NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 DESCRIPTION OF BUSINESS
UAS Drone Corp. (the Company) was incorporated under the laws of the State of Nevada on February 4, 2015. The Company began limited operations on February 11, 2015. Prior to the Companys formation, the operations were functioning under Unlimited Aerial Systems, LLP (UAS LLP). UAS LLP was formed under the laws of the State of Louisiana on August 22, 2014. Effective March 31, 2015, the Company completed a reverse merger with UASLLP. The reverse merger was accounted for as a reverse capitalization. Accordingly, the accompanying consolidated financial statements represent the historical assets, liabilities, and results of operations of UAS LLP.
The Company is engaged in the production and sale of Unmanned Aerial Systems, commonly referred to as drones. The Companys principal operations will include the production and sale of drones. The Company will work with law enforcement agencies and tailor its products to the specific needs of the law enforcement community and has entered into two agreements with Havis for the manufacturing and distribution of the Companys products. The Company also has an arrangement with a drone flight training group, under which management is gaining key operational and performance data to improve the product and make it more appealing to our core customer demographic. The Company expects to generate revenues and related cash flows from the sale of its drones through these arrangements as well as other channels.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
These consolidated financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States. The Companys financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 fiscal year end.
Principles of consolidation
The accompanying consolidated financial presented reflect the accounts of UAS Drone Corp. and UAS LLP. All significant inter-company transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include evaluation of obsolete inventory, valuation of stock options granted and valuation for awards of common stock.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity date of three months or less when purchased to be cash equivalents. At December 31, 2017, the Company had no cash balance in excess of federally insured limits.
Inventory
Inventory consists of the Companys finished goods and is stated at the lower of cost or market, using the FIFO method of inventory, net of reserves for excess, obsolete, damaged, or slow-moving items. Inventory consists of the following:
|
|
|
|
|
| |
|
|
2017
|
|
|
2016
|
|
Raw materials
|
$
|
4,320
|
|
$
|
4,320
|
|
Finished goods
|
|
10,452
|
|
|
15,193
|
|
Allowance for obsolescence
|
|
(9,661)
|
|
|
(9,661)
|
|
Total inventory
|
$
|
5,111
|
|
$
|
9,852
|
|
During the year ended December 31, 2017 and 2016, the Company recorded impairment charges of $0 and $7,524, respectively.
F-7
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Revenue Recognition
The Company is in the business of selling unmanned aerial systems (Drones). The sale of drones are recognized upon shipment of the product only if no significant Company obligations remain, the fee is fixed or determinable, and collection is received or the resulting receivable is deemed probable. On October 21, 2015, the Company entered into two agreements with a distributor who will provide both manufacturing and distribution services for its products to the law enforcement sector in the United States. The manufacturing agreement has a five-year term with successive three-year renewal terms, and provides a framework for development of marketing materials, warranty and service programs, training, and risk mitigation, among other material terms. Upon termination of the agreement, the Company shall repurchase any or all merchantable inventory of the Quadrotor drones on hand with the distributor at the prices paid to UAS. During the years ended December 31, 2017 and 2016, the Company did not sell any products to this distributor.
Fair Value of Financial Instruments
The carrying value of the Companys financial instruments, consisting of accounts payable, convertible debt and notes payable approximate their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements.
Income Taxes
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
When required, the Company records a liability for unrecognized tax positions, defined as the aggregate tax effect of differences between positions taken on tax returns and the benefits recognized in the financial statements. Tax positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. No tax benefits are recognized for positions that do not meet this threshold
We recognize interest and penalties related to unrecognized tax benefits on the interest expense line and other expense line, respectively, in the accompanying consolidated statement of operations. Accrued interest and penalties are included on the related liability lines in the unaudited condensed consolidated balance sheet.
