0001575705-18-000170.txt : 20180814 0001575705-18-000170.hdr.sgml : 20180814 20180814165037 ACCESSION NUMBER: 0001575705-18-000170 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 55 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180814 DATE AS OF CHANGE: 20180814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AgEagle Aerial Systems Inc. CENTRAL INDEX KEY: 0000008504 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT [3721] IRS NUMBER: 880422242 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36492 FILM NUMBER: 181018476 BUSINESS ADDRESS: STREET 1: 117 SOUTH 4TH STREET CITY: NEODESHA STATE: KS ZIP: 66757 BUSINESS PHONE: (620) 325-6363 MAIL ADDRESS: STREET 1: 117 SOUTH 4TH STREET CITY: NEODESHA STATE: KS ZIP: 66757 FORMER COMPANY: FORMER CONFORMED NAME: EnerJex Resources, Inc. DATE OF NAME CHANGE: 20060926 FORMER COMPANY: FORMER CONFORMED NAME: MILLENNIUM PLASTICS CORP DATE OF NAME CHANGE: 20000525 FORMER COMPANY: FORMER CONFORMED NAME: AURORA CORP DATE OF NAME CHANGE: 19990825 10-Q 1 uavs_2q18.htm FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended June 30, 2018

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File Number 001-36492

 

AGEAGLE AERIAL SYSTEMS, INC.

(Exact name of registrant issuer as specified in its charter)

 

Nevada   88-0422242

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

117 S. 4th Street
Neodesha, Kansas 66757
(Address of principal executive offices, including zip code)

620-325-6363

Registrant’s phone number, including area code

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

YES NO

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit and post such files).

 

YES NO

 

  

If an emerging growth company, indicate by checkmark 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.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” or an “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer Accelerated filer                   
Non-accelerated filer   Smaller reporting company 
    Emerging growth company 

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding at August 14, 2018
Common Stock, $.001 par value   10,289,001

  

 

 

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION 3
     
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: 3
     
  Condensed Interim Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017 3
     
  Condensed Interim Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2018 and 2017 (unaudited) 4
     
  Condensed Interim Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018  and 2017 (unaudited) 5
     
  Notes to Condensed Interim Consolidated Financial Statements (unaudited) 6
     
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 25
     
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 29
     
ITEM 4. CONTROLS AND PROCEDURES 29
     
PART II OTHER INFORMATION 31
     
ITEM 1. LEGAL PROCEEDINGS 31
     
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 31
     
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 31
     
ITEM 4. MINE SAFETY DISCLOSURES 31
     
ITEM 5. OTHER INFORMATION 31
     
ITEM 6 EXHIBITS 31
     
SIGNATURES 32

 

  

2

 

PART I – FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements.

 

AGEAGLE AERIAL SYSTEMS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(Unaudited) 

   As of
   June 30,
2018
  December 31,
2017
       
ASSETS          
           
CURRENT ASSETS:          
Cash  $2,560,062   $35,289 
Accounts receivable   6,362    255 
Inventories   132,314    158,632 
Prepaid expense   117,159    3,384 
Total current assets   2,815,897    197,560 
           
Property and equipment, net   30,400    38,703 
    Investment in unconsolidated investee   1,079,648    75,000 
Total assets  $3,925,945   $311,263 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
           
CURRENT LIABILITIES:          
Accounts payable  $381,174   $426,154 
Accrued expenses   26,482    59,354 
Accrued interest   2,337    185,335 
Payroll liabilities   5,328    5,521 
Convertible notes payable   —      1,160,005 
Promissory note   93,215    —   
Promissory notes – related party   —      131,050 
Total current liabilities   508,536    1,967,419 
Total liabilities   508,536    1,967,419 
           
COMMITMENTS AND CONTINGENCIES  (SEE NOTE 9)          
           
STOCKHOLDERS’ EQUITY (DEFICIT):          
Preferred stock, $0.001 par value, 25,000,000 shares authorized:          
Preferred stock Series B, $0.001 par value, 1,764 shares authorized, 0 shares issued and outstanding at June 30, 2018        
Preferred stock Series C Convertible, $0.001 par value, 10,000 shares authorized, 6,507 shares issued and outstanding at June 30,2018   7     
Common stock, $0.001 par value; 250,000,000 shares authorized; 10,164,001 shares issued and outstanding at June 30, 2018   10,164    —   
Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,200,000 shares issued and outstanding at December 31, 2017   —      420 
Preferred stock, $0.001 par value, 25,000,000 shares authorized:          
Additional paid-in capital   7,919,354    1,939,832 
Accumulated deficit   (4,512,116)   (3,596,408)
Total stockholders’ equity (deficit)   3,417,409    (1,656,156)
Total liabilities and stockholders’ equity (deficit)  $3,925,945   $311,263 

 

See accompanying notes to the condensed interim consolidated financial statements.

 

3

  

AGEAGLE AERIAL SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

 

   For the Three Months Ended  For the Six Months Ended
   June 30,  June 30,  June 30,  June 30,
   2018  2017  2018  2017
Revenues  $24,517   $47,192   $53,707   $82,391 
Cost of sales   18,174    36,905    41,971    43,183 
Gross Profit   6,343    10,287    11,736    39,208 
                     
Operating Expenses:                    
Selling expenses   27,005    8,376    36,460    14,850 
General and administrative   233,797    75,999    269,823    142,625 
Professional fees   426,210    15,578    576,795    101,550 
Consulting fees – related party   1,000    6,397    1,000    7,992 
Research and development   —      1,563    476    5,880 
Total Operating Expenses   688,012    107,913    884,554    272,897 
Loss from Operations   (681,669)   (97,626)   (872,818)   (233,689)
                     

Loss on Investment from Unconsolidated

Investee

   (30,352)   —      (30,352)   —   
                     
Other Income (Expenses):                    
Other income   1,645    535    16,711    5,189 
Interest expense   (1,834)   (36,383)   (29,248)   (77,554)
         Total Income (Expenses), Net   (189)   (35,848)   (12,537)   (72,365)
Loss Before Income Taxes   (712,210)   (133,474)   (915,707)   (306,054)
Provision for income taxes   —      —      —      —   
Net Loss  $(712,210)  $(133,474)  $(915,707   $(306,054)
                     
                     
Net Loss Per Share – Basic and Diluted  $(0.07)  $(0.03)  $(0.10)  $(0.07)
                     
Weighted Average Number of Shares   Outstanding During the Period – Basic and Diluted   10,044,454    4,200,000    9,440,717    4,200,000 

 

 

See accompanying notes to the condensed interim consolidated financial statements. 

 

4

  

AGEAGLE AERIAL SYSTEMS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

 

   For the Six Months Ended
   June 30,  June 30,
   2018  2017
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(915,707)  $(306,054)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   8,304    9,452 
Loss on investment from unconsolidated  investee   30,352    —   
Stock-based compensation   24,514    6,397 
Shares issued in exchange for professional services   135,600    —   
Warrants issued with convertible promissory note   —      4,927 
Accretion for debt discounts, warrants and issuance costs   —      25,000 
           
Changes in assets and liabilities:          
Accounts receivable   (6,107)   12,210 
Inventories   26,318    1,225 
Prepaid expenses and other assets   (113,775)   805 
Accounts payable   (865,508)   41,897 
Accrued liabilities   (32,872)   (84,861)
Accrued interest   25,577    45,985 
Accrued payroll liabilities   (194)   (2,966)
Net cash used in operating activities   (1,683,498)   (245,983)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash received in reverse merger   256,255    —   
Investment in unconsolidated investee   (35,000)   —   
Purchases of fixed assets   —      (12,775)
Net cash provided by (used in) investing activities   221,255    (12,775)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Issuance of convertible notes payable   —      248,050 
Payments on note payable   (32,342)   —   
Shares repurchased from shareholder   (210,642)   —   
Issuance of common stock and Series C convertible preferred stock in
connection upon merger, net of $20,000 in fees
   3,980,000    —   
Sale of Series C convertible preferred stock   250,000    —   
Net cash provided by financing activities   3,987,016    248,050 
           
Net increase (decrease) in cash   2,524,773    (10,708)
Cash at beginning of period   35,289    15,887 
Cash at end of period  $2,560,062   $5,179 
           
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:          
Assets acquired and (liabilities assumed) in reverse merger:          
    Cash  $256,255   $—   
    Accounts payable   (950,258)   —   
            Net liabilities assumed  $(694,003)  $—   
Issuance of common stock for investment made in unconsolidated investee  $1,000,000   $—   
Conversion of Series B and C preferred stock into common stock  $412   $—   

 

See accompanying notes to the condensed interim consolidated financial statements.

 

5

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 1 – Description of Business

 

AgEagle Aerial Systems, Inc. (the “Company” and/or “AgEagle”) designs, produces, distributes and supports technologically-advanced small unmanned aerial vehicles (UAVs or drones) that the Company offers for sale commercially to the precision agriculture industry. Additionally, the Company recently announced a new service offering using its UAVs and associated data processing services for the sustainable agriculture industry. The Company’s first commercially available product was the AgEagle Classic which was followed shortly thereafter by the RAPID System. As the Company improved and matured its products the Company launched the RX-60 and subsequently its current products, the RX-47 and RX-48. In February 2016, the Company signed a worldwide distribution agreement with Raven Industries, Inc. (“Raven”) under which Raven would purchase the RX-60 for the agriculture markets for resale through their network of dealers worldwide. The first shipment of our RX-60 system to Raven occurred in March 2016. In 2017, the Company amended its agreement with Raven to make it non-exclusive and to allow the Company to sell its products directly into the market. As a result, the Company began selling its products directly to farmers and agronomists and the Company does not anticipate sales to, or through Raven in the near future.

 

The Company believes the success it has achieved with its products, stems from its 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. The Company’s 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 (RX-60), and high end software provided by third parties that automates drone flights and provides geo-referenced data. Research and development activities are integral to the Company’s business and it follows a disciplined approach to investing our resources to create new technologies and solutions.

 

The Company is headquartered in Neodesha, Kansas 66757. Its website address is http://www.ageagle.com.

 

Corporate History; Recent Business Combination 

 

On March 26, 2018 (the “Merger Date), the Company consummated the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and our wholly-owned subsidiary, merged with and into AgEagle Aerial Systems, Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as its wholly-owned subsidiary (the “Merger”). In connection with the Merger, the Company changed its name to AgEagle Aerial Systems Inc. and AgEagle Sub changed its name to “AgEagle Aerial, Inc.” The Company’s common stock continues to trade on the NYSE American under its new symbol “UAVS” since March 27, 2018.

 

Prior to the merger, the Company was formerly known as Millennium Plastics Corporation and was incorporated in the State of Nevada on March 31, 1999. In August 2006, the Company acquired Midwest Energy, Inc., a Nevada corporation pursuant to a reverse merger. After such merger, Midwest Energy became a wholly-owned subsidiary, and as a result of such merger, the former Midwest Energy stockholders controlled approximately 98% of our outstanding shares of common stock. The Company changed its name to EnerJex Resources, Inc., (“EnerJex”) in connection with this merger, and in November 2007, it changed the name of Midwest Energy (one of our wholly-owned subsidiaries) to EnerJex Kansas, Inc. (“EnerJex Kansas”). All of its operations conducted prior to this merger were through EnerJex Kansas, Inc., Black Sable Energy, LLC, a Texas limited liability company (“Black Sable”) and Black Raven Energy, Inc. a Nevada corporation (“Black Raven”). The Company’s leasehold interests were held in our wholly-owned subsidiaries Black Sable, Working Interest, LLC, EnerJex Kansas and Black Raven.

6

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

 

In November 2017, AgEagle Sub entered into a multi-agreement arrangement with Agribotix, LLC (“Agribotix”), headquartered in Boulder, Colorado, a leading agricultural information processing company providing actionable data to the agriculture industry. See Note 5 for further details about the transaction. 

 

  

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 and pursuant to SEC rules and regulations 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 consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at June 30, 2018 and December 31, 2017, the results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017. The results for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with AgEagle Sub’s, AgEagle Aerial, Inc.’s audited financial statements and management’s discussion and analysis for the years ended December 31, 2017 and 2016 included as part of the Form 8-K filed by the Company on March 29, 2018.

 

 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.

 

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.

 

7

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 2 – Summary of Significant Accounting Policies – Continued

 

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 June 30, 2018 and December 31, 2017.

  

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. Cost components include direct materials and direct labor, as well as in-bound freight. 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. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. 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. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company’s estimates and expectations.

 

Provisions for Inventory Obsolescence – The Company has a provision for estimated obsolescence and shrinkage of inventory as of June 30, 2018 of $19,285. Our estimates consider the cost of inventory, forecasted demand, the estimated market value, the shelf life of the inventory and our historical experience. 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.

 

Research and Development - The Company expenses research and development costs during the period incurred, which totaled $0 and $476 for the three and six months ended June 30, 2018, respectively and $1,563 and $5,880 for the three and six months ended June 30, 2017, 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 are 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.

 

Investment in Unconsolidated Investee -The Company accounts for investments in which the Company owns more than 20% or more of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost, and adjusts the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income by the investor, and such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor's share of changes in the investee's capital. Dividends received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary and which should be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. 

 

8

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 2 – Summary of Significant Accounting Policies – Continued

 

Shipping Costs - Shipping costs for the three and six months ended June 30, 2018 totaled $2,548 and $1,597, respectively and $1,904 and $2,553 for the three and six months ended June 30, 2017. All shipping costs billed directly to the customer are directly offset to shipping costs resulting in a net expense to the Company which is included in cost of goods sold in shipments of operations.

 

Revenue Recognition and Concentration

 

The Company generally recognizes revenue on sales to customer, dealer and distributors upon satisfaction of our performance obligations when the goods are shipped. For consignment sales, the Company recognizes revenue when the goods are pulled from consignment inventory. 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 quantity of drones being purchased. The Company assesses collectability based on the creditworthiness of the customer as determined by evaluations and the customer’s payment history. Additionally, customers are required to place a deposit on each drone ordered.

 

The Company has executed one significant non-exclusive worldwide distributor agreement in 2016 and a dealer agreement whereby the dealer and distributor agreed to purchase AgEagle drones and other related products. In 2017, the Company amended its agreement with Raven to make it non-exclusive and to allow the Company to sell its products directly into the market. Only 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. As of June 30, 2018, no sales of the Company are subject to this right of return clause per the distributor agreement.

 

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

 

                    Percent of total sales for six months ended June 30,
Customers   2018   2017
Customer A   17.2%   *
Customer B   15.1%   *
Customer C   13.1%   *
Customer D   10.6%   *
Customer E   10.1%   *
Customer F   *   12.8%
Customer G   *   10.6%
Customer H   *    10.6%
*- Represents less than 10% of total revenue

         

9

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENS CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 2 – Summary of Significant Accounting Policies – Continued

 

Advertising Costs – Advertising costs are expensed as incurred. Advertising costs amounted to $483 and $1,389 for the three and six months ended June 30, 2018 and 2017, respectively and $5,043 and $ 6,078 for the three and six months ended June 30, 2017, respectively.

 

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, 2018, the Company had 828,200 warrants and 1,246,329 options to purchase common stock, and 6,257 Preferred Series C shares which may be converted into 4,214,672 common shares. As of June 30, 2017, the Company had 498,000 warrants and 207,500 options to purchase common stock, and 1,544,869 potential convertible 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. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All income tax returns not filed more than three years ago are subject to federal and state tax examinations by tax authorities.

   

Recently Issued and Adopted Accounting Standards - In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). 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. This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for annual and interim reporting periods beginning after December 15, 2017. Topic 606 requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services and recognize revenue under the new standard as costs are incurred. Under previous U.S. generally accepted accounting principles (GAAP), revenue was generally recognized when deliveries were made, performance milestones were attained, or as costs were incurred. The new standard accelerates the timing of when the revenue is recognized, however, it does not change the total amount of revenue recognized on these contracts. The new standard does not affect revenue recognition for purposes of the Company’s sales as each of the Company’s revenue transactions represent a single performance obligation that is satisfied at a point time, as defined in the new ASU.  Accordingly, the Company recognizes revenue for these customers at the point in time when the Company’s performance obligation is complete, which is when the customer accepts delivery of the drone. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method, however the new standard did not have a material impact on our consolidated financial position and consolidated results of operations, as it did not change the manner or timing of recognizing revenue on a majority of our revenue transactions. 

10

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 2 – Summary of Significant Accounting Policies – Continued

 

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 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. The Company is currently evaluating the 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice in how transactions are classified in the statement of cash flows. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

  

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 — Inventories

 

Inventories consist of the following at:

 

  

June 30,

2018

 

December 31,

2017

       
Raw materials   $98,739   $106,569 
Work-in-process    30,997    34,850 
Finished goods    21,864    32,582 
Gross Inventory   151,600    174,001 
Less obsolete reserve   (19,286)   (15,369)
Total  $132,314   $158,632 

  

 

11

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 4 — Property and Equipment

 

Property and equipment consist of the following at:

 

  

June 30,

2018

 

December 31,

2017

       
Property and equipment   $108,664   $108,664 
Less accumulated depreciation    (78,264)   (69,961)
   $30,400   $38,703 

  

Depreciation expense for the three and six months ended June 30, 2018 was $4,151 and $8,304, respectively and for the three and six months ended June 30, 2017 was $5,295 and $9,452, respectively.

