Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Jan. 31, 2020 | Mar. 18, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Red Cat Holdings, Inc. | |
Entity Central Index Key | 0000748268 | |
Document Type | 10-Q | |
Document Period End Date | Jan. 31, 2020 | |
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 | 19,861,091 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Shell Company | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (unaudited) - USD ($) | Jan. 31, 2020 | Apr. 30, 2019 |
Current Assets | ||
Cash | $ 442,863 | $ 503,438 |
Accounts receivable | 28,500 | |
Inventory | 123,306 | |
Other current assets | 22,330 | 100,000 |
Total Current Assets | 616,999 | 603,438 |
Goodwill | 2,468,902 | |
Trademark | 20,000 | |
Other | 3,851 | |
TOTAL ASSETS | 3,109,752 | 603,438 |
Current Liabilities | ||
Accounts payable | 219,133 | 20,894 |
Accrued Expenses | 43,069 | 15,116 |
Notes Payable | 211,609 | |
Due to Related Party | 343,121 | |
Common shares to be issued | 754,700 | |
Total Current Liabilities | 816,932 | 790,710 |
Convertible debentures | 450,000 | |
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 3,681,623 and 0 | 38,903 | |
Common stock - shares authorized 500,000,000; outstanding 19,861,091 and 179,292 | 19,861 | 179 |
Additional paid-in capital | 3,732,120 | 784,371 |
Accumulated deficit | (1,948,064) | (971,822) |
Total Stockholders' Equity | 1,842,820 | (187,272) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 3,109,752 | $ 603,438 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jan. 31, 2020 | Apr. 30, 2019 |
Preferred stock, shares authorized | 6,500,000 | 6,500,000 |
Preferred stock, shares issued | 3,890,327 | |
Preferred stock, shares outstanding | 3,890,327 | |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 19,861,091 | 179,292 |
Common stock, shares outstanding | 19,861,091 | 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 | 3,681,623 | |
Preferred stock, shares outstanding | 3,681,623 |
Condensed Consolidated Operatio
Condensed Consolidated Operations Statements (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Jan. 31, 2020 | Jan. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Income Statement [Abstract] | ||||
Revenues | $ 34,538 | $ 34,538 | ||
Cost of goods sold | 16,234 | 16,234 | ||
Gross Margin | 18,304 | 18,304 | ||
Operating Expenses | ||||
Research and development | 138,465 | 107,246 | 400,884 | 258,636 |
General and administrative expenses | 318,458 | 219,805 | 593,662 | 372,745 |
Total operating expenses | 456,923 | 327,051 | 994,546 | 631,381 |
Operating loss | (438,619) | (327,051) | (976,242) | (631,381) |
Provision for income taxes | ||||
Net loss | $ (438,619) | $ (327,051) | $ (976,242) | $ (631,381) |
Loss per share - basic and diluted | $ 0.02 | $ 1.82 | $ 0.08 | $ 3.56 |
Weighted average shares outstanding - basic and diluted | 17,732,298 | 179,293 | 11,556,950 | 177,440 |
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 | ||||||
Exercise of warrants, amount | ||||||
Stock based compensation | ||||||
Net loss | (631,381) | |||||
Ending balance, shares at Jan. 31, 2019 | 179,292 | |||||
Ending balance, amount at Jan. 31, 2019 | $ 179 | 784,371 | (851,871) | (67,321) | ||
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 | (157,880) | (157,880) | ||||
Ending balance, shares at Oct. 31, 2018 | 179,292 | |||||
Ending balance, amount at Oct. 31, 2018 | $ 179 | 784,371 | (524,820) | 259,730 | ||
Net loss | (327,051) | (327,051) | ||||
Ending balance, shares at Jan. 31, 2019 | 179,292 | |||||
Ending balance, amount at Jan. 31, 2019 | $ 179 | 784,371 | (851,871) | (67,321) | ||
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 | 1,937,867 | |||||
Exercise of warrants, amount | 152,239 | |||||
Stock based compensation | 161,529 | |||||
Net loss | (976,242) | |||||
Ending balance, shares at Jan. 31, 2020 | 208,704 | 3,681,623 | 19,861,091 | |||
Ending balance, amount at Jan. 31, 2020 | $ 2,087 | $ 36,816 | $ 19,861 | 3,732,120 | (1,948,064) | 1,842,820 |
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 |
Exercise of warrants, shares | 469,874 | |||||
Exercise of warrants, amount | $ 470 | 151,769 | 152,239 | |||
Conversion of Preferred Stock, shares | (291,022) | 242,519 | ||||
Conversion of Preferred Stock, amount | $ (2,910) | $ 243 | 2,668 | |||
Merger with Rotor Riot, shares | 2,219,650 | |||||
Merger with Rotor Riot, amount | $ 2,220 | 1,817,893 | 1,820,113 | |||
Stock based compensation | 149,462 | 149,462 | ||||
Net loss | (438,619) | (438,619) | ||||
Ending balance, shares at Jan. 31, 2020 | 208,704 | 3,681,623 | 19,861,091 | |||
Ending balance, amount at Jan. 31, 2020 | $ 2,087 | $ 36,816 | $ 19,861 | $ 3,732,120 | $ (1,948,064) | $ 1,842,820 |
Condensed Consolidated Cash Flo
Condensed Consolidated Cash Flows Statements (unaudited) - USD ($) | 9 Months Ended | |
Jan. 31, 2020 | Jan. 31, 2019 | |
Cash Flows from Operating Activities | ||
