Drone Aviation Holding Corp and Drone Aviation Corp Share Exchange, Reverse Merger and Recapitalization

9 Months Ended

Sep. 30, 2014

Drone Aviation Holding Corp and Drone Aviation Corp Share Exchange Reverse Merger and Recapitalization [Abstract]

DRONE AVIATION HOLDING CORP AND DRONE AVIATION CORP SHARE EXCHANGE, REVERSE MERGER AND RECAPITALIZATION

4. DRONE AVIATION HOLDING CORP AND DRONE AVIATION CORP SHARE EXCHANGE, REVERSE MERGER AND RECAPITALIZATION

On June 3, 2014, the Company entered into a Share Exchange Agreement with DAC.  Upon closing of the transaction, the shareholders of all of DAC’s outstanding shares transferred all 44,100,000 outstanding shares of common stock of DAC to the Company in exchange for an aggregate of 8,050,000 shares of common stock and 36,050,000 shares of Series D Preferred Stock, or a total of 44,100,000 common shares of the Company. Pursuant to the terms of the Exchange Agreement, certain Drone Shareholders who, as a result of receiving the shares of common stock would hold in excess of 3.33% of the Company’s issued and outstanding common stock on a post-closing basis, elected to receive shares of the Company’s Series D Preferred Stock. At the closing of the transaction, the Company had 3,920,700 common shares, 595,000 shares of Series A Preferred Stock, 324,671 shares of Series B Preferred Stock, 156,231 shares of Series B-1 Preferred Stock and 355,000 shares of Series C Preferred Stock issued and outstanding.

As a result of the Share Exchange, DAC and its subsidiary, Lighter Than Air Systems, became our wholly owned subsidiaries.

For accounting purposes, this transaction is being accounted for as a reverse merger and has been treated as a recapitalization of Drone Aviation Holding Corp. with Drone Aviation Corp. considered the accounting acquirer, and the financial statements of the accounting acquirer became the financial statements of the registrant. The 44,100,000 shares issued to shareholders of DAC and its designees in conjunction with the share exchange transaction have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented.

On June 3, 2014, the assets and liabilities of DAHC carried onto the books were:

Cash in bank	$	1,629,263
Available-for-sale securities		211,525
Prepaid expenses		37,403
Current liabilities		(95,325	)
Derivative liabilities		(2,159,824	)
Note payable		(110,000	)
Total	$	486,958

Series E Preferred Private Placement

On June 3, 2014, the Company sold an aggregate of 2,700,000 units in a private placement of its securities to certain investors at a purchase price of $0.50 per unit pursuant to subscription for an aggregate purchase price of $1,350,000. Each unit consists of one share of the Company’s Series E Convertible Preferred Stock, par value $0.0001 per share, each of which is convertible into one share of Common Stock, with such rights and designations as set forth in the Certificate of Designation; and a three year warrant to purchase one share of Common Stock at an exercise price of $1.00 per Warrant Share.