(7) Shareholders Equity

On August 1, 2020, the Company’s board of directors approved the EzFill Holdings, Inc. 2020 Equity Incentive Plan (2020 Plan), which plan has also been approved by the Company’s shareholders. The Company has reserved 239,155 of its outstanding shares of common stock for issuance under the 2020 Plan. On June 3, 2022, the Company’s board of directors approved the EzFill Holdings, Inc. 2022 Equity Incentive Plan (2022 Plan), which plan has also been approved by the Company’s shareholders. The Company has reserved 325,000 of its outstanding shares of common stock for issuance under the 2022 Plan.

Common stock

During the three months ended March 31, 2022, the Company issued 1,250 shares to a consultant for services rendered over the preceding three months.

During the three months ended March 31, 2022, the Company issued 5,040 shares to the sellers of the assets of Full Service Fueling. See note 11.

On February 17, 2023, the Company entered into a Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $2,096,000, subject to the terms and conditions of the Sales Agreement. The Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-268960) offering the Shares. Under the Sales Agreement, the Sales Agent may sell the Shares in sales deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The offering pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all of the Shares subject to the Sales Agreement and (ii) termination of the Sales Agreement as permitted therein. The Company will pay the Sales Agent a fixed commission rate of 3.0% of the aggregate gross proceeds from the sale of the Shares pursuant to the Sales Agreement and has agreed to provide the Sales Agent with customary indemnification and contribution rights. The Company also agreed to reimburse the Sales Agent the fees and expenses of the Sales Agent including but not limited to the fees and expenses of the counsel to the Sales Agent, payable upon the execution of the Sales Agreement, in an amount not to exceed $50,000. In addition, the Company will reimburse the Sales Agent upon request for such costs, fees and expenses incurred in connection with the Sales Agreement in an amount not to exceed $7,500 on a quarterly basis for the first three quarters of each year and $10,000 for the fourth quarter of each year. During the three months ended March 31, 2023, a total of 8,393 shares were sold under the Sales Agreement for gross proceeds of $26,601. The expenses related to the ATM were offset against capital up to the amount and the excess is included in operating expenses. The Sales Agreement was terminated on March 24, 2023.

During the three months ended March 31, 2023, the Company issued 10,417 shares of restricted stock to a director that will vest at the next annual shareholder meeting and is recording stock compensation expense of $40,000. The aforementioned grant was made pursuant to the Company’s 2022 Incentive Compensation Plan.

A summary of the restricted stock activity is presented as follows:

Schedule of Restricted Stock Activity 

The Company recognizes forfeitures of restricted shares as they occur rather than estimating a forfeiture rate.

Unrecognized stock compensation expense related to restricted stock was approximately $124,000 as of March 31, 2023, which will be recognized over a weighted-average period of 0.6 years.

Stock Options and Warrants

The following table represents stock option activity during the three months ended March 31, 2023:

Schedule of Stock Option Activity

On January 23, 2023, the Company entered into an agreement (the “Consulting Agreement”) with a consultant (the “Consultant”). For a term of two years unless terminated sooner as provided in the Consulting Agreement (the “Term”), the Consultant has agreed to provide the Company with certain services including, but not limited to, increasing the Company’s customer base through assembly of a contract sales team, assisting the Company in reducing its current operating expenses and assisting the Company with franchising its business. In exchange for its services, the Consultant received options to purchase 200,000 restricted shares of the Company’s common stock (the “Options”). The Options’ exercise prices, vesting requirements, and expiration dates were set forth in an option agreement between the Consultant and the Company. At the end of the Term, unless extended by the parties in writing, all unvested Options will immediately expire. In conjunction with the Consulting Agreement, the Consultant entered into several Non-Qualified Stock Option Agreements (“Option Agreements”) with the Company. The first Option Agreement is for 62,500 option shares that have an exercise price of $4.80 per share and an expiration date five years from the vesting date. The second Option Agreement is for 50,000 option shares that have an exercise price of $8.00 per share and an expiration date five years from the vesting date. The third Option Agreement is for 50,000 option shares that have an exercise price of $10.00 per share and an expiration date five years from the vesting date. The fourth Option Agreement is for 37,500 option shares that have an exercise price of $14.00 per share and an expiration date five years from the vesting date. Within each of the aforementioned Option Agreements, 90% of the vesting is related to performance conditions and 10% time-based vesting. Stock compensation recorded in the three months ended March 31, 2023 related to time-based options as the achievement of the performance conditions is not yet probable.

During the three months ended March 31, 2023, the Company issued 54,824 stock options to an executive in lieu of cash salary for a value of $50,000. The aforementioned grant was made pursuant to the Company’s 2022 Equity Incentive Plan.

The fair value of the stock options was determined using the Black-Scholes option pricing model with the following assumptions:

Schedule of Fair Value Assumptions

Unrecognized stock compensation expense related to stock options was approximately $135,000 as of March 31, 2023, which will be recognized over a weighted-average period of 1.8 years.

The underwriter’s representatives for the Company’s IPO received warrants to purchase up to 44,922 shares. The warrants are exercisable from March 14, 2022, until September 14, 2026, at an exercise price of $40.00 per share.

In April 2021, the Company issued 13,286 warrants to a lender in connection with a loan that has been repaid. The warrants are exercisable until September 14, 2024, at $40.00 per share.

The intrinsic value of options and warrants outstanding at March 31, 2023, and December 31, 2022 was $0 and $0, respectively.

Stock compensation expense for the three months ended March 31, 2023 totaled approximately $192,000, consisting of $50,000 related to options granted to an executive and approximately $3,000 related to options granted to consultants during the quarter, as well as $139,000 related to restricted stock and options granted in prior periods.

On April 27, 2023, the Company executed a 1-for-8 reverse stock split and decreased the number of shares of its authorized common stock from 500,000,000 shares to 50,000,000 and its preferred stock from 50,000,000 to 5,000,000. Refer to Note 11 for details of the reverse stock split. As a result, all share activity has been restated as if the reverse stock split had been consummated as of the beginning of the respective period.