Net loss | $ (976,242) | $ (631,381) |
Stock based compensation | 161,529 | |
Accrued interest | 182 | |
Changes in operating assets and liabilities | ||
Inventory | 4,105 | |
Other current assets | 77,670 | |
Accounts payable | 38,152 | (5,787) |
Accrued expense | (10,047) | |
Net cash used in operating activities | (704,651) | (637,168) |
Cash Flows from Investing Activities | ||
Acquired through acquisition | 46,327 | |
Net cash provided by investing activities | 46,327 | |
Cash Flows from Financing Activities | ||
Proceeds from issuance of common stock | 469,000 | |
Proceeds from exercise of Warrants | 152,239 | |
Proceeds from convertible debentures | 450,000 | |
Payments under notes payable | (4,490) | |
Net cash provided by financing activities | 597,749 | 469,000 |
Net use of Cash | (60,575) | (168,168) |
Cash, beginning of period | 503,438 | 570,326 |
Cash, end of period | 442,863 | 402,158 |
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 acquisitions | $ 1,937,867 |
The Business
The Business | 9 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Business | Note 1 - The Business The Company was originally incorporated in February 1984. Following the acquisition of Rotor Riot, we remain focused on providing products and solutions to the drone industry. We believe that Rotor Riot’s visibility and presence in the drone marketplace will foster growth in sales through its e*commerce platform and provide an initial target base of customers for the launch of “Dronebox”. We are targeting the second half of 2020 for the release of Dronebox although no assurances can be provided regarding the actual release date. Dronebox is being designed to provide distributed data storage, analytics and related services to the drone industry. The Company plans to utilize blockchain based technologies and offer its 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. 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. In January 2020, we consummated a merger agreement with Rotor Riot, LLC (“Rotor Riot”), a seller of commercial products in the drone marketplace, primarily focused on FPV (“first person view”). Rotor Riot primarily sells its products through an e*commerce site located at www.rotorriot.com. Recent corporate developments include: A. 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 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 converted automatically to common stock upon the effectiveness of the reverse split of our common stock in August 2019. This common stock and Series A Preferred Stock issued under the SEA constituted approximately 83.33% of our issued and outstanding share capital on a fully-diluted basis on the date of issuance. Our 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 constituted approximately 15.64% of our issued and outstanding share capital on a fully-diluted basis on the date of issuance. In total, the common stock, Series A Preferred Stock, and Series B Preferred Stock issued under the SEA were valued at $117,754. B. 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. The transaction was accounted for as follows: 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. C. Merger Agreement with Rotor Riot, LLC On December 31, 2019, the Company entered into an Agreement of Merger (the “Merger Agreement”) with Rotor Riot and the three members of Rotor Riot. Under the Merger Agreement, each member of Rotor Riot received its pro rata portion of the total number of shares of the Company’s common stock issued based on (A)(i) $3,700,000 minus (ii) $915,563 (which included certain debt and other obligations of Rotor Riot and its Chief Executive Officer that the Company agreed to assume (the “Assumed Obligations”) divided by Following the closing of the Merger Agreement, the former members of Rotor Riot owned approximately 10.4% of the Company. In addition, management of Red Cat Holdings controls the operating decisions of the combined company. Accordingly, we have accounted for the transaction as an acquisition of Rotor Riot by Red Cat. Based on purchase price accounting, we have recognized the assets and liabilities of Rotor Riot at fair value with the excess of the purchase price over the net assets acquired recognized as goodwill. The table below reflects the Company’s estimates of the acquisition date values of the purchase consideration, assets acquired, and liabilities assumed. The shares issued were valued at $1,820,113 (2,219,650 shares issued times $0.82 per share which equaled the closing price of the Company’s common stock on the date that the merger agreement was consummated). I. Purchase Price Shares issued $ 1,820,114 Promissory note issued $ 175,000 Total Purchase Price $ 1,995,114 II. Purchase Price Allocation Assets Acquired Cash $ 21,623 Accounts receivable 28,500 Other assets 3,853 Inventory 127,411 Trademark 20,000 Goodwill 2,375,852 Total assets acquired 2,577,239 Liabilities Assumed Accounts Payable and accrued expenses $ 171,651 Notes payable $ 216,099 Due to Related Party $ 194,375 Total liabilities assumed $ 582,125 Net assets acquired $ 1,995,114 The foregoing amounts reflect our preliminary estimates of fair value as of the January 23, 2020 acquisition date. The Company expects to recognize fair values associated with the customer relationships acquired, as well as the Rotor Riot brand name, but has not yet accumulated sufficient information to assign such values. As additional information becomes known regarding the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is a one-year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of estimated lives of depreciable tangible and intangible assets) requires significant judgement. |
