In re AgEagle Aerial Systems Inc.

   
 
 
 
 
 UNITED STATES OF AMERICA 
 Before the 
   SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 98552 / September 27, 2023 
                                                               
ADMINISTRATIVE PROCEEDING 
File No. 3-21737 
 
 
 
In the Matter of 
 
AgEagle Aerial Systems Inc., 
 
Respondent. 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  
  
 I. 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that 
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
Securities Exchange Act of 1934 (“Exchange Act”), against AgEagle Aerial Systems Inc. 
(“AgEagle” or “Respondent”).   
II. 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject 
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order 
Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth 
below.   

 
2 
 
III. 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
Summary 
1. These proceedings arise out of violations of the issuer reporting requirements and 
beneficial ownership reporting requirements of the federal securities laws.   
2. Section 16(a) of the Exchange Act and the rules promulgated thereunder require 
officers and directors of a company with a class of equity security registered under Section 12 of the 
Exchange Act, and any beneficial owners of greater than 10% of such class (collectively, 
“insiders”), to file certain reports of securities holdings and transactions.  Section 16(a) was 
motivated by a belief that “the most potent weapon against the abuse of inside information is full 
and prompt publicity” and by a desire “to give investors an idea of the purchases and sales by 
insiders which may in turn indicate their private opinion as to prospects of the company.”  H.R. 
Rep. 73-1383, at 13, 24 (1934).  Reflecting this informational purpose, the obligation to file applies 
irrespective of profits or the filer’s reasons for engaging in the transactions.  The Sarbanes-Oxley 
Act of 2002 and Commission implementing regulations accelerated the reporting deadline for most 
transactions to two business days and mandated that all reports be filed electronically on EDGAR to 
facilitate rapid dissemination to the public. 
3. Reporting issuers are required to disclose in the proxy statement for the issuer’s 
annual meeting, or its annual report, Section 16 reporting delinquencies by its insiders.  Although 
insiders remain responsible for the timeliness and accuracy of their required Section 16(a) reports, 
the Commission has encouraged the practice of many issuers to “help their [officers and directors] 
or submit the [] filings on their behalf . . . [in order] to facilitate accurate and timely filing.”  
Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809 
(May 7, 2003), 68 Fed. Reg. 25788, 25789 (May 13, 2003). 
4. At all relevant times, Respondent has been a reporting issuer and its insiders have 
been required to file Section 16(a) reports.  On numerous occasions since at least 2018, 
Respondent’s officers and directors violated Section 16(a) by failing to timely file required 
reports.  Respondent failed to comply with its disclosure obligations to report such 
delinquencies.  In addition, Respondent was a cause of many of the Section 16(a) violations by 
its officers and directors as a result of Respondent’s negligence in performing certain tasks it 
voluntarily agreed to undertake in connection with the preparation and filing of Section 16(a) 
reports on their behalf.  
 
1
   The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding. 

 
3 
 
Respondent 
5. AgEagle (f/k/a EnerJex Resources, Inc. until March 26, 2018) is a Nevada 
corporation with its principal place of business in Kansas.  AgEagle common stock is and has been 
at all relevant times registered with the Commission under Section 12 of the Exchange Act and 
trades on the NYSE (ticker: UAVS).  AgEagle is required to file annual reports on Form 10-K 
pursuant to Section 13(a) of the Exchange Act and Rule 13a-1 thereunder. 
Applicable Legal Framework 
6. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial 
statements of holdings on Form 3 and keep this information current by reporting transactions on 
Forms 4 and 5.  Specifically, within 10 days after becoming an   insider, or on or before the effective 
date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report 
disclosing his or her beneficial ownership of all securities of the issuer.  To keep this information 
current, insiders must file Form 4 reports disclosing transactions resulting in a change in beneficial 
ownership within two business days following the execution date of the transaction, except for 
limited types of transactions eligible for deferred reporting.  Transactions required to be reported on 
Form 4 include purchases and sales of securities, exercises and conversions of derivative securities, 
and grants or awards of securities from the issuer.  In addition, insiders are required to file a Form 5 
report within 45 days after the issuer’s fiscal year-end to report any transactions or holdings that 
should have been, but were not, reported on Form 3 or 4 during the issuer’s most recent fiscal year 
and any transactions eligible for deferred reporting (unless the corporate insider has previously 
reported all such transactions).   Insiders are required to file the reports electronically on EDGAR.  
There is no state of mind requirement for violations of Section 16(a) and the rules thereunder.
2
    