Loss per Share
The basic loss per share is calculated by dividing our net loss by the weighted average number of common shares during the period. The diluted earnings (loss) per share is calculated by dividing our net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. For the year ended December 31, 2017, the Company has 1,217,181 shares underlying the convertible debt, and 45,000 vested stock options, which have been excluded from the calculation of diluted loss per share because their impact was anti-dilutive. For the year ended December 31, 2016, the Company has 1,106,703 shares underlying the convertible debt, and 25,000 vested stock options, which have been excluded from the calculation of diluted loss per share because their impact was anti-dilutive.
F-8
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard to achieve a consistent application of revenue recognition within the U.S., resulting in a single revenue model to be applied by reporting companies under U.S. generally accepted accounting principles. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On July 9 2015, the FASB agreed to delay the effective date by one year; accordingly, the new standard is effective for us beginning in the first quarter of 2018 and we expect to adopt it at that time. The new standard is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. This standard is not expected to have a material effect on the Companys financial position, results of operations and cash flows.
In February 2016, the FASB issued changes to the accounting for leases that primarily affect presentation and disclosure requirements. The new standard will require the recognition of a right to use asset and underlying lease liability for operating leases with an initial life in excess of one year. This standard is effective for us beginning in the first quarter of 2019. We have not yet determined the impact of the new standard on our consolidated financial statements.
Recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Companys present or future financial statements.
Research and Development
The Company expenses research and development costs as incurred. Research and Development costs totaled $0 and $4,740 for the years ended December 31, 2017 and 2016, respectively.
NOTE 3 RELATED PARTY TRANSACTIONS
During 2017, a stockholder of the Company loaned $48,008 to the company without a set maturity date and zero percent interest. The Company recorded a discount of $1,680 on the loan, which was classified as Additional Paid in Capital, and recorded interest expense of $1,680 during 2017. The balance due to the shareholder is $60,190 as of December 31, 2017.
During 2016, a stockholder of the Company loaned $37,182 to the company without a set maturity date and zero percent interest. The Company recorded a discount of $1,312 on the loan, which was classified as Additional Paid in Capital, and recorded interest expense of $237 during 2016. The balance due to the shareholder is $26,107 as of December 31, 2016.
NOTE 4 NOTES PAYABLE
On April 1, 2015, the Company closed a Subscription Agreement by which one institutional investor purchased an 8% Convertible Debenture having a total principal amount of $300,000, convertible into common shares of the Company at $0.33 per share and maturing April 1, 2017. The Company determined that the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not readily convertible to cash. The Company estimated the fair value of the underlying common stock and determined that the convertible note did not include a beneficial conversion feature. As of December 31, 2017 and 2016, the balance of this convertible note payable was $300,000.
On April 1, 2016, the Company closed an Additional Advance Agreement by which one institutional investor purchased an 8% Convertible Debenture having a total principal amount of $100,010, convertible into common shares of the Company at $1.55 per share and maturing April 1, 2017. The Company determined that the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not readily convertible to cash. The Company estimated the fair value of the underlying common stock and determined that the convertible note did not include a beneficial conversion feature. As of December 31, 2017 and 2016, the balance of these convertible notes payable were $100,010.
F-9
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 NOTES PAYABLE - Continued
On January 27, 2017, the Company closed a convertible debenture by which one institutional investor purchased an 8% Convertible Debenture having a total principal amount of $50,005, convertible into common shares of the Company at $1.55 per share and maturing August 1, 2018. The Company determined that the embedded conversion option did not require bifurcation and liability treatment because the underlying shares were not readily convertible to cash. The Company estimated the fair value of the underlying common stock and determined that the convertible note did not include a beneficial conversion feature. As of December 31, 2017, the balance of this convertible note payable was $50,005.
On September 23, 2017, the Company financed the premium for directors and officers insurance. The Company borrowed $28,098 at 5.54% interest, and the note will be repaid in 10 equal installments of $2,882. As of December 31, 2017, the balance of the note payable was $19,804.