 

 

Note 5 —Investment in Unconsolidated Investee

 

In November 2017, AgEagle Sub entered into a multi-agreement arrangement with Agribotix, LLC (“Agribotix”), headquartered in Boulder, Colorado, an agricultural information processing company providing actionable data to the agriculture industry.  Agribotix’s platform delivers agricultural intelligence to increase yields and profits using drone-enabled technologies. Agribotix was founded in 2013 by Dr. Tom McKinnon, its Chief Technology Officer.

 

The Company believes that developing a strong working relationship with Agribotix will benefit the Company and its shareholders by developing important vertically integrated products and services.  Agribotix’s primary product is FarmLens™, a subscription cloud analytics service that processes data, primarily collected with a drone such as the Company’s, and makes such data usable by farmers and agronomists. FarmLens is currently sold by Agribotix as a subscription and offered either standalone or in a bundle with major drone platforms manufactured by leading drone providers like AgEagle, DJI, and senseFly.

 

Agribotix extends the reach of its FarmLens platform by partnering with and directly integrating into offerings by leading agricultural companies like John Deere’s Operations Center and The Climate Corporation’s FieldView.  To date, Agribotix has processed agricultural imagery for over 50 different crop types from over 50 countries around the world.

 

The agreements reached between the Company, through AgEagle Sub, and Agribotix include:

 

  Dealer Agreement whereby the Company appointed Agribotix as a non-exclusive dealer of the Company’s products on a worldwide, best efforts basis.  The term of the agreement is for twelve months with marketing and sales commencing on or after January 1, 2018, and automatically renews for one-year periods unless otherwise terminated.  Either party may terminate the agreement with 30 days’ written notice.  Both parties agree to provide standard reporting and support services.  Agribotix is required to maintain proper insurance and is obligated to standard confidentiality clauses.  The Company has the right to audit Agribotix on an annual basis for its business under this agreement.  Both parties agreed to standard indemnification clauses.
     
  Distribution and Resale Agreement whereby Agribotix appointed the Company as a non-exclusive distributor of Agribotix products and analytic services including FarmLens on a worldwide, best efforts basis. The term of the agreement is for twelve months and automatically renews for one-year periods unless otherwise terminated.  Either party may terminate the agreement with 90 days’ written notice. Both parties agree to provide standard reporting and support services. The Company is required to maintain proper insurance and is obligated to standard confidentiality clauses. Both parties agree to standard indemnification clauses.

 

12

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 5 —Investment in Unconsolidated Investee - Continued

 

  Exchange Agreement whereby, to further align interests between the parties, AgEagle Sub exchanged 200,000 shares of the Company’s common stock it received in the Merger (equal to an aggregate value of $1,000,000) for 20% of the equity membership interests of Agribotix.  The shares did not affect the Merger exchange ratio, and therefore was not additionally dilutive to the Company’s shareholders.
     
  As part of the signing of the exchange agreement three promissory notes totaling $110,000 with a 6% per annum interest payable that were executed between Agribotix and AgEagle Sub in exchange for exclusive dealing until the later of 120 days after the signing date, or the termination date as defined per the exchange agreement has been recorded on the Company’s balance sheet as part of the Company’s investment in unconsolidated investee as of the date of close of the Merger Agreement.

   

The Company accounts for its investment in Agribotix using the equity method of accounting. The difference between the fair value of the Company’s investment, and the amount of underlying equity in the net assets of Agribotix, totaling approximately $445,108 is accounted for as if Agribotix was a consolidated subsidiary and all identifiable assets, including goodwill and identifiable intangibles, were recorded at fair value and amortized, with this amortization recorded in “memo” and included in the Company’s portion of earnings of Agribotix. Condensed unaudited summary financial information for Agribotix LLC as of June 30, 2018 and for the three amonths ended June 30, 2018 is as follows:

 

  

June 30,

2018

   (Unaudited)
ASSETS     
Cash  $42,388 
Accounts receivable   21,325 
Property and equipment   7,019 
Inventories   8,400 
Prepayments   1,976 
Marketable securities in the Company’s at fair value   364,000 
Total assets  $445,108 
      
LIABILITIES AND MEMBERS' DEFICIT     
Accounts payable and accrued expenses  $125,019 
Deferred revenue   15,079 
Debt   2,014,149 
Members' deficit   (1,709,139)
Total liabilities and members' deficit  $445,108 

 

13

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 5 —Investment in Unconsolidated Investee - Continued

 

  

 For the Three

Months Ended

June 30, 2018

   (Unaudited)
STATEMENT OF OPERATIONS     
Revenues  $107,290 
Cost of sales   63,782 
Gross profit   43,508 
Operating expenses   142,420 
Operating loss   (98,912)
Other expense   (38,000)
Net loss   (136,912)
Amortization of “memo” intangible assets   (14,848)
Total adjusted net loss   (151,760)
Unrealized loss on Company’s common stock   (502,000)
Comprehensive loss  $(653,760)
Ownership interest   20%
Share of adjusted net loss  $(30,352)

 

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 and maturing on November 6, 2016. Interest on the notes accrues at a rate of 8% annually and is payable quarterly. It was determined that there were no aggregate beneficial conversion features. 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, 2016, 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 months ended March 31, 2018 and 2017, the Company recorded $9,111 and $10,000 of interest expense, respectively. As of the Merger Date, the principal amount of the promissory note of $500,000 and its accrued interest of $114,556 were converted at $1.25 per share into 814,381 shares of common stock.

 

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. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $5,467 and $6,000 of interest expense, respectively. As of the Merger Date, the principal amount of the promissory note of $300,000 and its accrued interest of $42,933 were converted at $1.25 per share into 454,440 shares of common stock.

 

14

 

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 6 — Debt - Continued

 

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 Note 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 Note A warrants 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 Note A 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. Upon conversion the Company had issued an additional 300,000 warrants to purchase shares resulting from the default of the loan.

 

For the three months ended March 31, 2018 and 2017, the Company recorded $7,077 and $4,833 of interest expense, respectively. As of the date of the merger March 26, 2018, the principal amount of the promissory note of $175,000 and its accrued interest of $35,642 were converted at $2.50 per share into 139,567 shares of common stock.

 

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 $100,005, convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $1,822 of interest expense. As of the date of the Merger Date, the principal amount of the promissory note of $100,005 and its accrued interest of $5,600 were converted at $1.25 per share into 139,943 shares of common stock.

 

On September 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, convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $638 of interest expense. As a date of the Merger Date, the principal amount of the promissory note of $35,000 and the accrued interest of $1,369 were converted at $1.25 per share into 48,194 shares of common stock.

 

On October 2017, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor purchased a convertible note having a principal amount of $50,000, (the “2017 Note D”) convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $911 of interest expense. As a date of the Merger Date, the principal of $50,000 and the accrued interest of $1,722 were converted at $1.25 per share into 68,540 shares of common stock.

 

15

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 6 — Debt - Continued  

  

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 2nd promissory note with an aggregate principal amount of $30,000 to the same related party. On June 14, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $16,050 to the same related party. All three promissory notes (the “Related Party Notes A”) accrue interest at an annual rate of 2% and matured on November 6, 2017. On or about August 1, 2017, the Company and the related party promissory note A holders entered into extension and modification agreements whereby they agreed to extend the maturity date of the Related Party Notes A to February 28, 2018, added a conversion feature whereby the debt can be converted into common stock of the Company at $2.00 per share and amended the interest rate on the note retroactively to accrue at a rate of 8% annually. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $1,386 and $870 of interest expense, respectively. As of the date of the Merger Date, the principal of $76,050 and the accrued interest of $7,239 were converted at $1.25 per share into 110,371 shares of common stock.

 

On March 5, 2017, the Company issued a promissory note with an aggregate principal amount of $10,000 to a related party. On May 15, 2017, the Company issued a 2nd promissory note with an aggregate principal amount of $10,000 to the same related party. On June 15, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $32,000 to the same related party that is part of management of the Company. On July 25, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $3,000 to the same related party that is part of management of the Company with the amended terms agreed to on August 1, 2017 per the modification agreement. The promissory notes (the “Related Party Notes B”) accrue interest at an annual rate of 2% and mature on November 6, 2017. On or about August 1, 2017, the Company and the related party promissory note B holders entered into extension and modification agreements whereby they agreed to extend the maturity date of the Related Party Notes B to February 28, 2018, added a conversion feature whereby the debt can be converted into common stock of the Company at $2.00 per share and amended the interest rate on the note retroactively to accrue at a rate of 8% annually. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $1,002 and $37 of interest expense, respectively. As of the date of the Merger Date, the principal of $55,000 and the accrued interest of $3,686 were converted at $1.25 per share into 77,769 shares of common stock.

 

As of the date of the Merger Date, all the AgEagle common shares issued in connection with conversion of debt noted above were subsequently converted into EnerJex shares and then split at a rate of 25 to 1 resulting in a conversion rate of 1.6564 per AgEagle share into a total of a series of EnerJex common stock of 787,891 shares and 1,631 of Series C preferred shares.

 

As part of the liabilities acquired from EnerJex the Company recorded a promissory note for a principal amount of $125,556 and accrued interest of $4,171 payable over twelve months and maturing on March 26, 2019. The total amount outstanding as of June 30, 2018 was $95,552 and accrued interest of $2,337. The Company recorded interest of $1,834 for the three and six months ended June 30, 2018.

 

16

 

 AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

 

Note 7 – Equity

 

Capital Stock Issuances

 

As a result of the Merger all the holders of the Company’s 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) had their shares automatically converted into 896,640 shares of the Company’s common stock. The Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) remains outstanding, and 1,623.79 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) are now convertible into 1,060,432 shares of the Company’s common stock. Furthermore, an additional 5,050.60 shares of Series C Preferred Stock, convertible into 3,298,348 shares of the Company’s common stock, were issued to the current holder of Series C Preferred Stock in connection with a $4 million financing of Series C Preferred Stock (the “Financing”) and the conversion and retirement of $425,000 in the Company’s promissory notes due and owing to such holder.

 

As of the Merger Date, the former shareholders of AgEagle Sub own approximately 67% of the Company’s common stock (inclusive of the AgEagle Sub assumed stock options and warrants), the former EnerJex holders of common stock, the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, which were outstanding immediately prior to the Financing, collectively own 12.7% of the Company’s common stock on a fully-diluted basis.

On April 16, 2018, Alpha Capital Anstalt converted 8.25 shares of Series B Preferred Stock, at a conversion price of $1.53 representing the last outstanding Series B shares, into 5,388 shares of common stock.

During the month of April 2018 Alpha capital Anstalt converted 621.86 shares of Series C Preferred Stock into 406,129 shares of common stock at a conversion price of $1.53.

 

On May 11, 2018, we issued an additional 250 shares of our Series C Convertible Preferred Stock, convertible into 163,265 shares of our common stock and received a cash payment of $250,000 for the issuance of the Series C Preferred Stock. The Series C Convertible Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Convertible Preferred Stock into more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Convertible Preferred Stock.

 

17

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited) 

 

Note 7 – Equity - Continued

 

Options

 

The Board of Directors of the Company has unanimously approved a proposal to adopt and approve the EnerJex 2017 Omnibus Equity Incentive Plan (the “Plan”). The Board of Directors recommended that this proposal be presented to the EnerJex shareholders for approval. The Plan became effective on March 26, 2018, the date of the Merger, and is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, the Company. The purpose of the Plan is to help the Company attract, motivate and retain such persons and thereby enhance shareholder value.

 

The Company has reserved a total of 2,000,000 shares of common stock for issuance as or under awards to be made under the Plan. To the extent that an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate, any shares subject to such award shall again be available for the grant of a new award. The Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date). The Board of Directors in its discretion may terminate the Plan at any time with respect to any shares for which awards have not theretofore been granted; provided, however, that the Plan’s termination shall not materially and adversely impair the rights of a holder, without the consent of the holder, with respect to any award previously granted. The number of shares for which awards which are options or SARs may be granted to a participant under the Plan during any calendar year is limited to 500,000. For purposes of qualifying awards as “performance-based” compensation under Code Section 162(m), the maximum amount of cash compensation that may be paid to any person under the Plan in any single calendar year shall be $500,000.

 

On June 30, 2018, the Company issued options to purchase 49,500 shares of common stock to directors of the Company at the fair-market value exercise price of $1.82 per share expiring on June 29, 2023. The Company determined the fair-value of the options to be $62,252. In connection with the issuance of these options the Company recognized no stock compensation expense for the three and six months ended June 30, 2018 as the vesting period will commence July 1, 2018.

 

On March 31, 2018, the Company issued options to purchase 62,000 shares of common stock to directors and an employee of the Company at the fair-market value exercise price of $4.33 per share expiring on March 30, 2023. The Company determined the fair-value of the options to be $156,258. In connection with the issuance of these options the Company recognized $19,932 stock compensation expense for the three and six months ended June 30, 2018 as the vesting period will commenced April 1, 2018.

 

On October 4, 2017, AgEagle Sub issued options to purchase 927,774 shares of common stock to employees and directors, that were approved by the board at an exercise price of $0.06 per share. These options were assumed by the Company in the Merger. In connection with the issuance of these options to employees and directors for the three and six months ended June 30, 2018, the Company recorded $2,491 and $4,982, respectively of stock compensation expense.

 

On March 1, 2015, AgEagle Sub entered into a strategic consulting agreement with a related party and granted 207,055 stock options exercisable over five years from the grant date at an exercise price per share of $2.60. On October 4, 2017, AgEagle Sub held a board meeting to approve the modification of the existing 207,055 options to purchase common stock from an exercise price of $2.60 to $0.06 per share. These options were assumed by the Company in the Merger. In connection with these options the Company recognized no stock compensation expense for the three and six months ended June 30, 2018.

 

18

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 7 — Equity – Continued

  

The fair value of options granted during the three months and six months ended March 31, 2018, were determined using the Black-Scholes option valuation model. 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.

 

The significant weighted average assumptions relating to the valuation of the Company’s stock options granted during the six months ended June 30, 2018 were as follows: 

  

For the three

months ended

 

For the three

months ended

   March 31, 2018  June 30, 2018
Dividend yield   0%   0%
Expected life   3.5 yrs.    3.5 yrs. 
Expected volatility   77.03%   78.66%
Risk-free interest rate   2.81%   2.68%

  

A summary of the options activity for the six months ended June 30, 2018, are as follows:

 

            Weighted    
        Weighted   Average    
        Average   Remaining   Aggregate
        Exercise   Contractual   Intrinsic
    Shares   Price   Term   Value
                 
Outstanding at January 1, 2018     1,134,830     $ 0.06       8.5 years     $ —    
Granted     111,500       2.93       5.0 years       —    
Outstanding at June 30, 2018     1,246,330     $ 0.32       7.8 years     $ —    
Exercisable at end of the year     851,088     $ 0.09       7.6 years     $ —    

 

For options granted in 2018, the fair value of the Company’s stock was obtained per the close of market as of June 30, 2018. The future expected stock-based compensation expense expected to be recognized in future years is $211,433 through June 30, 2020. 

 

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at June 30, 2018 (for outstanding options), less the applicable exercise price. 

  

19

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 8 – Warrants to Purchase Common Stock  

 

As of June 30, 2018, the Company had outstanding, in connection with the issuance of debentures in the prior year, warrants to purchase 828,221 shares of the Company’s common stock at an exercise price of $1.51. All warrants outstanding as of June 30, 2018 are scheduled to expire between February 2, 2024 and October 31, 2024.

 

A summary of activity related to warrants for the six months ended June 30, 2018 follows:  

 

    Shares   Weighted- Average Exercise Price ($)   Weighted-Average Remaining Contractual Term
  Outstanding at December 31, 2017       828,221     $ 1.51       —    
  Outstanding at June 30, 2018        828,221     $ 1.51       6.10  
  Exercisable at June 30, 2018       828,221     $ 1.51       6.10  

 

 

 

20

   

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 9 – Commitments and Contingencies

 

 Operating Leases

 

The Company leases office space in Neodesha, Kansas for $300 a month. The lease terminates on September 30, 2018 with no option to renew unless approved by the city commission of Neodesha. Rent expense was $1,800 and $1,800 for the six months ended June 30, 2018 and 2017, respectively.

  

Service Agreements

 

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 of $424 for the six-month ended June 30, 2018 and $220 for the six months ended June 30, 2017 which represents approximately 1% 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.