Going Concern
Going Concern | 9 Months Ended |
Jan. 31, 2020 | |
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 generated less than $50,000 in revenues 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 additional commercial products 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 | 9 Months Ended |
Jan. 31, 2020 | |
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 Leases – Leases at January 31, 2020 are short term in nature and do not require accounting under the lease accounting standards. 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 Revenue Recognition – The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, issued by the Financial Accounting Standards Board (“FASB”). This standard includes a comprehensive evaluation of factors to be considered regarding revenue recognition including (i) identifying the promised goods, (ii) evaluating performance obligations, (iii) measuring the transaction price, (iv) allocating the transaction price to the performance obligations if there are multiple components, and (v) recognizing revenue as each obligation is satisfied. The Company’s revenue transactions include a single component, specifically, the shipment of goods to customers as orders are received. Customers pay at the time they order and the Company recognizes revenue upon shipment which occurs quickly after the order is received. Research and Development – Income Taxes Recent Accounting Pronouncements Comprehensive Loss – Stock-Based Compensation – Basic and Diluted Net Loss per Share Related Parties n Note 12. |
Notes Payable, Due to Related P
Notes Payable, Due to Related Party and Convertible Debentures | 9 Months Ended |
Jan. 31, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable, Due to Related Party and Convertible Debentures | Note 4 – Notes Payable In connection with the merger agreement with Rotor Riot, the Company agreed to assume certain financial obligations of Rotor Riot totaling $216,099 in the aggregate. A summary of these obligations is as follows: A. Note Payable to PayPal In November 2019, Rotor Riot entered into an agreement with PayPal under which it borrowed $100,000. PayPal is an electronic commerce company that facilitates payments between parties through online funds transfers. The Company processes certain customer payments ordered on its e-commerce site through PayPal. The note is being repaid through 52 weekly payments of $2,056 ending in November 2020, resulting in an effective interest rate of 16%. The balance outstanding at January 31, 2020 was $88,398. B. Note Payable to Shopify Capital In August 2019, Rotor Riot entered into an agreement with Shopify Capital under which it sold $176,000 of “Purchased Receivables” for total consideration of $160,000. Shopify Capital is an affiliate of Shopify, Inc. which provides sales software and services to the Company. The Company processes customer transactions ordered on its e-commerce site through Shopify which will retain 14% of daily receipts until a total of $176,000 is retained. The balance outstanding at January 31, 2020 was $64,487. C. Note Payable to Race Day Quads During 2019, Rotor Riot purchased inventory from Race Day Quads (“RDQ”), an online retailer of drone racing parts . Note 5 – Due to Related Party BRIT, LLC, formally known as Brains Riding in Tanks, LLC, was the largest shareholder of Rotor Riot. Following the Merger, BRIT is a significant shareholder in the Company. The controlling shareholder of BRIT is now employed in a management role with the Company. A. Note Payable to BRIT, LLC Under the terms of the Merger Agreement, the Company issued a promissory note to BRIT, LLC in the principal amount of $175,000. The promissory note bears interest at 4.75% annually and requires $3,500 of the principal amount to be paid monthly. The outstanding principal amount and all accrued interest is due on the earlier of (a) January 23, 2021 or (b) the closing of an equity offering by the Company of at least $3,500,000. The balance outstanding at January 31, 2020 totaled $175,182, reflecting the addition of accrued interest from the date of issuance through January 31, 2020. B. Obligations of BRIT, LLC BRIT incurred certain financial obligations