On September 23, 2016, the Company financed the premium for directors and officers insurance. The Company borrowed $28,098 at 5.54% interest, and the note will be repaid in 10 equal installments of $2,882. As of December 31, 2016, the balance of the note payable was $19,804.
NOTE 5 EQUITY
Common Stock
The Company has authorized 100,000,000 shares of common stock, $0.0001 par value.
During the year ended December 31, 2016, the Company sold 25,844 shares of the Companys common stock at $1.50 a share, for proceeds of $38,766.
On January 19, 2016, 25,000 shares of common stock were awarded to the CEO recording expense of $37,500.
On March 4, 2016, the company issued the 10,000 shares of common stock awarded to a board member recording and $15,000 of expense for the services provided.
As of December 31, 2016, the Company accrued liabilities of $3,300 for refunds that will be returned to prospective investors. These amounts remain unpaid as of December 31, 2017 and are included in accrued expenses on the accompanying consolidated balance sheet.
Stock Options
During 2017, the Company granted a board member 20,000 stock options at $1.50, which vested on the date of grant, and during 2016, the Company granted a board member 20,000 stock options @ $1.50 that vested on the date of grant.
The fair value of option granted during the years ended December 31, 2017 and 2016 was determined using the Black-Scholes option valuation model. The significant weighted average assumptions relating to the valuation of the Companys Stock Options for the year ended December 31, 2017 and 2016 were as follows:
|
|
|
| |
|
2017
|
|
|
2016
|
Dividend yield
|
0%
|
|
0%
|
Expected life
|
3.0 yrs.
|
|
3.0 yrs.
|
Expected volatility
|
105.75%
|
|
110.74%
|
Risk-free interest rate
|
1.50 1.62%
|
|
0.71 1.47%
|
F-10
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 EQUITY Continued
A summary of the options activity for the years ended December 31, 2017 and 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
For the Years Ended December 31, 2017 and 2016
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at January 1, 2016
|
|
|
5,000
|
|
|
$
|
1.50
|
|
|
3.0 years
|
|
|
$
|
|
|
Granted
|
|
|
20,000
|
|
|
$
|
1.50
|
|
|
3.0 years
|
|
|
|
|
|
Outstanding at December 31, 2016
|
|
|
25,000
|
|
|
$
|
1.50
|
|
|
2.43 years
|
|
|
|
|
|
Granted
|
|
|
20,000
|
|
|
$
|
1.50
|
|
|
3.0 years
|
|
|
|
|
|
Outstanding at end of year
|
|
|
45,000
|
|
|
$
|
1.50
|
|
|
1.96 years
|
|
|
|
|
|
Outstanding at end of year
|
|
|
45,000
|
|
|
$
|
1.50
|
|
|
1.96 years
|
|
|
|
|
|
Exercisable at end of year
|
|
|
45,000
|
|
|
$
|
1.50
|
|
|
1.96 years
|
|
|
|
|
|
The total intrinsic value of options as of December 31, 2017 was $0. Intrinsic value is measured using the fair market value at the date of exercise (for shares exercised) or at December 31, 2017 (for outstanding options), less the applicable exercise price. During 2017 and 2016, the company recorded $18,402 and $20,020, respectively of non-cash compensation expense related to the vested stock options issued to a Director.
NOTE 6 CONFLICTS OF INTEREST
The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such person(s) may face a conflict in selecting between the Company and his other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 7 GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company recognized $5,000 of revenue in 2017 and net losses for the year ended December 31, 2017 and 2016. These conditions raise substantial doubt about the Companys ability to continue as a going concern. The Companys continuation as a going concern is dependent on its ability to meet its obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management is planning to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be successful in these efforts.