7. Section 13(a) of the Exchange Act requires issuers that have securities registered 
pursuant to Section 12 of the Exchange Act to file such periodic and other reports as the 
Commission may prescribe and in conformity with such rules as the Commission may promulgate.   
Exchange Act Rule 13a-1 requires such issuers to file annual reports with the Commission 
containing specified information.  In 1991, the Commission adopted Item 405 of Regulation S-K to 
help address compliance with Section 16(a) by requiring reporting issuers to disclose in annual 
 
2
   See, e.g., SEC v. e-Smart Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required 
to establish a violation of Section 16(a) of the Exchange Act); cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL 
26901, at *2 (May 19, 1980) (“We have previously held that the failure to make a required report, even though 
inadvertent, constitutes a willful violation”); SEC Release No. 34-47809, 68 Fed. Reg. at 25792 (noting that an 
issuer’s eligibility for temporary relief from disclosing Forms 4 filed one business day late by its insiders “does not 
change the fact that any Form 3, 4 or 5 filed later than the applicable due date violates Section 16(a)”) (emphasis 
added).  Negligence is sufficient to establish liability for causing such violations.  See KPMG Peat Marwick LLP, 74 
SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (“[N]egligence is sufficient to establish ‘causing’ liability 
under Exchange Act Section 21C(a) ... in cases in which a person is alleged to ‘cause’ a primary violation that does 
not require scienter.”). 

 
4 
 
proxy and information statements or annual reports information regarding delinquent Section 
16(a) filings by insiders.
3
   
8. Item 405 of Regulation S-K specifically requires an issuer to disclose any late 
filing or known failure by an insider to file a report required by Section 16(a).  In determining 
whether such disclosure is required, the issuer may rely on a review of the Forms 3 and 4 filed 
during the most recent fiscal year, and Forms 5 filed with respect to the most recent fiscal year, 
by the issuer’s insiders.  Section 16(a) reports are posted on EDGAR, and thus are readily 
available to issuers to evaluate their timeliness.  A “known” failure to file includes, but is not 
limited to, a failure to file a Form 3, which is required of all insiders, and a failure to file a Form 
5 in the absence of a written representation that no Form 5 is required, unless the issuer 
otherwise knows that no Form 5 is required.  The Item 405 disclosure of any late filings or 
known failures to file must (i) identify by name each insider who failed to file on a timely basis 
Forms 3, 4, or 5 during the most recent fiscal year or prior fiscal years and (ii) set forth the 
number of late reports, the number of late-reported transactions, and any known failure to file.  
An issuer does not have an obligation under Item 405 to research or make inquiry regarding 
delinquent Section 16(a) filings beyond the review specified in the item.   
9. An issuer that files annual reports with the Commission on Form 10-K, such as 
Respondent, is required to include the Item 405 disclosure in its Form 10-K, or incorporate by 
reference to its Form 10-K the Item 405 disclosure made in the issuer’s definitive proxy or 
information statement for its annual meeting of shareholders for the election of directors, if that 
definitive proxy or information statement is filed with the Commission not later than 120 days 
after the end of the fiscal year covered by the Form 10-K.  To the extent disclosure is required by 
Item 405, materially false, misleading, or omitted Item 405 disclosures constitute a violation of 
Section 13(a) of the Exchange Act and Rule 13a-1.  No showing of scienter is necessary to 
establish a violation of Section 13(a).
4
   
Respondent Failed to Comply with Item 405 Disclosure Requirements 
10. As an issuer required to file annual reports on Form 10-K, Respondent is and has 
been at all relevant times required to disclose information concerning delinquent Section 16(a) 
filings by its insiders to the extent required by Item 405 of Regulation S-K.   
11. Respondent failed to do so for multiple fiscal years, including: 
a. Respondent failed to make the required Item 405 disclosure for its 2018 
fiscal year, improperly stating that “[b]ased solely on our review of the copies of such reports 
 
3
   Ownership Reports and Trading by Officers, Directors and Principal Security Holders, SEC Release 34-
28869, 56 Fed. Reg. 7242, 7259-60 (Feb. 21, 1991); 17 C.F.R. § 229.405.  The Commission amended Item 405 in 
FAST Act Modernization and Simplification of Regulation S-K, SEC Release 33-10618 (Mar. 20, 2019), 84 Fed. 
Reg. 12674 (Apr. 2, 2019), which among other things, permits an issuer to omit the disclosure if there are no Section 
16(a) delinquencies to report. 
 
