Red Cat (RCAT) 10-Q 23 Dec 19 2020 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Oct. 31, 2019	Dec. 20, 2019
Document And Entity Information
Entity Registrant Name	Red Cat Holdings, Inc.
Entity Central Index Key	0000748268
Document Type	10-Q
Document Period End Date	Oct. 31, 2019
Entity Incorporation, State or Country Code	NV
Amendment Flag	false
Current Fiscal Year End Date	--04-30
Entity File Number	000-31587
Is Entity's Reporting Status Current?	Yes
Entity Interactive Data Current	Yes
Is Entity Emerging Growth Company?	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Common Stock, Shares Outstanding		16,929,048
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2020
Entity Shell Company	false

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (unaudited) - USD ($)	Oct. 31, 2019	Apr. 30, 2019
Current Assets
Cash	$ 264,533	$ 503,438
Prepaid expenses	25,000	100,000
Total Current Assets	289,533	603,438
Goodwill	93,050
TOTAL ASSETS	382,583	603,438
Current Liabilities
Accounts payable	60,895	20,894
Accrued Expenses	9,823	15,116
Common shares to be issued	152,239	754,700
Total Current Liabilities	222,957	790,710
Total Liabilities	222,957	790,710
Commitments and contingencies
Stockholders' Equity
Series A Preferred Stock - shares authorized 2,200,000; outstanding 208,704 and 0; Series B Preferred Stock - shares authorized 4,300,000; outstanding 3,972,645 and 0	41,813
Common stock - shares authorized 500,000,000; outstanding 16,929,048 and 179,292	16,929	179
Additional paid-in capital	1,610,329	784,371
Accumulated deficit	(1,509,445)	(971,822)
Total Stockholders' Equity	159,626	(187,272)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 382,583	$ 603,438

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Oct. 31, 2019	Apr. 30, 2019
Preferred stock, shares authorized	6,500,000	6,500,000
Preferred stock, shares issued	4,181,349
Preferred stock, shares outstanding	4,181,349
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	16,929,048	179,292
Common stock, shares outstanding	16,929,048	179,292
Series A Preferred Stock
Preferred stock, shares authorized	2,200,000	2,200,000
Preferred stock, shares issued	208,704
Preferred stock, shares outstanding	208,704
Series B Preferred Stock
Preferred stock, shares authorized	4,300,000	4,300,000
Preferred stock, shares issued	3,972,645
Preferred stock, shares outstanding	3,972,645

Condensed Consolidated Operatio

Condensed Consolidated Operations Statements (unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Oct. 31, 2019	Oct. 31, 2018	Oct. 31, 2019	Oct. 31, 2018
Income Statement [Abstract]
REVENUES
EXPENSES
Research and development	76,724	112,096	262,419	219,264
General and administrative expenses	139,397	45,785	275,204	84,567
Loss before income taxes	216,121	157,881	537,623	303,831
Provision for income taxes
NET LOSS	$ 216,121	$ 157,881	$ 537,623	$ 303,831
LOSS PER SHARE - basic and diluted	$ (0.01)	$ (0.88)	$ (0.06)	$ (1.70)
Weighted average shares outstanding - basic and diluted	16,929,048	179,293	8,644,382	179,202