 

Merger Agreement

 

On March 26, 2018, EnerJex Resources, Inc. (“EnerJex”), a Nevada company, consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of EnerJex, merged with and into AgEagle Aerial Systems, Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as a wholly-owned subsidiary of EnerJex (the “Merger”). In connection with the Merger, EnerJex changed its name to AgEagle Aerial Systems, Inc. (the “Company, “we,” “our,” or “us”) and AgEagle Sub changed its name to “Eagle Aerial Systems, Inc.” Our common stock will continue to trade on the NYSE American under its new symbol “UAVS” commencing on March 27, 2018. As a result of the Merger, through AgEagle Sub, the Company is now engaged in the business of designing, developing, producing, distributing and supporting technologically-advanced small unmanned aerial vehicles (UAVs or drones) that we supply to the precision agriculture industry.

 

Each share of common stock issued and outstanding and underlying options and warrants of AgEagle Sub outstanding immediately prior to the Merger was exchanged for 1.66 shares of Company common stock (the “Exchange Ratio”). As a result, at the effective time of the Merger Date (the “Effective Time”), 5,439,526 shares of AgEagle Sub’s capital stock, representing all currently outstanding common shares and all other debt or equity securities convertible into common shares (except options and warrants as described below) were automatically converted into 7,944,941 shares of Company common stock. In addition, at the Effective Time, 685,100 outstanding options and 500,000 warrants to purchase shares of AgEagle Sub common stock were assumed by EnerJex and converted into 1,134,830 options and 828,221 warrants to purchase shares of common stock of the Company.

 

All holders of EnerJex’s 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) had their shares automatically converted into 896,640 shares of the Company’s common stock. EnerJex’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) remains outstanding, and 1,623.79 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) are now convertible into 1,060,432 shares of Company common stock. Furthermore, an additional 5,050.60 shares of Series C Preferred Stock, convertible into 3,298,348 shares of Company common stock, were issued to the current holder of Series C Preferred Stock in connection with a $4 million financing of Series C Preferred Stock (the “Financing”) and the conversion and retirement of $425,000 in prior EnerJex promissory notes due and owing to such holder. 

 

21

   

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 9 – Commitments and Contingencies - Continued

 

As of the Effective Time, the former shareholders of AgEagle Sub own approximately 67% of the Company’s common stock (inclusive of the AgEagle Sub assumed stock options and warrants), the former EnerJex holders of common stock, the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, which were outstanding immediately prior to the Financing, collectively own 12.7% of the Company’s common stock on a fully-diluted basis.

 

In connection with the Merger, AgEagle waived the requirement for EnerJex to have paid and satisfied in full all outstanding indebtedness of EnerJex such that there would be no continuing liabilities of EnerJex subsequent to the closing of the Merger (“Liability Condition”). In consideration for AgEagle waiving the Liability Condition, the 1,215,278 shares of common stock to be held in escrow (valued at $350,000) owned by certain former principal stockholders, officers and directors of EnerJex to secure losses, if any, that may be suffered by the AgEagle indemnified parties pursuant to the indemnification obligations under the Merger Agreement, were never issued and such former principal stockholders, officers and directors are not entitled to receive such shares. However, such former principal stockholders, officers and directors received, in the aggregate, deferred salaries and fees valued at approximately $297,500. In lieu of payment of the deferred salaries and fees in cash, such amounts have been converted into an aggregate of 1,032,986 shares of Company common stock.

 

Prior to the Merger, EnerJex operated as an oil exploration and production company engaged in the acquisition, development, exploration and production of oil in Eastern Kansas. In connection with the Merger, EnerJex disposed of its principal assets, consisting primarily of its Kansas oil and gas properties.

 

 

Note 10 — Related Party Transactions

 

The following reflects the related party transactions during the three months ended June 30, 2018.

 

Consulting Agreement

 

The Company issued promissory notes for an aggregate amount of $76,050 (the “Related Party Notes A”) that accrued interest at an annual rate of 8% and were set to mature as of the date of the Merger. For the three months ended March 31, 2018, the Company recorded $1,386 of interest expense and for the three months ended March 31, 2017, $870 of interest expense was recorded. As of the date of the Merger Date, the principal of $76,050 and the accrued interest of $7,239 were converted at $1.25 per share into 110,371 shares of the Company’s common stock.

 

The Company issued promissory notes for an aggregate amount of $55,000 (the “Related Party Notes B”) that accrued interest at an annual rate of 8% and were set to mature as of the date of the Merger. For the three months ended March 31, 2018, the Company recorded $1,002 of interest expense and for the three months ended March 31, 2017, $37 of interest expense was recorded. As of the date of the Merger Date, the principal of $55,000 and the accrued interest of $3,686 were converted at $1.25 per share into 77,769 shares of the Company’s common stock. 

 

Transactions with Officers

 

The Company’s Chief Financial Officer, Nicole Fernandez-McGovern, is one of the principals of, Premier Financial Filings, a full-service financial printer. Premier Financial Filings provided contracted financial services to the Company and their related expenses have been included within general and administrative expenses.  For the three and six months ended months ended June 30, 2018 Premier Financial Filings provided services to the Company resulting in fees of $3,055 and accounts payables of $1,475 as of June 30, 2018.

 

22

  

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 11 – Subsequent Events

 

Appointment of Board Member and CEO

 

On July 10, 2018, the Company appointed Corbett Kull as an independent director to serve on the company’s board of directors (the “Board”). Mr. Kull’s appointment fills a vacancy on the Board.

 

As compensation for his services as an independent director, Mr. Kull shall receive an initial grant of 41,250 stock options at an exercise price of $1.77 per share (the “Initial Grant”). The Initial Grant is exercisable for a period of five years and vests in equal quarterly installments over a one-year period from the date of grant. In addition, Mr. Kull will receive a quarterly grant of 16,500 with an exercise price at the current market price of the Company’s common stock at the time of issuance (the “Quarterly Options”). The Quarterly Options are exercisable for a period of five years from the date of grant and vest in equal quarterly installments over a period of two years from the date of grant.

Effective as of July 18, 2018, Mr. Barrett Mooney joined the Company, as Chief Executive Officer. Mr. Bret Chilcott, founder of the Company, stepped down as Chief Executive Officer, but will remain with the Company as President and Chairman of the Board.

 

Pursuant to an employment offer letter dated July 9, 2018, Mr. Mooney will receive as compensation for his services as Chief Executive Officer a base salary of $220,000 per year, which shall be subject to annual performance review by the Compensation Committee of the Board and may be revised by the Board, in its sole discretion. Mr. Mooney received an initial grant of 75,000 shares of restricted common stock of the Company which is fully vested. Mr. Mooney shall also be eligible to receive an award of 75,000 shares of restricted common stock of the Company which shall fully vest as of January 1, 2019 if, and only if, the stock price of the Company reaches $3.55 per share and the closing price per share is at or above such price at the end of the day on January 1, 2019.

 

In addition, Mr. Mooney is eligible to receive an award of 20,000 nonqualified stock options under the Company’s 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) upon securing one sustainability pilot program on or before October 31, 2018, and an additional award of 30,000 nonqualified stock options under the Equity Plan upon securing a second sustainability pilot program on or before January 31, 2019. Both awards shall provide for immediate vesting and exercisability at an exercise price equal to the fair market value of the Company’s shares of common stock underlying the options as of the date of grant. Mr. Mooney will also be eligible receive an award of up to 55,000 nonqualified stock options under the Equity Plan based upon the results of his annual performance review in the first quarter of 2019.

 

Shares Issued

 

In connection with an investor relations agreement, dated April 4, 2018, the Company issued 60,000 shares of its common stock to the investor relations firm, and its affiliates, and agreed to register such shares on its next registration statement (the “Registration Rights”). On July 24, 2018 in connection with the filing of the Company’s registration statement on form S-1, a waiver of the Registration Rights was obtained from the investor relationship firm in exchange for 125,000 additional shares, which were issued and approved by the Board. 

 

23

 

AGEAGLE AERIAL SYSTEMS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Unaudited)

 

Note 11 – Subsequent Events - Continued

 

Asset Purchase Agreement

 

On July 25, 2018, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Eagle Aerial Systems, Inc., a wholly-owned subsidiary of the Company, Agribotix, LLC, a Colorado limited liability company (the “Seller”), and the other parties named therein. Pursuant to the Purchase Agreement, the Company shall, upon the closing, acquire all right, title and interest in and to all assets owned by the Seller utilized in the Seller’s business of providing integrated agricultural drone solutions and drone-enabled software technologies and services for precision agriculture, except for certain excluded assets as set forth in the Purchase Agreement (the “Purchased Assets”). At closing, the Company shall also assume certain liabilities under various third party contracts, accounts payable and indebtedness pursuant to the terms of the Purchase Agreement. The Company anticipates that the closing of the transaction will occur within the next 30 days in accordance with the terms of the Purchase Agreement, subject to the closing conditions described therein.

 

The consideration for the Purchased Assets includes the following to be made at closing: (a) a cash payment of $150,000 (of which $110,000 was previously paid), (b) 200,000 shares of common stock of the Company (the “Common Stock”) at a value of $5.00 per share (all of which shares were issued to the Seller pursuant to an exchange agreement between the Company and the Seller dated as of November 20, 2017), (c) an amount payable at closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $1,000,000 by the average closing daily price per share of the Common Stock on the NYSE, for each of the 20 trading days ending on the date immediately preceding the closing date (the “Average Price”), provided that in no event shall the Average Price be less than $2.00 (the “Closing Shares”); and (ii) $450,000 in cash.

 

In addition, the Seller shall pay an amount on the 90th day following the closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $2,000,000 by the Average Price (calculated as if the 20-trading day period ends on the 89th day following the closing), provided that in no event shall the Average Price be less than $2.00 (the “Post-Closing Shares”); and provided further that in the event that the Average Price so calculated is more than the Average Price calculated in the preceding paragraph, the Average Price shall be the Average Price calculated as set forth in the preceding paragraph); and (ii) $400,000 in cash.

 

If revenue of the business for the one year period ending on the first anniversary of the closing date is at least $1,000,000, plus the Capital Investment Multiplier (as defined below), then the Seller shall earn the number of shares of Common Stock that is calculated by dividing $250,000 by the Average Price (calculated as if the 20–trading day period to which reference is made above ends on such first anniversary), provided that in no event shall the Average Price be less than $2.00. “Capital Investment Multiplier” means 1.5 times the amount of capital invested by the Company or its affiliates in the Seller to support and advance the business, inclusive of loans or other investments provided to Seller prior to the closing, less $250,000.

 

The Purchase Agreement contains customary representations, warranties and covenants, including covenants obligating the Seller to continue to conduct its business in the ordinary course. In addition, the Purchase Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of, among other things, breaches of representations and warranties contained therein. An aggregate amount equal $75,000 in cash, 50% of the number of Closing Shares and 25% of the number of Post-Closing Shares shall be deposited in an escrow account with a third party escrow agent to secure the indemnification obligations of the Seller pursuant to the terms of the Purchase Agreement.

 

24

 

Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

 

The information contained in this Form 10-Q is intended to update the information contained in the financial statements for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 29, 2018 (the “Form 8-K”) and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 8-K. The following discussion and analysis also should be read together with our financial statements and the notes to the financial statements included elsewhere in this Form 10-Q.

 

 

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form 8-K in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this quarterly report on Form 10-Q. The following should also be read in conjunction with the unaudited Financial Statements and notes thereto that appear elsewhere in this report.

 

Except as otherwise indicated herein or as the context otherwise requires, references in this offering circular to “we,” “us,” “our,” “Company,” and “AgEagle” refer to AgEagle Aerial Systems, Inc., a Nevada corporation.

 

Company Overview

 

         On March 26, 2018, EnerJex Resources, Inc. (“EnerJex”), a Nevada company, consummated the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of EnerJex, merged with and into AgEagle Aerial Systems, Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as a wholly-owned subsidiary of EnerJex (the “Merger”). In connection with the Merger, EnerJex changed its name to AgEagle Aerial Systems Inc. (the “Company, “we,” “our,” or “us”) and AgEagle Sub changed its name to “AgEagle Aerial, Inc.” Our common stock will continue to trade on the NYSE American under its new symbol “UAVS” commencing on March 27, 2018. As a result of the Merger, through AgEagle Sub, we are now engaged in the business of designing, developing, producing, distributing and supporting technologically-advanced small unmanned aerial vehicles (UAVs or drones) that we supply to the precision agriculture industry.

We are headquartered in Neodesha, Kansas, and are a manufacturer of unmanned aerial vehicles focused on providing actionable data to the precision agriculture industry. We design, produce, distribute and support technologically-advanced small unmanned aerial vehicles (UAVs or drones) that we offer for sale commercially to the precision agriculture industry. Additionally, we recently announced a new service offering using our UAVs and associated data processing services for the sustainable agriculture industry.

 

Historically, AgEagle’s derived the majority of its 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, RX-47 and RX-48, we will no longer manufacture and distribute our previous two systems. We believe that the UAV industry is currently in the early stages of development and has significant growth potential. Additionally, we believe that some of the innovative potential products in our research and development pipeline will emerge and gain traction as new growth platforms in the future, creating market opportunities.

 

In February 2016, we signed a worldwide distribution agreement with Raven Industries, Inc. (“Raven”) under which Raven would purchase the RX-60 for the agriculture markets for resale through their network of dealers worldwide. The first shipment of our RX-60 system to Raven occurred in March 2016. 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. As a result, we began selling our products directly to farmers and agronomists and we do not anticipate sales to, or through Raven in the near future. 

 

25

 

 

The success we have achieved with our products, which we believe has carried over into the new RX-47 and RX-48, 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 (RX-60), and high end software provided by third parties that automates drone flights and provides geo-referenced data. 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.

 

We believe the success that has been achieved with our products, stems from its 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 UAVs were initially 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, reducing the amount of chemicals applied and potentially increasing yields. Our products were 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. Our UAVs 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 Software or SMS Software. The result is a prescription or zone map that can then be used in a 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

 

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.

 

In November 2017, we entered into a multi-agreement arrangement with Agribotix, LLC (“Agribotix”), headquartered in Boulder, Colorado, a leading agricultural information processing company providing actionable data to the agriculture industry. See Note 5 for further details about the transaction.

   

Off-Balance Sheet Arrangements

 

Since our inception, except for standard operating leases, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities. We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

 

Critical Accounting Policies

 

Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include, but are not limited to: collectability of receivables, realizability of inventories, warranty accruals, valuation of share-based transactions, and valuation of deferred tax assets. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

 

 See Note 2 in the accompanying unaudited financial statements for a listing of our critical accounting policies. 

 

26

  

Results of Operations

 

For the Three and Six Months ended June 30, 2018 and 2017

 

For the three months ended June 30, 2018 and 2017, we recorded revenues of $24,517 compared to revenues of $47,192 for the same period in 2017, representing a 48% decrease. For the six months ended June 30, 2018 and 2017, we recorded revenues of $53,707 compared to revenues of $82,391 for the same period in 2017, a 35% decrease. The decrease was due to a shift in the drone industry from do-it-yourself, early adopter farmers to a more services oriented model whereby independent agronomists provided prescriptions for the application of chemicals based on data they collect through aerial imagery and drones. The Company is in the process of addressing this change in the market through strategic acquisitions and the launch of a service oriented model toward sustainable markets as result of the recent infusion of operating capital and significant reduction of debt.

 

For the three months ended June 30, 2018 and 2017, cost of sales totaled $18,174 and $36,905, respectively, a decrease of 50%. Costs of sales totaled $41,971 and $43,183, for the six months ended June 30, 2018 and 2017, respectively, reflecting a decrease in our cost of goods sold of 3%. For the three months ended June 30, 2018, and 2017 we had a gross profit of $6,343 or 26% and $10,287 or 22% representing an increase of 4% in our profit margins. For the six months ended June 30, 2018 and 2017, we had a gross profit of $11,736 or 22% and $39,208 or 48%, a decrease in our profit margins of 26%. For the three months ended June 30, 2018, our cost of sales decreased while increasing our gross margin as we did not sell our slow-moving inventory during the period and instead focused on our UAVS sales. The decrease in our gross margin and increase in our costs of goods sold for the six months ended June 30, 2018 in comparison to the comparable prior periods is due to the increase of slow-moving inventory due to the innovation of our products which resulted in raw-materials being sold at a discount such as sensors, cameras and other parts.

 

For the three months ended June 30, 2018, and 2017 we had a gross profit of $6,343 or 26% and $10,287 or 22% representing an increase of 4% in our profit margins. For the six months ended June 30, 2018 and 2017, we had a gross profit of $11,736 or 22% and $39,208 or 48%, a decrease in our profit margins of 26%. For the three months ended June 30, 2018, our cost of sales decreased while increasing our gross margin as we did not sell our slow-moving inventory during the period and instead focused on our UAVS sales. The decrease in our gross margin and increase in our costs of goods sold for the six months ended June 30, 2018 in comparison to the comparable prior periods is due to the increase of slow-moving inventory due to the innovation of our products which resulted in raw-materials being sold at a discount such as sensors, cameras and other parts

 

We recorded total operating expenses of $688,012 and $107,913, respectively, for the three months ended June 30, 2018 and 2017, resulting in an 538% increase. For the three months ended June 30, 2018 and 2017 we recorded $428,044 and $15,578 in professional fees, respectively, a 2,648% increase. The increase is mainly due to more professional fees related to legal, accounting and consulting services in connection with the Merger completed on March 26, 2018 and the on-going expenses related to us being publicly traded such as legal, audit and consulting services. General and administrative expenses also increased 208% as we had $233,797 of expenses for the current period versus $75,999 in the comparable prior period. This was mainly due to an increase in salaries, financial service fees, investor relations costs and stock compensation expense due to the issuance of shares and options to directors and employees. Lastly included in operating expenses was selling costs that increased 222% to $27,005 versus $8,377 in the prior comparable period due to attendance to various trade shows in that propel our sustainable market initiatives.