in support of the operations of Rotor Riot which the Company has agreed to assume responsibility to pay. The total amount assumed was $167,939 which equals the balance outstanding at January 31, 2020. These obligations bear interest at annual rates ranging from 7.5% to 21.74%. Note 6 – Convertible Debentures 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. Based on the Company’s results since inception, both on an operating and capital raising basis, we believe that it is more likely than not that the Company will not be able to complete an equity financing of at least $3,000,000 during the term of the Notes. In addition, we do not believe that the Company will be able to pre-pay the Notes prior to the one year anniversary of their issuance. Based on these conclusions, the Company has not recognized a beneficial conversion feature or a derivative liability in connection with the convertible debentures. |
Income Taxes
Income Taxes | 9 Months Ended |
Jan. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7 - 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 incurred net losses in each year of operations. Our current provision for the reporting periods presented in these financial statements 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 January 31, 2020 and April 30, 2019, we had accumulated deficits of approximately $1,948,000 and $972,000, respectively. Deferred tax assets related to the future benefit of these net operating losses for tax purposes totaled approximately $78,000 and $39,000, 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 an operating profit since inception, we have applied a full valuation allowance against our deferred tax assets at January 31, 2020 and April 30, 2019. |
Common Stock, Preferred Stock a
Common Stock, Preferred Stock and Warrants | 9 Months Ended |
Jan. 31, 2020 | |
Stockholders' Equity Note [Abstract] | |
Common Stock, Preferred Stock and Warrants | Note 8 – 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 9 – 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. Conversions of Series B Stock into Common Stock are as follows: Date Series B Common Stock July 2019 240,000 200,000 November 2019 60,000 50,000 December 2019 231,022 192,519 Note 10 - 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. 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 | 9 Months Ended |
Jan. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Share Based Awards | Note 11 – 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. A. October 2019 Issuances In October 2019, we issued options to purchase 350,000 shares of common stock valued at $477,500. Options to purchase 200,000 shares vest ratably over a 2 year period and expire in October 2029. Options to purchase 150,000 shares 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. 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%. B. January 2020 Issuances In January 2020, we issued options to purchase 1,100,000 shares of common stock exercisable at $0.82 vesting quarterly over a 3 year period. These options were valued at $707,300. We also issued options to purchase 147,475 shares of common stock exercisable at $0.82. These options were valued at $94,826 and were vested in full upon issuance. All of these options were issued at an exercise price which equaled the stock price on the date of issuance. 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 – 1.74%, (iii) expected life – 10 years, and (iv) expected dividend yield of zero. C. Summary for three and nine months ended January 31, 2020 Compensation expense recognized in the three months ended January 31, 2020 was $149,462, of which $105,976 was included in general and administrative expenses and $43,486 was included in research and development expenses. Compensation expense recognized in the nine months ended January 31, 2020 was $161,529, of which $114,791 was included in general and administrative expenses and $46,738 was included in research and development expenses. There was no compensation expense recognized in the nine months ended January 31, 2019. Options exercisable as of January 31, 2020 totaled $147,475. The remaining weighted average contractual term of the options outstanding at October 31, 2019 was 9.47 years. The aggregate intrinsic value of outstanding options, representing the excess of the stock price at January 31, 2020 of $1.74 over the exercise price of each option, was $1,147,677 at January 31, 2020. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Jan. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 12 - Related-Party Transactions Shares Issued for Services Office Lease Convertible Note Financing |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Jan. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 13 - Commitments and Contingencies Office Lease |
Subsequent Events
Subsequent Events | 9 Months Ended |
