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Equity
 12 Months Ended
Dec. 31, 2024
Equity [Abstract]  
Equity

Note 9 – Equity

 

Capital Stock Issuances

 

Preferred Series F Convertible Stock

 

On June 26, 2022 (the “Series F Closing Date”), the Company entered into a Securities Purchase Agreement (the “Series F Agreement”) with 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. The sale of Series F includes 100% warrant coverage (“Series F Warrants”). The Series F Warrants are not exercisable for the first six months after its issuance and have a three-year term from its exercise date. The initial conversion and exercise price of the Series F and the Series F Warrants are based on the volume weighted average market price for the four days prior to the issuance of the Series F and Serries F Warrants. Conversion and exercise prices are subject to downward adjustment for any equity instrument or equity-linked instrument sold or granted at an effective price per share that is lower than the initial conversion and exercise price (“Down Round Provision”). See Note 11 for warrant related disclosures.

 

On the Series F Closing Date, the Company issued to Alpha 10,000 shares of Series F, initially convertible into 16,129 shares of Common Stock at $620 per share, subject to adjustment for subsequent equity sales, and a warrant to purchase 16,129 shares of Common Stock at $960 per shares and received net proceeds of $9,920,000. As of December 31, 2024, the Series F issued on the Series F Closing Date have all been converted into shares of common stock. The warrant to purchase 16,129 shares of common stock remains outstanding at an exercise price of $1.10 after several down round provision triggers (see below).

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

Additional Investment Right

 

Alpha has the right, subject to certain conditions, including shareholder approval, to purchase up to $25,000,000 of additional shares of Series F and Series F Warrants (collectively, the “Series F Option”). The Series F Option will be available for an initial period of eighteen months, extended through June 1, 2026 (see Note 17). The Series F and Series F Warrants shall be identical to the initial purchase, except the conversion and exercise price shall be adjusted to the volume weighted average price for three trading days prior to the date that Alpha gives notice to the Company of its intent to exercise the Series F Option.

 

Since the Series F Closing Date, the Company has sold and issued Series F and Series F Warrants to Alpha or Investors that Alpha has assigned the Additional Investment Rights for cash proceeds through the exercise of their Series F Option. A summary of the Series F activity during the years ended December 31, 2024 and 2023 is as follows:

 

            Original      Shares Outstanding   Conversion Price   Shares Issuable 
Date of Purchase  Shares Purchased   Gross Proceeds   Net Proceeds   Conversion Price  

Series F

Converted

   December 31, 2024   December 31, 2024   December 31, 2024 
March 9, 2023   3,000    3,000,000    3,000,000   $420    (3,000)   -    1.1000    - 
November 15, 2023   1,850    1,850,000    1,850,000    124.70    (1,700)   150    1.1000    136,364 
December 31, 2023   4,850   $4,850,000   $4,850,000    -    (4,700)   150    -    136,364 
                                         
March 6, 2024   1,000    1,000,000    950,000   $60.29    (565)   435    1.1000    395,455 
April 12, 2024   1,050    1,050,000    1,050,000    37.00    -    1,050    1.1000    954,545 
May 31, 2024   1,050    1,050,000    1,025,000    32.15    -    1,050    1.1000    954,545 
July 25, 2024   500    500,000    500,000    23.15    -    500    1.1000    454,545 
August 27, 2024   500    500,000    500,000    20.19    -    500    1.1000    454,545 
October 1, 2024 (i)   1,500    -    -    12.00    -    1,500    1.1000    1,363,636 
December 18, 2024   750    750,000    750,000    5.25    -    750    5.2500    142,857 
December 31, 2024   6,350   $4,850,000   $4,775,000    -    (565)   5,785    -    4,720,128 
Grand Total   11,200   $9,700,000   $9,625,000   $-    (5,265)   5,935    -    4,856,492 

 

  (i)These shares were issued as consideration for executing the Omnibus Agreement in connection with the October 2024 Offering.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

During the year ended December 31, 2024, an aggregate of 269,583 Series F Warrants were issued with the sale and issuance of the Series F with initial exercise prices ranging from $20.19 and $60.29, subject to adjustment for subsequent equity sales or equity issuances below the initial exercise price.