F-11
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES
The Company accounts for income taxes in accordance with FASB ASC Topic 740,
Accounting for Income Taxes
which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carryforwards. At December 31, 2017 and 2016, the total of all deferred tax assets was $113,726 and $225,231, respectively, and the total of the deferred liabilities was $542 and $4,440, respectively. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Companys future earnings, and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization of the deferred tax assets the Company has established a valuation allowance of $113,726 and $225,231 for the years ended December 31, 2017 and 2016. The change in the valuation allowance for the year ended December 31, 2017 and 2016 was $112,759 and $112,472, respectively.
On December 22, 2017, the Tax Cuts and Jobs Act (the Act) was signed into law. The Act decreases the U.S. corporate federal income tax rate from a maximum of 35% to a flat 21% effective January 1, 2018. The impact of the re-measurement on the Corporations net deferred tax asset, as of December 31, 2017, was an approximately $55,124 decrease in deferred tax assets, with a corresponding decrease in the Companys valuation allowance, and no impact on income tax expense. The Act also includes a number of other provisions including, among others, the elimination of net operating loss carrybacks and limitations on the use of future losses, the repeal of the Alternative Minimum Tax regime and the repeal of the domestic production activities deduction. These provisions are not expected to have a material effect on the Corporation.
Given the significant complexity of the Act and anticipated additional implementation guidance from the Internal Revenue Service, further implications of the Act may be identified in future periods.
The components of income tax expense (benefit) for the years ended December 31, 2017 and 2016 consist of the following:
|
|
|
|
|
|
| |
|
|
|
2017
|
|
|
2016
|
|
Deferred tax benefit:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(5,005)
|
|
$
|
101,622
|
|
State
|
|
|
4039
|
|
|
10,850
|
|
Increase in valuation allowance
|
|
|
966
|
|
|
(112,472)
|
|
Deferred tax benefit
|
|
$
|
-
|
|
$
|
-
|
|
A reconciliation of income tax expense at the federal statutory rate to income tax expense at the companys effective rate for the years ended December 31:
|
|
|
|
|
| |
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Computed tax at the expected statutory rate
|
|
$
|
(5,005)
|
|
$
|
(101,640)
|
State and local income taxes, net of federal
|
|
|
4,039
|
|
|
(10,850)
|
Revaluation of deferred tax assets for change in Federal Tax Rate
|
|
|
(55,124)
|
|
|
-
|
Other non-deductible expenses
|
|
|
-
|
|
|
18
|
Change in Valuation allowance
|
|
|
(54,158)
|
|
|
112,472
|
Income tax expense/(benefit)
|
|
$
|
-
|
|
$
|
-
|
F-12
UAS DRONE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - INCOME TAXES - Continued
The temporary differences, and carryforwards gave rise to the following deferred tax assets at December 31, 2017 and 2016:
|
|
|
|
|
| |
|
|
|
2017
|
|
|
2016
|
Deferred tax assets:
|
|
|
|
|
|
|
Allowance for obsolete inventory
|
|
$
|
542
|
|
$
|
4,440
|
Common stock awarded for services
|
|
|
3,802
|
|
|
25,400
|
Stock options granted for services
|
|
|
5,231
|
|
|
8,376
|
Net operating loss carryforward
|
|
|
104,151
|
|
|
187,015
|
Total deferred tax assets
|
|
|
113,726
|
|
|
225,231
|
Valuation allowance
|
|
|
(113,726)
|
|
|
(225,231)
|
Net deferred tax assets
|
|
$
|
-
|
|
$
|
-
|
NOTE 9 - SUBSEQUENT EVENTS
During January and February of 2018, a stockholder of the Company advanced $10,787 to the Company for operating purposes.
F-13
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 (the Exchange Act), such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within the time periods specified by SEC rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the Chief Executive Officer (CEO) and the Acting Chief Financial Officer (CFO), to allow timely decisions regarding required disclosure.
