Management believes that all the former dealers based on their right of return clause are properly accrued. At this time no more dealers have the right of return and one dealer will upgrade four units costing the Company approximately $3,400 of which has been properly recorded as accrued expense as of June 30, 2017.

Service Agreements

F- 14

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 10 – Commitments and Contingencies - Continued

Note 11 — Related Party Transactions

The following reflects the related party transactions during the six months ended June 30, 2017.

Consulting Agreement

On March 1, 2015, the Company entered into a strategic consulting agreement to assist it with raising capital and strategic positioning in an effort to increase its valuation. Under the terms of the agreement, the Company agreed to issue 125,000 shares of the Company’s common stock on May 1, 2015, an additional 125,000 shares of common stock on January 15, 2016 and 125,000 stock options exercisable for five years from the issuance date. As of December 31, 2015, no shares had been issued to the consultant. The Company recognized $1,250,000 of consulting expense during 2015 and 2016 related to the value of the shares earned, which was based on the estimated fair value of the stock as of December 31, 2015, based on the terms of a transaction which ultimately closed in February 2016, as there was no dis-incentive for non-performance. No additional expense was recorded for the six months June 30, 2017 for the common shares granted in connection with the strategic consulting agreement executed in March 2015. During the six months ended June 30, 2017, the Company recognized $6,397 of additional consulting expense related to the issuance of the common stock for the stock options as a result of the modification of the exercise price of the options from $2.60 per share to $0.10 per share.

On December 15, 2016, the Company issued a promissory note with the consultants of the strategic consulting agreement for $30,000. The interest is payable upon maturity of the note together with the principal amount of $30,000 on June 30, 2017. On January 24, 2017, the Company issued a 2 ^nd promissory note with an aggregate principal amount of $30,000 to the same related party. On June 14, 2017, the Company issued a 3 ^rd promissory note with an aggregate principal amount of $16,050 to the same related party. All three promissory notes accrue interest at 2% annually.

F- 15

AGEAGLE AERIAL SYSTEMS, INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 12 – Subsequent Events

On July 2017, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor (the “2017 Note B”) purchased a convertible note having a principal amount of $100,000, Management believes the terms of the note will be similar to the recent 2017 Note A and is currently in negotiations with the holder.

On October 2017, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor (the “2017 Note C”) purchased a convertible note having a principal amount of $35,000, Management believes the terms of the note will be similar to the recent 2017 Note A and is currently in negotiations with the holder.

On October 2017, the Company held a board meeting to approve the modification of the existing 125,000 options to purchase common stock from an exercise price of $2.60 to $0.10. Also approved at the same meeting was the issuance of 560,100 new options per the 2016 Employee Option Plan for directors and employees at an exercise price of $0.10 per share.

F- 16

Exhibit 99.3

EnerJex Resources Signs Definitive Merger Agreement with Commercial Drone Company AgEagle Aerial Systems

Computer Analytics of Hi-Resolution Aerial Imagery Serving the Precision Ag Industry

EnerJex Resources Receives Notice of Non-compliance with NYSE American Listing Standard;

Intends to Submit Compliance Plan Including this Transaction

SAN ANTONIO, TX - EnerJex Resources, Inc., (NYSE American: ENRJ) announced today that it has entered into a definitive Merger Agreement with AgEagle Aerial Systems, Inc., a leading commercial agricultural drone company. AgEagle products are designed to improve centuries old farming methodologies through the use of GPS technology, high-resolution aerial imagery, computer learning and robotics.

AgEagle’s line of automated flying drones collect valuable information for farmers by flying over large fields of corn, soy beans, wheat and other types of crops, collecting thousands of ultra high resolution pictures using sophisticated near-infrared sensors (cameras). The images are loaded to the cloud midflight through cellular connectivity and stitched together to form one large, near-infrared aerial picture. Unlike the human eye, algorithmic-based computer programs are able to determine the current health of the photographed crop by analyzing the amount of near-infrared light reflected from the plants. Healthy plants reflect more near-infrared light while unhealthy plants absorb the light. Using this high resolution, near-infrared image, a farmer or an agronomist is able to create a ‘prescription map’ that is then fed into the computers that guide large precision crop sprayers so that chemicals, herbicides, pesticides and nutrients can be applied more precisely in the fields, saving money, increasing the amount of yield per acre, and improving the environmental impact of farming.

“Our goal at EnerJex has been to maximize stockholder value and we believe AgEagle, with its strong leadership team, is well-positioned to capitalize on the fast-growing agriculture drone market,” said Louis Schott, CEO of EnerJex. “While AgEagle is focused on the agriculture market, we believe there is opportunity for drones in the oil and gas industry.”

AgEagle’s board of directors includes company founder and CEO Bret Chilcott, a representative from stakeholder Raven Industries, and Grant Begley, formerly the senior advisor to the Undersecretary of Defense for drones and corporate leader to Lockheed Martin and Raytheon for their respective drone initiatives.

“With 2.1 million farms on 235 million acres of land in the U.S., we believe the precision agriculture sector of the unmanned aerial vehicle market presents robust opportunities for our products,” said Bret Chilcott, AgEagle CEO. “Now that Amazon and WalMart are heavily investing in the grocery and food services industry we believe an “Amazon Effect” is in store for the agriculture industry, which will require a systematic overhaul of the current processes and a rapid adoption in technology on the farm to increase crop yield and reduce expenses. When Wal-Mart and Amazon come into a business, margins often get squeezed dramatically. We believe our product can be cost effectively layered into the workflow of farms in the U.S., and around the world, to increase profitability in an industry under constant margin pressures. We believe a technology revolution is coming to the farming industry and we further believe that our product demonstrates a clear return on investment for farmers and agronomists alike.”