 

During the years ended December 31, 2024 and 2023, a total of 6,490 and 4,638 Series F were converted into a total of 200,645 and 27,805 shares of common stock, respectively. As of December 31, 2024 and 2023, accrued dividends on the Series F total $746,666 and $512,227 which are included in accrued expenses on the 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 purchase date of June 30, 2022. As of December 31, 2024, a total of 13,800 Series F shares remain issuable on the Series F Option.

 

Common Stock and Warrant Transaction

 

2023 Issuances

 

On June 5, 2023, the Company entered into a Securities Purchase Agreement (the “June 2023 Purchase Agreement”) with certain accredited investors, including Alpha (the “Investors”). Pursuant to the terms of the Purchase Agreement, the Company agreed to issue and sell to Investors (i) 16,720 shares of Common Stock (the “Offering Shares”) at $250.00 per share and (ii) warrants to purchase up to 25,080 shares of common stock (the “Warrants”), exercisable at $380.00 per share and raised gross sales proceeds of $4,180,000. The Warrant is for a term of 5.5 years commencing on the closing date but is not exercisable for the first six months after closing. As a result, pursuant to the June 2023 Purchase Agreement the Company issued 16,720 shares of Common Stock for proceeds of $3,817,400, net of issuance costs from the offering and warrants to purchase up to 25,080 shares of common stock exercisable at $380.00 per share. The Offering Shares and Warrants triggered down round provisions embedded in outstanding Series F and Series F Warrants (the “June 2023 Down Round Trigger”).

 

For twelve (12) months following the closing date of the Purchase Agreement, in the event the Company or any of its subsidiaries proposes to offer and sell shares of Common Stock or common stock equivalents (the “Offered Securities”) to investors primarily for capital raising purposes (each, a “Future Offering”), the Investors shall have the right, but not the obligation, to participate in each such Future Offering in an amount of up to 50% in the aggregate of the Offered Securities.

 

The Offering Shares were issued pursuant to a prospectus supplement and was filed with the Securities and Exchange Commission (the “Commission”) on June 7, 2023, and the prospectus included in the Company’s Registration Statement on Form S-3 (Registration No. 333-252801), which was filed with the Commission on April 23, 2021, and was declared effective on May 6, 2021. The Warrants were issued in a concurrent private placement under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and have not been registered under the Securities Act, or applicable state securities laws.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

The Warrants were issued on the date of closing. The exercise price of the Warrants and the number of Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization, or similar transaction, as described in the Warrants, but has no anti-dilution protection or down round provisions. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of the Warrant Shares. The Warrants contain a beneficial ownership limitation, such that none of such Warrants may be exercised, if, at the time of such exercise, the holder would become the beneficial owner of more than 4.99% or 9.99%, as determined by the Investor, of the Company’s outstanding shares of Common Stock following the exercise of such Warrant.

 

Pursuant to the terms of the Purchase Agreement, the Company filed a registration statement on Form S-1 Registration No. 333-273332), which was declared effective on July 27, 2023, providing for the resale by the Investors of the Warrant Shares issuable upon exercise of the Warrants.

 

2024 Issuances

 

On February 16, 2024, the Company received a notification from the holder of the Convertible Note to convert $100,000 of principal outstanding on a Convertible Note (see Note 7) into 1,597 shares of common stock at a conversion price of $62.62.

 

On March 6, 2024, the Company entered into a warrant exercise agreement with several institutional investors holding warrants issued to such investors pursuant to a securities purchase agreement, dated as of June 5, 2023, in connection with a private placement. The warrant exercise agreement provides that for those Investors who exercise their existing warrants they will receive a reduction in the exercise price to $30 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 16,590 warrants converted to 16,590 shares of common stock. The reduction in exercise price (“March 2024 Down Round Trigger”) triggered down round provisions embedded in the outstanding Series F and Series F Warrants (see below).

 

October 2024 Unit Offering

 

We closed the following Offering on October 1, 2024.

 

The Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Spartan Capital Securities, LLC (the “Placement Agent”) in connection with the issuance and sale by the Company in a public offering (the “Offering”) of 538,000 units (the “Units”), consisting of common units (“Common Units”), each consisting of one share of common stock of the Company, $0.001 par value per share, one Series A warrant (“Series A Warrant”) to purchase one share of common stock and one Series B warrant (“Series B Warrant”) to purchase one share of common stock and pre-funded Units (the “Pre-Funded Units” and together with the Common Units, the “Units”), with each Pre-Funded Unit consisting of one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of common stock, one Series A Warrant to purchase one share of common stock and one Series B Warrant to purchase one share of common stock.