4
   SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998). 

 
5 
 
and upon written representations of the Reporting Persons received by us, we believe that all 
Section 16(a) filing requirements applicable to such Reporting Persons have been timely met.”  
(AgEagle Form 10-K filed on March 28, 2019.)  In fact, during such fiscal year, multiple 
AgEagle insiders filed untimely required Section 16(a) reports, which Respondent was required 
to disclose pursuant to Item 405.  Respondent was required to review the forms filed and identify 
by name each insider who failed to file on a timely basis and set forth the number of late reports 
and the number of transactions that were not reported on a timely basis, which Respondent failed 
to do.  In addition, Respondent did not possess any written representations from its officers and 
directors that no Form 5 was required, and Respondent did not have a basis to know that no 
Form 5 was required for at least certain insiders with respect to its fiscal year 2018.  In fact, 
several officers and directors had reportable transactions during 2018 involving, among other 
things, options award grants and exercises that should have been reported on Form 4 within two 
business days, but were not, and such reports were not filed until May 2019.   
b. Respondent failed to make the required Item 405 disclosure for its 2019 
fis  cal year, improperly stating that “[b]ased solely on our review of copies of [] reports and upon 
written representations of the Reporting Persons received by us, we believe that the following 
Reporting Persons have not timely complied with the Section 16(a) filing requirements”, 
followed by a table with one line per insider name.  For each insider named, the table listed 
“Form 4” as the type of report, “Acquisition of Stock Options” as the transactions covered, and a 
number of shares.  (AgEagle Form 10-K filed on April 13, 2020.)  However, this disclosure had 
material deficiencies and omissions.  Respondent was required to set forth for each insider who 
failed to file on a timely basis the number of late reports and the number of transactions that were 
not reported on a timely basis, which Respondent failed to do, and each named insider had 
multiple late or missing late Form 4 filings for numerous stock option award transactions.  In 
addition, Respondent did not possess any written representations from its officers and directors 
that no Form 5 was required, and Respondent did not have a basis to know that no Form 5 was 
required for at least certain insiders with respect to its fiscal year 2019.  In fact, several officers 
or directors had reportable transactions during 2019 for numerous stock option award 
transactions that should have been reported on Form 4 within two business days, but were not, 
and such reports were not filed until September 2020. 
c. Respondent failed to make the required Item 405 disclosure for its 2020 
fiscal year, improperly stating that “[b]ased solely on our review of copies of such reports and 
upon written representations of the Reporting Persons received by us, we believe that the 
following Reporting Persons have not timely complied with the Section 16(a) filing 
requirements”, followed by a table with one line per insider name.  For each insider named, the 
table listed “Form 4” as the type of report, “Acquisition of Stock Options” as the transactions 
covered, and a number of shares.  (AgEagle Form 10-K filed on March 31, 2021.)  However, this 
disclosure also had material deficiencies and omissions, including failing to set forth for each 
named insider the number of late reports and the number of transactions that were not reported 
on a timely basis, when each named insider had multiple late Form 4 reports filed for numerous 
stock option award transactions.  In addition, although the Item 405 disclosure is not required to 
set forth the type of transactions covered, the description provided by AgEagle was inaccurate 