Condensed Consolidated Stockhol

Condensed Consolidated Stockholders' Equity Statements (unaudited) - USD ($)	Series A Preferred Stock	Series B Preferred Stock	Common stock	Additional Paid in Capital	Accumulated Deficit	Total
Beginning balance, shares at Apr. 30, 2018			177,611
Beginning balance, amount at Apr. 30, 2018			$ 178	$ 734,372	$ (220,490)	$ 514,060
Issuance of common stock, shares			1,681
Issuance of common stock, amount			$ 2	49,998		50,000
Net loss					(146,450)	(146,450)
Ending balance, shares at Jul. 31, 2018			179,292
Ending balance, amount at Jul. 31, 2018			$ 179	784,371	(366,940)	417,610
Beginning balance, shares at Apr. 30, 2018			177,611
Beginning balance, amount at Apr. 30, 2018			$ 178	734,372	(220,490)	514,060
Shares Issued for Services, amount
Share Exchange Agreement, amount
Net loss						(303,831)
Ending balance, shares at Oct. 31, 2018			179,292
Ending balance, amount at Oct. 31, 2018			$ 179	784,371	(524,821)	259,729
Beginning balance, shares at Jul. 31, 2018			179,292
Beginning balance, amount at Jul. 31, 2018			$ 179	784,371	(366,940)	417,610
Net loss					(157,881)	(157,881)
Ending balance, shares at Oct. 31, 2018			179,292
Ending balance, amount at Oct. 31, 2018			$ 179	784,371	(524,821)	259,729
Beginning balance, shares at Apr. 30, 2019			179,292
Beginning balance, amount at Apr. 30, 2019			$ 179	784,371	(971,822)	(187,272)
Issuance of common stock, shares			15,355
Issuance of common stock, amount			$ 15	684,685		684,700
Shares Issued for Services, shares			1,570
Shares Issued for Services, amount			$ 2	69,998		70,000
Share Exchange Agreement, shares	2,169,068	4,212,645	196,667
Share Exchange Agreement, amount	$ 21,691	$ 42,126	$ 197	53,740		117,754
Conversion of Preferred Stock and Reverse Stock Split, shares	(1,960,364)	(240,000)	16,536,164
Conversion of Preferred Stock and Reverse Stock Split, amount	$ (19,604)	$ (2,400)	$ 16,536	5,468
Net loss					(321,502)	(321,502)
Ending balance, shares at Jul. 31, 2019	208,704	3,972,645	16,929,048
Ending balance, amount at Jul. 31, 2019	$ 2,087	$ 39,726	$ 16,929	1,598,262	(1,293,324)	363,680
Beginning balance, shares at Apr. 30, 2019			179,292
Beginning balance, amount at Apr. 30, 2019			$ 179	784,371	(971,822)	$ (187,272)
Shares Issued for Services, shares						1,570
Shares Issued for Services, amount						$ 70,000
Share Exchange Agreement, amount						117,754
Stock based compensation						12,067
Net loss						(537,623)
Ending balance, shares at Oct. 31, 2019	208,704	3,972,645	16,929,048
Ending balance, amount at Oct. 31, 2019	$ 2,087	$ 39,726	$ 16,929	1,610,329	(1,509,445)	159,626
Beginning balance, shares at Jul. 31, 2019	208,704	3,972,645	16,929,048
Beginning balance, amount at Jul. 31, 2019	$ 2,087	$ 39,726	$ 16,929	1,598,262	(1,293,324)	363,680
Stock based compensation				12,067		12,067
Net loss					(216,121)	(216,121)
Ending balance, shares at Oct. 31, 2019	208,704	3,972,645	16,929,048
Ending balance, amount at Oct. 31, 2019	$ 2,087	$ 39,726	$ 16,929	$ 1,610,329	$ (1,509,445)	$ 159,626

Condensed Consolidated Cash Flo

Condensed Consolidated Cash Flows Statements (unaudited) - USD ($)	6 Months Ended
	Oct. 31, 2019	Oct. 31, 2018
Cash Flows from Operating Activities
Net loss	$ (537,623)	$ (303,831)
Stock based compensation	12,067
Adjustments to reconcile net loss to net cash from operations:
Prepaid expenses	75,000
Accounts payable	40,001
Accrued expense	(5,293)	(602)
Net cash used in operating activities	(415,848)	(304,433)
Cash Flows from Investing Activities
Acquired through acquisition	24,704
Net cash provided by investing activities	24,704
Cash Flows from Financing Activities
Common stock to be issued	152,239
Common stock issued		50,000
Net cash provided by financing activities	152,239	50,000
Net use of Cash	(238,905)	(254,433)
Cash, beginning of period	503,438	570,326
Cash, end of period	264,533	315,893
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for taxes
Noncash transactions
Common stock issued for services	70,000
Fair value of shares exchanged in acquisition	$ 117,754