AgEagle markets its products through a distribution relationship with Raven Industries, a leading precision agriculture company. Additionally, AgEagle markets its drones directly to farmers and independent agronomists (crop consultants).

Other key aspects of the drone industry include:

In a 2016 report, Goldman Sachs labeled AgEagle as a Major Player in the agriculture drone space.

In a 2017 report, Goldman Sachs identified the total addressable market for agriculture drones at $5.9 billion over the next five years.

The United Nations Food and Agriculture Organization (“FAO”) projects that the world will require 70% more food production by 2050 in order to keep up with population growth.

Goldman Sachs suggests that the commercial Unmanned Aerial Vehicle industry has a $21 billion total addressable market with an estimated triple-digit compounded annual growth rate from 2016 to 2020.

PricewaterhouseCoopers pegs the addressable market for agriculture drones at $32.4 billion, second only to the infrastructure sector.

Upon completion of the Merger transaction, EnerJex’s Common and Series A Preferred shareholders will own approximately 15% of the combined company. The Company is valuing AgEagle at approximately $20,000,000 prior to the completion of any financing that occurs in advance of the merger.

The transaction, which has been approved by the board of directors of both companies, is expected to occur late in the fourth quarter of 2017 or first quarter of 2018, subject to various closing conditions, including, among other things: approval by the stockholders of both EnerJex and AgEagle; the raising of at least $4 million prior to the consummation of the merger; approval by NYSE for the listing of the combined company’s common stock on the NYSE American exchange immediately upon consummation of the merger; and other closing conditions. The Company intends to dispose of its principal assets, primarily its Kansas oil and gas properties, concurrently with the closing of the Merger. In the event the Merger is not consummated the Company does not have a present intention to dispose of the above described assets.

NYSE American Notice of Non-compliance

On October 19, 2017, the Company received notice from NYSE Regulation, Inc. that it is not in compliance with certain NYSE American (“NYSE American”) continued listing standards relating to stockholders’ equity. Specifically, the Company is not in compliance with Section 1003(a)(i) (requiring stockholders’ equity of $2.0 million or more if an issuer has reported losses from continuing operations and/or net losses in two of its three most recent fiscal years) of the NYSE American LLC Company Guide (the “Company Guide”). As a result, the Company has become subject to the procedures and requirements of Section 1009 of the Company Guide and is required to submit a plan by November 19, 2017 advising the NYSE American of the actions the Company has taken or will take to regain compliance with the NYSE American continued listing standards. The plan period may not exceed April 19, 2019.

The Company intends to submit a plan by the November 19, 2017 deadline. The plan will be based in significant part upon the Merger and the associated financing. The Company expects that its common stock will continue to be listed on the NYSE American while the Company seeks to regain compliance with the listing standard noted, subject to the Company’s compliance with other continued listing requirements. If the Company fails to submit a plan or if the Company’s plan is not accepted then the NYSE American may commence delisting procedures. Upon completion of the merger, the Company will be required to satisfy all applicable requirements for initial listing on the NYSE American.

In addition to this press release, today EnerJex filed a Current Report on Form 8-K with the SEC in which more detailed information about the merger transaction, AgEagle’s business, and the non-compliance notice can be found (www.sec.gov).

Forward-Looking Statements

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

Apart from statements of historical fact, the text of this press release constitutes forward-looking statements within the meaning of the U.S. securities laws, and is subject to the safe harbors created therein. These statements include, but are not limited to, statements regarding the future business operations of EnerJex Resources, Inc. (the “Company”), the prospect for development of AgEagle Aerial Systems’ drone devices, the possibility of a merger transaction between the companies, and possible benefits from such a merger for the companies and their respective stakeholders. These forward-looking statements speak only as of the date of this news release. The Company does not undertake to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. Such statements reflect management’s current views and are based on certain assumptions that may or may not ultimately prove valid. The Company’s actual results may vary materially from those contemplated in such forward-looking statements due to risks and uncertainties to which the Company is subject, including uncertainties about the parties’ ability to complete the merger; uncertainties concerning the sufficiency of the Company’s remaining funds to continue operations; uncertainties regarding the negotiation with the Company’s lenders; uncertainties as to whether AgEagle will become profitable; and other factors that are described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017, and the Company’s Current Report on Form 8-K filed on October 20 2017.

IMPORTANT INFORMATION FOR INVESTORS AND SHAREHOLDERS

This communication does not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities or a solicitation of any vote or approval.

EnerJex plans to file a registration statement on Form S-4 in connection with the proposed transaction which will include a definitive proxy statement and a proxy card, and will be mailed to the Company’s stockholders seeking any required stockholder approvals in connection with the proposed transactions. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT THE COMPANY MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTIONS. Stockholders may obtain, free of charge, copies of the definitive proxy statement/prospectus and any other documents filed by EnerJex with the SEC in connection with the proposed transactions at the SEC’s website (http://www.sec.gov), at EnerJex’s website, or by directing written request to: EnerJex Resources, Inc., 4040 Broadway Street, Suite 425, San Antonio, TX 78209, Attention: Louis G. Schott, Interim Chief Executive Officer.

The Company and its directors and executive officers and AgEagle and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of the Company in connection with the proposed transaction. Information regarding the special interests of these directors and executive officers in the merger will be included in the proxy statement referred to above. Additional information regarding the directors and executive officers of the Company is also included in the Company’s Definitive Proxy Statement on Schedule 14A relating to the 2017 Annual Meeting of Stockholders, which was filed with the SEC on April 7, 2017. This document is available free of charge at the SEC web site (www.sec.gov), at the Company’s website, or by directing a written request to the Company as described above.