 
6 
 
because each of the named insiders had also filed multiple late Forms 4 for options exercises and 
stock sales during such fiscal year.  The disclosure made also failed to identify two other 
AgEagle insiders who also had filed untimely Form 4 reports for transactions during 2020. 
d. Respondent failed to make the required Item 405 disclosure for its 2021 
fiscal year, improperly stating that “[b]ased solely on the Company’s review only of Section 16 
reports that have been filed on EDGAR, the Company believes that during the year ended 
December 31, 2021, the following reports were not filed or untimely filed”, followed by a table 
with one line per insider name.  For each insider named, the table listed “Form 4” as the type of 
report, “Acquisition of Stock Options” or “Acquisition of Stock Options and Restricted Stock 
Units” as the transactions covered, and a number of shares.  (AgEagle Definitive Proxy 
Statement filed on May 2, 2022, incorporated by reference into Form 10-K filed on April 12, 
2022.)  However, this disclosure again had material deficiencies and omissions, including failing 
to set forth for each named insider the number of late reports and the number of transactions that 
were not reported on a timely basis, when each named insider had multiple late or missing late 
Form 4 filings for numerous transactions.  In addition, although the Item 405 disclosure is not 
required to set forth the type of transactions covered, the description provided by AgEagle was 
inaccurate because nearly all of the late Forms 4 filed by such insiders during 2021 related to 
exercises of options and stock sales.  Respondent also did not possess any written representations 
from its officers and directors that no Form 5 was required, and Respondent did not have a basis 
to know that no Form 5 was required for at least certain insiders with respect to fiscal year 2021.  
In fact, several officers and directors had reportable transactions during 2021 involving, among 
other things, exercises of options and stock sales that should have been reported on Form 4 
within two business days, but were not, and such reports were not filed until June 2022. 
12. As a result of the conduct described above, Respondent failed to comply with its 
disclosure obligation to the extent required by Item 405 and violated Section 13(a) of the 
Exchange Act and Rule 13a-1 thereunder. 
Respondent Was a Cause of Certain Violations of Section 16(a) by its Insiders 
13. Although the Commission encourages the practice of many issuers to assist insiders 
in complying with Section 16(a) filing requirements, issuers who voluntarily accept certain 
responsibilities and then act negligently in the performance of those tasks may be liable as a cause 
of Section 16(a) violations by insiders.   
14. Since at least 2018, Respondent has voluntarily agreed with its officers and 
directors to perform certain tasks in connection with the filing of Section 16(a) reports on their 
behalf, including the preparation and filing of all such reports for which Respondent had timely 
notification of the required information concerning the transactions.  However, on multiple 
occasions, Respondent acted negligently in its performance of such tasks and was a cause of 
AgEagle’s officers and directors failing to file Section 16(a) reports on a timely basis.  AgEagle’s 
personnel responsible for tasks relating to the preparing and filing of Section 16(a) reports 
repeatedly failed to perform on a timely basis the tasks that Respondent had agreed to perform.  The 

 
7 
 
procedures and practices employed by Respondent were insufficient to the extent that those 
practices resulted in the recurrent failure to meet the two-business day filing deadline.   
15. For example, between March 2018 and June 2022, Respondent’s officers and 
directors in the aggregate filed more than 125 untimely Forms 4 to report transactions related to, 
among other things, stock and option awards, options exercises, and open-market sales.  For 
virtually all of these late-reported transactions, Respondent had received timely notification of or 
otherwise possessed the necessary information for such filings but failed to prepare and file the 
reports within the required time frame. 
16. As a result of the conduct described above, Respondent was a cause of certain 
violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by Respondent’s 
insiders.   
Respondent’s Remedial Efforts 
17. In determining to accept the Offer, the Commission considered certain remedial 
acts undertaken by Respondent and cooperation afforded to Commission staff. 
IV. 
 
In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 13(a) and 16(a) of the 
Exchange Act and Rules  13a-1 and 16a-3 promulgated thereunder.   
 
B. Respondent shall, within 14 days of the entry of this Order, pay a civil money 
penalty in the amount of $190,000 to the Securities and Exchange Commission, for transfer to 
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3)
.  If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  
Payment must be made in one of the following ways:   
(1)  Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2)  Respondent may make direct payment from a bank account via Pay.gov through 
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 

 
8 
 
(3)  Respondent may pay by certified check, bank cashier’s check, or United States 
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
AgEagle Aerial Systems Inc. as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Thomas Smith, 
Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 
100 Pearl Street, Suite 20-100, New York, NY 10004.   
 
C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such 
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 
granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount 
of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be 
deemed an additional civil penalty and shall not be deemed to change the amount of the civil 
penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” 
means a private damages action brought against Respondent by or on behalf of one or more 
investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
 
 By the Commission. 
 
 
 
       Vanessa A. Countryman 
       Secretary 

UNITED STATES OF AMERICA 
 Before the 
   SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 98552 / September 27, 2023 
                                                               
ADMINISTRATIVE PROCEEDING 
File No. 3-21737 
 
 
 
In the Matter of 
 

AgEagle Aerial Systems Inc., 
 
Respondent. 
 
 

 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER  

  
 I. 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that 
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the 
Securities Exchange Act of 1934 (“Exchange Act”), against AgEagle Aerial Systems Inc. 
(“AgEagle” or “Respondent”).   

II. 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over Respondent and the subject 
matter of these proceedings, which are admitted, Respondent consents to the entry of this Order 
Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange 
Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth 
below.   



