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Jax Daily Record Monday, Mar. 27, 201712:00 PM EST

Drone Aviation's Trump ties untethered

by: Mark Basch Contributing Writer

When Donald Trump became president, it looked like Jacksonville-based Drone Aviation Holding Corp. might have an advantageous tie to the new administration.

The company’s former vice chairman, Michael Flynn, was installed as the new president’s national security adviser.

Flynn resigned from Drone Aviation in December to take the high-ranking job.

Of course, that didn’t work out so well. Flynn had to resign from his White House position in February after less than one month on the job over questions about his communications with Russian officials.

So Drone Aviation, a company that makes tethered drones and lighter-than-air aerostats and which seeks business with the U.S. government, no longer has a direct tie to the administration.

As it turns out, Drone Aviation has another previous tie to the current administration, although it also is unlikely to help now.

Several years ago, its predecessor company signed an agreement with a young businessman named Donald Trump Jr.

Drone Aviation became a public company in 2014 by merging into an existing public company called MacroSolve Inc. The company now has no real relationship to the former business of MacroSolve but it was an interesting deal signed with Trump in 2011.

Tulsa, Okla.-based MacroSolve was developing mobile applications. According to Securities and Exchange Commission filings, it entered into a “partnering relationship” with the son of the future president for public relations and marketing services.

Trump was paid a one-time fee of $45,000 for a two-year contract and issued 5 million shares of restricted MacroSolve stock, the filings show.

“As an influential businessman and brand authority, Donald Trump Jr. brings MacroSolve’s patented mobile app platform and services to his wide network of companies and affiliates looking to improve their performance using mobile apps,” MacroSolve said in a news release announcing the agreement.

“Having a company’s brand and logo on the screen of mobile devices is a valuable place to be for a company looking to drive revenues and productivity. The mobile app market is exploding and is a major part of our Trump branded businesses,” Trump said in a statement in the news release.

“With the combination of exploding market demand for mobile apps and the depth of experience and expertise of the management team at MacroSolve, I see unparalleled potential in this agreement,” he said.

Trump’s relationship with MacroSolve has been highlighted recently on several technology news websites trying to gauge the new administration’s policies on patents.

Before Drone Aviation became the company’s primary business, MacroSolve was known for filing patent lawsuits.

According to MacroSolve’s 2013 annual report filed with the SEC, after selling off a business in 2012, the company “focused on intellectual property licensing and enforcement of our patent in the mobile app market development space.”

That report said MacroSolve had filed complaints against 101 defendants and received settlements from 68 of them.

The company reported revenue of $1.45 million in 2013 from intellectual property licensing and services.

However, MacroSolve said in a June 2014 SEC filing that it decided to change direction and merge with Drone Aviation “after receiving an adverse action by the United States Patent and Trademark Office on patents we have been licensing.”

The “adverse action” was the rejection of claims on a single patent held by MacroSolve, and it forced the company to withdraw all outstanding litigation.

Drone Aviation’s 2016 annual report filed 10 days ago does not mention any patent lawsuits pending.

Drone Aviation took in $1.47 million in revenue for 2016 from its tethered drone business, according to the annual report. The company recorded a net loss of $8.5 million, or $1.23 a share.

The report shows Flynn was paid $27,000 in director’s fees after joining the board nearly a year ago.

Flynn was also issued 100,000 shares of common stock when he was appointed and was issued additional shares in September. However he “disclaimed” his interest in the stock when he resigned “and therefore did not effectively receive any stock-based compensation,” the report said.

The fledgling company announced several government contracts last year that it hopes will increase revenue this year. But its direct ties to the Trump administration, particularly with the president’s son, are well in the past.

PHH cutting elsewhere

Jacksonville is not the only location where PHH Corp. is sharply reducing its presence.

A story in Buffalo Business First last week said the struggling mortgage banking company is reducing its staff in Amherst, N.Y., to 30 people after its third cutback in the last few months.

PHH employed nearly 300 in that office near Buffalo before the cuts began.

Last month, PHH said it is selling off a big chunk of its Jacksonville operation and turning over the lease on its Baymeadows office to LenderLive Network LLC.

Denver-based LenderLive is hiring 250 to 300 of the PHH workers, while PHH expects to retain about 100 Jacksonville employees and lease space from LenderLive.

PHH had more than 1,000 employees in Jacksonville four years ago but has been cutting jobs and shedding operations as losses mounted at the New Jersey-based company.

As the company cuts back, it also is facing a proxy fight.

Investment firm EJF Capital, which controls 9.9 percent of PHH stock, sent a letter to the company saying it intends to nominate two directors to PHH’s seven-member board at the company’s annual meeting.

EJF said in an SEC filing it has had discussions with PHH about the board “as well as the timing of the Issuer’s plan to monetize its assets and return capital to investors.”

The filing said EJF’s director nominees “possess the requisite industry expertise necessary to work to enhance shareholder value.”

PHH issued a statement in response saying it will review EJF’s nominees.

“We appreciate EJF Capital’s input and will continue our dialogue with them and our other shareholders,” it said.

Shoe Carnival reports mixed results

Shoe Carnival Inc. last week reported higher-than-expected fourth-quarter earnings but forecast lower-than-expected earnings for fiscal 2017.

The footwear chain controlled by former Jacksonville Jaguars owner Wayne Weaver reported adjusted earnings of 7 cents a share for the fourth quarter ended Jan. 28, down from 21 cents the previous year but higher than analysts’ forecasts of 2 to 6 cents, according to Yahoo Finance.

Total sales rose by 0.2 percent to $234.2 million but comparable-store sales (sales at stores open for more than one year) dropped 1.2 percent.

Shoe Carnival had previously announced that holiday season sales were disappointing, but CEO Cliff Sifford said in a news release Thursday that profit margins in the quarter were better than expected.

“Our team took decisive actions to promote our seasonal boot footwear to ensure we ended 2016 in a clean inventory position. We believe the strong athletic footwear cycle we experienced during the year will continue into 2017, and we are pleased with the early results from our casual sandal footwear,” he said.

Shoe Carnival forecast fiscal 2017 earnings to be between $1.45 and $1.54 a share, up from adjusted earnings of $1.40 last year. However, that was lower than analysts’ forecasts which ranged from $1.55 to $1.76.

Shoe Carnival operates 411 stores in 35 states, after opening 19 stores and closing nine in fiscal 2016.

Weaver is chairman of Shoe Carnival and its largest shareholder, controlling 25.2 percent of the stock along with his wife, Delores.

Lennar sees strong housing market

Homebuilder Lennar Corp. last week reported better-than-expected earnings and said it is optimistic about trends in the housing market.

Miami-based Lennar’s earnings of 56 cents a share for the first quarter ended Feb. 28 were 7 cents lower than the previous year but a penny higher than the average analyst’s forecast, according to Bloomberg News.

CEO Stuart Miller said in a news release that the company has seen “an improving macroeconomic environment” after last year’s elections.

“Since November we have seen a combination of renewed optimism, wage and job growth, and consumer confidence,” Miller said.

“As a result, our homebuilding operations have gone from slow and steady to a faster-than-expected sales pace throughout our first quarter. In this environment of accelerating sales pace, together with limited land and labor, and tight inventory particularly at the lower price points, we believe we are positioned for increased pricing power and solid earnings going forward,” he said.

Lennar, which builds homes in several Northeast Florida communities, is one of the largest homebuilders in Florida, growing even more in the state after acquiring Bonita Springs-based WCI Communities Inc. last month.

WCI, which operated in the southern half of Florida, brought additional high-growth and coastal markets to Lennar’s portfolio, the company said.

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