The Business

The Business	6 Months Ended
	Oct. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
The Business	Note 1 - The Business The Company was originally incorporated in February 1984. Beginning in May 2019, we have elected to focus on the business operations of Red Cat Holdings (or “Red Cat”) which is developing products to provide distributed data storage, analytics and related services to the drone industry. We plan to utilize blockchain based technologies and offer our solutions as a Software-as-a-Service platform. Potential customers include regulators to track and review flight data, insurance companies for coverage and claims administration, and pilots to maintain compliance with regulations. We are targeting the first half of 2020 for the release of our first product, “Black Box by Red Cat” although no assurances can be provided regarding the actual release date. In July 2019, we changed our name from TimeFire VR Inc. to Red Cat Holdings, Inc. In August 2019, we changed our fiscal year to April 30 which was the historical fiscal year of Red Cat. In August 2019, we effected a reverse stock split (the “Reverse Stock Split”) of our outstanding shares of common stock at a ratio of one-for-twelve hundred (1 for 1,200). All references in this Quarterly Report to shares of the Company’s common stock, including prices per share of its common stock, reflect the Reverse Stock Split. The Share Exchange Agreement Effective May 15, 2019, we closed a Share Exchange Agreement (the “SEA”) with TimeFireVR, Inc., (“TimeFire”), a Nevada corporation. Under the SEA, we acquired approximately 83.33% of TimeFire’s outstanding share capital on a fully-diluted basis. We issued: (i) 196,667 shares of our common stock, (ii) 2,169,068 shares of our newly-designated Series A Preferred Stock, and (iii) 4,212,645 shares of our newly-designated Series B Preferred Stock. Our new Series A Preferred Stock is convertible to common stock at a ratio of 8.33 shares of common stock for each share of preferred stock held, and votes together with the common stock on an as-converted basis. The new Series A Preferred Stock will convert automatically to common stock upon the effectiveness of any future reverse split of our common stock. This common stock and Series A Preferred Stock issued under the SEA will constitute approximately 83.33% of our issued and outstanding share capital on a fully-diluted basis. Our new Series B Preferred Stock is convertible to common stock at a ratio of 0.83 shares of common stock for each share of preferred stock held, and votes together with the common stock on an as-converted basis. This Series B Preferred Stock issued under the SEA will constitute approximately 15.64% of our issued and outstanding share capital on a fully-diluted basis. In total, the common stock, Series A Preferred Stock, and Series B Preferred Stock issued under the SEA are valued at $117,754. Red Cat Propware, Inc. On May 15, 2019, we acquired TimeFireVR, Inc., in a $117,754 stock transaction classified as a reverse-merger transaction. The acquisition will provide access to the public markets and support the development of our product platform. In this reverse merger, the financial results of Red Cat Propware, Inc., (the accounting acquirer), have been presented as the continuing operations of the Company since inception. Cash $ 24,704 Goodwill 93,050 Total $ 117,754 The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies and benefits from the combination of the two companies, including access to the public markets to raise capital, and is expected to be deductible for tax purposes.

Going Concern

Going Concern	6 Months Ended
	Oct. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Going Concern	Note 2 - Going Concern The financial statements have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying financial statements, we have never generated revenues since our inception and have accumulated losses totaling approximately $1.5 million through October 31, 2019. Management recognizes that these operating results and our financial position raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and the classification of liabilities that might be necessary should we be unable to continue as a going concern. We are presently seeking to address these going concern doubts through a number of actions including efforts to (a) raise capital through the public markets, (b) release our first commercial product and (c) pursue acquisitions of complementary, revenue generating companies which are accretive to our operating results. We can provide no assurance that any of these efforts will be successful or, that even if successful, that they will alleviate doubts about our ability to continue as a going concern.

