Equity

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Equity

Note 7 – Stockholders’ Equity

Capital Stock Issuances as of the date of Merger

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 902,186 shares of the Company’s common stock. The Company’s Series B Convertible Preferred Stock of 8.25 shares (the “Series B Preferred Stock”) remained outstanding and were convertible into 5,388 shares of the Company’s common stock. The Company’s Series C Convertible Preferred Stock (the “Series C Preferred Stock”) included 2,879 of remaining shares after the conversion and retirement of all the Company’s promissory notes due. These shares are convertible into 1,471,425 shares of the Company’s common stock. Furthermore, an additional 4,000 shares of Series C Preferred Stock were issued and are convertible into 3,020,797 shares of the Company’s common stock, as they 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”).

On May 11, 2018, we issued an additional 250 shares of our Series C 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 Preferred Stock includes a beneficial ownership limitation preventing conversion of shares of Series C 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 Preferred Stock.

On November 21, 2017, Alpha Capital Anstalt (“Alpha”) signed a binding commitment letter 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. At the time of private placement, the Series C Preferred Stock was 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.

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.

Series C Preferred Stock

 During the three-month period ended March 31, 2020, Alpha Capital Anstalt converted 189 shares of Series C Preferred Stock into 350,000 shares of common stock at a conversion price of $0.54. During the three-month period ended March 31, 2019, Alpha Capital Anstalt converted a total of 1,026 shares of Series C Preferred Stock into 1,900,000 shares of common stock at a conversion price of $0.54.

Series D Preferred Stock

On December 27, 2018, AgEagle Aerial Systems Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Agreement”) with Alpha Capital Anstalt (the “Purchaser”). Pursuant to the terms of the Agreement, the Board of Directors of the Company (the “Board”) designated a new series of preferred stock, the Series D Preferred Stock, which is non-convertible and provides for an 8% annual dividend and is subject to optional redemption by the Company (the “Preferred Stock”). The Company issued 2,000 shares of Preferred Stock and a warrant to purchase 3,703,703 shares of common stock, par value $0.001 per share (the “Warrant,” and the shares of common stock underling the warrants, the “Warrant Shares”) for $2,000,000 in gross proceeds. The Company also entered into a Registration Rights Agreement, granting registration rights to the Purchaser with respect to the Warrant Shares.

The Agreement provides that upon a subsequent financing or financings with net proceeds of at least $500,000, the Company must exercise its optional redemption of the Preferred Stock (as more fully described below in Item 5.03) and apply any and all net proceeds from such financing(s) to the redemption in full of the Preferred Stock.

The Preferred Stock is non-convertible, provides for an 8% annual dividend payable semi-annually and has liquidation rights senior to the common stock, but pari passu with the Company’s Series C Preferred Stock. During the three months ended March 31, 2020 and 2019, the Company recorded $40,444 and $40,000 of accrued dividends, respectively. As of March 31, 2020 and December, 31, 2019, accumulated accrued dividends totaled $204,000 and $163,555, respectively, as presented on the condensed interim consolidated balance sheets.

The Preferred Stock has no voting rights, except that the Company shall not undertake certain corporate actions as set forth in the Certificate of Designation that would materially impact the holders of Preferred Stock without their consent.

 The Preferred Stock is subject to optional redemption by the Company at 115% of the stated value of the Preferred Stock outstanding at the time of such redemption, plus any accrued but unpaid dividends and all liquidated damages or other amounts due. Any such optional redemption may only be exercised after giving notice and upon satisfaction of certain equity conditions set forth in the Certificate of Designation, including (i) all dividends, liquidated damages and other amounts have been paid; (ii) there is an effective registration statement covering the Warrant Shares, or the Warrant Shares can be exercised through a cashless exercise without restriction under Rule 144, (iii) the Warrant Shares are listed on an exchange, (iv) the holder is not in possession of material, non-public information, (v) there is a sufficient number of authorized shares for issuance of all Warrant Shares, and (vi) for each trading day in a period of 20 consecutive trading days prior to the redemption date, the daily trading volume for the common stock on the principal trading market exceeds $200,000 per trading day.

Options Issued

On March 26, 2018, the EnerJex 2017 Omnibus Equity Incentive Plan (the “Plan”) became effective. Under the Plan, 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 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. There are 3,000,000 shares of common stock reserved for the Plan.

On March 31, 2020, the Company issued options to purchase 87,000 shares of common stock to directors and employees of the Company at the fair value exercise price of $0.41 per share expiring on March 30, 2025. The Company determined the fair-market value of the options to be $21,492. In connection with the issuance of these options, the Company recognized no stock compensation expense for the three months ended March 31, 2020.

During the periods March 31, 2020 and 2019, the company recognized stock compensation expense of $54,635 and $60,920, respectively on options previously issued under the Plan that vested.

The fair value of options granted during the three-month periods ending March 31, 2020 and 2019 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 three months ended March 31, 2020 were as follows:

	March 31, 2020
Dividend yield		0.00	%
Expected life		3.5 Years
Expected volatility		90.07	%
Risk-free interest rate		0.29	%

A summary of the options activity for the three months ended March 31, 2020 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2020		2,480,470	$	0.39		6.28	$	378,111
Granted		87,000		0.41		5		—
Outstanding at March 31, 2020		2,567,470		0.39		6	$	381,158
Exercisable at period end		1,668,517	$	0.38		5.64	$	342,608

For options granted during the three months ended March 31, 2020, the fair value of the Company’s stock was based upon the close of market price on the date of grant. As of March 31, 2020, the future expected stock-based compensation expense e to be recognized in future years is $226,051, through March 31, 2022.

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at March 31, 2020 (for outstanding options), less the applicable exercise price.

A summary of the options activity for the three months ended March 31, 2019 is as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		1,494,158		$	0.46		6.93	$	409,678
Granted		540,000			0.42		8.68		—
Exercised/Forfeited		(70,438	)		0.49		—		—
Outstanding at March 31, 2019		1,963,720			0.45		7.19		256,049
Exercisable at period end		1,101,835		$	0.26		6.75	$	256,049