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Stockholders’ Equity
 3 Months Ended
Mar. 31, 2024
Equity [Abstract]  
Stockholders’ Equity

Note 7 – Stockholders’ Equity

 

Capital Stock Issuances

 

Common Stock and Warrant Transaction

 

On March 6, 2024, the Company entered into a warrant exercise agreement with several institutional investors holding warrants issued to such Investors pursuant a securities purchase agreement, dated as of June 5, 2023, in connection with a private placement. The Exercise Agreement provides that for those Investors who exercise their Existing Warrants they will receive a reduction in the Exercise Price to $0.60 per share of Common Stock. The shares of Common Stock issuable upon exercise of the Existing Warrants were registered pursuant to a registration statement on Form S-1 File No. 333-273332 and declared effective on July 27, 2023. The Company received up to $497,701 from the exercise of 829,500 warrants converted to 829,500 shares of common stock. The reduction in exercise price (“March 2024 Down Round Trigger”) triggered several anti-dilution protections embedded in outstanding Preferred Series F Convertible Stock and Common Stock Warrants (see below).

 

On February 16, 2024, the Company received a notification from an investor to convert $100,000 of principal outstanding on a Convertible Note (see Note 6) into 79,828 shares of common stock at a conversion price of $1.25.

 

Preferred Series F Convertible Stock

 

Purchase History

 

On June 26, 2022 (the “Series F Closing Date”), the Company entered into a Securities Purchase Agreement (the “Series F Agreement”) with Alpha Capital Anstalt (“Alpha”). Pursuant to the terms of the Series F Agreement, the Board of Directors of the Company (the “Board”) designated a new series of Preferred Stock, the Series F 5% Preferred Convertible Stock (“Series F”), and authorized the sale and issuance of up to 35,000 shares of Series F.

 

On March 9, 2023, the Company received an Investor Notice from Alpha to purchase an additional 3,000 shares of Series F Convertible Preferred (the “Additional Series F Preferred”) convertible into 2,381 shares of the Company’s Common Stock per $1,000 Stated Value per share of Series F Preferred Stock, at an initial conversion price of $8.40, post slit per share and associated Common Stock warrant to purchase up to 357,136 shares of Common Stock, post split, at an initial exercise price of $8.40, post split (the “Additional Warrant”) for an aggregate purchase price of $3,000,000. The Additional Warrant is exercisable upon issuance and has a three-year term. On March 10, 2023, the Company issued and sold the Additional Series F Preferred and the Additional Warrant. This issuance triggered anti-dilution provisions embedded in Series F and Common Stock warrants outstanding (the “March 2023 Down Round Trigger”).

 

On March 6, 2024, in connection with the Assigned Rights, the Company received Investor Notices from Alpha and the Assignees for the aggregate purchase of 1,000 shares of Series F Convertible Preferred convertible into 829,394 shares of Common Stock at an initial conversion price of $1.2057 and warrants to purchase up to 829,394 shares of Common Stock at an initial exercise price of $1.2057 per share for an aggregate purchase price of $1,000,000. The conversion price and exercise price are subject to adjustment based on anti-dilution protection provisions in connection with subsequent equity issuances embedded in the Securities Purchase Agreement. The Warrants were immediately exercisable upon issuance and have a three-year term.

 

Conversions

 

For the three months ended March 31, 2024, Alpha converted 3,130 shares of Series F into 2,952,050 shares of Common Stock. As a result, for the same periods, the Company recorded $61,235 cumulative dividends, which are included in accrued expenses on the condensed consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the first conversation date of June 30, 2022.

 

During the three months ended March 31, 2023, Alpha had converted 998 shares of Series F into 2,304,762 shares of Common Stock and recorded $66,921 cumulative dividends, included in accrued expenses on the unaudited condensed consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the first conversation date of June 30, 2022.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

 

Note 7 – Stockholders’ Equity-Continued

 

As of March 31, 2024 and 2023, there are 3,945 and 7,865 Series F outstanding, respectively.