 

The purchase price of each Common Unit was $12.00, and the purchase price of each Pre-Funded Unit was $11.95, less Placement Agent fees and commissions.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

  

Note 9 – Equity- Continued

 

The Units have no stand-alone rights and will not be certificated or issued as stand-alone securities. Each Series A Warrant is immediately exercisable on the date of issuance at an exercise price of the public offering price of the Units of $12, or pursuant to an alternate cashless exercise option, and expires five years from the closing date of the Offering. Each Series B Warrant is immediately exercisable on the date of issuance at an exercise price of $25 and expires five years from the closing date of the offering.

 

Under the alternate cashless exercise option of the Series A Warrants, a holder of the Series A Warrant, has the right to receive an aggregate number of shares equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise of the Series A Warrant and (y) 2.0. In addition, the Series A Warrants and Series B Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) the lowest volume weighted average price for the five trading days immediately preceding and immediately following the date the Company effects a reverse stock split in the future with a proportionate adjustment to the number of shares underlying the Series A Warrants and Series B Warrants so that the aggregate exercise price remains constant in such an event (the “Share Combination Event”). Finally, with certain exceptions, the Series B Warrants provide for a down round adjustment to the exercise price and number of shares underlying the Series B Warrants upon the Company’s issuance of its common stock or common stock equivalents at a price per share that is less than the exercise price of the Series B Warrant.

 

Each Pre-Funded Warrant is immediately exercisable for one share of common stock at an exercise price of $0.001 per share. Subject to limited exceptions, a holder of Pre-Funded Warrants does not have the right to exercise any portion of its Pre-Funded Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of the holder, such limit may be increased to up to 9.99%) of the number of shares of common stock outstanding immediately after giving effect to such exercise. The Pre-Funded Warrants may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.

 

The shares of common stock, the Pre-Funded Warrants, the Series A Warrants and the Series B Warrants and the shares of common stock issuable upon exercise of the Pre-Funded Warrants, the Series A Warrants and the Series B Warrants described above, were offered by the Company pursuant to a Registration Statement on Form S-1 (File No. 333-281897), filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”) and declared effective by the SEC on September 30, 2024.

 

Upon completing the October 2024 Offering, the Company issued 538,000 shares of common stock, 538,000 Series A and 538,000 Series B warrants and received gross proceeds of $6,466,500 and paid issuance related costs for placement agent fees and legal fees totaling $778,261 resulting in net proceeds of $5,688,239 from the October 2024 Offering.

 

Reverse Stock Split and Share Combination Event

 

On October 3, 2024, the Board approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $0.001 per share, at a ratio of one (1) share of common stock for every fifty (50) shares of common stock (the “Reverse Stock Split”). The Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effectuate the Reverse Stock Split. The Reverse Stock Split was effective on October 14, 2024.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

As a result of the Reverse Stock Split, the Share Combination Event embedded in the Series A and B warrants were triggered resulting in the exercise price of the Series A and B Warrants adjusting down to the lowest volume weighted average price for the five trading days immediately preceding and immediately following the effective date of the Reverse Stock Split. This resulted in the exercise prices in the Series A and B Warrants adjusting down from $12 and $25, respectively, to $1.9445 and the issuance of 2,782,133 of Series A and 6,378,944 of Series B to keep the aggregate exercise price constant. The Share Combination Event triggered down round provisions embedded within Series F, Series F warrants and a Convertible Note (the “Share Combination Event Down Round Trigger”) (see below – Down Round Triggers and Deemed Dividends).

 

Omnibus Agreement

 

The October 2024 Offering required the consent of Alpha, the holder of the Convertible Note (Note 7) and the primary holder of our issued and outstanding Series F and Series F Warrants.

 

Pursuant to the Omnibus Agreement, among other things, Alpha consented to the October 2024 Offering and agreed to purchase $3,000,000 of the units in the offering and the Company agreed to apply said $3,000,000 towards the repayment of the Convertible Note balance. The Company issued to Alpha 1,500 shares of Series F 5% Convertible Preferred Stock with an aggregate stated value of $1,500,000 as consideration for entering into the Omnibus Agreement. The estimated fair value of the Series F of $1,500,000 has been treated as an equity issuance cost and have been reflected in the loss on equity issuance on the consolidated statements of operations and comprehensive loss (see below).