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Oct. 31, 2019
Accounting Policies [Abstract]
Summary of Significant Accounting Policies	Note 3 - Summary of Significant Accounting Policies Basis of Accounting Principles of Consolidation – Use of Estimates Cash Prepaid Expenses Goodwill We plan to perform an impairment test at the end of each fiscal year, or more frequently if indications of impairment arise. We have a single reporting unit, and consequently, evaluate goodwill for impairment based on an evaluation of the fair value of the Company as a whole. Common Stock Warrants Research and Development Income Taxes Recent Accounting Pronouncements Comprehensive Loss – Stock-Based Compensation – Basic and Diluted Net Loss per Share Related Parties

Income Taxes

Income Taxes	6 Months Ended
	Oct. 31, 2019
Income Tax Disclosure [Abstract]
Income Taxes	Note 4 - Income Taxes Our operating subsidiary is incorporated and based in Puerto Rico which is a commonwealth of the United States. We are not subject to taxation by the United States as Puerto Rico has its own taxing authority which passed the Export Services Act, also known as Act 20, in 2012. Under Act 20, eligible businesses are subject to a special corporate tax rate of 4%. Since inception, we have not generated any revenues and incurred net losses in each of the three and nine month periods ended October 31, 2019 and 2018. Our current provision for each of these periods consisted of a tax benefit against which we applied a full valuation allowance, resulting in no current provision for income taxes. In addition, there was no deferred provision for any of these reporting periods. At October 31, 2019 and April 30, 2019, we had accumulated deficits of approximately $1.5 million and $972,000, respectively. Deferred tax assets related to the future benefit of these net operating losses for tax purposes totaled approximately $60,000 and $40,000, respectively, based on the Act 20 rate of 4%. Currently, we focus on projected future taxable income in evaluating whether it is more likely than not that these deferred assets will be realized. Based on the fact that we have not generated any revenues since inception, we have applied a full valuation allowance against our deferred tax assets at October 31, 2019 and April 30, 2018.

Common Stock, Preferred Stock a

Common Stock, Preferred Stock and Warrants	6 Months Ended
	Oct. 31, 2019
Stockholders' Equity Note [Abstract]
Common Stock, Preferred Stock and Warrants	Note 5 – Common Stock We are authorized to issue 500,000,000 shares of common stock. Each share of common stock is entitled to one vote. Note 6 – Preferred Stock Our Series A Preferred Stock (“Series A Stock”) is convertible to common stock at a ratio of 8.33 shares of common stock for each share of Series A Stock, and votes together with the common stock on an as-converted basis. The Series A Preferred Stock was originally issued under the Securities Exchange Agreement, as further described in Note 1. The Series A Stock was automatically converted into shares of common stock upon the effectiveness of our reverse stock split in August 2019, except for 208,704 shares which were subject to a limitation on the number of shares of common stock that can be held by the holder of those shares of Series A Stock. Our Series B Preferred Stock (“Series B Stock”) is convertible into common stock at a ratio of 0.8334 shares of common stock for each share of Series B Stock held and votes together with the common stock on an as-converted basis. The Series B Preferred Stock was originally issued under the Exchange Agreement, as further described in Note 1. In August 2019, a total of 240,000 shares of Series B Stock were converted into 200,000 shares of common stock. Note 7 - Warrants In May 2019, as part of the Share Exchange Agreement, we issued warrants to purchase 469,874 shares of common stock at an exercise price of $0.324 per share of common stock. The value of these warrants was considered to be a nominal amount at the time of issuance. In September 2019, we received $152,239 in connection with the exercise of these warrants. The holder did not provide the required paperwork to complete the exercise until November 2019 and the shares are not expected to be issued until December 2019. As a result, the amount received has been reported as Common Stock to be Issued in the liabilities section of the Balance Sheet at October 31, 2019. We also assumed a fully vested, restricted stock unit agreement requiring the issuance of 41,667 shares of common stock in May 2021, as well as a warrant to purchase 5,556 shares of common stock at an exercise price of $60.00 per share. This warrant expires in March 2021.

