Drone Aviation Corp (DRNE): A Drone Stock with a Past
With very few publicly traded drone stocks available for investors, we knew it would just be a matter of time before an over-the-counter (OTC) company stepped into the drone space. As we’ve highlighted before, investing in OTC companies is probably the easiest way to lose your money aside from leaving it in a bundle on the street outside your house overnight. As we have many times in the past, we will continue to go out of our way to shine the light on OTC companies that attempt to capitalize on the excitement behind disruptive technologies. We may have found one such company in the drone space.
The first thing that looks peculiar about Drone Aviation Corp (OTCMKTS:DRNE) is that the CEO (Kevin Hess) and the CFO (Felicia Hess) appear to be related, or perhaps they are husband and wife. If that is the case, then this is a conflict of interest that no competent board of directors would allow to exist. However, for the sake of this article, let’s assume that this is a coincidence and these two individuals are not related.
In doing a bit of digging around, we found out that on March 28 2013, an over-the-counter (OTC) company called World Surveillance Group (OTCMKTS:WSGI) acquired a company called Lighter Than Air Systems from none other than Kevin Hess and Felicia Hess. Here’s how shares of WSGI have performed since that transaction:
Shareholders who were lucky enough to get in on the last Hess business venture would have lost -93% of their investment so far. So what happened to Lighter Than Air Systems? It was sold to Drone Aviation Corp less than one year later at which time both Kevin and Felicia Hess resigned from their positions at WSGI, a company which now has a market cap of less than $1 million. Here is what DRNE explicitly states on their homepage:
Drone Aviation was formed in April 2014 from the acquisition of Lighter Than Air Systems Corp. (LTAS), founded in 2009.
Now we see that both Kevin Hess and Felicia Hess are leading this new venture; Drone Aviation Corp. Since that acquisition, shares of DRNE have lost almost -90% so far:
If investors in the first attempt to commercialize LSAT lost -93% of their investment, and so far in the second attempt have lost nearly -90%, just what hope is there that anything positive can come out of this? One hope may be in the pedigree of individuals who sit on the Board of Directors (BOD). In looking at the BOD for DRNE, we see a certain Major General Wayne Jackson listed as a Director. Having a retired major on your BOD certainly looks compelling, that is until you find out that Major Jackson was previously the Chairman of the Compensation Committee for WSGI and resigned from that position in February 2015.
DRNE has now hired an ex-Oracle executive as Chairman of the Board and they are looking to reverse split their way into a NASDAQ listing by September 2016. At this point, we haven’t even looked at the Company’s drone product offerings (tethered drones and aerostats) or revenues (small and shrinking). With what we know about the past business dealings of Kevin and Felicia Hess, we’re just seeing far too many red flags that discourage us from spending any more time looking into this company.