Annual report pursuant to Section 13 and 15(d)

Corp Aquisition of Lighter than Air Systems

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Corp Aquisition of Lighter than Air Systems
12 Months Ended
Dec. 31, 2014
Merger between Macrosolve, inc. and Drone Aviation Holding Corp / Drone Aviation Corp Aquisition of Lighter than Air Systems [Abstract]  
CORP AQUISITION OF LIGHTER THAN AIR SYSTEMS
3. CORP AQUISITION OF LIGHTER THAN AIR SYSTEMS

 

On March 31, 2014, DAC was incorporated in the state of Nevada. During April and May 2014, investors purchased 34,100,000 shares of DAC common stock for an aggregate purchase price of $653,327. On May 5, 2014, DAC entered into a securities exchange agreement with World Surveillance Group, Inc. (WSGI) to acquire 100% of WSGI’s interest in its subsidiary, Lighter Than Air Systems (LTAS). LTAS provides critical aerial and land-based surveillance and communications solutions to government and commercial customers. DAC paid $335,000 and issued 10,000,000 shares of its common stock valued at the market price on the date of issuance, and the fair value of the shares was determined to be $79,000, or a total of $414,000, to WSGI as consideration for LTAS. Since DAC acquired cash of $30,361 from LTAS, as shown in the following table, the net cash amount DAC paid is $304,639.

 

In accordance with ASC 805-10 Business Combination and purchase acquisition accounting, DAC initially allocated the consideration to the net tangible and identifiable intangible assets, based on their estimated fair values as of the date of acquisition. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and intangible assets. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

 

  Property and equipment   $ 1,638  
  Accounts receivable     135,050  
  Cash in bank     30,361  
  Due from related party     20,650  
  Prepaid expenses     1,381  
  Inventory     109,581  
  Intangible asset     135,550  
  Current liabilities     (120,010 )
  Goodwill     99,799  
  Total purchase price   $ 414,000  

  

Intangible asset is in relation to the acquired customer list with a useful life of five years. The fair value of the customer list was determined by using a discounted cash flow model and $135,550 was recorded on the date of business combination. The Company recorded $31,941 of amortization expense for the year ended December 31, 2014.

 

The consolidated financial statements included herein are presented for the fiscal year ended December 31, 2013 and the period from January 1, 2014 to May 5, 2014 since LTAS is considered DAC’s predecessor. LTAS has a net loss of $39,918 during the period from January 1, 2014 to May 5, 2014.