Share Based Awards

Share Based Awards	6 Months Ended
	Oct. 31, 2019
Share-based Payment Arrangement [Abstract]
Share Based Awards	Note 8 – Share Based Awards Effective August 2019, shareholders approved the 2019 Equity Incentive Plan (the “Plan”) which allows us to incentivize key employees, consultants, and directors with long term compensation awards such as stock options, restricted stock, and restricted stock units (collectively, the “Awards”). The number of shares issuable in connection with Awards under the Plan may not exceed 8,750,000. In October 2019, we issued options to purchase 350,000 shares of common stock valued at $477,500. 200,000 of the options vest ratably over a 2 year period and expire in October 2029. 150,000 of the options vest ratably over a 3 year period and expire in October 2024. All of the options were issued at an exercise price of $2.10 which equaled the stock price on the date of issuance. None of the options were exercisable as of October 31, 2019. The remaining weighted average contractual term of the options outstanding at October 31, 2019 was 7.80 years. The aggregate intrinsic value of the options, representing the excess of the stock price over the exercise price, was zero at October 31, 2019. We recognized stock compensation expense of $12,067 during the three months ended October 31, 2019, of which $8,815 was included in general and administrative expenses and $3,252 was included in research and development expenses. We used the Black-Scholes Model to estimate the fair value of the stock options issued using the following assumptions: (i) expected volatility – 75%, (ii) risk free interest rate – 1.59% or 1.74%, (iii) expected life – 5 or 10 years, and (iv) expected dividend yield of 0%.

Related Party Transactions

Related Party Transactions	6 Months Ended
	Oct. 31, 2019
Related Party Transactions [Abstract]
Related Party Transactions	Note 9 - Related-Party Transactions Shares Issued for Services Office Lease Convertible Note Financing

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Oct. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Note 10 - Commitments and Contingencies Office Lease

Subsequent Events

Subsequent Events	6 Months Ended
	Oct. 31, 2019
Subsequent Events [Abstract]
Subsequent Events	Note 11 - Subsequent Events In November 2019 we issued a convertible note in the principal amount of $300,000 to one accredited investor and in December 2019 we issued a convertible note in the principal amount of $125,000 to a director and a convertible note in the principal amount of $25,000 to our chief executive officer (collectively, the “Notes”). The Notes have a term of 2 years and bear interest at a rate of 12% which accrues and is payable in full when the Notes mature. Interest on the Notes may be paid in cash or in shares of common stock of the Company at the Conversion Price (as defined below).The Notes are convertible into shares of common stock at the holder’s sole discretion as follows: (A) prior to consummating an equity financing which generates gross proceeds of not less than $3,000,000 (a “Qualified Offering”), then at the 30 day volume weighted average of the closing price of a share of our common stock as listed or quoted on the market in which the shares are then traded or listed, or (B) after we have consummated a Qualified Offering, at 40% of the price per share of common stock sold in the Qualified Offering (the “Conversion Price”) . We may, upon 10 business days advance notice, elect to pre-pay the Note, including all accrued interest, in whole or in part, provided that any such prepayment prior to the one-year anniversary of the Note issuance shall be at a price equal to 112% of the then outstanding original principal amount. Upon an event of default, as described in the Notes, the outstanding principal and interest shall become immediately due and payable. Additionally, under the Note, unless waived by the holder, the holder shall not be entitled to convert the Note if such conversion would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the outstanding shares of common stock of the Company on such date.

