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Subsequent Events
6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS

23. SUBSEQUENT EVENTS

 

Corporate Acquisition

 

On July 6, 2020, the Company completed its acquisition (the "VNC Acquisition") of Virtual Network Communications Inc., a Virginia corporation ("VNC"), pursuant to an Agreement and Plan of Merger and Reorganization dated as of May 21, 2020 (the "Merger Agreement"), by and among the Company and its wholly-owned subsidiaries, CHC Merger Sub 7, Inc. and VNC Acquisition LLC, VNC and Mohan Tammisetti, solely in his capacity as the representative of the security holders of VNC. VNC is an EDGE telecom access radio developer and provider of both 4G LTE/Advanced and 5G capable radio equipment. Additionally, VNC has virtualized and patented an entire LTE Advanced network core solution that the Company believes eliminates much of the costly backbone equipment of telecom networks. VNC also has developed and is currently selling a rapidly deployable network system that can be combined with the tethered aerostats and drones offered by the Company's Drone Aviation subsidiary and enabled and operated in nearly any location in the world.

 

In connection with the VNC Acquisition, the Company paid to the stockholders and certain other stakeholders of VNC (i) $1,785,139 in cash and (ii) 11,738,210 shares of the Company's common stock, of which an aggregate of 4,000,000 shares is being held in an escrow fund for purposes of satisfying any post-closing indemnification claims of the former VNC security holders under the Merger Agreement. Pursuant to the Merger Agreement, the Company also issued to the holders of outstanding options and warrants of VNC, whether vested or unvested, in replacement of such options or warrants, options or warrants to purchase an aggregate of 4,261,790 shares of the Company's common stock, all of which were fully vested. In addition, at the closing of the VNC Acquisition, the Company paid approximately $1.142 million of outstanding payables of VNC.

 

Debt Agreements

 

In connection with the transactions contemplated by the Merger Agreement, on July 2, 2020, the Company sold an aggregate of 29 units (the "Units") to accredited investors, including 19 Units to Dr. Dustin McIntire, the Company's Chief Technology Officer, for a purchase price of $100,000 per Unit, or $2,900,000 in the aggregate. Each Unit consisted of a 9% Senior Convertible Debenture (the "July 9% Debentures") of the Company in the principal amount of $100,000 and warrants (the "July Warrants") to purchase 10,000 shares of the Company's common stock. The July 9% Debentures bear interest at the rate of 9% per annum, mature on September 30, 2020 and are convertible into shares of the Company's common stock at a conversion price of $1.00 per share, subject to adjustment. The July Warrants are exercisable to purchase shares of the Company's common stock at an exercise price of $1.00 per share, subject to adjustment, and expire on the earlier of (i) December 31, 2022 or (ii) the second anniversary of the Company's consummation of a public offering of its common stock in connection with an up-listing of its common stock to a national securities exchange. The proceeds from the sale of the Units were applied to the cash consideration the Company paid in the Acquisition and related expenses.

 

On July 1, 2020, the Company borrowed $50,000 from Mr. Davies and issued Mr. Davies a promissory note evidencing such loan that bears interest of $1,000 and matures on August 31, 2020.

  

Between July 2, 2020 and August 10, 2020, the Company borrowed an aggregate of $900,000 from accredited investors and issued to such investors promissory notes evidencing such loans. The principal amounts of the notes are between $50,000 and $200,000. The loans bear interest at a rate of 15% and have maturity dates between October 13, 2020 and November 9, 2020. As additional consideration for such loans, Daniel L. Hodges, the Company's Chairman and Chief Executive Officer, transferred to such investors an aggregate of 170,000 shares of common stock. On July 29, 2020, the Company sold 91,841 shares of common stock at a price of $1.00 per share to one of the accredited investors.

 

Operating Lease

 

On August 14, 2020, the Company amended its lease for 5,533 square feet of office space in Jacksonville, Florida to extend the term through July 31, 2023 with monthly payments ranging from $4,786 to $5,078 over the extended lease term, a reduced monthly payment compared to the prior lease term.