Our management evaluated, with the participation of our CEO and CFO, the effectiveness of our disclosure controls and procedures as of December 31, 2017, pursuant to paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. This evaluation included a review of the controls objectives and design, the operation of the controls, and the effect of the controls on the information presented in this Annual Report. Our management, including the CEO and CFO, do not expect that disclosure controls can or will prevent or detect all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Our disclosure controls and procedures are designed to provide such reasonable assurance of achieving their objectives. Also, the projection of any evaluation of the disclosure controls and procedures to future periods is subject to the risk that the disclosure controls and procedures may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Based on their review and evaluation, and subject to the inherent limitations described above, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of December 31, 2017 at the above-described reasonable assurance level.
During the year ended December 31, 2017, management identified the following weaknesses, which were deemed to be material weaknesses in internal controls:
1.
Due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties.
2.
The Company does not have a full time Chief Executive Officer nor Chief Financial Officer that can oversee day to day operations and the financial reporting function.
3.
The Company does not have an Independent Audit Committee that can provide management oversight.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even internal controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The effectiveness of our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error, and the risk of fraud. The projection of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies may deteriorate. Because of these limitations, there can be no assurance that any system of internal
26
control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
This Annual Report does not include an attestation report of the companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the companys registered public accounting firm pursuant to rules of the Securities and Exchange Commission that exempt from this requirement issuers that are neither accelerated filers nor large accelerated filers.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended December 31, 2017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Managements Report on Internal Control over Financial Reporting
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Integrated Framework. Based on this assessment, management has determined that the Companys internal control over financial reporting as of December 31, 2017, was effective.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth:
·
the names of our current directors and executive officers,
·
their ages as of March 28, 2017, which is the date for filing of this 10-K; and
·
the capacities in which they currently serve UAS :
|
|
|
|
|
| |
Name
|
|
Age
|
|
Position(s)
|
|
Served in Position Since
|
Grant A. Begley
|
|
65
|
|
CEO and Director
|
|
2016*
|
Scott Kahoe
|
|
31
|
|
Acting Chief Financial Officer
|
|
2015
|
Christopher M. Nelson
|
|
48
|
|
Director
|
|
2015
|
|
|
|
|
|
|
|
* - Mr. Begley was appointed CEO on January 22, 2016.
Grant A. Begley
, CEO and Director, is an industry expert in the commercial and military drone sectors. Mr. Begley served as Corporate Senior Vice President for Alion Science and Technology, where he developed and implemented its $1 billion Business Development Enterprise. Prior to Alion, Mr. Begley served as Pentagon Senior Advisor to the Office of the Under Secretary of Defense for Unmanned Aerial Systems, leading development of the Department of Defenses 2011 Unmanned Systems Roadmap. His career also includes leadership positions in advanced capabilities with Raytheon Corporation and Lockheed Martin where he initiated and led cross-corporation unmanned aerial systems/drone programs.
Mr. Begley served in the United States Navy for 26 years, where he was designated Top Gun, followed by acquisition assignments for the development and management of next generation manned and unmanned aircraft systems, weapon systems and joint executive acquisition assignments. Mr. Begley also served as the first competitively selected National Director for Counter Stealth, and Navy Director for StealthTechnologies, Policy and Advance Programs; and was on the Association of Unmanned Vehicle Systems International (AUVSI), Unmanned Systems 2014 Planning Committee. He holds
27
master's degrees in Aerospace and Aeronautic Engineering from the Naval Post-Graduate School and a bachelor's degree in General Engineering from the U.S. Naval Academy; and is certified from University of Virginia, Darden Business School in Executive Program Management, and from Massachusetts Institute of Technology in Executive Technical Management.
Scott Kahoe
, Acting Chief Financial Officer, was previously a Vice President at GreenBlock Capital based in Palm Beach, FL. From 2005 until 2015, Mr. Kahoe worked in the Financial Services industry as an investment banker, financial adviser and portfolio manager for some of the largest financial institutions in the United States. Having worked for Goldman Sachs, PNC Bank, and SEI Investments, Mr. Kahoe has experience managing public and private clients from Fortune 500 organizations to individual high-net worth portfolios. Mr. Kahoe is a graduate of Georgetown University in Washington, DC where he obtained his Bachelor of Science degree in Finance, and Syracuse University where he completed his Masters of Business Administration, concentrating on Information and Financial Management.