 

We recorded total operating expenses of $884,544 and $272,897, respectively, for the six months ended June 30, 2018 and 2017, a 224% increase. For the six months ended June 30, 2018 and 2017 we recorded $578,629 and $101,550 in professional fees, respectively, a 470% increase. The increase is mainly due to more professional fees related to legal, accounting and consulting services in connection with the reverse merger completed on March 26, 2018 and the on-going expenses related to us being publically traded such as legal, audit and consulting services. General and administrative expenses also increased 89% as we had $269,823 of expenses for the current period versus $142,625 in the comparable prior period. This was mainly due to an increase in salaries, financial service fees, investor relations costs and stock compensation expense due to the issuance of shares and options to directors and employees. Lastly included in operating expenses was selling costs that increased 146% to $36,460 versus $14,850 in the prior comparable period due to attendance to various trade shows in that propel our sustainable market initiatives.

Other income for the three months ended June 30, 2018 and 2017 was $(189) and $(35,848), respectively representing a 99% decrease and $16,711 and $5,189, respectively for the six months ended June 30, 2018 and 2017, representing a 83% decrease. The other income is a result of dealer termination costs being accrued in prior periods that were reversed as a result of all liabilities having been satisfied.

 

Interest expense for the three months ended June 30, 2018 and 2017 was $0 and $36,383, respectively and $27,414 and $77,554, for the six month ended June 30, 2018 and 2017, respectively. The decrease is mainly due to the conversion of all debt as of the date of the merger with EnerJex except for the promissory note assumed as a result of the merger and the amortization of debt discounts in 2017 totaling $18,621 that was not recorded in 2018.

 

Our net loss was $712,210 and $133,474 for the three months ended June 30, 2018 and 2017, respectively and $915,707 and $306,054, for the six month ended June 30, 2018 and 2017, respectively. This represents a $578,736 or 434% increase for the three months ended June 30, 2018 and $609,653 or 199% increase for the six months ended June 30, 2018 and 2017. Overall the increase in net loss is due to more costs and less sales and the recording of the loss from the unconsolidated investee of $30,352.

 

27

 

Cash Flows

 

June 30, 2018 compared to December 31, 2017

 

Cash on hand was $2,560,062 at June 30, 2018 compared to the $35,289 at December 31, 2017, an increase of $2,524,773. Cash used in operations for the six months ended June 30, 2018 was $(1,683,498) compared to $(245,983) of cash used in operations for the six months ended June 30, 2017. The increase was driven mainly by a significant amount of accounts payable assumed by us in the amount of $950,258 from EnerJex in connection with the Merger and added insurance expenses that were prepaid of $ 101,282. We also recorded non-cash expenses of $135,600 for stock issued in exchange for services and investment in unconsolidated investee of $30,352.

 

Cash provided by investing activities during the six months ended June 30, 2018 was $221,255 compared to cash used in investing activities during the six months ended June 30, 2017 of $12,775, the increase was mainly due to the $265,255 of cash acquired in connection with the Merger and . a payment to Agribotix of $35,000 related to the investment made in Agribotix..

 

Cash provided by financing activities during the six months ended June 30, 2018 was $3,987,016 compared to $248,050 as of June 30, 2017. This was as a result of $4,000,000 net of $20,000 in fees invested in the company in exchange for common and preferred shares. Cash was also used to repurchase shares from a shareholder for $210,642 and make payments of $32,341 on the promissory note assumed from Enerjex offset by additional cash that was received in connection with issuance of the Series C Preferred Stock

 

Liquidity and Capital Resources

 

On November 21, 2017, Alpha Capital Anstalt (“Alpha”) signed a binding commitment letter with EnerJex to provide prior to or at the closing of the Merger a minimum of $4 million in new equity capital (the “Private Placement”). The Private Placement was consummated on March 26, 2018. In connection with the Private Placement, Alpha purchased an additional 4,000 shares of Series C Preferred Stock at a purchase price of $1,000 per share for total aggregate consideration of $4 million. The Series C Preferred Stock is convertible into 2,612,245 shares of our common stock. In addition, as consideration for their funding commitment, Alpha received a fee equal to 408,552 shares of our common stock.

 

On May 11, 2018, we issued an additional 250 shares of our Series C Convertible Preferred Stock, convertible into 163,265 shares of our common stock. received a cash payment of $250,000 for the issuance of the Series C Preferred Stock. The Series C Convertible Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Convertible Preferred Stock into more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Convertible Preferred Stock.

 

Each share of Series C Preferred Stock is convertible into a number of shares of our common stock equal to the quotient determined by dividing (x) the stated value of $1,000 per share, by (y) a conversion price of $1.53. Until the volume weighted average price of our common stock on NYSE exceeds $107.50 with average trading volume of 200,000 shares per day for ten consecutive trading days, the conversion price of our Series C Preferred Stock is subject to full-ratchet, anti-dilution price protection. Under that provision, if, while that full-ratchet, anti-dilution price protection is in effect, we issue shares of our common stock at a price per share (the “Dilutive Price”) that is less than the conversion price, then the conversion price of our Series C Preferred Stock is automatically reduced to be equal to the Dilutive Price. The effect of that reduction is that, upon the issuance of shares of common stock at a Dilutive Price, the Series C Preferred Stock would be convertible into a greater number of shares of our common stock.

 

The Series C Preferred Stock was issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder, in reliance on the recipient’s status as an “accredited investor” as defined in Rule 501(a) of Regulation D.,

 

As of June 30, 2018, we had working capital of $2,307,361 and a loss from operations of $900,203 for the period then ended.  While there can be no guarantees, we believe cash on hand, in connection with cash from operations and this offering, will be sufficient to fund operations for the next year of operations.  In addition, we intend to pursue other opportunities of financing with outside investors. 

 

28

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term “disclosure controls and procedures”, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of March 31, 2018, that our disclosure controls and procedures were effective.

 

Management’s Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The internal controls for the Company are provided by executive management’s review and approval of all transactions. Our internal control over financial reporting also includes those policies and procedures that:

 

1. pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

 

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management; and

 

3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2018. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of these controls.

 

29

 

Based on this assessment, management has concluded that as of June 30, 2018, our internal control over financial reporting was effective.

 

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Quarterly Report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting for the three ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

 

30

  

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

We previously disclosed on a Current Report on Form 8-K filed on March 29, 2018, the sale and issuance of 4,626 shares of Series C Preferred Stock, which issuance was pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder, in reliance on the recipient’s status as an “accredited investor” as defined in Rule 501(a) of Regulation D.

 

There Company repurchased 139,567 shares of our common stock during the three-month period ended June 30, 2018 in a private repurchase for $210,642.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

Exhibit No.   Description
31.1   Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer
31.2   Rule 13(a)-14(a)/15(d)-14(a) Certification of principal financial officer
32.1   Section 1350 Certification of principal executive officer
32.2   Section 1350 Certification of principal financial officer and principal accounting officer
101.INS   XBRL INSTANCE DOCUMENT
101.SCH    XBRL TAXONOMY EXTENSION SCHEMA
101.CAL    XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF    XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB   XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE    XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

 

31

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

  AgEagle Aerial Systems, Inc.
     
  By: /s/ Barrett Mooney
    Barrett Mooney
    Chief Executive Officer
    (Principal Executive Officer)
     
  By: /s/ Nicole Fernandez-McGovern 
    Nicole Fernandez-McGovern
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

32

 

 

 

 

 

 

 

 

EX-31.1 2 ex31_1.htm EXHIBIT 31.1

EXHIBIT 31.1

 

CERTIFICATION

 

I, BARRETT MOONEY certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of AgEagle Aerial Systems, Inc. (the “Company”) for the quarter ended June 30, 2018;

 

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 14, 2018    
  By: /s/ Barrett Mooney 
  Title: Chief Executive Officer, President, Director
    (Principal Executive Officer)

 

 

 

 

 

 

EX-31.2 3 ex31_2.htm EXHIBIT 31.2

  EXHIBIT 31.2

 

CERTIFICATION

 

I, NICOLE FERNANDEZ-MCGOVERN, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of AgEagle Aerial Systems, Inc. (the “Company”) for the quarter ended June 30, 2018;

 

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting

 

Date: August 14, 2018    
  By: /s/ Nicole Fernandez-McGovern 
  Title: Chief Financial Officer
     (Principal Financial and
    Accounting Officer)

 

 

 

 

 

 

EX-32.1 4 ex32_1.htm EXHIBIT 32.1

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of AgEagle Aerial Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), The undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: August 14, 2018    
  By: /s/ Barrett Mooney
  Title: Chief Executive Officer
    (Principal Executive Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 

 

 

 

EX-32.2 5 ex32_2.htm EXHIBIT 32.2

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, 

AS ADOPTED PURSUANT TO 

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of AgEagle Aerial Systems, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), The undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: August 14, 2018    
  By: /s/ Nicole Fernandez-McGovern  
  Title: Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

 

 

 

 

 

 

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Document And Entity Information - shares
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Aug. 14, 2018
Document And Entity Information [Abstract]    
Entity Registrant Name AgEagle Aerial Systems Inc.  
Entity Central Index Key 0000008504  
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q2  
Current Fiscal Year End Date --12-31  
Entity Well-known Seasoned Issuer No  
Entity Voluntary Filers No  
Entity Current Reporting Status Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   10,289,001
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Balance Sheets (Unaudited) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Current Assets:    
Cash $ 2,560,062 $ 35,289
Accounts receivable 6,362 255
Inventories 132,314 158,632
Prepaid expense 117,159 3,384
Total current assets 2,815,897 197,560
Property and equipment, net 30,400 38,703
Investment in unconsolidated investee 1,079,648 75,000
Total assets 3,925,945 311,263
CURRENT LIABILITIES:    
Accounts payable 381,174 426,154
Accrued liabilities 26,482 59,354
Accrued interest 2,337 185,335
Payroll liabilities 5,328 5,521
Convertible notes payable 0 1,160,005
Promissory note 93,215 0
Promissory notes - related party 0 131,050
Total current liabilities 508,536 1,967,419
Total liabilities 508,536 1,967,419
STOCKHOLDERS' EQUITY (DEFICIT):    
Common stock, $0.001 par value; 250,000,000 shares authorized; 10,164,001 shares issued and outstanding at June 30, 2018. Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,200,000 shares issued and outstanding at December 31, 2017 10,164 420
Additional paid-in capital 7,919,354 1,939,832
Accumulated deficit (4,512,116) (3,596,408)
Total stockholders' equity (deficit) 3,417,409 (1,656,156)
Total liabilities and stockholders' equity (deficit) 3,925,945 $ 311,263
Series B Preferred Stock [Member]    
STOCKHOLDERS' EQUITY (DEFICIT):    
Preferred stock, $0.001 par value, 25,000,000 shares authorized: Preferred stock Series B, $0.001 par value, 1,764 shares authorized, 0 shares issued and outstanding at June 30, 2018. Preferred stock Series C Convertible, $0.001 par value, 10,000 shares authorized, 6,507 shares issued and outstanding at June 30,2018 0  
Series C Convertible Preferred Stock [Member]    
STOCKHOLDERS' EQUITY (DEFICIT):    
Preferred stock, $0.001 par value, 25,000,000 shares authorized: Preferred stock Series B, $0.001 par value, 1,764 shares authorized, 0 shares issued and outstanding at June 30, 2018. Preferred stock Series C Convertible, $0.001 par value, 10,000 shares authorized, 6,507 shares issued and outstanding at June 30,2018 $ 7  
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Preferred stock, par value $ 0.001  
Preferred stock, shares authorized 25,000,000  
Common stock, par value $ 0.001 $ 0.0001
Common stock, shares authorized 250,000,000 100,000,000
Common stock, shares issued 10,164,001 4,200,000
Common stock, shares outstanding 10,164,001 4,200,000
Series B Preferred Stock [Member]    
Preferred stock, par value $ 0.001  
Preferred stock, shares authorized 1,764  
Preferred stock, shares issued 0  
Preferred Stock, shares outstanding 0  
Series C Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.001  
Preferred stock, shares authorized 10,000  
Preferred stock, shares issued 6,507  
Preferred Stock, shares outstanding 6,507  
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Revenues $ 24,517 $ 47,192 $ 53,707 $ 82,391
Cost of sales 18,174 36,905 41,971 43,183
Gross Profit 6,343 10,287 11,736 39,208
Operating Expenses:        
Selling expenses 27,005 8,376 36,460 14,850
General and administrative 233,797 75,999 269,823 142,625
Professional fees 426,210 15,578 576,795 101,550
Consulting fees - related party 1,000 6,397 1,000 7,992
Research and development 0 1,563 476 5,880
Total operating expenses 688,012 107,913 884,554 272,897
Loss from operations (681,669) (97,626) (872,818) (233,689)
Loss on investment from unconsolidated investee (30,352) 0 (30,352) 0
Other income (expense):        
Other income 1,645 535 16,711 5,189
Interest expense (1,834) (36,383) (29,248) (77,554)
Total Income (Expenses), Net (189) (35,848) (12,537) (72,365)
Loss before Income Taxes (712,210) (133,474) (915,707) (306,054)
Provision for income taxes 0 0 0 0
Net Loss $ (712,210) $ (133,474) $ (915,707) $ (306,054)
Net Loss Per Share - Basic and Diluted $ (0.07) $ (0.03) $ (0.10) $ (0.07)
Weighted Average Number of Shares Outstanding During the Period - Basic and Diluted 10,044,454 4,200,000 9,440,717 4,200,000
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash flows from operating activities    
Net loss $ (915,707) $ (306,054)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 8,304 9,452
Loss on investment from unconsolidated investee 30,352 0
Stock-based compensation 24,514 6,397
Shares issued in exchange for professional services 135,600 0
Warrants issued with convertible promissory note 0 4,927
Accretion for debt discounts, warrants and issuance cost 0 25,000
Changes in assets and liabilities    
Accounts receivable (6,107) 12,210
Inventory 26,318 1,225
Prepaid expenses and other assets (113,775) 805
Accounts payable (865,508) 41,897
Accrued liabilities (32,872) (84,861)
Accrued interest 25,577 45,985
Accrued payroll liabilities (194) (2,966)
Net cash used in operating activities (1,683,498) (245,983)
Cash flows from investing activities    
Cash received in reverse merger 256,255 0
Investment in unconsolidated investee (35,000) 0
Purchase of fixed assets 0 (12,775)
Net cash provided by (used in) investing activities 221,255 (12,775)
Cash flows from financing activities    
Issuance of convertible notes payable 0 248,050
Payments on note payable (32,342) 0
Shares repurchased from shareholder (210,642) 0
Issuance of common stock and Series C convertible preferred stock in connection upon merger, net of $20,000 in fees 3,980,000 0
Sale of Series C convertible preferred stock 250,000 0
Net cash provided by financing activities 3,987,016 248,050
Net increase (decrease) in cash 2,524,773 (10,708)
Cash at beginning of period 35,289 15,887
Cash at end of period 2,560,062 5,179
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:    
Assets acquired and (liabilities assumed) in reverse merger cash 256,255 0
Assets acquired and (liabilities assumed) in reverse merger accounts payable (950,258) 0
Net liabilities assumed (694,003) 0
Issuance of common stock for investment made in unconsolidated investee 1,000,000 0
Conversion of Series B and C preferred stock into common stock $ 412 $ 0
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Consolidated Statements of Cash Flows (Parenthetical)
6 Months Ended
Jun. 30, 2018
USD ($)
Statement of Cash Flows [Abstract]  
Reverse merger Fees $ 20,000
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Description of Business
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Description of Business

Note 1 – Description of Business

 

AgEagle Aerial Systems, Inc. (the “Company” and/or “AgEagle”) designs, produces, distributes and supports technologically-advanced small unmanned aerial vehicles (UAVs or drones) that the Company offers for sale commercially to the precision agriculture industry. Additionally, the Company recently announced a new service offering using its UAVs and associated data processing services for the sustainable agriculture industry. The Company’s first commercially available product was the AgEagle Classic which was followed shortly thereafter by the RAPID System. As the Company improved and matured its products the Company launched the RX-60 and subsequently its current products, the RX-47 and RX-48. In February 2016, the Company signed a worldwide distribution agreement with Raven Industries, Inc. (“Raven”) under which Raven would purchase the RX-60 for the agriculture markets for resale through their network of dealers worldwide. The first shipment of our RX-60 system to Raven occurred in March 2016. In 2017, the Company amended its agreement with Raven to make it non-exclusive and to allow the Company to sell its products directly into the market. As a result, the Company began selling its products directly to farmers and agronomists and the Company does not anticipate sales to, or through Raven in the near future.