 

2 
 

III. 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

Summary 

1. These proceedings arise out of violations of the issuer reporting requirements and 
beneficial ownership reporting requirements of the federal securities laws.   

2. Section 16(a) of the Exchange Act and the rules promulgated thereunder require 
officers and directors of a company with a class of equity security registered under Section 12 of the 
Exchange Act, and any beneficial owners of greater than 10% of such class (collectively, 
“insiders”), to file certain reports of securities holdings and transactions.  Section 16(a) was 
motivated by a belief that “the most potent weapon against the abuse of inside information is full 
and prompt publicity” and by a desire “to give investors an idea of the purchases and sales by 
insiders which may in turn indicate their private opinion as to prospects of the company.”  H.R. 
Rep. 73-1383, at 13, 24 (1934).  Reflecting this informational purpose, the obligation to file applies 
irrespective of profits or the filer’s reasons for engaging in the transactions.  The Sarbanes-Oxley 
Act of 2002 and Commission implementing regulations accelerated the reporting deadline for most 
transactions to two business days and mandated that all reports be filed electronically on EDGAR to 
facilitate rapid dissemination to the public. 

3. Reporting issuers are required to disclose in the proxy statement for the issuer’s 
annual meeting, or its annual report, Section 16 reporting delinquencies by its insiders.  Although 
insiders remain responsible for the timeliness and accuracy of their required Section 16(a) reports, 
the Commission has encouraged the practice of many issuers to “help their [officers and directors] 
or submit the [] filings on their behalf . . . [in order] to facilitate accurate and timely filing.”  
Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5, SEC Release No. 34-47809 
(May 7, 2003), 68 Fed. Reg. 25788, 25789 (May 13, 2003). 

4. At all relevant times, Respondent has been a reporting issuer and its insiders have 
been required to file Section 16(a) reports.  On numerous occasions since at least 2018, 
Respondent’s officers and directors violated Section 16(a) by failing to timely file required 
reports.  Respondent failed to comply with its disclosure obligations to report such 
delinquencies.  In addition, Respondent was a cause of many of the Section 16(a) violations by 
its officers and directors as a result of Respondent’s negligence in performing certain tasks it 
voluntarily agreed to undertake in connection with the preparation and filing of Section 16(a) 
reports on their behalf.  

 
1   The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on 
any other person or entity in this or any other proceeding. 



 

3 
 

Respondent 

5. AgEagle (f/k/a EnerJex Resources, Inc. until March 26, 2018) is a Nevada 
corporation with its principal place of business in Kansas.  AgEagle common stock is and has been 
at all relevant times registered with the Commission under Section 12 of the Exchange Act and 
trades on the NYSE (ticker: UAVS).  AgEagle is required to file annual reports on Form 10-K 
pursuant to Section 13(a) of the Exchange Act and Rule 13a-1 thereunder. 

Applicable Legal Framework 

6. Pursuant to Section 16(a) and Rule 16a-3, insiders are required to file initial 
statements of holdings on Form 3 and keep this information current by reporting transactions on 
Forms 4 and 5.  Specifically, within 10 days after becoming an insider, or on or before the effective 
date of the Section 12 registration of the class of equity security, an insider must file a Form 3 report 
disclosing his or her beneficial ownership of all securities of the issuer.  To keep this information 
current, insiders must file Form 4 reports disclosing transactions resulting in a change in beneficial 
ownership within two business days following the execution date of the transaction, except for 
limited types of transactions eligible for deferred reporting.  Transactions required to be reported on 
Form 4 include purchases and sales of securities, exercises and conversions of derivative securities, 
and grants or awards of securities from the issuer.  In addition, insiders are required to file a Form 5 
report within 45 days after the issuer’s fiscal year-end to report any transactions or holdings that 
should have been, but were not, reported on Form 3 or 4 during the issuer’s most recent fiscal year 
and any transactions eligible for deferred reporting (unless the corporate insider has previously 
reported all such transactions).  Insiders are required to file the reports electronically on EDGAR.  
There is no state of mind requirement for violations of Section 16(a) and the rules thereunder.2    

7. Section 13(a) of the Exchange Act requires issuers that have securities registered 
pursuant to Section 12 of the Exchange Act to file such periodic and other reports as the 
Commission may prescribe and in conformity with such rules as the Commission may promulgate.   
Exchange Act Rule 13a-1 requires such issuers to file annual reports with the Commission 
containing specified information.  In 1991, the Commission adopted Item 405 of Regulation S-K to 
help address compliance with Section 16(a) by requiring reporting issuers to disclose in annual 