 

Loss on the October 2024 Offering

 

As more fully disclosed in Note 8, the Series A and B Warrants were determined to meet the definition of derivative liabilities due to the variability embedded in the instruments due to multiple settlement scenarios which precludes the Series A and B Warrants from being equity classified. Pursuant to ASC 815-40-35-4, liability classified contracts are initially and subsequently measured at fair value. Changes in fair value are presented on the statements of operations and comprehensive loss within the other income (expense).

 

At issuance, the fair value of the Series A and B Warrants was determined to be an aggregate of $19,494,000. As noted above, the net proceeds received in the October 2024 Offering was $5,688,239. Therefore, the fair value of the warrants upon issuance exceeds the net proceeds. In such cases, a loss is recognized for the excess fair value of the derivative liabilities over the net proceeds received in the offering. Therefore, we have reflected such an excess of $15,305,761, inclusive of the $1,500,000 estimated fair value of the Series F issued to Alpha for their consent, as a loss on equity financing on the consolidated statements of operations and comprehensive loss.

 

Down Round Triggers and Deemed Dividends

 

We have several outstanding equity-linked instruments that include down round provisions in which the conversion or exercise price is adjusted down upon the Company’s issuance of its common stock or common stock equivalents at a price per share that is less than the conversion or exercise price of the equity-linked instruments. As of December 31, 2024, these equity-linked instruments include the Series F, Series F Warrants, Convertible Note and Series B Warrants. The down round provisions included in these equity-linked instruments have been triggered several times.

 

Upon a down round provision being triggered, we compute the incremental value provided to the holder for the reduction in conversion or exercise price using a Black-Scholes model to determine the fair value of the equity-linked instruments prior to and after the down round provision trigger. The incremental value is recorded within stockholders’ equity (deficit) as a deemed dividend and reduced from net loss available to common stockholders in our computation of earnings per share.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

  

Note 9 – Equity- Continued

 

During the years ended December 31, 2024 and 2023, we used the following assumptions in the Black-Scholes model used to compute the incremental value:

 

   December 31, 2024   December 31, 2023 
Expected term (years)   1 - 3    2 - 3 
Volatility   84.88 - 152.24%   89.35 - 149.26%
Risk-free rate   3.52 - 4.55%   4.10 - 4.90%
Dividend yield   0.00%   0.00%

 

During the year ended December 31, 2024, the following transactions resulted in down round triggers:

 

The March 2024 Down Round Trigger disclosed above resulted in the reduction of the conversion and exercise prices to $30.00.

 

On August 27, 2024, the Company issued 500 shares of Series F Convertible Preferred convertible into 24,765 shares of Common Stock, in the aggregate, at a conversion price of $20.19 and warrants to purchase up to 24,765 shares of Common Stock at an exercise price of $20.19 for an aggregate purchase price of $500,000 (the “August 2024 Down Round Trigger”).

 

The October 2024 Offering resulted in an effective price per share of $4.00 which resulted in another down round trigger as the effective price per share in the October 2024 Offering was lower than the previous $20.19 (the “October 2024 Down Round Trigger”).

 

The Share Combination Event Down Round Trigger resulted in the modification of the conversion and exercise prices of the Series F, Series F Warrants and Convertible Debt being reduced to $1.10 based on an acknowledgement and price reset executed between the Company and Alpha in connection with the Share Combination Event resulting in the reduction of the effective price per share paid in the October 2024 Offering.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

Below is a summary of the deemed dividends resulting from various down round triggers that occurred during the year ended December 31, 2024:

 

Deemed Dividends on Series F Preferred Stock 
Date of  Description of  Series F    Conversion Prices   Conversion Price   Incremental Value 
Trigger Event  Trigger Event  Outstanding    Prior to Trigger   After Trigger   Deemed Dividend 
March 6, 2024  March 2024 Down Round Trigger   3,945    $60.29 -124.50   $30.00   $5,102,674 
August 27, 2024  August 2024 Down Round Trigger   3,755    $ 23.15 - 37.00   $20.19   $1,233,685 
October 1, 2024  October 2024 Offering   5,200    $ 12.00 - 20.19   $4.00   $6,459,543 
October 22, 2024  Share Combination Event   5,200    $4.00   $1.10   $4,159,552 
   Deemed Dividends on Series F                  $16,955,454 

 

