Drone Aviation Holding Corp Asset Acquisition of Adaptive, Flight, Inc.

12 Months Ended

Dec. 31, 2015

Merger between Macrosolve, inc. and Drone Aviation Holding Corp / Drone Aviation Corp Aquisition of Lighter than Air Systems / Drone Aviation Holding Corp Asset Acquisition of Adaptive, Flight, Inc. [Abstract]

DRONE AVIATION HOLDING CORP ASSET ACQUISITION OF ADAPTIVE, FLIGHT, INC.

5. DRONE AVIATION HOLDING CORP ASSET ACQUISITION OF ADAPTIVE, FLIGHT, INC.

On July 20, 2015, the Company, through its wholly-owned subsidiary Drone AFS Corp., purchased substantially all the assets of Adaptive Flight, Inc. (AFI), a Georgia corporation. The Company purchased assets including but not limited to intellectual property and licenses and permits, including commercial software licenses for the “GUST” (Georgia Tech UAV Simulation Tool) autopilot system, and other transferable licenses which include flight simulation and fault tolerant flight control algorithms. The Company paid $100,000 in immediately available funds and $100,000 to be held in escrow. In addition, the Company issued 150,000 shares of unregistered common stock valued at $8.40 per share, on a post-reverse split basis, on the date of agreement, to be held in escrow.

The Company has a milestone of twelve months to complete a technology Integration Plan, the non-completion of which may result in the return of the purchased assets and termination of the Company’s obligations to release the escrow cash and shares. Additional milestones include exclusive, no-cost and perpetual licenses to all contributing intellectual property included or related to the purchased assets. As such time as all milestones are met, one-half of the escrow shares will be released to AFI. Upon termination of the escrow agreement, anticipated to be twelve months from the closing of the asset purchase, if all milestones have been met, the remaining escrow shares will be released to AFI; but if all milestones have not been met, the escrow cash and escrow shares will be released to the Company and the purchased assets will be returned to AFI. According to the terms of the Escrow Agreement, if the escrow share value is less than $1,400,000, the Company must issue an additional number of unregistered shares, not to exceed 50,000 shares. At December 31, 2015, the value of the 150,000 shares was $3.23 per share, or $484,500. The Company recorded $161,500 as an additional liability and expense at December 31, 2015 for the cost of 50,000 shares at $3.23 per share. The liability will be reevaluated at the end of each quarter and adjusted through the profit and loss statement as necessary.

The asset acquisition did not qualify as a business combination under ASC 805-10 and has been accounted for as a regular asset purchase.