 
2   See, e.g., SEC v. e-Smart Technologies, Inc., 82 F. Supp. 3d 97, 104 (D.D.C. 2015) (scienter is not required 
to establish a violation of Section 16(a) of the Exchange Act); cf. Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL 
26901, at *2 (May 19, 1980) (“We have previously held that the failure to make a required report, even though 
inadvertent, constitutes a willful violation”); SEC Release No. 34-47809, 68 Fed. Reg. at 25792 (noting that an 
issuer’s eligibility for temporary relief from disclosing Forms 4 filed one business day late by its insiders “does not 
change the fact that any Form 3, 4 or 5 filed later than the applicable due date violates Section 16(a)”) (emphasis 
added).  Negligence is sufficient to establish liability for causing such violations.  See KPMG Peat Marwick LLP, 74 
SEC Docket 357, 2001 WL 47245, at *19 (Jan. 19, 2001) (“[N]egligence is sufficient to establish ‘causing’ liability 
under Exchange Act Section 21C(a) … in cases in which a person is alleged to ‘cause’ a primary violation that does 
not require scienter.”). 



 

4 
 

proxy and information statements or annual reports information regarding delinquent Section 
16(a) filings by insiders.3   

8. Item 405 of Regulation S-K specifically requires an issuer to disclose any late 
filing or known failure by an insider to file a report required by Section 16(a).  In determining 
whether such disclosure is required, the issuer may rely on a review of the Forms 3 and 4 filed 
during the most recent fiscal year, and Forms 5 filed with respect to the most recent fiscal year, 
by the issuer’s insiders.  Section 16(a) reports are posted on EDGAR, and thus are readily 
available to issuers to evaluate their timeliness.  A “known” failure to file includes, but is not 
limited to, a failure to file a Form 3, which is required of all insiders, and a failure to file a Form 
5 in the absence of a written representation that no Form 5 is required, unless the issuer 
otherwise knows that no Form 5 is required.  The Item 405 disclosure of any late filings or 
known failures to file must (i) identify by name each insider who failed to file on a timely basis 
Forms 3, 4, or 5 during the most recent fiscal year or prior fiscal years and (ii) set forth the 
number of late reports, the number of late-reported transactions, and any known failure to file.  
An issuer does not have an obligation under Item 405 to research or make inquiry regarding 
delinquent Section 16(a) filings beyond the review specified in the item.   

9. An issuer that files annual reports with the Commission on Form 10-K, such as 
Respondent, is required to include the Item 405 disclosure in its Form 10-K, or incorporate by 
reference to its Form 10-K the Item 405 disclosure made in the issuer’s definitive proxy or 
information statement for its annual meeting of shareholders for the election of directors, if that 
definitive proxy or information statement is filed with the Commission not later than 120 days 
after the end of the fiscal year covered by the Form 10-K.  To the extent disclosure is required by 
Item 405, materially false, misleading, or omitted Item 405 disclosures constitute a violation of 
Section 13(a) of the Exchange Act and Rule 13a-1.  No showing of scienter is necessary to 
establish a violation of Section 13(a).4   

Respondent Failed to Comply with Item 405 Disclosure Requirements 

10. As an issuer required to file annual reports on Form 10-K, Respondent is and has 
been at all relevant times required to disclose information concerning delinquent Section 16(a) 
filings by its insiders to the extent required by Item 405 of Regulation S-K.   

11. Respondent failed to do so for multiple fiscal years, including: 

a. Respondent failed to make the required Item 405 disclosure for its 2018 
fiscal year, improperly stating that “[b]ased solely on our review of the copies of such reports 

 
3   Ownership Reports and Trading by Officers, Directors and Principal Security Holders, SEC Release 34-
28869, 56 Fed. Reg. 7242, 7259-60 (Feb. 21, 1991); 17 C.F.R. § 229.405.  The Commission amended Item 405 in 
FAST Act Modernization and Simplification of Regulation S-K, SEC Release 33-10618 (Mar. 20, 2019), 84 Fed. 
Reg. 12674 (Apr. 2, 2019), which among other things, permits an issuer to omit the disclosure if there are no Section 
16(a) delinquencies to report. 
 
