XML 28 R17.htm IDEA: XBRL DOCUMENT v3.20.2
Subsequent Events
6 Months Ended
Jun. 30, 2020
Subsequent Events [Abstract]  
Subsequent Events

Note 11 – Subsequent Events

 

Preferred D Share Conversions

 

During the month of July 2020, Alpha converted the remaining 110 Preferred Series D shares at a stated value of $1,116.67 into 227,470 shares of common stock at a conversion price of $0.54.

 

Pre-Funded Warrant Conversions

 

On July 7, 2020, Alpha exercised 1,956,236 of Pre-Funded warrants into 1,956,236 shares of common stock at a conversion price of $0.001.

 

Warrant Conversions

 

During the month of July 2020, Alpha converted 1,950,000 warrants into 1,950,000 shares of common stock at a conversion price of $1.35. The Company received cash proceeds of $2,632,500 associated with exercise of the warrants.

 

Option Exercises

 

During the month of July 2020, the Company had conversions of options into 354,954 shares of common stock at a conversion price of $0.06.

 

Approval of Compensation by Compensation Committee

 

On July 20, 2020, the Board of Directors of the Company, upon recommendation of the Compensation Committee, approved a change in the compensation of the directors and of Ms. Nicole Fernandez-McGovern, the Company’s Chief Financial Officer and EVP of Operations. The Compensation Committee engaged Albeck to perform an independent third party study of compensation to assess if the Company’s compensation of its Board and its executive officers is in line with the industry averages.

 

As a result of the study, and upon the recommendation of the Compensation Committee, the Board approved:

 

1) an increase in Ms. Fernandez-McGovern’s annual salary from $200,000 to $220,000 and an increase in quarterly stock options from 12,500 to 15,000. In addition to the previously approved 2020 bonus structure, Ms. Fernandez-McGovern was awarded an additional performance based bonus of $40,000, equal to 20% of her current salary; and

 

2) a cash component for director compensation in the amount of $60,000 per year payable quarterly and an increase in quarterly stock options from 16,500 to 25,000. The approved compensation is retroactive to July 1, 2020.

 

As previously disclosed in an amendment to the Current Report on Form 8-K filed on April 20, 2020, Mr. Barrett Mooney, who is currently the Chairman of the Board, receives a monthly fee for consulting services he provides to the Company, which is outside of his role as Chairman of the Board. Mr. Mooney’s consulting fee has been increased to $10,000 per month commencing on August 1, 2020.

 

Security Purchase Agreement

 

On August 4, 2020, the Company, and Alpha entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company agreed to sell to Alpha in a registered direct offering 3,355,705 shares of common stock, par value $0.001, and warrants to purchase up to 2,516,778 shares of common stock at an exercise price of $3.30 per share (the “Warrants”), and received net proceeds of $9,900,000 after issuance costs. Upon exercise of the Warrants in full by the Investor, the Company would receive additional gross proceeds of approximately $8,305,367. The shares of common stock underlying the Warrants are referred to as “Warrant Shares.”

 

The purchase price for each share of common stock and warrants is $2.98. Net proceeds from the sale will be used for working capital, capital expenditures and general corporate purposes. The Shares, the Warrants and the Warrant Shares are being offered by the Company pursuant to an effective shelf registration statement on Form S-3 (File No. 333-239157), which was declared effective on June 19, 2020.

 

Pursuant to the terms of the Purchase Agreement, the Company has agreed to certain restrictions on future stock offerings, including that during the 75-day period following the closing, the Company will not issue (or enter into any agreement to issue) any shares of common stock or common stock equivalents, subject to certain exceptions, including if the consolidated closing price on the trading market on which the Company’s common stock is traded at the time is greater than $5.00 (adjusted for any subsequent stock splits or similar capital adjustments) for ten consecutive trading days, the Company may issue such securities at not less than $5.00 per Common Stock Equivalent. In addition, the Company’s executive officers and directors agreed that they shall not sell (or hedge in any manner) any of their shares of the common stock for a period ending September 7, 2020. Alpha has a right from the date of the Purchase Agreement until December 31, 2020, to participate in a subsequent financing by the Company or any of its Subsidiaries of common stock or Common Stock Equivalents for cash consideration, indebtedness or a combination of units thereof (a “Subsequent Financing”), in an amount equal to 50% of the Subsequent Financing on the same terms, conditions and price provided for in the Subsequent Financing.

 

The exercise price of the Warrants and the number of Warrant Shares issuable upon the exercise thereof will be subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. The Warrants will be exercisable on a “cashless” basis only in the event there is no effective registration statement registering, or the prospectus contained therein is not available for the sale of the shares underlying the Warrants. The Warrants contain a beneficial ownership limitation, such that none of such Warrants may be exercised, if, at the time of such exercise, the holder would become the beneficial owner of more than 9.99% of our outstanding shares of common stock following the exercise of such Warrant. The Warrant is for a ten-month term and is not exercisable for the first six months.

 

Lease

 

 On August 3, 2020 (the “Effective Date”), the Company entered into a lease agreement (the “Wichita Lease”) with U.S. Business Centers, L.L.C. (the “Landlord”) with an expected commencement date of November 1, 2020 (the “Commencement Date”) and expected expiration date of October 31, 2023 unless the Wichita Lease is sooner terminated or extended. The Wichita Lease premises include approximately 12,000 square feet, located at 8833 E. 34th Street, Wichita, Kansas 19103 (the “Leased Premises”). The aggregate estimated rent payments due over the initial three-year term of the Wichita Lease is $297,000. The Company will post a security deposit in the amount of $9,720.

 

The Landlord may grant the Company the option to extend the term of the Wichita Lease for an additional 36 months (the “Option Term”). The aggregate estimated rent payments due over the Option Term of the Wichita Lease would be $314,640.

 

In addition, the Landlord grants the Company the right to take occupancy of the Leased Premises rent free, beginning on September 1, 2020. The Company expects to use the Leased Premises as its new corporate headquarters and base of operations for manufacturing, assembly, design and engineering and testing of drones, drone subcomponents and drone-related equipment.