Christopher M. Nelson
, Director, is Managing Director of GreenBlock Capital (GBC), a Palm Beach, Florida based boutique merchant bank focused on assisting sub-$200mm private and public companies increase their shareholder value through strategic financings, mergers & acquisitions, and other fundamental catalyst events.
Mr. Nelson also serves as Director and President of Q2Earth Inc., a company pursuing acquisitions in the compost and soil manufacturing sector, which is a GBC portfolio company. Through GBC, Mr. Nelson successfully spun-off the companys patented technology from its parent company in 2014 and completed four rounds of funding amounting to over $6 million to date. Q2Earth is publicly traded on the OTC under the symbol QPWR.
Mr. Nelson has practiced law in Florida for over 22 years and has served in a general corporate counsel role for many start-up, early stage and established businesses seeking financing, acquisitions and general growth management counseling. Between 2000 and 2010 as a solo practitioner, Mr. Nelson raised over $20 million for his clients, directly closed over 15 acquisitions, and worked side-by-side with the executive management of these and other company/clients in forming and executing their business plans and growth strategies.
Between 1997 and 2000, Mr. Nelson was an associate with the international law firm Greenberg Traurig PA, and between 1995 and 1997 an associate with Akerman Senterfitt PA, both in Miami, Florida, and both in their corporate, M&A and securities practice divisions. At these law firms he represented companies such as AutoNation, Republic Industries and Wackenhut. During this time, Mr. Nelson worked on over $500 million in IPOs and other public financings, as well as leading or participating in over 50 mergers and acquisitions. Mr. Nelson received his BA from Princeton University and JD from University of Miami School of Law.
There are no non-officer employees who are expected to make a significant contribution to the business.
Family Relationships.
There are no family relationships between any of our directors or executive officers.
Involvement in Certain Legal Proceedings.
During the past ten years, none of our present or former directors, executive officers or persons nominated to become directors or executive officers:
(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
(2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
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(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or
(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
(4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
(5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
(6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
(7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
(i) Any Federal or State securities or commodities law or regulation; or
(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
(8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORT COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors, and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to us with respect to fiscal 2017, we believe that as of the filing date of this Annual Report on Form 10-K, each of our current directors, executive officers and 10% stockholders did not timely file his/its Form 3, Form 4 and/or Form 5 disclosures. Based solely on a review of such filings, as of the filing date of this Annual Report, each of such filings has been made, with the exception of the Form 3 of Mr. Swan.
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CORPORATE GOVERNANCE
Code of Ethics
We uphold a set of basic values to guide our actions and are committed to maintaining the highest standards of business conduct and corporate governance. We have adopted a Code of Business Conduct and Ethics for directors, officers (including our principal executive officer and principal financial officer) and employees, which, in conjunction with our Certificate of Incorporation, and Bylaws, form the framework for governance of UAS. The Code of Ethics and Business Conduct, Bylaws and Article of Incorporation are available at our corporate offices. Stockholders may request free printed copies of these documents from:
UAS Drone Corp
Attn: CFO
420 Royal Palm Way, Suite 100
Palm Beach, FL 33480
Committees of the Board of Directors
The Board of Directors has not adopted any written charters for any standing committees as there are only two directors on the board. The two board members oversee the operation of the Company.
Item 11. Executive Compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
A compensation committed has not been established by the company as executives are not currently being compensated in any material amount.
Summary Compensation Table
The following sets forth the compensation of UASs Chief Executive Officer during fiscal 2017, and the other persons who served as executive officers during fiscal 2017. Unless otherwise noted, the amounts shown represent what was earned in fiscal 2017.
SUMMARY COMPENSATION TABLE FISCAL 2017