4   SEC v. McNulty, 137 F.3d 732, 740-41 (2d Cir. 1998). 



 

5 
 

and upon written representations of the Reporting Persons received by us, we believe that all 
Section 16(a) filing requirements applicable to such Reporting Persons have been timely met.”  
(AgEagle Form 10-K filed on March 28, 2019.)  In fact, during such fiscal year, multiple 
AgEagle insiders filed untimely required Section 16(a) reports, which Respondent was required 
to disclose pursuant to Item 405.  Respondent was required to review the forms filed and identify 
by name each insider who failed to file on a timely basis and set forth the number of late reports 
and the number of transactions that were not reported on a timely basis, which Respondent failed 
to do.  In addition, Respondent did not possess any written representations from its officers and 
directors that no Form 5 was required, and Respondent did not have a basis to know that no 
Form 5 was required for at least certain insiders with respect to its fiscal year 2018.  In fact, 
several officers and directors had reportable transactions during 2018 involving, among other 
things, options award grants and exercises that should have been reported on Form 4 within two 
business days, but were not, and such reports were not filed until May 2019.   

b. Respondent failed to make the required Item 405 disclosure for its 2019 
fiscal year, improperly stating that “[b]ased solely on our review of copies of [] reports and upon 
written representations of the Reporting Persons received by us, we believe that the following 
Reporting Persons have not timely complied with the Section 16(a) filing requirements”, 
followed by a table with one line per insider name.  For each insider named, the table listed 
“Form 4” as the type of report, “Acquisition of Stock Options” as the transactions covered, and a 
number of shares.  (AgEagle Form 10-K filed on April 13, 2020.)  However, this disclosure had 
material deficiencies and omissions.  Respondent was required to set forth for each insider who 
failed to file on a timely basis the number of late reports and the number of transactions that were 
not reported on a timely basis, which Respondent failed to do, and each named insider had 
multiple late or missing late Form 4 filings for numerous stock option award transactions.  In 
addition, Respondent did not possess any written representations from its officers and directors 
that no Form 5 was required, and Respondent did not have a basis to know that no Form 5 was 
required for at least certain insiders with respect to its fiscal year 2019.  In fact, several officers 
or directors had reportable transactions during 2019 for numerous stock option award 
transactions that should have been reported on Form 4 within two business days, but were not, 
and such reports were not filed until September 2020. 

c. Respondent failed to make the required Item 405 disclosure for its 2020 
fiscal year, improperly stating that “[b]ased solely on our review of copies of such reports and 
upon written representations of the Reporting Persons received by us, we believe that the 
following Reporting Persons have not timely complied with the Section 16(a) filing 
requirements”, followed by a table with one line per insider name.  For each insider named, the 
table listed “Form 4” as the type of report, “Acquisition of Stock Options” as the transactions 
covered, and a number of shares.  (AgEagle Form 10-K filed on March 31, 2021.)  However, this 
disclosure also had material deficiencies and omissions, including failing to set forth for each 
named insider the number of late reports and the number of transactions that were not reported 
on a timely basis, when each named insider had multiple late Form 4 reports filed for numerous 
stock option award transactions.  In addition, although the Item 405 disclosure is not required to 
set forth the type of transactions covered, the description provided by AgEagle was inaccurate 



 

6 
 

because each of the named insiders had also filed multiple late Forms 4 for options exercises and 
stock sales during such fiscal year.  The disclosure made also failed to identify two other 
AgEagle insiders who also had filed untimely Form 4 reports for transactions during 2020. 

d. Respondent failed to make the required Item 405 disclosure for its 2021 
fiscal year, improperly stating that “[b]ased solely on the Company’s review only of Section 16 
reports that have been filed on EDGAR, the Company believes that during the year ended 
December 31, 2021, the following reports were not filed or untimely filed”, followed by a table 
with one line per insider name.  For each insider named, the table listed “Form 4” as the type of 
report, “Acquisition of Stock Options” or “Acquisition of Stock Options and Restricted Stock 
Units” as the transactions covered, and a number of shares.  (AgEagle Definitive Proxy 
Statement filed on May 2, 2022, incorporated by reference into Form 10-K filed on April 12, 
2022.)  However, this disclosure again had material deficiencies and omissions, including failing 
to set forth for each named insider the number of late reports and the number of transactions that 
were not reported on a timely basis, when each named insider had multiple late or missing late 
Form 4 filings for numerous transactions.  In addition, although the Item 405 disclosure is not 
required to set forth the type of transactions covered, the description provided by AgEagle was 
inaccurate because nearly all of the late Forms 4 filed by such insiders during 2021 related to 
exercises of options and stock sales.  Respondent also did not possess any written representations 
from its officers and directors that no Form 5 was required, and Respondent did not have a basis 
to know that no Form 5 was required for at least certain insiders with respect to fiscal year 2021.  
In fact, several officers and directors had reportable transactions during 2021 involving, among 
other things, exercises of options and stock sales that should have been reported on Form 4 
within two business days, but were not, and such reports were not filed until June 2022. 