Deemed Dividends on Series F Warrants 
Date of  Description of  Series F    Conversion Prices   Conversion Price   Incremental Value 
Trigger Event  Trigger Event  Warrants Outstanding    Prior to Trigger   After Trigger   Deemed Dividend 
March 6, 2024  March 2024 Down Round Trigger   54,695    $60.29 - 124.50   $30.00   $147,030 
August 27, 2024  August 2024 Down Round Trigger   137,331    $23.15 - 37 .00   $20.19   $216,546 
October 1, 2024  October 2024 Offering   162,096    $20.19   $4.00   $365,665 
October 22, 2024  Share Combination Event   162,096    $4.00   $1.10   $64,007 
   Deemed Dividends on Series F Warrants                  $793,248 
   Warrant Modification (i)                  $7,752 
   Total Deemed Dividends                  $17,756,454 

 

(i)On May 31, 2024, the Company agreed to reduce the exercise price of a warrant held by Alpha originally issued in June 2023 from $380.00 to $30.00. As result, the Company recorded a deemed dividend of $7,752 for the incremental value due to the modification.

 

During the year ended December 31, 2023, the following transactions resulted in down round triggers:

 

On March 9, 2023, the Company issued 3,000 shares of Series F Convertible Preferred convertible into 7,143 shares of Common Stock, in the aggregate, at an initial conversion price of $420 and warrants to purchase up to 7,143 shares of Common Stock at an initial exercise price of $420 for aggregate proceeds of $3,000,000. The transaction triggered several down round provisions embedded in the outstanding Series F and Series F warrants as the conversion price and exercise price of the Series and Series F Warrants issued in the purchase were less than the conversion and exercise price after the March 2024 Down Round Trigger of $30 (the “March 2023 Down Round Trigger”).

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

  

Note 9 – Equity- Continued

 

The June 2023 Down Round Trigger discussed above.

 

On November 15, 2023, the Company issued 1,850 shares of Preferred Stock pursuant to an Assignment, Waiver and Amendment Agreement (the “Assignment Agreement”) with the Investor pursuant to which, among other things, (i) the Investor transferred and assigned to certain institutional and accredited investors (the “Assignees” or “Investors”), the rights and obligations to purchase up to $1,850,000 of Preferred Stock pursuant to the Additional Investment Right provided in the Original Purchase Agreement (the “Assigned Rights”), (ii) the Original Purchase Agreement was amended so that the Assignees are party thereto and have the same rights and obligations thereunder as the Investor to the extent of the Assigned Rights, (iii) the time period during which the Investor can provide an investor notice was extended from August 3, 2024 until February 3, 2025; and (iv) the Investor and the Company agreed to a onetime waiver of the Minimum Subscription Requirement to allow exercise of the Assigned Rights.

 

Pursuant to the Assignment Agreement, the Company issued 1,850 shares of Preferred Stock convertible into convertible into 14,835 shares of Common Stock at an initial conversion price of $124.70 per share and warrants to purchase up to 14,835 shares of our Common Stock an exercise price of $124.70 exercisable upon issuance for three years. The Assignment Agreement triggered down round provisions embedded in outstanding Series F and Series F Warrants (the “November 2023 Down Round Trigger”).

 

The below is a summary of the deemed dividends resulting from various down round triggers that occurred during the year ended December 31, 2023:

 

Deemed Dividends on Series F Preferred Stock
Date of  Description of     Conversion Prices   Conversion Price   Incremental Value 
Trigger Event  Trigger Event  Series F Outstanding   Prior to Trigger   After Trigger   Deemed Dividend 
March 9, 2023  March 2023 Down Round Trigger   5,159   $440.00   $420.00   $217,750 
June 6, 2023  June 2023 Down Round Trigger   7,025   $420.00   $250.00    3,867,095 
November 15, 2023  November 2023 Down Round Trigger   6,075   $250.00   $100.00    5,832,000 
   Deemed Dividends on Series F                 $9,916,845 

 

Deemed Dividends on Series F Warrants
Date of  Description of  Series F   Conversion Prices   Conversion Price   Incremental Value 
Trigger Event  Trigger Event  Warrants Outstanding   Prior to Trigger   After Trigger   Deemed Dividend 
March 9, 2023  March 2023 Down Round Trigger   16,129   $440.00   $420.00   $38,226 
June 6, 2023  June 2023 Down Round Trigger   23,272   $420.00   $250.00    787,823 
November 15, 2023  November 2023 Down Round Trigger   23,272   $250.00   $100.00    865,016 
   Deemed Dividends on Series F Warrants                 $1,691,065 
   Total Deemed Dividends                 $11,607,910 

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

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 consolidated statements of operations and comprehensive loss.