 

The Company believes the success it has achieved with its products, stems from its 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. The Company’s 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 (RX-60), and high end software provided by third parties that automates drone flights and provides geo-referenced data. Research and development activities are integral to the Company’s business and it follows a disciplined approach to investing our resources to create new technologies and solutions.

 

The Company is headquartered in Neodesha, Kansas 66757. Its website address is http://www.ageagle.com.

 

Corporate History; Recent Business Combination 

 

On March 26, 2018 (the “Merger Date), the Company consummated the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and our wholly-owned subsidiary, merged with and into AgEagle Aerial Systems, Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as its wholly-owned subsidiary (the “Merger”). In connection with the Merger, the Company changed its name to AgEagle Aerial Systems Inc. and AgEagle Sub changed its name to “AgEagle Aerial, Inc.” The Company’s common stock continues to trade on the NYSE American under its new symbol “UAVS” since March 27, 2018.

 

Prior to the merger, the Company was formerly known as Millennium Plastics Corporation and was incorporated in the State of Nevada on March 31, 1999. In August 2006, the Company acquired Midwest Energy, Inc., a Nevada corporation pursuant to a reverse merger. After such merger, Midwest Energy became a wholly-owned subsidiary, and as a result of such merger, the former Midwest Energy stockholders controlled approximately 98% of our outstanding shares of common stock. The Company changed its name to EnerJex Resources, Inc., (“EnerJex”) in connection with this merger, and in November 2007, it changed the name of Midwest Energy (one of our wholly-owned subsidiaries) to EnerJex Kansas, Inc. (“EnerJex Kansas”). All of its operations conducted prior to this merger were through EnerJex Kansas, Inc., Black Sable Energy, LLC, a Texas limited liability company (“Black Sable”) and Black Raven Energy, Inc. a Nevada corporation (“Black Raven”). The Company’s leasehold interests were held in our wholly-owned subsidiaries Black Sable, Working Interest, LLC, EnerJex Kansas and Black Raven. 

 

In November 2017, AgEagle Sub entered into a multi-agreement arrangement with Agribotix, LLC (“Agribotix”), headquartered in Boulder, Colorado, a leading agricultural information processing company providing actionable data to the agriculture industry. See Note 5 for further details about the transaction. 

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Accounting Policies
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Summary of Accounting Policies

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 and pursuant to SEC rules and regulations 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 consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at June 30, 2018 and December 31, 2017, the results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017. The results for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with AgEagle Sub’s, AgEagle Aerial, Inc.’s audited financial statements and management’s discussion and analysis for the years ended December 31, 2017 and 2016 included as part of the Form 8-K filed by the Company on March 29, 2018.

 

 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.

 

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.

 

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 June 30, 2018 and December 31, 2017.

  

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. Cost components include direct materials and direct labor, as well as in-bound freight. 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. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. 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. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company’s estimates and expectations.

 

Provisions for Inventory Obsolescence – The Company has a provision for estimated obsolescence and shrinkage of inventory as of June 30, 2018 of $19,285. Our estimates consider the cost of inventory, forecasted demand, the estimated market value, the shelf life of the inventory and our historical experience. 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.

 

Research and Development - The Company expenses research and development costs during the period incurred, which totaled $0 and $476 for the three and six months ended June 30, 2018, respectively and $1,563 and $5,880 for the three and six months ended June 30, 2017, 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 are 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.

 

Investment in Unconsolidated Investee -The Company accounts for investments in which the Company owns more than 20% or more of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost, and adjusts the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income by the investor, and such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor's share of changes in the investee's capital. Dividends received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary and which should be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. 

Shipping Costs - Shipping costs for the three and six months ended June 30, 2018 totaled $2,548 and $1,597, respectively and $1,904 and $2,553 for the three and six months ended June 30, 2017. All shipping costs billed directly to the customer are directly offset to shipping costs resulting in a net expense to the Company which is included in cost of goods sold in shipments of operations.

 

Revenue Recognition and Concentration

 

The Company generally recognizes revenue on sales to customer, dealer and distributors upon satisfaction of our performance obligations when the goods are shipped. For consignment sales, the Company recognizes revenue when the goods are pulled from consignment inventory. 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 quantity of drones being purchased. The Company assesses collectability based on the creditworthiness of the customer as determined by evaluations and the customer’s payment history. Additionally, customers are required to place a deposit on each drone ordered.

 

The Company has executed one significant non-exclusive worldwide distributor agreement in 2016 and a dealer agreement whereby the dealer and distributor agreed to purchase AgEagle drones and other related products. In 2017, the Company amended its agreement with Raven to make it non-exclusive and to allow the Company to sell its products directly into the market. Only 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. As of June 30, 2018, no sales of the Company are subject to this right of return clause per the distributor agreement.

 

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

 

                    Percent of total sales for six months ended June 30,
Customers   2018   2017
Customer A   17.2%   *
Customer B   15.1%   *
Customer C   13.1%   *
Customer D   10.6%   *
Customer E   10.1%   *
Customer F   *   12.8%
Customer G   *   10.6%
Customer H   *    10.6%
*- Represents less than 10% of total revenue

 

Advertising Costs – Advertising costs are expensed as incurred. Advertising costs amounted to $483 and $1,389 for the three and six months ended June 30, 2018 and 2017, respectively and $5,043 and $ 6,078 for the three and six months ended June 30, 2017, respectively.

 

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, 2018, the Company had 828,200 warrants and 1,246,329 options to purchase common stock, and 6,257 Preferred Series C shares which may be converted into 4,214,672 common shares. As of June 30, 2017, the Company had 498,000 warrants and 207,500 options to purchase common stock, and 1,544,869 potential convertible 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. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All income tax returns not filed more than three years ago are subject to federal and state tax examinations by tax authorities.

   

Recently Issued and Adopted Accounting Standards - In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). 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. This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for annual and interim reporting periods beginning after December 15, 2017. Topic 606 requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services and recognize revenue under the new standard as costs are incurred. Under previous U.S. generally accepted accounting principles (GAAP), revenue was generally recognized when deliveries were made, performance milestones were attained, or as costs were incurred. The new standard accelerates the timing of when the revenue is recognized, however, it does not change the total amount of revenue recognized on these contracts. The new standard does not affect revenue recognition for purposes of the Company’s sales as each of the Company’s revenue transactions represent a single performance obligation that is satisfied at a point time, as defined in the new ASU.  Accordingly, the Company recognizes revenue for these customers at the point in time when the Company’s performance obligation is complete, which is when the customer accepts delivery of the drone. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method, however the new standard did not have a material impact on our consolidated financial position and consolidated results of operations, as it did not change the manner or timing of recognizing revenue on a majority of our revenue transactions. 

 

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 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. The Company is currently evaluating the 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice in how transactions are classified in the statement of cash flows. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

  

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.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories
6 Months Ended
Jun. 30, 2018
Inventory Disclosure [Abstract]  
Inventories

Note 3 — Inventories

 

Inventories consist of the following at:

 

   

June 30,

2018

 

December 31,

2017

         
Raw materials   $ 98,739     $ 106,569  
Work-in-process     30,997       34,850  
Finished goods     21,864       32,582  
Gross Inventory     151,600       174,001  
Less obsolete reserve     (19,286 )     (15,369 )
Total   $ 132,314     $ 158,632  
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment

Note 4 — Property and Equipment

 

Property and equipment consist of the following at:

 

   

June 30,

2018

 

December 31,

2017

         
Property and equipment   $ 108,664     $ 108,664  
Less accumulated depreciation     (78,264 )     (69,961 )
    $ 30,400     $ 38,703  

  

Depreciation expense for the three and six months ended June 30, 2018 was $4,151 and $8,304, respectively and for the three and six months ended June 30, 2017 was $5,295 and $9,452, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Investment in Unconsolidated Investee
6 Months Ended
Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract]  
Investment in Unconsolidated Investee

Note 5 —Investment in Unconsolidated Investee

 

In November 2017, AgEagle Sub entered into a multi-agreement arrangement with Agribotix, LLC (“Agribotix”), headquartered in Boulder, Colorado, an agricultural information processing company providing actionable data to the agriculture industry.  Agribotix’s platform delivers agricultural intelligence to increase yields and profits using drone-enabled technologies. Agribotix was founded in 2013 by Dr. Tom McKinnon, its Chief Technology Officer.

 

The Company believes that developing a strong working relationship with Agribotix will benefit the Company and its shareholders by developing important vertically integrated products and services.  Agribotix’s primary product is FarmLens™, a subscription cloud analytics service that processes data, primarily collected with a drone such as the Company’s, and makes such data usable by farmers and agronomists. FarmLens is currently sold by Agribotix as a subscription and offered either standalone or in a bundle with major drone platforms manufactured by leading drone providers like AgEagle, DJI, and senseFly.

 

Agribotix extends the reach of its FarmLens platform by partnering with and directly integrating into offerings by leading agricultural companies like John Deere’s Operations Center and The Climate Corporation’s FieldView.  To date, Agribotix has processed agricultural imagery for over 50 different crop types from over 50 countries around the world.

 

The agreements reached between the Company, through AgEagle Sub, and Agribotix include:

 

  Dealer Agreement whereby the Company appointed Agribotix as a non-exclusive dealer of the Company’s products on a worldwide, best efforts basis.  The term of the agreement is for twelve months with marketing and sales commencing on or after January 1, 2018, and automatically renews for one-year periods unless otherwise terminated.  Either party may terminate the agreement with 30 days’ written notice.  Both parties agree to provide standard reporting and support services.  Agribotix is required to maintain proper insurance and is obligated to standard confidentiality clauses.  The Company has the right to audit Agribotix on an annual basis for its business under this agreement.  Both parties agreed to standard indemnification clauses.
     
  Distribution and Resale Agreement whereby Agribotix appointed the Company as a non-exclusive distributor of Agribotix products and analytic services including FarmLens on a worldwide, best efforts basis. The term of the agreement is for twelve months and automatically renews for one-year periods unless otherwise terminated.  Either party may terminate the agreement with 90 days’ written notice. Both parties agree to provide standard reporting and support services. The Company is required to maintain proper insurance and is obligated to standard confidentiality clauses. Both parties agree to standard indemnification clauses.

 

  Exchange Agreement whereby, to further align interests between the parties, AgEagle Sub exchanged 200,000 shares of the Company’s common stock it received in the Merger (equal to an aggregate value of $1,000,000) for 20% of the equity membership interests of Agribotix.  The shares did not affect the Merger exchange ratio, and therefore was not additionally dilutive to the Company’s shareholders.
     
  As part of the signing of the exchange agreement three promissory notes totaling $110,000 with a 6% per annum interest payable that were executed between Agribotix and AgEagle Sub in exchange for exclusive dealing until the later of 120 days after the signing date, or the termination date as defined per the exchange agreement has been recorded on the Company’s balance sheet as part of the Company’s investment in unconsolidated investee as of the date of close of the Merger Agreement.

   

The Company accounts for its investment in Agribotix using the equity method of accounting. The difference between the fair value of the Company’s investment, and the amount of underlying equity in the net assets of Agribotix, totaling approximately $445,108 is accounted for as if Agribotix was a consolidated subsidiary and all identifiable assets, including goodwill and identifiable intangibles, were recorded at fair value and amortized, with this amortization recorded in “memo” and included in the Company’s portion of earnings of Agribotix. Condensed unaudited summary financial information for Agribotix LLC as of June 30, 2018 and for the three amonths ended June 30, 2018 is as follows:

 

   

June 30,

2018

    (Unaudited)
ASSETS        
Cash   $ 42,388  
Accounts receivable     21,325  
Property and equipment     7,019  
Inventories     8,400  
Prepayments     1,976  
Marketable securities in the Company’s at fair value     364,000  
Total assets   $ 445,108  
         
LIABILITIES AND MEMBERS' DEFICIT        
Accounts payable and accrued expenses   $ 125,019  
Deferred revenue     15,079  
Debt     2,014,149  
Members' deficit     (1,709,139 )
Total liabilities and members' deficit   $ 445,108  

 

   

 For the Three

Months Ended

June 30, 2018

    (Unaudited)
STATEMENT OF OPERATIONS        
Revenues   $ 107,290  
Cost of sales     63,782  
Gross profit     43,508  
Operating expenses     142,420  
Operating loss     (98,912 )
Other expense     (38,000 )
Net loss     (136,912 )
Amortization of “memo” intangible assets     (14,848 )
Total adjusted net loss     (151,760 )
Unrealized loss on Company’s common stock     (502,000 )
Comprehensive loss   $ (653,760 )
Ownership interest     20 %
Share of adjusted net loss   $ (30,352 )
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Debt
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Debt

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 and maturing on November 6, 2016. Interest on the notes accrues at a rate of 8% annually and is payable quarterly. It was determined that there were no aggregate beneficial conversion features. 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, 2016, 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 months ended March 31, 2018 and 2017, the Company recorded $9,111 and $10,000 of interest expense, respectively. As of the Merger Date, the principal amount of the promissory note of $500,000 and its accrued interest of $114,556 were converted at $1.25 per share into 814,381 shares of common stock.

 

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. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $5,467 and $6,000 of interest expense, respectively. As of the Merger Date, the principal amount of the promissory note of $300,000 and its accrued interest of $42,933 were converted at $1.25 per share into 454,440 shares of common stock.

 

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 Note 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 Note A warrants 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 Note A 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. Upon conversion the Company had issued an additional 300,000 warrants to purchase shares resulting from the default of the loan.

 

For the three months ended March 31, 2018 and 2017, the Company recorded $7,077 and $4,833 of interest expense, respectively. As of the date of the merger March 26, 2018, the principal amount of the promissory note of $175,000 and its accrued interest of $35,642 were converted at $2.50 per share into 139,567 shares of common stock.

 

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 $100,005, convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $1,822 of interest expense. As of the date of the Merger Date, the principal amount of the promissory note of $100,005 and its accrued interest of $5,600 were converted at $1.25 per share into 139,943 shares of common stock.

 

On September 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, convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $638 of interest expense. As a date of the Merger Date, the principal amount of the promissory note of $35,000 and the accrued interest of $1,369 were converted at $1.25 per share into 48,194 shares of common stock.

 

On October 2017, the Company closed a private placement pursuant to a subscription agreement whereby an existing institutional investor purchased a convertible note having a principal amount of $50,000, (the “2017 Note D”) convertible into common stock of the Company at $2.00 per share and maturing on February 28, 2018. Interest on the note accrues at a rate of 8% annually payable upon maturity. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018, the Company recorded $911 of interest expense. As a date of the Merger Date, the principal of $50,000 and the accrued interest of $1,722 were converted at $1.25 per share into 68,540 shares of common stock. 

  

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 2nd promissory note with an aggregate principal amount of $30,000 to the same related party. On June 14, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $16,050 to the same related party. All three promissory notes (the “Related Party Notes A”) accrue interest at an annual rate of 2% and matured on November 6, 2017. On or about August 1, 2017, the Company and the related party promissory note A holders entered into extension and modification agreements whereby they agreed to extend the maturity date of the Related Party Notes A to February 28, 2018, added a conversion feature whereby the debt can be converted into common stock of the Company at $2.00 per share and amended the interest rate on the note retroactively to accrue at a rate of 8% annually. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $1,386 and $870 of interest expense, respectively. As of the date of the Merger Date, the principal of $76,050 and the accrued interest of $7,239 were converted at $1.25 per share into 110,371 shares of common stock.

 

On March 5, 2017, the Company issued a promissory note with an aggregate principal amount of $10,000 to a related party. On May 15, 2017, the Company issued a 2nd promissory note with an aggregate principal amount of $10,000 to the same related party. On June 15, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $32,000 to the same related party that is part of management of the Company. On July 25, 2017, the Company issued a 3rd promissory note with an aggregate principal amount of $3,000 to the same related party that is part of management of the Company with the amended terms agreed to on August 1, 2017 per the modification agreement. The promissory notes (the “Related Party Notes B”) accrue interest at an annual rate of 2% and mature on November 6, 2017. On or about August 1, 2017, the Company and the related party promissory note B holders entered into extension and modification agreements whereby they agreed to extend the maturity date of the Related Party Notes B to February 28, 2018, added a conversion feature whereby the debt can be converted into common stock of the Company at $2.00 per share and amended the interest rate on the note retroactively to accrue at a rate of 8% annually. It was determined that there were no aggregate beneficial conversion features. For the three months ended March 31, 2018 and 2017, the Company recorded $1,002 and $37 of interest expense, respectively. As of the date of the Merger Date, the principal of $55,000 and the accrued interest of $3,686 were converted at $1.25 per share into77,769 shares of common stock.

 

As of the date of the Merger Date, all the AgEagle common shares issued in connection with conversion of debt noted above were subsequently converted into EnerJex shares and then split at a rate of 25 to 1 resulting in a conversion rate of 1.6564 per AgEagle share into a total of a series of EnerJex common stock of 787,891 shares and 1,631 of Series C preferred shares.

