| Equity | Note 7 – Equity Capital Stock Issuances During the six months
ended June 30, 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. On June 18, 2019, the Company
issued in connection with a consulting agreement, dated May 3, 2019, 500,000 shares of its Common Stock to the consulting company
as a part of their compensation for services. The Company recognized a total of $170,000 of investor relations expense at a fair
value of $0.34 per share within general and administrative costs related to these issuances. On June 18, 2019 the Company
issued in connection with an investor relations agreement, dated April 4, 2018, 50,000 shares of its Common Stock to the investor
relations firm. The
Company recognized a total of $20,500 of investor relations expense at a fair value of $0.41 per share within general and administrative
costs related to these issuances. 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. During the six months ended June 30, 2019, the Company recorded $80,444 of accrued
dividends. 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
nonconvertible, 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. 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. Series C Preferred Stock 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. At the time of the 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. 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. On
June 18, 2019, at the annual meeting of shareholders of the Company, the shareholders approved a proposal to increase the number
of shares of Common Stock reserved for issuance under the Plan from 2,000,000 to 3,000,000. 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 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. During the six
months ended June 30, 2019, the Company issued options to purchase 602,000 shares of Common Stock to directors and employees
of the Company at the fair value exercise price ranging from $0.29 to $0.54 per share expiring on dates between December 31,
2023 and March 28, 2029. The Company determined the fair-market value of the options to be $166,756. In connection with the
issuance of these options to employees and directors, the Company recognized $14,545 and $16,488, respectively in stock
compensation expense for the three and six months ended June 30, 2019. During the year ended
December 31, 2018, the Company issued options to purchase 534,598 shares of Common Stock to directors and employees of the
Company at the fair value exercise price ranging from $0.51 to $4.33 per share expiring on dates between March 30, 2023 and
December 15, 2028. The Company determined the fair-market value of the options to be $387,052. In connection with the
issuance of these options to employees and directors, the Company recognized $68,574 and $126,200 in stock compensation
expense for the three and six months ended June 30, 2019, respectively. On October 4, 2017, AgEagle
Sub issued options to purchase 927,775 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, the Company recognized $1,349 and $2,699 in f stock compensation expense for the three
and six months ended June 30, 2019, respectively. The fair value of options
granted during the six months ended June 30, 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 six months ended June 30,
2019 were as follows:
June 30, 2019
Dividend yield 0%
Expected life 3.5-6.5 Years
Expected volatility 82.40-85.89%
Risk-free interest rate 1.71-2.23% A summary of the options
activity for the six months ended June 30, 2019 is as follows:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at January 1, 2019 1,494,158 $ 0.46 6.93 Years $ 409,678
Granted 602,000 0.41 8.08 Years —
Exercised/Forfeited (70,438 ) 0.49 —Years —
Outstanding at June 30, 2019 2,025,720 0.44 6.97 Years 215,883
Exercisable at period end 1,218,544 $ 0.34 6.57 Years $ 208,659 For options granted during
the six months ended June 30, 2019, the fair value of the Company’s stock was based upon the close of market price on the
date of grant. The future expected stock-based compensation expense expected to be recognized in future years is $309,769 through
March 31, 2022. Intrinsic value is measured
using the fair market value at the date of exercise (for shares exercised) or at June 30, 2019 (for outstanding options), less
the applicable exercise price. A summary of the options
activity for the six months ended June 30, 2018 is 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 $ — |
