Subsequent Events

3 Months Ended

Mar. 31, 2014

11. SUBSEQUENT EVENTS

On April 17, 2014, the Company entered into a series of exchange agreements with certain holders of convertible debentures and promissory notes in the principal face amount of $683,680 and accrued interest of $97,306 previously issued by the Company. Pursuant to the Exchange Agreements, the Holders exchanged the Notes and relinquished any and all other rights they may have pursuant to the Notes in exchange for 595,000 shares of newly designated Series C Convertible Preferred Stock, 324,671 shares of newly designated Series D Convertible Preferred Stock and 156,231 shares of newly designated Series D-1 Convertible Preferred Stock. Such exchanges were conducted pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended.

Series C Preferred, Series D Preferred, Series D-1 Preferred

Pursuant to Certificate of Designations, the Company designated 595,000 shares of its blank check preferred stock as Series C Preferred, 324,671 shares of its blank check preferred stock as Series D Preferred, and 156,231 shares of its blank check preferred stock as Series D-1 Preferred. Each share of preferred stock has a stated value of $0.01977775 per share. In the event of a liquidation, dissolution or winding up of the Company, each share of Series C, D and D-1 Preferred Stock will be entitled to a payment as set forth in the applicable Certificate of Designation. The Series CPreferred Stock is convertible into such number of shares of the Company’s common stock equal to such number of shares of Series C Preferred being converted multiplied by 100 and divided by the stated value. The Series D Preferred is convertible into such number of shares of Common Stock equal to such number of shares of Series D Preferred being converted divided by the stated value. The Series D-1 Preferred is convertible into such number of shares of Common Stock equal to such number of shares of Series D-1 Preferred being converted divided by the stated value. Each share of Series C, D and D-1 Preferred entitles the holder to vote on all matters voted on by holders of Common Stock as a single class. With respect to any such vote, each share of preferred entitles the holder to cast such number of votes equal to the number of shares of Common Stock such share of preferred is convertible into at such time, but not in excess of the conversion limitations set forth in the applicable Certificate of Designation. The Series C, D and D-1 Preferred will be entitled to dividends to the extent declared by the Company.

Resignations

On April 17, 2014, Mr. James C. McGill resigned as Chief Executive Officer, and President of the Company as well as his position serving on the Company’s Board of Directors. Also on April 17, 2014, Messrs. David Humphrey and John Clerico resigned their positions serving on the Company’s Board of Directors. In submitting their resignations, Messrs. McGill, Humphrey and Clerico did not express any disagreement with the Company on any matter relating to the registrant’s operations, policies or practices.

Appointment of New Interim President and Director

Effective April 17, 2014, the Company appointed Michael Haas to serve as the Company’s interim President and to serve on the Company’s Board of Directors. The Company agreed to pay Mr. Haas $2,500 a month for his services.

Submission of Matters to a Vote of Security Holders

On April 14, 2014, shareholders representing a majority of the then issued and outstanding shares of the Company’s Common Stock entitled to vote thereon approved a plan of merger pursuant to which the Company would merge with a newly created wholly-owned Nevada subsidiary for the purpose of reincorporating the Company to the State of Nevada (the “Reincorporation”). Pursuant to the Reincorporation, the shareholders approved a share consolidation, whereby holders of the Company’s common stock would receive one share of common stock, par value $0.0001 per share of the Nevada subsidiary for every 50.56186 shares of the Company’s Common Stock, other than shares of Common Stock that are owned by stockholders exercising appraisal rights.

Cancellation of Options and Warrants

On April 17, 2014, management, directors and debenture holders agreed to the cancellation of 29,537,115 warrants with strike prices between $.2618 and $.063 and 9,759,255 options with exercise prices between $2.50 and $.033.

Entry Into a Material Definitive Agreement

Effective April 30, 2014, Macrosolve, Inc.entered into an Agreement and Plan of Merger with its wholly-owned subsidiary, Drone Aviation Holding Corp., pursuant to which Macrosolve merged with and into Drone Aviation Holding Corp. for the purpose of reincorporating the Company in the State of Nevada . Pursuant to the Merger, every 50.56186 shares of common stock of Macrosolve, other than shares that are owned by stockholders exercising appraisal rights, were converted into one share of common stock, par value $0.0001, of Drone, with the same rights, powers and privileges as the shares prior to such conversion (such exchange ratio, the “Merger Exchange Ratio”).

Pursuant to the Merger Agreement, (i) each share of Series C Convertible Preferred Stock of Macrosolve, other than shares that are owned by stockholders exercising appraisal rights, were converted into one share of Series A Convertible Preferred Stock of the Company, (ii) each share of Series D Convertible Preferred Stock of Macrosolve, other than shares that are owned by stockholders exercising appraisal rights, were converted into one share of Series B Convertible Preferred Stock of the Company, and (iii) each share of Series D-1 Convertible Preferred Stock of Macrosolve, other than shares that are owned by stockholders exercising appraisal rights, were converted into one share of Series B-1 Convertible Preferred Stock of the Company

Prior to the Merger, Macrosolve had 198,219,132 shares of common stock issued and outstanding. Subsequent to the Merger, as a result of the Merger Exchange Ratio described above, the Company has approximately 3,920,329 shares of common stock issued and outstanding.

Unregistered Sales of Equity Securities

On April 29, 2014, prior to the Merger, Macrosolve sold an aggregate of $120,000 of its preferred stock to an accredited investor. Pursuant to the Subscription Agreement, upon consummation of the Merger, the Company would designate 355,000 shares of preferred stock, $0.0001 par value per share, as Series C Convertible Preferred Stock. On May 1, 2014, subsequent to consummation of the Merger, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock with the Secretary of State of the State of Nevada and issued the shares to the Investor.

Each share of Series C Preferred Stock is convertible, at the option of the holder, at any time into one hundred (100) shares of the Company’s common stock, par value $0.0001 per share, and has a stated value of $0.0001. Such conversion ratio is subject to adjustment in the case of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company is prohibited from effecting the conversion of the Series C Preferred Stock to the extent that, as a result of such conversion, the holder will beneficially own more than 4.99% (or, if such limitation is waived by the holder upon no less than 61 days prior notice, 9.99%) in the aggregate of the issued and outstanding shares of the Company’s Common Stock calculated immediately after giving effect to the issuance of shares of Common Stock upon the conversion of the Series C Preferred Stock.