 

As part of the liabilities acquired from EnerJex the Company recorded a promissory note for a principal amount of $125,556 and accrued interest of $4,171 payable over twelve months and maturing on March 26, 2019. The total amount outstanding as of June 30, 2018 was $95,552 and accrued interest of $2,337. The Company recorded interest of $1,834 for the three and six months ended June 30, 2018.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
Equity

Note 7 – Equity

 

Capital Stock Issuances

 

As a result of the Merger all the holders of the Company’s 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) had their shares automatically converted into 896,640 shares of the Company’s common stock. The Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) remains outstanding, and 1,623.79 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) are now convertible into 1,060,432 shares of the Company’s common stock. Furthermore, an additional 5,050.60 shares of Series C Preferred Stock, convertible into 3,298,348 shares of the Company’s common stock, were issued to the current holder of Series C Preferred Stock in connection with a $4 million financing of Series C Preferred Stock (the “Financing”) and the conversion and retirement of $425,000 in the Company’s promissory notes due and owing to such holder.

 

As of the Merger Date, the former shareholders of AgEagle Sub own approximately 67% of the Company’s common stock (inclusive of the AgEagle Sub assumed stock options and warrants), the former EnerJex holders of common stock, the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, which were outstanding immediately prior to the Financing, collectively own 12.7% of the Company’s common stock on a fully-diluted basis.

On April 16, 2018, Alpha Capital Anstalt converted 8.25 shares of Series B Preferred Stock, at a conversion price of $1.53 representing the last outstanding Series B shares, into 5,388 shares of common stock.

During the month of April 2018 Alpha capital Anstalt converted 621.86 shares of Series C Preferred Stock into 406,129 shares of common stock at a conversion price of $1.53.

 

On May 11, 2018, we issued an additional 250 shares of our Series C Convertible Preferred Stock, convertible into 163,265 shares of our common stock and received a cash payment of $250,000 for the issuance of the Series C Preferred Stock. The Series C Convertible Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C Convertible Preferred Stock into more than 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock upon conversion of the Series C Convertible Preferred Stock.

 

Options

 

The Board of Directors of the Company has unanimously approved a proposal to adopt and approve the EnerJex 2017 Omnibus Equity Incentive Plan (the “Plan”). The Board of Directors recommended that this proposal be presented to the EnerJex shareholders for approval. The Plan became effective on March 26, 2018, the date of the Merger, and is a comprehensive incentive compensation plan under which the Company can grant equity-based and other incentive awards to officers, employees and directors of, and consultants and advisers to, the Company. The purpose of the Plan is to help the Company attract, motivate and retain such persons and thereby enhance shareholder value.

 

The Company has reserved a total of 2,000,000 shares of common stock for issuance as or under awards to be made under the Plan. To the extent that an award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its holder terminate, any shares subject to such award shall again be available for the grant of a new award. The Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board of Directors (except as to awards outstanding on that date). The Board of Directors in its discretion may terminate the Plan at any time with respect to any shares for which awards have not theretofore been granted; provided, however, that the Plan’s termination shall not materially and adversely impair the rights of a holder, without the consent of the holder, with respect to any award previously granted. The number of shares for which awards which are options or SARs may be granted to a participant under the Plan during any calendar year is limited to 500,000. For purposes of qualifying awards as “performance-based” compensation under Code Section 162(m), the maximum amount of cash compensation that may be paid to any person under the Plan in any single calendar year shall be $500,000.

 

On June 30, 2018, the Company issued options to purchase 49,500 shares of common stock to directors of the Company at the fair-market value exercise price of $1.82 per share expiring on June 29, 2023. The Company determined the fair-value of the options to be $62,252. In connection with the issuance of these options the Company recognized no stock compensation expense for the three and six months ended June 30, 2018 as the vesting period will commence July 1, 2018.

 

On March 31, 2018, the Company issued options to purchase 62,000 shares of common stock to directors and an employee of the Company at the fair-market value exercise price of $4.33 per share expiring on March 30, 2023. The Company determined the fair-value of the options to be $156,258. In connection with the issuance of these options the Company recognized $19,932 stock compensation expense for the three and six months ended June 30, 2018 as the vesting period will commenced April 1, 2018.

 

On October 4, 2017, AgEagle Sub issued options to purchase 927,774 shares of common stock to employees and directors, that were approved by the board at an exercise price of $0.06 per share. These options were assumed by the Company in the Merger. In connection with the issuance of these options to employees and directors for the three and six months ended June 30, 2018, the Company recorded $2,491 and $4,982, respectively of stock compensation expense.

 

On March 1, 2015, AgEagle Sub entered into a strategic consulting agreement with a related party and granted 207,055 stock options exercisable over five years from the grant date at an exercise price per share of $2.60. On October 4, 2017, AgEagle Sub held a board meeting to approve the modification of the existing 207,055 options to purchase common stock from an exercise price of $2.60 to $0.06 per share. These options were assumed by the Company in the Merger. In connection with these options the Company recognized no stock compensation expense for the three and six months ended June 30, 2018.

  

The fair value of options granted during the three months and six months ended March 31, 2018, were determined using the Black-Scholes option valuation model. 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.

 

The significant weighted average assumptions relating to the valuation of the Company’s stock options granted during the six months ended June 30, 2018 were as follows: 

   

For the three

months ended

 

For the three

months ended

    March 31, 2018   June 30, 2018
Dividend yield     0 %     0 %
Expected life     3.5 yrs.       3.5 yrs.  
Expected volatility     77.03 %     78.66 %
Risk-free interest rate     2.81 %     2.68 %

  

A summary of the options activity for the six months ended June 30, 2018, are as follows:

 

            Weighted    
        Weighted   Average    
        Average   Remaining   Aggregate
        Exercise   Contractual   Intrinsic
    Shares   Price   Term   Value
                 
Outstanding at January 1, 2018     1,134,830     $ 0.06       8.5 years     $ —    
Granted     111,500       2.93       5.0 years       —    
Outstanding at June 30, 2018     1,246,330     $ 0.32       7.8 years     $ —    
Exercisable at end of the year     851,088     $ 0.09       7.6 years     $ —    

 

For options granted in 2018, the fair value of the Company’s stock was obtained per the close of market as of June 30, 2018. The future expected stock-based compensation expense expected to be recognized in future years is $211,433 through June 30, 2020. 

 

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at June 30, 2018 (for outstanding options), less the applicable exercise price. 

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants to Purchase Common Stock
6 Months Ended
Jun. 30, 2018
Notes to Financial Statements  
Warrants to Purchase Common Stock

Note 8 – Warrants to Purchase Common Stock  

 

As of June 30, 2018, the Company had outstanding, in connection with the issuance of debentures in the prior year, warrants to purchase 828,221 shares of the Company’s common stock at an exercise price of $1.51. All warrants outstanding as of June 30, 2018 are scheduled to expire between February 2, 2024 and October 31, 2024.

 

A summary of activity related to warrants for the six months ended June 30, 2018 follows:  

 

    Shares   Weighted- Average Exercise Price ($)   Weighted-Average Remaining Contractual Term
  Outstanding at December 31, 2017       828,221     $ 1.51       —    
  Outstanding at June 30, 2018        828,221     $ 1.51       6.10  
  Exercisable at June 30, 2018       828,221     $ 1.51       6.10  
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 9 – Commitments and Contingencies

 

 Operating Leases

 

The Company leases office space in Neodesha, Kansas for $300 a month. The lease terminates on September 30, 2018 with no option to renew unless approved by the city commission of Neodesha. Rent expense was $1,800 and $1,800 for the six months ended June 30, 2018 and 2017, respectively.

  

Service Agreements

 

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 of $424 for the six-month ended June 30, 2018 and $220 for the six months ended June 30, 2017 which represents approximately 1% 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.

 

Merger Agreement

 

On March 26, 2018, EnerJex Resources, Inc. (“EnerJex”), a Nevada company, consummated the transactions contemplated by that certain Agreement and Plan of Merger, dated October 19, 2017, pursuant to which AgEagle Merger Sub, Inc., a Nevada corporation and a wholly-owned subsidiary of EnerJex, merged with and into AgEagle Aerial Systems, Inc., a privately held company organized under the laws of the state of Nevada (“AgEagle Sub”), with AgEagle Sub surviving as a wholly-owned subsidiary of EnerJex (the “Merger”). In connection with the Merger, EnerJex changed its name to AgEagle Aerial Systems, Inc. (the “Company, “we,” “our,” or “us”) and AgEagle Sub changed its name to “Eagle Aerial Systems, Inc.” Our common stock will continue to trade on the NYSE American under its new symbol “UAVS” commencing on March 27, 2018. As a result of the Merger, through AgEagle Sub, the Company is now engaged in the business of designing, developing, producing, distributing and supporting technologically-advanced small unmanned aerial vehicles (UAVs or drones) that we supply to the precision agriculture industry.

 

Each share of common stock issued and outstanding and underlying options and warrants of AgEagle Sub outstanding immediately prior to the Merger was exchanged for 1.66 shares of Company common stock (the “Exchange Ratio”). As a result, at the effective time of the Merger Date (the “Effective Time”), 5,439,526 shares of AgEagle Sub’s capital stock, representing all currently outstanding common shares and all other debt or equity securities convertible into common shares (except options and warrants as described below) were automatically converted into 7,944,941 shares of Company common stock. In addition, at the Effective Time, 685,100 outstanding options and 500,000 warrants to purchase shares of AgEagle Sub common stock were assumed by EnerJex and converted into 1,134,830 options and 828,221 warrants to purchase shares of common stock of the Company.

 

All holders of EnerJex’s 10% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Series A Preferred Stock”) had their shares automatically converted into 896,640 shares of the Company’s common stock. EnerJex’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”) remains outstanding, and 1,623.79 shares of Series C Convertible Preferred Stock (the “Series C Preferred Stock”) are now convertible into 1,060,432 shares of Company common stock. Furthermore, an additional 5,050.60 shares of Series C Preferred Stock, convertible into 3,298,348 shares of Company common stock, were issued to the current holder of Series C Preferred Stock in connection with a $4 million financing of Series C Preferred Stock (the “Financing”) and the conversion and retirement of $425,000 in prior EnerJex promissory notes due and owing to such holder. 

 

As of the Effective Time, the former shareholders of AgEagle Sub own approximately 67% of the Company’s common stock (inclusive of the AgEagle Sub assumed stock options and warrants), the former EnerJex holders of common stock, the Series A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock, which were outstanding immediately prior to the Financing, collectively own 12.7% of the Company’s common stock on a fully-diluted basis.

 

In connection with the Merger, AgEagle waived the requirement for EnerJex to have paid and satisfied in full all outstanding indebtedness of EnerJex such that there would be no continuing liabilities of EnerJex subsequent to the closing of the Merger (“Liability Condition”). In consideration for AgEagle waiving the Liability Condition, the 1,215,278 shares of common stock to be held in escrow (valued at $350,000) owned by certain former principal stockholders, officers and directors of EnerJex to secure losses, if any, that may be suffered by the AgEagle indemnified parties pursuant to the indemnification obligations under the Merger Agreement, were never issued and such former principal stockholders, officers and directors are not entitled to receive such shares. However, such former principal stockholders, officers and directors received, in the aggregate, deferred salaries and fees valued at approximately $297,500. In lieu of payment of the deferred salaries and fees in cash, such amounts have been converted into an aggregate of 1,032,986 shares of Company common stock.

 

Prior to the Merger, EnerJex operated as an oil exploration and production company engaged in the acquisition, development, exploration and production of oil in Eastern Kansas. In connection with the Merger, EnerJex disposed of its principal assets, consisting primarily of its Kansas oil and gas properties.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions
6 Months Ended
Jun. 30, 2018
Related Party Transactions [Abstract]  
Related Party Transactions

Note 10 — Related Party Transactions

 

The following reflects the related party transactions during the three months ended June 30, 2018.

 

Consulting Agreement

 

The Company issued promissory notes for an aggregate amount of $76,050 (the “Related Party Notes A”) that accrued interest at an annual rate of 8% and were set to mature as of the date of the Merger. For the three months ended March 31, 2018, the Company recorded $1,386 of interest expense and for the three months ended March 31, 2017, $870 of interest expense was recorded. As of the date of the Merger Date, the principal of $76,050 and the accrued interest of $7,239 were converted at $1.25 per share into 110,371 shares of the Company’s common stock.

 

The Company issued promissory notes for an aggregate amount of $55,000 (the “Related Party Notes B”) that accrued interest at an annual rate of 8% and were set to mature as of the date of the Merger. For the three months ended March 31, 2018, the Company recorded $1,002 of interest expense and for the three months ended March 31, 2017, $37 of interest expense was recorded. As of the date of the Merger Date, the principal of $55,000 and the accrued interest of $3,686 were converted at $1.25 per share into 77,769 shares of the Company’s common stock. 

 

Transactions with Officers

 

The Company’s Chief Financial Officer, Nicole Fernandez-McGovern, is one of the principals of, Premier Financial Filings, a full-service financial printer. Premier Financial Filings provided contracted financial services to the Company and their related expenses have been included within general and administrative expenses.  For the three and six months ended months ended June 30, 2018 Premier Financial Filings provided services to the Company resulting in fees of $3,055 and accounts payables of $1,475 as of June 30, 2018.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events

Note 11 – Subsequent Events

 

Appointment of Board Member and CEO

 

On July 10, 2018, the Company appointed Corbett Kull as an independent director to serve on the company’s board of directors (the “Board”). Mr. Kull’s appointment fills a vacancy on the Board.

 

As compensation for his services as an independent director, Mr. Kull shall receive an initial grant of 41,250 stock options at an exercise price of $1.77 per share (the “Initial Grant”). The Initial Grant is exercisable for a period of five years and vests in equal quarterly installments over a one-year period from the date of grant. In addition, Mr. Kull will receive a quarterly grant of 16,500 with an exercise price at the current market price of the Company’s common stock at the time of issuance (the “Quarterly Options”). The Quarterly Options are exercisable for a period of five years from the date of grant and vest in equal quarterly installments over a period of two years from the date of grant.

Effective as of July 18, 2018, Mr. Barrett Mooney joined the Company, as Chief Executive Officer. Mr. Bret Chilcott, founder of the Company, stepped down as Chief Executive Officer, but will remain with the Company as President and Chairman of the Board.

 

Pursuant to an employment offer letter dated July 9, 2018, Mr. Mooney will receive as compensation for his services as Chief Executive Officer a base salary of $220,000 per year, which shall be subject to annual performance review by the Compensation Committee of the Board and may be revised by the Board, in its sole discretion. Mr. Mooney received an initial grant of 75,000 shares of restricted common stock of the Company which is fully vested. Mr. Mooney shall also be eligible to receive an award of 75,000 shares of restricted common stock of the Company which shall fully vest as of January 1, 2019 if, and only if, the stock price of the Company reaches $3.55 per share and the closing price per share is at or above such price at the end of the day on January 1, 2019.

 

In addition, Mr. Mooney is eligible to receive an award of 20,000 nonqualified stock options under the Company’s 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) upon securing one sustainability pilot program on or before October 31, 2018, and an additional award of 30,000 nonqualified stock options under the Equity Plan upon securing a second sustainability pilot program on or before January 31, 2019. Both awards shall provide for immediate vesting and exercisability at an exercise price equal to the fair market value of the Company’s shares of common stock underlying the options as of the date of grant. Mr. Mooney will also be eligible receive an award of up to 55,000 nonqualified stock options under the Equity Plan based upon the results of his annual performance review in the first quarter of 2019.

 

Shares Issued

 

In connection with an investor relations agreement, dated April 4, 2018, the Company issued 60,000 shares of its common stock to the investor relations firm, and its affiliates, and agreed to register such shares on its next registration statement (the “Registration Rights”). On July 24, 2018 in connection with the filing of the Company’s registration statement on form S-1, a waiver of the Registration Rights was obtained from the investor relationship firm in exchange for 125,000 additional shares, which were issued and approved by the Board. 

 

Asset Purchase Agreement

 

On July 25, 2018, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Eagle Aerial Systems, Inc., a wholly-owned subsidiary of the Company, Agribotix, LLC, a Colorado limited liability company (the “Seller”), and the other parties named therein. Pursuant to the Purchase Agreement, the Company shall, upon the closing, acquire all right, title and interest in and to all assets owned by the Seller utilized in the Seller’s business of providing integrated agricultural drone solutions and drone-enabled software technologies and services for precision agriculture, except for certain excluded assets as set forth in the Purchase Agreement (the “Purchased Assets”). At closing, the Company shall also assume certain liabilities under various third party contracts, accounts payable and indebtedness pursuant to the terms of the Purchase Agreement. The Company anticipates that the closing of the transaction will occur within the next 30 days in accordance with the terms of the Purchase Agreement, subject to the closing conditions described therein.