Summary of Significant Accoun_2

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Oct. 31, 2019
Accounting Policies [Abstract]
Basis of Accounting	Basis of Accounting
Principles of Consolidation	Principles of Consolidation
Use of Estimates	Use of Estimates
Cash	Cash
Prepaid Expenses	Prepaid Expenses
Goodwill	Goodwill We plan to perform an impairment test at the end of each fiscal year, or more frequently if indications of impairment arise. We have a single reporting unit, and consequently, evaluate goodwill for impairment based on an evaluation of the fair value of the Company as a whole.
Common Stock	Common Stock
Warrants	Warrants
Research and Development	Research and Development
Income Taxes	Income Taxes
Recent Accounting Pronouncements	Recent Accounting Pronouncements
Comprehensive Loss	Comprehensive Loss –
Stock-Based Compensation	Stock-Based Compensation –
Basic and Diluted Net Loss per Share	Basic and Diluted Net Loss per Share
Related Parties	Related Parties

The Business (Tables)

The Business (Tables)	6 Months Ended
	Oct. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Major classes of assets and liabilities allocated to purchase price of acquisition	Cash $ 24,704 Goodwill 93,050 Total $ 117,754

The Business - Major classes of

The Business - Major classes of assets and liabilities allocated to purchase price of acquisition (Details)	Oct. 31, 2019USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Cash	$ 24,704
Goodwill	93,050
Total	$ 117,754

The Business (Details Narrative

The Business (Details Narrative) - USD ($)	Aug. 02, 2019	Oct. 31, 2019	May 15, 2019
Percentage of TimeFire's outstanding share capital acquired in Share Exchange Agreement			83.33%
Total value of stock issued under Share Exchange Agreement			$ 117,754
Reverse stock split	1:1,200
Common Stock issued
Stock issued in Share Exchange Agreement		196,667
Series A Preferred Stock issued
Stock issued in Share Exchange Agreement		2,169,068
Series B Preferred Stock issued
Stock issued in Share Exchange Agreement		4,212,645

Going Concern (Details Narrativ

Going Concern (Details Narrative) - USD ($)	Oct. 31, 2019	Apr. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (1,509,445)	$ (971,822)

Income Taxes (Details Narrative

Income Taxes (Details Narrative) - USD ($)	Oct. 31, 2019	Apr. 30, 2019
Income Tax Disclosure [Abstract]
Accumulated deficit	$ (1,509,445)	$ (971,822)
Approximate deferred tax assets related to future benefit of net operating losses	$ 60,000	$ 40,000

Common Stock, Preferred Stock_2

Common Stock, Preferred Stock and Warrants (Details Narrative) - USD ($)	6 Months Ended
	Oct. 31, 2019	May 15, 2019
Stockholders' Equity Note [Abstract]
Warrants issued, number issued		469,874
Warrants issued, value	$ 152,239
Warrants issued, shares of common stock available for purchase		469,874
Warrants issued, price per share		$ 0.324

Share Based Awards (Details Nar

Share Based Awards (Details Narrative) - USD ($)	3 Months Ended	6 Months Ended
	Oct. 31, 2019	Oct. 31, 2019
Share-based Payment Arrangement [Abstract]
Number of shares issuable in connection with Awards under the Plan, maximum		8,750,000
Options issued, number of common stock shares available for purchase		350,000
Options issued, value		$ 477,500
Options issued, remaining weighted average contractural term		7 years 9 months 18 days
Stock compensation expense recognized	$ 12,067	$ 12,067

Related Party Transactions (Det

Related Party Transactions (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended	6 Months Ended
	Dec. 20, 2019	Jul. 31, 2019	Oct. 31, 2019	Oct. 31, 2018
Shares Issued for Services, shares			1,570
Shares Issued for Services, amount		$ 70,000	$ 70,000
Rent expense			$ 8,100	$ 7,200
Member of Board of Directors
Convertible note financing with related parties	$ 125,000
Chief Executive Officer
Convertible note financing with related parties	$ 25,000

Commitments and Contingencies (

Commitments and Contingencies (Details Narrative)	6 Months Ended
	Oct. 31, 2019USD ($)
Commitments and Contingencies Disclosure [Abstract]
Lease agreement, annual amount	$ 26,638