 

Down Round Triggers and Anti-dilution

 

The reduced warrant exercise price of $0.60 on March 6, 2024 (see above), the March 2024 Down Round Trigger, triggered anti-dilution protection provisions in connection with subsequent equity issuances embedded in the Series F and Common Stock warrants issued with the Series F. As a result, the Company recognized an aggregate deemed dividend of $5,249,704 which has been reflected in stockholders’ equity and increased the net loss available to common stockholders in the earning per share calculation as presented on the accompanying condensed consolidated statements of operations and comprehensive loss.

 

During the three months ended March 31, 2024, the deemed dividend on the Series F Warrants of $147,030 represents the difference between fair value of the Series F Warrants under the original terms before the Down Round Trigger and the fair value of the Series F Warrants after the Down Round Trigger at the reduced exercise price. The fair value of the Series F Warrants was determined using a Black-Scholes pricing model and the following assumptions: expected life of 2-3 years, volatility of 196.80%, risk free rate of 4.55%, and dividend rate of 0%.

 

Deemed Dividends

 

During the three months ended March 31, 2024, the deemed dividend on the Series F of $5,249,704 represents the value of the incremental shares issuable upon conversion of the Series F into shares of common stock at the reduced conversion price and the market price of the common stock on the date the Down Round Trigger occurred.

 

During the three months ended March 31, 2023, as a result of issuing the additional 3,000 shares of Series F Convertible Preferred, the March 2023 Down Round Trigger, resulted in the conversion rate on the Series F and the exercise price of the Series F Warrants issued with the Series F adjusting down to $8.40 from $8.80. The March 2023 Down Round  Trigger resulted in the Company recognizing a deemed dividend on the common stock warrants and Series F Preferred Stock of $38,226 and $217,750, respectively, or aggregate deemed dividend of $255,976, for the incremental value to the warrant and Series F holder resulting from the reduction in exercise price and conversion price.

 

During the three months ended March 31, 2023, the deemed dividend on the Series F Warrants represents the difference between fair value of the Series F Warrants under the original terms before the March 2023 Down Round Trigger and the fair value of the Series F Warrants after March 2023 Down Round Trigger at the reduced exercise price. The fair value of the Series F Warrants was determined using a Black-Scholes pricing model and the following assumptions: expected life of 3 years, volatility of 196.8%, risk free rate of 4.46%, and dividend rate of 0%.

 

Stock-based Compensation

 

The Company determines the fair value of awards granted under the Equity Plan based on the fair value of its Common Stock on the date of grant. Stock-based compensation expenses related to grants under the Equity Plan are included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss. For the three months ended March 31, 2024 and 2023, the Company recorded $18,580 and $512,529 of stock based compensation, respectively.

 

Pension Costs

 

senseFly S.A. sponsors a defined benefit pension plan (the “Defined Benefit Plan”) covering all its employees. The Defined Benefit Plan provides benefits in the event of retirement, death or disability, with benefits based on age and salary. The Defined Benefit Plan is funded through contributions paid by senseFly S.A. and its employees, respectively. The Defined Benefit Plan assets are Groupe Mutuel Prévoyance (“GMP”), which invests these plan assets in cash and cash equivalents, equities, bonds, real estate and alternative investments.

 

The Projected Benefit Obligation (“PBO”) includes in full the accrued liability for the plan death and disability benefits, irrespective of the extent to which these benefits may be reinsured with an insurer. The actuarial valuations are based on the census data as of December 31, 2023, provided by GMP.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

 

Note 7 – Stockholders’ Equity-Continued

 

The Defined Benefit Plan has a PBO in excess of Defined Benefit Plan assets. For the three months ended March 31, 2024, the amounts recognized in accumulated other comprehensive loss related to the Defined Benefit Plan were $0, compared to $43,345 for the same period during 2023.