 

The consideration for the Purchased Assets includes the following to be made at closing: (a) a cash payment of $150,000 (of which $110,000 was previously paid), (b) 200,000 shares of common stock of the Company (the “Common Stock”) at a value of $5.00 per share (all of which shares were issued to the Seller pursuant to an exchange agreement between the Company and the Seller dated as of November 20, 2017), (c) an amount payable at closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $1,000,000 by the average closing daily price per share of the Common Stock on the NYSE, for each of the 20 trading days ending on the date immediately preceding the closing date (the “Average Price”), provided that in no event shall the Average Price be less than $2.00 (the “Closing Shares”); and (ii) $450,000 in cash.

 

In addition, the Seller shall pay an amount on the 90th day following the closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $2,000,000 by the Average Price (calculated as if the 20-trading day period ends on the 89th day following the closing), provided that in no event shall the Average Price be less than $2.00 (the “Post-Closing Shares”); and provided further that in the event that the Average Price so calculated is more than the Average Price calculated in the preceding paragraph, the Average Price shall be the Average Price calculated as set forth in the preceding paragraph); and (ii) $400,000 in cash.

 

If revenue of the business for the one year period ending on the first anniversary of the closing date is at least $1,000,000, plus the Capital Investment Multiplier (as defined below), then the Seller shall earn the number of shares of Common Stock that is calculated by dividing $250,000 by the Average Price (calculated as if the 20–trading day period to which reference is made above ends on such first anniversary), provided that in no event shall the Average Price be less than $2.00. “Capital Investment Multiplier” means 1.5 times the amount of capital invested by the Company or its affiliates in the Seller to support and advance the business, inclusive of loans or other investments provided to Seller prior to the closing, less $250,000.

 

The Purchase Agreement contains customary representations, warranties and covenants, including covenants obligating the Seller to continue to conduct its business in the ordinary course. In addition, the Purchase Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of, among other things, breaches of representations and warranties contained therein. An aggregate amount equal $75,000 in cash, 50% of the number of Closing Shares and 25% of the number of Post-Closing Shares shall be deposited in an escrow account with a third party escrow agent to secure the indemnification obligations of the Seller pursuant to the terms of the Purchase Agreement.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Basis of Presentation

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 and pursuant to SEC rules and regulations 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 consolidated financial statements contain all normal recurring adjustments considered necessary for a fair presentation of the Company’s financial position at June 30, 2018 and December 31, 2017, the results of operations for the three and six months ended June 30, 2018 and 2017, and cash flows for the six months ended June 30, 2018 and 2017. The results for the six months ended June 30, 2018 and 2017 are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with AgEagle Sub’s, AgEagle Aerial, Inc.’s audited financial statements and management’s discussion and analysis for the years ended December 31, 2017 and 2016 included as part of the Form 8-K filed by the Company on March 29, 2018.

Use of estimates

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

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

Receivables and Credit Policy

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.

 

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 June 30, 2018 and December 31, 2017.

Inventory

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. Cost components include direct materials and direct labor, as well as in-bound freight. 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. The physical condition (e.g., age and quality) of the inventories is also considered in establishing its valuation. 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. These adjustments are estimates, which could vary significantly, either favorably or unfavorably, from the amounts that the Company may ultimately realize upon the disposition of inventories if future economic conditions, customer inventory levels, product discontinuances, sales return levels or competitive conditions differ from the Company’s estimates and expectations.

Provisions for Inventory Obsolescence

Provisions for Inventory Obsolescence – The Company has a provision for estimated obsolescence and shrinkage of inventory as of June 30, 2018 of $19,285. Our estimates consider the cost of inventory, forecasted demand, the estimated market value, the shelf life of the inventory and our historical experience. 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.

Research and Development

Research and Development - The Company expenses research and development costs during the period incurred, which totaled $0 and $476 for the three and six months ended June 30, 2018, respectively and $1,563 and $5,880 for the three and six months ended June 30, 2017, respectively.

Property and Equipment

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 are 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.

Investment in Unconsolidated Investee

Investment in Unconsolidated Investee -The Company accounts for investments in which the Company owns more than 20% or more of the investee, using the equity method in accordance with ASC Topic 323, Investments—Equity Method and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost, and adjusts the carrying amount of the investment to recognize the investor's share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income by the investor, and such amount reflects adjustments similar to those made in preparing consolidated statements including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between investor cost and underlying equity in net assets of the investee at the date of investment. The investment of an investor is also adjusted to reflect the investor's share of changes in the investee's capital. Dividends received from an investee reduce the carrying amount of the investment. A series of operating losses of an investee or other factors may indicate that a decrease in value of the investment has occurred which is other than temporary and which should be recognized even though the decrease in value is in excess of what would otherwise be recognized by application of the equity method. 

Shipping Costs

Shipping Costs - Shipping costs for the three and six months ended June 30, 2018 totaled $2,548 and $1,597, respectively and $1,904 and $2,553 for the three and six months ended June 30, 2017. All shipping costs billed directly to the customer are directly offset to shipping costs resulting in a net expense to the Company which is included in cost of goods sold in shipments of operations.

Revenue Recognition and Concentration

Revenue Recognition and Concentration

 

The Company generally recognizes revenue on sales to customer, dealer and distributors upon satisfaction of our performance obligations when the goods are shipped. For consignment sales, the Company recognizes revenue when the goods are pulled from consignment inventory. 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 quantity of drones being purchased. The Company assesses collectability based on the creditworthiness of the customer as determined by evaluations and the customer’s payment history. Additionally, customers are required to place a deposit on each drone ordered.

 

The Company has executed one significant non-exclusive worldwide distributor agreement in 2016 and a dealer agreement whereby the dealer and distributor agreed to purchase AgEagle drones and other related products. In 2017, the Company amended its agreement with Raven to make it non-exclusive and to allow the Company to sell its products directly into the market. Only 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. As of June 30, 2018, no sales of the Company are subject to this right of return clause per the distributor agreement.

 

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

 

                    Percent of total sales for six months ended June 30,
Customers   2018   2017
Customer A   17.2%   *
Customer B   15.1%   *
Customer C   13.1%   *
Customer D   10.6%   *
Customer E   10.1%   *
Customer F   *   12.8%
Customer G   *   10.6%
Customer H   *    10.6%
*- Represents less than 10% of total revenue
Advertising Costs

Advertising Costs – Advertising costs are expensed as incurred. Advertising costs amounted to $483 and $1,389 for the three and six months ended June 30, 2018 and 2017, respectively and $5,043 and $ 6,078 for the three and six months ended June 30, 2017, respectively.

Earnings Per Share

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

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, 2018, the Company had 828,200 warrants and 1,246,329 options to purchase common stock, and 6,257 Preferred Series C shares which may be converted into 4,214,672 common shares. As of June 30, 2017, the Company had 498,000 warrants and 207,500 options to purchase common stock, and 1,544,869 potential convertible shares which may be issued resulting from the provisions of convertible notes.

Income Taxes

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. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred. All income tax returns not filed more than three years ago are subject to federal and state tax examinations by tax authorities.

Recently Issued and Adopted Accounting Standards

Recently Issued and Adopted Accounting Standards - In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). 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. This standard provides a single set of guidelines for revenue recognition to be used across all industries and requires additional disclosures. It is effective for annual and interim reporting periods beginning after December 15, 2017. Topic 606 requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services and recognize revenue under the new standard as costs are incurred. Under previous U.S. generally accepted accounting principles (GAAP), revenue was generally recognized when deliveries were made, performance milestones were attained, or as costs were incurred. The new standard accelerates the timing of when the revenue is recognized, however, it does not change the total amount of revenue recognized on these contracts. The new standard does not affect revenue recognition for purposes of the Company’s sales as each of the Company’s revenue transactions represent a single performance obligation that is satisfied at a point time, as defined in the new ASU.  Accordingly, the Company recognizes revenue for these customers at the point in time when the Company’s performance obligation is complete, which is when the customer accepts delivery of the drone. The Company adopted the updated guidance effective January 1, 2018 using the full retrospective method, however the new standard did not have a material impact on our consolidated financial position and consolidated results of operations, as it did not change the manner or timing of recognizing revenue on a majority of our revenue transactions. 

 

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 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. The Company is currently evaluating the 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 August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The new guidance is intended to reduce diversity in practice in how transactions are classified in the statement of cash flows. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

  

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.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Sales concentration information

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

 

                    Percent of total sales for six months ended June 30,
Customers   2018   2017
Customer A   17.2%   *
Customer B   15.1%   *
Customer C   13.1%   *
Customer D   10.6%   *
Customer E   10.1%   *
Customer F   *   12.8%
Customer G   *   10.6%
Customer H   *    10.6%
*- Represents less than 10% of total revenue

    

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Tables)
6 Months Ended
Jun. 30, 2018
Inventory Disclosure [Abstract]  
Inventories

Inventories consist of the following at:

 

   

June 30,

2018

 

December 31,

2017

         
Raw materials   $ 98,739     $ 106,569  
Work-in-process     30,997       34,850  
Finished goods     21,864       32,582  
Gross Inventory     151,600       174,001  
Less obsolete reserve     (19,286 )     (15,369 )
Total   $ 132,314     $ 158,632  
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Tables)
6 Months Ended
Jun. 30, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment

Property and equipment consist of the following at:

 

   

June 30,

2018

 

December 31,

2017

         
Property and equipment   $ 108,664     $ 108,664  
Less accumulated depreciation     (78,264 )     (69,961 )
    $ 30,400     $ 38,703  
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Investment in Unconsolidated Investee (Tables)
6 Months Ended
Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract]  
Business combination

Condensed unaudited summary financial information for Agribotix LLC as of June 30, 2018 and for the three amonths ended June 30, 2018 is as follows:

 

   

June 30,

2018

    (Unaudited)
ASSETS        
Cash   $ 42,388  
Accounts receivable     21,325  
Property and equipment     7,019  
Inventories     8,400  
Prepayments     1,976  
Marketable securities in the Company’s at fair value     364,000  
Total assets   $ 445,108  
         
LIABILITIES AND MEMBERS' DEFICIT        
Accounts payable and accrued expenses   $ 125,019  
Deferred revenue     15,079  
Debt     2,014,149  
Members' deficit     (1,709,139 )
Total liabilities and members' deficit   $ 445,108  

 

   

 For the Three

Months Ended

June 30, 2018

    (Unaudited)
STATEMENT OF OPERATIONS        
Revenues   $ 107,290  
Cost of sales     63,782  
Gross profit     43,508  
Operating expenses     142,420  
Operating loss     (98,912 )
Other expense     (38,000 )
Net loss     (136,912 )
Amortization of “memo” intangible assets     (14,848 )
Total adjusted net loss     (151,760 )
Unrealized loss on Company’s common stock     (502,000 )
Comprehensive loss   $ (653,760 )
Ownership interest     20 %
Share of adjusted net loss   $ (30,352 )
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity Transactions (Tables)
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The significant weighted average assumptions relating to the valuation of the Company’s stock options granted during the six months ended June 30, 2018 were as follows: 

   

For the three

months ended

 

For the three

months ended

    March 31, 2018   June 30, 2018
Dividend yield     0 %     0 %
Expected life     3.5 yrs.       3.5 yrs.  
Expected volatility     77.03 %     78.66 %
Risk-free interest rate     2.81 %     2.68 %
Summary of Stock Options

A summary of the options activity for the six months ended June 30, 2018, are as follows:

 

            Weighted    
        Weighted   Average    
        Average   Remaining   Aggregate
        Exercise   Contractual   Intrinsic
    Shares   Price   Term   Value
                 
Outstanding at January 1, 2018     1,134,830     $ 0.06       8.5 years     $ —    
Granted     111,500       2.93       5.0 years       —    
Outstanding at June 30, 2018     1,246,330     $ 0.32       7.8 years     $ —    
Exercisable at end of the year     851,088     $ 0.09       7.6 years     $ —    
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants to Purchase Common Stock (Tables)
6 Months Ended
Jun. 30, 2018
Notes to Financial Statements  
Summary of activity related to warrants

A summary of activity related to warrants for the six months ended June 30, 2018 follows:  

 

    Shares   Weighted- Average Exercise Price ($)   Weighted-Average Remaining Contractual Term
  Outstanding at December 31, 2017       828,221     $ 1.51       —    
  Outstanding at June 30, 2018        828,221     $ 1.51       6.10  
  Exercisable at June 30, 2018       828,221     $ 1.51       6.10  
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Accounting Policies (Details) - Sales Revenue, Net [Member]
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Customer A    
Concentration percentage 17.20% [1]
Customer B    
Concentration percentage 15.10% [1]
Customer C    
Concentration percentage 13.10% [1]
Customer D    
Concentration percentage 10.60% [1]
Customer E    
Concentration percentage 10.10% [1]
Customer F    
Concentration percentage [1] 12.80%
Customer G    
Concentration percentage [1] 10.60%
Customer H    
Concentration percentage [1] 10.60%
[1] Represents less than 10% of total revenue
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Accounting Policies (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Summary Of Accounting Policies [Line Items]        
Estimated obsolescence and shrinkage of inventory     $ 19,285  
Research and development costs $ 0 $ 1,563 476 $ 5,880
Shipping Costs 2,548 1,904 1,597 2,553
Advertising costs $ 483 $ 5,043 $ 1,389 $ 6,078
Warrant [Member]        
Summary Of Accounting Policies [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     828,200 498,000
Option [Member]        
Summary Of Accounting Policies [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     1,246,329 207,500
Series B Preferred Stock [Member]        
Summary Of Accounting Policies [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     6,257  
Common Stock [Member]        
Summary Of Accounting Policies [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount     4,214,672  
Convertible notes [Member]        
Summary Of Accounting Policies [Line Items]        
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount       1,544,869
Minimum [Member]        
Summary Of Accounting Policies [Line Items]        
Property, Plant and Equipment, Useful Life     3 years  
Maximum [Member]        
Summary Of Accounting Policies [Line Items]        
Property, Plant and Equipment, Useful Life     7 years  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Inventories (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Inventory Disclosure [Abstract]    
Raw materials $ 98,739 $ 106,569
Work-in-process 30,997 34,850
Finished goods 21,864 32,582
Gross Inventory 151,600 174,001
Less obsolete reserve (19,286) (15,369)
Total inventory $ 132,314 $ 158,632
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details) - USD ($)
Jun. 30, 2018
Dec. 31, 2017
Property, Plant and Equipment [Abstract]    
Property and equipment $ 108,664 $ 108,664
Less accumulated depreciation (78,264) (69,961)
Property and equipment, net $ 30,400 $ 38,703
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Property and Equipment (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Property, Plant and Equipment [Abstract]        
Depreciation expense $ 4,151 $ 5,295 $ 8,304 $ 9,452
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Investment in Unconsolidated Investee (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
ASSETS          
Property and equipment $ 30,400   $ 30,400   $ 38,703
Inventories 132,314   132,314   158,632
Prepayments 117,159   117,159   3,384
Total assets 3,925,945   3,925,945   311,263
LIABILITIES AND MEMBERS' DEFICIT          
Members' deficit 3,417,409   3,417,409   $ (1,656,156)
Operating expenses 688,012 $ 107,913 884,554 $ 272,897  
Operating loss (681,669) (97,626) (872,818) (233,689)  
Share of adjusted net loss (30,352) $ 0 (30,352) $ 0  
Agribotix LLC          
ASSETS          
Cash 42,388   42,388    
Accounts receivable 21,325   21,325    
Property and equipment 7,019   7,019    
Inventories 8,400   8,400    
Prepayments 1,976   1,976    
Marketable securities in the Company's at fair value 364,000   364,000    
Total assets 445,108   445,108    
LIABILITIES AND MEMBERS' DEFICIT          
Accounts payable and accrued expenses 125,019   125,019    
Deferred revenue 15,079   15,079    
Debt 2,014,149   2,014,149    
Members' deficit (1,709,139)   (1,709,139)    
Total liabilities and members' deficit $ 445,108   445,108    
Revenues     107,290    
Cost of sales     63,782    
Gross profit     43,508    
Operating expenses     142,420    
Operating loss     (98,912)    
Other expense     (38,000)    
Net loss     (136,912)    
Amortization of "memo" intangible assets     (14,848)    
Total adjusted net loss     (151,760)    
Unrealized loss on Company's common stock     (502,000)    
Comprehensive loss     $ (653,760)    
Ownership interest 20.00%   20.00%    
Share of adjusted net loss     $ (30,352)    
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Investment in Unconsolidated Investee (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Promissory notes $ 93,215 $ 0
Common stock issued 10,164,001 4,200,000
Agribotix LLC    
Promissory notes $ 110,000  
Interest rate 6.00%  
Agreegate value of equity membership interests $ 1,000,000  
Common stock issued 200,000  
Investment in Unconsolidated Investee Description

The Company accounts for its investment in Agribotix using the equity method of accounting. The difference between the fair value of the Company’s investment, and the amount of underlying equity in the net assets of Agribotix, totaling approximately $445,108 is accounted for as if Agribotix was a consolidated subsidiary and all identifiable assets, including goodwill and identifiable intangibles, were recorded at fair value and amortized, with this amortization recorded in “memo” and included in the Company’s portion of earnings of Agribotix.

