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Equity

3 Months Ended

Mar. 31, 2018

Equity [Abstract]

Equity

Note 7 – Equity

Capital Stock Issuances

As a result of the Merger all the 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 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 prior EnerJex 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.

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 of EnerJex 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 March 31, 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 $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 no stock compensation expense for the three months ended March 31, 2018 as the vesting period will commence April 1, 2018.

On October 4, 2017, the Company 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. In connection with the issuance of these options to employees and directors for the three months ended March 31, 2018, the Company recorded $2,491 of stock compensation expense.

On March 1, 2015, the Company 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, the Company 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.

The fair value of options granted during the three 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 three months ended March 31, 2018 were as follows:

		March 31, 2018
Dividend yield			0	%
Expected life			7	yrs.
Expected volatility			78.66	%
Risk-free interest rate			2.68	%

A summary of the options activity as of March 31, 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			49,500				4.33				5.0 years				—
Outstanding at March 31, 2018			1,184,330			$	4.19				4.0 years			$	—
Exercisable at end of the year			786,914			$	0.06				4.0 years			$	—

For options granted in 2018, the fair value of the Company’s stock was obtained per the close of market as of March 30, 2018. The future expected stock-based compensation expense expected to be recognized in future years is $171,204.

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at March 31,2018 (for outstanding options), less the applicable exercise price.