 

2017 Omnibus Equity Incentive Plan

 

On March 26, 2018, the 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) became effective. Under the Equity Plan, the Company may grant equity-based and other incentive awards to officers, employees, and directors of, and consultants and advisers to, the Company. The purpose of the Equity Plan is to help the Company attract, motivate, and retain such persons and thereby enhance shareholder value. The Equity Plan shall continue in effect, unless sooner terminated, until the tenth (10th) anniversary of the date on which it is adopted by the Board (except as to awards outstanding on that date). The Board in its discretion may terminate the Equity Plan at any time with respect to any shares for which awards have not theretofore been granted; provided, however, that the Equity 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. As of December 31, 2024, 15,000 shares of common stock have been reserved for issuance under the Equity Plan which was approved at the Annual Shareholders’ Meeting held on November 14, 2023.

 

The Company determines the fair value of awards granted under the Equity Plan 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 consolidated statements of operations and comprehensive loss.

 

Restricted Stock Units (“RSUs”)

 

For the year ended December 31, 2024, a summary of RSU activity is as follows:

 

   Shares  

Weighted Average

Grant Date

Fair Value Per Share

 
Outstanding as of December 31, 2023   3,054   $910.29 
Granted   7,959    16.54 
Canceled   (3,020)   25.16 
Vested and released   (700)   782.79 
Outstanding as of December 31, 2024   7,293   $324.64 
Vested as of December 31, 2024   3,443   $661.60 
Unvested as of December 31, 2024   3,850   $16.74 

 

For the year ended December 31, 2024, the aggregate fair value of RSUs at the time of grant was $131,606 based on the market price of our common stock.

 

As of December 31, 2024, the Company had $40,969 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately eighteen months. During the year ended December 31, 2024, the Company recognized $80,606 of stock compensation related to restricted stock units.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

For the year ended December 31, 2023, a summary of RSU activity is as follows:

 

   Shares  

Weighted Average

Grant Date

Fair Value Per Share

 
Outstanding as of December 31, 2022   1,029   $2,310 
Granted   3,227    260 
Canceled   (173)   1,450 
Vested and released   (1,029)   210 
Outstanding as of December 31, 2023   3,054   $910.29 
Vested as of December 31, 2023   2,861   $930 
Unvested as of December 31, 2023   193   $490 

 

For the year ended December 31, 2023, the aggregate fair value of RSUs at the time of vesting was $839,247.

 

As of December 31, 2023, the Company had $39,280 of unrecognized stock-based compensation expense related to RSUs, which was amortized over approximately eleven months. During the year ended December 31, 2023, the Company recognized $975,282 of stock compensation related to restricted stock units.

 

Issuance of RSUs to Current Officers and Directors of the Company

 

For the year ended December 31, 2024, the Company granted 6,000 RSUs to officers, equal to $95,970 as compensation, which vest over two years.

 

For the year ended December 31, 2024, the Company granted 500 RSUs equal to $7,560 to the four non-executive directors as quarterly board compensation, which vested immediately.

 

On December 29, 2023, upon recommendation of the Compensation Committee of the Board (“Compensation Committee”), in lieu of the payment of $55,133 for the three Board members as quarterly cash compensation, three (3) non-executive directors received 551 RSUs equal to $55,133, which were immediately vested, also in lieu of the issuance of stock options for the purchase of 30 shares of common stock, for each of these three (3) non-executive directors received a total of 90 in restricted stock awards, which vested immediately for a fair value of $9,000 in the aggregate or $3,000 each.

 

On December 22, 2023, the Company granted its former chief commercial officer 580 RSUs as part of the resignation agreement. Mr. O’Sullivan’s termination was effective December 8, 2023.

 

On September 29, 2023, upon recommendation of the Compensation Committee, in lieu of the payment of $15,000 for each Board member or a total of $45,000 as quarterly cash compensation, three (3) non-executive directors each received 88, totaling 265 RSUs equal to $45,000, which were immediately vested, also in lieu of the issuance of stock options for the purchase of 30 shares of common stock, for each of these three (3) non-executive directors received a total of 90 in restricted stock awards, which vested immediately for a fair value of $15,300 in the aggregate or $5,100 each.