 
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Debt (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Dec. 15, 2017
Mar. 05, 2017
Feb. 03, 2017
Dec. 15, 2016
Jun. 06, 2016
May 06, 2015
Mar. 26, 2018
Oct. 31, 2017
Sep. 30, 2017
Jul. 31, 2017
Jun. 30, 2018
Mar. 31, 2018
Mar. 31, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Jun. 24, 2017
Jun. 15, 2017
May 15, 2017
Jan. 24, 2017
Debt Instrument [Line Items]                                        
Proceeds from convetible debt                           $ 0 $ 248,050          
Promissory notes                     $ 93,215     93,215   $ 0        
Accrued interest                     2,337     2,337   $ 185,335        
EnerJex                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable                     95,552     95,552            
Interest expenses                     $ 1,834     $ 1,834            
Common stock                     787,891     787,891            
Accrued interest                     $ 2,337     $ 2,337            
Series C Convertible Preferred Stock [Member]                                        
Debt Instrument [Line Items]                                        
Preffered shares                     1,631     1,631            
Related Party Notes A                                        
Debt Instrument [Line Items]                                        
Share price       $ 2.00                         $ 2.00     $ 2.00
Debt Instrument, Interest Rate, Stated Percentage       8.00%                         8.00%     8.00%
Interest expenses                       $ 1,386 $ 870              
Number of shares con version       110,371                                
Conversion price       $ 1.25                                
Promissory notes       $ 30,000                         $ 16,050     $ 30,000
Related Party Notes B                                        
Debt Instrument [Line Items]                                        
Share price   $ 2.00                               $ 2.00 $ 2.00  
Debt Instrument, Interest Rate, Stated Percentage   8.00%                               8.00% 8.00%  
Interest expenses                       1,002 37              
Number of shares con version   77,769                                    
Conversion price   $ 1.25                                    
Promissory notes   $ 10,000                               $ 32,000 $ 10,000  
Principal | EnerJex                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount                           $ 125,556            
Principal | Related Party Notes A                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount $ 76,050                                      
Principal | Related Party Notes B                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount   55,000                                    
Accrued Interest | EnerJex                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount                           4,171            
Accrued Interest | Related Party Notes A                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount $ 7,239                                      
Accrued Interest | Related Party Notes B                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount   $ 3,686                                    
2015 Holders                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable           $ 500,000                            
Share price           $ 2.00                            
Debt Instrument, Interest Rate, Stated Percentage           8.00%                            
Maturity date           Nov. 06, 2016                            
Interest expenses                       9,111 10,000              
Number of shares con version           814,381                            
Conversion price           $ 1.25                            
2015 Holders | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount           $ 500,000                            
2015 Holders | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount           $ 114,556                            
2016 Holders                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable         $ 300,000                              
Share price         $ 3.00                              
Debt Instrument, Interest Rate, Stated Percentage         8.00%                              
Maturity date         Jun. 30, 2017                              
Interest expenses                       5,467 6,000              
Number of shares con version         454,440                              
Conversion price         $ 1.25                              
2016 Holders | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount         $ 300,000                              
2016 Holders | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount                           $ 42,933            
2017 Holder Note A                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable     $ 175,000                                  
Original issue discount     $ 25,000                                  
Share price     $ 2.50                                  
Debt Instrument, Interest Rate, Stated Percentage     18.00%                                  
Interest expenses                       7,077 $ 4,833              
Number of shares con version             139,567                          
Conversion price             $ 2.50                          
Proceeds from convetible debt     $ 101,250                                  
Warrants purchase     200,000                                  
Exercise price     $ 2.50                                  
2017 Holder Note A | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount             $ 175,000                          
2017 Holder Note A | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount             35,642                          
2017 Holder Note A                                        
Debt Instrument [Line Items]                                        
Warrants purchase     300,000                                  
2017 Note B                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable                   $ 100,005                    
Share price                   $ 2.00                    
Debt Instrument, Interest Rate, Stated Percentage                   8.00%                    
Maturity date                   Feb. 28, 2018                    
Interest expenses                       1,822                
Number of shares con version                   139,943                    
Conversion price                   $ 1.25                    
2017 Note B | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount             100,005                          
2017 Note B | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount             $ 5,600                          
2017 Note C                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable                 $ 35,000                      
Share price                 $ 2.00                      
Debt Instrument, Interest Rate, Stated Percentage                 8.00%                      
Maturity date                 Feb. 28, 2018                      
Interest expenses                       638                
Number of shares con version                 48,194                      
Conversion price                 $ 1.25                      
2017 Note C | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount                 $ 35,000                      
2017 Note C | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount                 $ 1,369                      
2017 Note D                                        
Debt Instrument [Line Items]                                        
Convertible Notes Payable               $ 50,000                        
Share price               $ 2.00                        
Debt Instrument, Interest Rate, Stated Percentage               8.00%                        
Interest expenses                       $ 911                
Number of shares con version               68,540                        
Conversion price               $ 1.25                        
2017 Note D | Principal                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount               $ 50,000                        
2017 Note D | Accrued Interest                                        
Debt Instrument [Line Items]                                        
Conversion of debt amount               $ 1,722                        
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity (Details)
3 Months Ended
Jun. 30, 2018
Mar. 31, 2018
Equity [Abstract]    
Dividend yield 0.00% 0.00%
Expected life 3 years 6 months 3 years 6 months
Expected volatility 78.66% 77.03%
Risk-free interest rate 2.68% 2.81%
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity (Details 1) - USD ($)
6 Months Ended 12 Months Ended
Oct. 04, 2017
May 01, 2015
Jun. 30, 2018
Dec. 31, 2017
Options        
Options Outstanding, Beginning Balance     1,134,830  
Options Granted     111,500  
Options Outstanding, Ending Balance     1,246,330 1,134,830
Options Exercisable at end     851,088  
Weighted Avg. Exercise Price        
Weighted Avg. Exercise Price Outstanding, Beginning Balance     $ 0.06  
Weighted Avg. Exercise Price Granted $ 0.06 $ 2.60 2.93  
Weighted Avg. Exercise Price Outstanding, Ending balance     0.32 $ 0.06
Weighted Avg. Exercise Price Exercisable at end     $ 0.09  
Weighted Average Remaining Contractual Term        
Weighted Average Remaining Contractual Term Outstanding     7 years 9 months 18 days 8 years 6 months
Weighted Average Remaining Contractual Term Granted   5 years 5 years  
Weighted Average Remaining Contractual Term Exercisable at end     7 years 7 months 6 days  
Aggregate Intrinsic Value        
Aggregate Intrinsic Value Outstanding, Beginning Balance     $ 0  
Aggregate Intrinsic Value Granted     0  
Aggregate Intrinsic Value Outstanding, at end     0 $ 0
Aggregate Intrinsic Value Exercisable at end     $ 0  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
May 11, 2018
Oct. 04, 2017
Oct. 04, 2015
May 01, 2015
Apr. 30, 2018
Apr. 16, 2018
Jun. 30, 2018
Mar. 31, 2018
Jun. 30, 2018
Option available under plan             2,000,000   2,000,000
Cash compensation                 $ 500,000
Option to purchase stock       $ 207,055          
Option granted                 111,500
Term       5 years         5 years
Exercise price   $ 0.06   $ 2.60         $ 2.93
Modification of options to purchase common stock   207,055              
Stock-based compensation expense                 $ 211,433
Alpha Capital Anstalt [Member] | Series B Preferred Stock [Member]                  
Common stock issued upon conversion of preferred stock (shares)           5,388      
Preferred stock converted (shares)           8.25      
Alpha Capital Anstalt [Member] | Series C Convertible Preferred Stock [Member]                  
Common stock issued upon conversion of preferred stock (shares)         406,129        
Preferred stock converted (shares)         621.86        
Common stock issued upon conversion of preferred stock (shares) $ 250,000                
Additional Common stock issued upon conversion of preferred stock (shares) 163,265                
Additional Preferred stock converted (shares) 250                
AgEagle | Series C Convertible Preferred Stock [Member]                  
Common stock issued upon conversion of preferred stock (shares)                 1,060,432
Preferred stock converted (shares)                 1,623.79
Additional Common stock issued upon conversion of preferred stock (shares)                 3,298,348
Additional Preferred stock converted (shares)                 5,050.60
Financing cost                 $ 4,000,000
Retirement of promissory notes cost                 $ 425,000
AgEagle | Series A Preferred Stock [Member]                  
Common stock issued upon conversion of preferred stock (shares)                 896,640
Employees and directors [Member]                  
Option to purchase stock     $ 927,774            
Exercise price     $ 0.06            
Stock-based compensation expense             $ 4,982   $ 2,491
Employees and directors one [Member]                  
Option to purchase stock                 $ 49,500
Exercise price                 $ 1.82
Fair-value of options                 $ 62,252
Expiration date                 Jun. 29, 2023
Stock-based compensation expense             0   $ 0
Employees and directors Two [Member]                  
Option to purchase stock               $ 62,000  
Exercise price               $ 4.33  
Fair-value of options               $ 156,258  
Expiration date               Mar. 30, 2023  
Stock-based compensation expense             $ 19,932   $ 19,932
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants to Purchase Common Stock (Details)
6 Months Ended
Jun. 30, 2018
$ / shares
shares
Warrants  
Warrants Outstanding, Beginning Balance | shares 828,221
Warrants Outstanding, Ending Balance | shares 828,221
Warrants Exercisable at end | shares 828,221
Weighted Avg. Exercise Price  
Weighted Avg. Exercise Price Outstanding, Beginning Balance | $ / shares $ 1.51
Weighted Avg. Exercise Price Outstanding, Ending balance | $ / shares 1.51
Weighted Avg. Exercise Price Exercisable at end | $ / shares $ 1.51
Weighted-Average Remaining Contractual Term  
Weighted-Average Remaining Contractual Term Outstanding 6 years 1 month 6 days
Weighted-Average Remaining Contractual Term Exercisable at end 6 years 1 month 6 days
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments & Contingencies (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Commitments and Contingencies Disclosure [Line Items]      
Operating Leases, Rent Expense $ 1,800 $ 1,800  
Periodic payment $ 300    
Lease termination date Sep. 30, 2018    
Warranty accrual expense $ 424 $ 220  
Option outstanding 1,246,330   1,134,830
Common stock to be held in escrow , Shares   1,215,278  
Common stock to be held in escrow, Value   $ 350,000  
AgEagle      
Commitments and Contingencies Disclosure [Line Items]      
Capital stock oustanding 5,439,526    
Common stock conversion 7,944,941    
Option outstanding 685,100    
Warrants to purchase in connection with common stock 500,000    
Conversion of option 1,134,830    
Warrants to purchase shares of common stock 828,221    
AgEagle | Series A Preferred Stock [Member]      
Commitments and Contingencies Disclosure [Line Items]      
Common stock issued upon conversion of preferred stock (shares) 896,640    
Deferred salaries and fees $ 297,500    
Common stock issued in connection with payment to deferred salaries and fees 1,032,986    
AgEagle | Series C Convertible Preferred Stock [Member]      
Commitments and Contingencies Disclosure [Line Items]      
Common stock issued upon conversion of preferred stock (shares) 1,060,432    
Preferred stock converted (shares) 1,623.79    
Additional Common stock issued upon conversion of preferred stock (shares) 3,298,348    
Additional Preferred stock converted (shares) 5,050.60    
Financing cost $ 4,000,000    
Retirement of promissory notes cost $ 425,000    
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Related Party Transactions (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Dec. 15, 2017
Mar. 05, 2017
Dec. 15, 2016
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Jun. 24, 2017
Jun. 15, 2017
May 15, 2017
Jan. 24, 2017
Promissory notes       $ 93,215   $ 93,215   $ 0        
General and administrative expenses       233,797 $ 75,999 269,823 $ 142,625          
Related Party Notes A                        
Promissory notes     $ 30,000           $ 16,050     $ 30,000
Number of shares con version     110,371                  
Conversion price     $ 1.25                  
Related Party Notes A | Principal                        
Conversion of debt amount $ 76,050                      
Related Party Notes A | Accrued Interest                        
Conversion of debt amount $ 7,239                      
Related Party Notes B                        
Promissory notes   $ 10,000               $ 32,000 $ 10,000  
Number of shares con version   77,769                    
Conversion price   $ 1.25                    
Related Party Notes B | Principal                        
Conversion of debt amount   $ 55,000                    
Related Party Notes B | Accrued Interest                        
Conversion of debt amount   $ 3,686                    
Nicole Fernandez-McGovern | Premier Financial Filings | Chief Financial Officer                        
General and administrative expenses       3,055   3,055            
Accounts payables       1,475   1,475            
Consulting Agreement | Related Party Notes A                        
Promissory notes       $ 76,050   $ 76,050            
Accrued interest rate           8.00%            
Interest expense           $ 1,386 870          
Number of shares con version           110,371            
Conversion price       $ 1.25   $ 1.25            
Consulting Agreement | Related Party Notes A | Principal                        
Conversion of debt amount           $ 76,050            
Consulting Agreement | Related Party Notes A | Accrued Interest                        
Conversion of debt amount           7,239            
Consulting Agreement | Related Party Notes B                        
Promissory notes       $ 55,000   $ 55,000            
Accrued interest rate           8.00%            
Interest expense           $ 1,002 $ 37          
Number of shares con version           77,769            
Conversion price       $ 1.25   $ 1.25            
Consulting Agreement | Related Party Notes B | Principal                        
Conversion of debt amount           $ 55,000            
Consulting Agreement | Related Party Notes B | Accrued Interest                        
Conversion of debt amount           $ 3,686            
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 6 Months Ended
Jul. 10, 2018
Jul. 09, 2018
Jan. 31, 2019
Oct. 31, 2018
Jul. 25, 2018
Mar. 31, 2019
Jun. 30, 2018
Jul. 24, 2018
Apr. 04, 2018
Dec. 31, 2017
Stock option granted             111,500      
Common stock, shares issued             10,164,001     4,200,000
Investor relations agreement [Member]                    
Common stock, shares issued                 60,000  
Subsequent Event [Member] | Investor relations agreement [Member]                    
Common stock, shares issued               125,000    
Subsequent Event [Member] | Asset Purchase Agreement [Member]                    
Subsequent Events description        

The consideration for the Purchased Assets includes the following to be made at closing: (a) a cash payment of $150,000 (of which $110,000 was previously paid), (b) 200,000 shares of common stock of the Company (the “Common Stock”) at a value of $5.00 per share (all of which shares were issued to the Seller pursuant to an exchange agreement between the Company and the Seller dated as of November 20, 2017), (c) an amount payable at closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $1,000,000 by the average closing daily price per share of the Common Stock on the NYSE, for each of the 20 trading days ending on the date immediately preceding the closing date (the “Average Price”), provided that in no event shall the Average Price be less than $2.00 (the “Closing Shares”); and (ii) $450,000 in cash.

 

In addition, the Seller shall pay an amount on the 90th day following the closing equal to the sum of: (i) the number of shares of Common Stock that is calculated by dividing $2,000,000 by the Average Price (calculated as if the 20-trading day period ends on the 89th day following the closing), provided that in no event shall the Average Price be less than $2.00 (the “Post-Closing Shares”); and provided further that in the event that the Average Price so calculated is more than the Average Price calculated in the preceding paragraph, the Average Price shall be the Average Price calculated as set forth in the preceding paragraph); and (ii) $400,000 in cash.

 

If revenue of the business for the one year period ending on the first anniversary of the closing date is at least $1,000,000, plus the Capital Investment Multiplier (as defined below), then the Seller shall earn the number of shares of Common Stock that is calculated by dividing $250,000 by the Average Price (calculated as if the 20–trading day period to which reference is made above ends on such first anniversary), provided that in no event shall the Average Price be less than $2.00. “Capital Investment Multiplier” means 1.5 times the amount of capital invested by the Company or its affiliates in the Seller to support and advance the business, inclusive of loans or other investments provided to Seller prior to the closing, less $250,000.

 

The Purchase Agreement contains customary representations, warranties and covenants, including covenants obligating the Seller to continue to conduct its business in the ordinary course. In addition, the Purchase Agreement contains provisions for indemnification in the event of any damages suffered by either party as a result of, among other things, breaches of representations and warranties contained therein. An aggregate amount equal $75,000 in cash, 50% of the number of Closing Shares and 25% of the number of Post-Closing Shares shall be deposited in an escrow account with a third party escrow agent to secure the indemnification obligations of the Seller pursuant to the terms of the Purchase Agreement. 

         
Subsequent Event [Member] | Independent director [Member] | Kull [Member]                    
Stock option granted 41,250                  
Exercise price $ 1.77                  
Additionally quarterly grant received $ 16,500                  
Subsequent Event [Member] | Chief Executive Officer [Member] | Barrett Mooney [Member]                    
Stock option granted   75,000                
Exercise price   $ 3.55                
Base salary   $ 220,000                
Restricted common stock issued   75,000                
Subsequent Event [Member] | Chief Executive Officer [Member] | Barrett Mooney [Member] | 2017 Omnibus Equity Incentive Plan [Member]                    
Nonqualified stock options     30,000 20,000   55,000        
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