 

Restricted Stock Units (“RSUs”)

 

For the three months ended March 31, 2024, a summary of RSU activity is as follows:

 

   Shares   Weighted Average Grant Date Fair Value 
Outstanding as of December 31, 2023   152,703   $18.03 
Granted   —    — 
Canceled   (463)   9.34 
Outstanding as of March 31, 2024   152,240    18.06 
Vested as of March 31, 2024   143,427    18.56 
Unvested as of March 31, 2024   8,813   $9.89 

 

For the three months ended March 31, 2024, no RSUs were awarded.

 

As of March 31, 2024, the Company had approximately $25,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately eight months.

 

For the three months ended March 31, 2023, a summary of RSU activity is as follows:

 

   Shares   Weighted Average Grant Date Fair Value 
Outstanding as of December 31, 2022   51,484   $46.22 
Granted   32,489    8.40 
Canceled   (2,861)   36.16 
Outstanding as of March 31, 2023   81,112    31.43 
Vested as of March 31, 2023   56,151    32.20 
Unvested as of March 31, 2023   24,961   $29.70 

 

For the three months ended March 31, 2023, the aggregate fair value of RSU awards at the time of vesting was $272,908.

 

As of March 31, 2023, the Company had approximately $304,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately twenty months.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

 

Note 7 – Stockholders’ Equity-Continued

 

Issuance of RSUs to Current Officers and Directors of the Company

 

For the three months ended March 31, 2024, the Company assigned 100,000 RSUs equal to $74,000 to the four non-executive directors as quarterly board compensation, which were granted on April 1, 2024, and vested immediately.

 

On March 29, 2023, upon recommendation of the Compensation Committee of the Board (“Compensation Committee”) the Board, in connection with the 2022 executive compensation plan granted to the officers of the Company 640,000 RSUs, which vested immediately. For the three months ended March 31, 2023, the Company recognized stock-based compensation expense of $268,800, based upon the market price of its Common Stock of $0.42 per share on the date of grant of these RSUs.

 

Stock Options

 

For the three months ended March 31, 2024, a summary of the options activity is as follows:

 

   Shares   Weighted Average Exercise Price   Weighted Average Fair Value   Weighted Average Remaining Contractual Term (Years)   Aggregate Intrinsic Value 
Outstanding as of December 31, 2023   125,264   $40.61   $22.04    23.80   $45,880 
Granted   —    —    —    —    — 
Exercised   —    —    —    —    — 
Expired/Forfeited   (60,181)   41.09    22.51    —    — 
Outstanding as of March 31, 2024   65,083   $40.19   $21.63    2.36   $— 
Exercisable as of March 31, 2024   58,848   $43.68   $23.56    2.19   $— 

 

As of March 31, 2024, the Company had approximately $21,000 of total unrecognized compensation cost related to stock options, which will be amortized through June 30, 2025.

 

Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or as of March 31, 2024 (for outstanding options), less the applicable exercise price.

 

For the three months ended March 31, 2024 and 2023, the significant assumptions relating to the valuation of the Company’s stock options granted were as follows:

Schedule of Significant Weighted Average Assumptions 

   2024   2023 
   March 31, 
   2024   2023 
Stock price  $—   $9.00 
Dividend yield   —%   —%
Expected life (years)   —    3.02 
Expected volatility   —%   65.78%
Risk-free interest rate   —%   3.81%

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(UNAUDITED)

 

Note 7 – Stockholders’ Equity-Continued

 

Issuances of Options to Officers and Directors

 

For the three months ended March 31 2024, no options were granted during this period.

 

On March 31, 2023, the Company issued to directors and officers options to purchase 7,500 shares of Common Stock at an exercise price of $9.00 per share, which vest over a period of two years from the date of grant, and expire on March 30, 2028. The Company determined the fair market value of these unvested options to be $31,350.

 

For the three months ended March 31, 2023, the Company recognized stock-based compensation expense of $42 based upon the fair value market price of $4.20.

 

Cancellations of Options

 

For the three months ended March 31, 2024 and 2023, as a result of employee terminations and options expirations, stock options aggregating 60,181 and 1,034 with fair market values of $1,292,459 and $88,899 were canceled, respectively.