 

On May 11, 2023, upon recommendation of the Compensation Committee, the Board granted to the officers of the Company in connection with the 2022 executive compensation plan 969 RSUs, which vested immediately.

 

On March 29, 2023, upon recommendation of the Compensation Committee, the Board granted to the officers of the Company in connection with the 2022 executive compensation plan 640 RSUs, which vested immediately.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

For the year ended December 31, 2023, the Company recognized stock-based compensation expense of $828,130, based upon the market price of its Common Stock between $100.00 and $420.00 per share on the date of grant of these RSUs.

 

Stock Options

 

For the year ended December 31, 2024, a summary of the options activity is as follows:

 

   Shares   Weighted Average Exercise Price   Weighted Average Grant Date Fair Value   Weighted Average Remaining Contractual Term (Years)   Aggregate Intrinsic Value 
Outstanding as of December 31, 2023   2,505   $2,000   $1,080   1.49   $2,294 
Granted   —    —    —    —    — 
Exercised   —    —    —    —    — 
Expired/forfeited   (2,449)   1,953    1,060    —    — 
Outstanding as of December 31, 2024   56   $5,342   $2,874    1.23   $— 
Exercisable as of December 31, 2024   56   $5,342   $2,874    1.23   $— 

 

For the year ended December 31, 2023, a summary of the options activity is as follows:

 

   Shares   Weighted Average Exercise Price   Weighted Average Grant Date Fair Value   Weighted Average Remaining Contractual Term (Years)   Aggregate Intrinsic Value 
Outstanding as of December 31, 2022   2,561   $2,180   $1,190    3.33   $31,124 
Granted   325    320    150    3.02    — 
Exercised   —    —    —    —    — 
Expired/forfeited   (381)   1,830    990    —    — 
Outstanding as of December 31, 2023   2,505   $2,000   $1,080    1.49   $2,294 
Exercisable as of December 31, 2023   2,309   $2,130   $1,160    1.27   $2,294 

 

As of December 31, 2024, the Company had no unrecognized compensation cost related to stock options.

 

As of December 31, 2023, the Company has $37,409 of total unrecognized compensation cost related to stock options, which was amortized over approximately twenty-eight months.

 

During the years ended December 31, 2024 and 2023, the Company recognized $0 and $330,047 of stock compensation related to stock options, respectively.

 

The Company uses the Black-Scholes valuation model to estimate the fair market value of the stock options at the grant date as of December 31, 2024.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

 

Note 9 – Equity- Continued

 

For the years ended December 31, 2024 and 2023, the significant weighted average assumptions relating to the valuation of the Company’s stock options granted were as follows:

 

   2024   2023 
   Years Ended December 31, 
   2024   2023 
Stock price  $—   $0.32 
Dividend yield   —%   —%
Expected life (years)   —    3.02 
Expected volatility   —%   63.64%
Risk-free interest rate   —%   4.22%

 

Issuances of Options to Officers and Directors

 

On September 30, 2023, the Company issued to officers options to purchase 50 shares of Common Stock at an exercise price of $170.00 per share, which vests over a period of two years from the date of grant and expires on September 29, 2028. The Company determined the fair market value of these unvested options to be $3,750. For the year ended December 31, 2023, the Company recognized stock-based compensation expense of $234, based upon the fair value market price of $80.00.

 

On June 30, 2023, the Company issued to directors and officers options to purchase 125 shares of Common Stock at an exercise price of $230.00 per share, which vests over a period of two years from the date of grant and expires on June 29, 2028. The Company determined the fair market value of these unvested options to be $13,000. For the year ended December 31, 2023, the Company recognized stock-based compensation expense of $2,945, based upon the fair value market price of $100.00.

 

On March 31, 2023, the Company issued to directors and officers options to purchase 150 shares of Common Stock at an exercise price of $450.00 per share, which vests over a period of two years from the date of grant, and expires on March 30, 2028. The Company determined the fair market value of these unvested options to be $31,350. For the year ended December 31, 2023, the Company recognized stock-based compensation expense of $11,158, based upon the fair value market price of $210.00.

 

Cancellations of Options

 

During the year ended December 31, 2024, 2,449 options were cancelled with a grant-date fair value $2,554,225 due to employee terminations. During the year ended December 31, 2023, as a result of employee terminations and options expirations, stock options aggregating 381, with estimated values of approximately $378,869, were cancelled.

 

 

AGEAGLE AERIAL SYSTEMS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023