12. As a result of the conduct described above, Respondent failed to comply with its 
disclosure obligation to the extent required by Item 405 and violated Section 13(a) of the 
Exchange Act and Rule 13a-1 thereunder. 

Respondent Was a Cause of Certain Violations of Section 16(a) by its Insiders 

13. Although the Commission encourages the practice of many issuers to assist insiders 
in complying with Section 16(a) filing requirements, issuers who voluntarily accept certain 
responsibilities and then act negligently in the performance of those tasks may be liable as a cause 
of Section 16(a) violations by insiders.   

14. Since at least 2018, Respondent has voluntarily agreed with its officers and 
directors to perform certain tasks in connection with the filing of Section 16(a) reports on their 
behalf, including the preparation and filing of all such reports for which Respondent had timely 
notification of the required information concerning the transactions.  However, on multiple 
occasions, Respondent acted negligently in its performance of such tasks and was a cause of 
AgEagle’s officers and directors failing to file Section 16(a) reports on a timely basis.  AgEagle’s 
personnel responsible for tasks relating to the preparing and filing of Section 16(a) reports 
repeatedly failed to perform on a timely basis the tasks that Respondent had agreed to perform.  The 



 

7 
 

procedures and practices employed by Respondent were insufficient to the extent that those 
practices resulted in the recurrent failure to meet the two-business day filing deadline.   

15. For example, between March 2018 and June 2022, Respondent’s officers and 
directors in the aggregate filed more than 125 untimely Forms 4 to report transactions related to, 
among other things, stock and option awards, options exercises, and open-market sales.  For 
virtually all of these late-reported transactions, Respondent had received timely notification of or 
otherwise possessed the necessary information for such filings but failed to prepare and file the 
reports within the required time frame. 

16. As a result of the conduct described above, Respondent was a cause of certain 
violations of Section 16(a) of the Exchange Act and Rule 16a-3 thereunder by Respondent’s 
insiders.   

Respondent’s Remedial Efforts 

17. In determining to accept the Offer, the Commission considered certain remedial 
acts undertaken by Respondent and cooperation afforded to Commission staff. 

IV. 
 

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 13(a) and 16(a) of the 
Exchange Act and Rules 13a-1 and 16a-3 promulgated thereunder.   

 
B. Respondent shall, within 14 days of the entry of this Order, pay a civil money 

penalty in the amount of $190,000 to the Securities and Exchange Commission, for transfer to 
the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3).  If 
timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717.  
Payment must be made in one of the following ways:   

(1)  Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2)  Respondent may make direct payment from a bank account via Pay.gov through 
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 



 

8 
 

(3)  Respondent may pay by certified check, bank cashier’s check, or United States 
postal money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to:  

 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 

 
Payments by check or money order must be accompanied by a cover letter identifying 

AgEagle Aerial Systems Inc. as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Thomas Smith, 
Associate Regional Director, Division of Enforcement, Securities and Exchange Commission, 
100 Pearl Street, Suite 20-100, New York, NY 10004.   

 
C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 

be treated as penalties paid to the government for all purposes, including all tax purposes.  To 
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor 
Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any 
award of compensatory damages by the amount of any part of Respondent’s payment of a civil 
penalty in this action (“Penalty Offset”).  If the court in any Related Investor Action grants such 
a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order 
granting the Penalty Offset, notify the Commission’s counsel in this action and pay the amount 
of the Penalty Offset to the Securities and Exchange Commission.  Such a payment shall not be 
deemed an additional civil penalty and shall not be deemed to change the amount of the civil 
penalty imposed in this proceeding.  For purposes of this paragraph, a “Related Investor Action” 
means a private damages action brought against Respondent by or on behalf of one or more 
investors based on substantially the same facts as alleged in the Order instituted by the 
Commission in this proceeding. 
 
 
 By the Commission. 
 
 
 
       Vanessa A. Countryman 
       Secretary 


	Respondent