Jan. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 14 - Subsequent Events Subsequent events have been evaluated through the date of this filing and there are no subsequent events which require disclosure. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Jan. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting |
Principles of Consolidation | Principles of Consolidation – |
Use of Estimates | Use of Estimates |
Cash | Cash |
Leases | Leases – Leases at January 31, 2020 are short term in nature and do not require accounting under the lease accounting standards. |
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 |
Revenue Recognition | Revenue Recognition – The Company recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers”, issued by the Financial Accounting Standards Board (“FASB”). This standard includes a comprehensive evaluation of factors to be considered regarding revenue recognition including (i) identifying the promised goods, (ii) evaluating performance obligations, (iii) measuring the transaction price, (iv) allocating the transaction price to the performance obligations if there are multiple components, and (v) recognizing revenue as each obligation is satisfied. The Company’s revenue transactions include a single component, specifically, the shipment of goods to customers as orders are received. Customers pay at the time they order and the Company recognizes revenue upon shipment which occurs quickly after the order is received. |
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 n Note 12. |
The Business (Tables)
The Business (Tables) | 9 Months Ended |
Jan. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Values of purchase consideration, assets acquired, and liabilities assumed from reverse-merger and merger | B. Red Cat Propware, Inc. Cash $ 24,704 Goodwill 93,050 Total $ 117,754 C. Merger Agreement with Rotor Riot, LLC I. Purchase Price Shares issued $ 1,820,114 Promissory note issued $ 175,000 Total Purchase Price $ 1,995,114 II. Purchase Price Allocation Assets Acquired Cash $ 21,623 Accounts receivable 28,500 Other assets 3,853 Inventory 127,411 Trademark 20,000 Goodwill 2,375,852 Total assets acquired 2,577,239 Liabilities Assumed Accounts Payable and accrued expenses $ 171,651 Notes payable $ 216,099 Due to Related Party $ 194,375 Total liabilities assumed $ 582,125 Net assets acquired $ 1,995,114 |
The Business - Major classes of
The Business - Major classes of assets and liabilities allocated to purchase price of acquisition (Details) | 9 Months Ended |
Jan. 31, 2020USD ($)shares | |
Red Cat Propware, Inc. | |
Cash | $ 24,704 |
Goodwill | 93,050 |
Total | $ 117,754 |
Merger Agreement with Rotor Riot, LLC | |
Purchase Price | |
Shares issued | shares | 1,820,114 |
Promissory note issued | $ 175,000 |
Total Purchase Price | 1,995,114 |
Assets Acquired | |
Cash | 21,623 |
Accounts receivable | 28,500 |
Other assets | 3,853 |
Inventory | 127,411 |
Trademark | 20,000 |
Goodwill | 2,375,852 |
Total assets acquired | 2,577,239 |
Liabilities Assumed | |
Accounts Payable and accrued expenses | 171,651 |
Notes payable | 216,099 |
Due to Related Party | 194,375 |
Total liabilities assumed | 582,125 |
Net assets acquired | $ 1,995,114 |
The Business (Details Narrative
The Business (Details Narrative) - USD ($) | Aug. 02, 2019 | Jan. 31, 2020 | 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 ($) | Jan. 31, 2020 | Apr. 30, 2019 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accumulated deficit | $ (1,948,064) | $ (971,822) |
Disclosure - Notes Payable, Due
Disclosure - Notes Payable, Due to Related Party and Convertible Debentures (Details Narrative) | 9 Months Ended |
Jan. 31, 2020USD ($) | |
Note Payable to PayPal | |
Notes Payable | |
Notes payable assumed in connection with merger agreement | $ 88,398 |
Note Payable to Shopify Capital | |
Notes Payable | |
Notes payable assumed in connection with merger agreement | 64,487 |
Note Payable to Race Day Quads | |
Notes Payable | |
Notes payable assumed in connection with merger agreement | 58,724 |
Note Payable to BRIT, LLC | |
Due to Related Party | |
Due to related party, Merger Agreement | 175,182 |
Obligations of BRIT, LLC | |
Due to Related Party | |
Due to related party, Merger Agreement | 167,939 |
Convertible Note issued to accredited investor | |
Convertible Debentures | |
Convertible note, principal amount | $ 300,000 |
Convertible note, term | 2 years |
Convertible note, interest rate | 12.00% |
Convertible Note issued to director | |
Convertible Debentures | |
Convertible note, principal amount | $ 125,000 |
Convertible note, term | 2 years |
Convertible note, interest rate | 12.00% |
Convertible Note issued to chief executive officer | |
Convertible Debentures | |
Convertible note, principal amount | $ 25,000 |
Convertible note, term | 2 years |
Convertible note, interest rate | 12.00% |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Jan. 31, 2020 | Apr. 30, 2019 |
Income Tax Disclosure [Abstract] | ||
Accumulated deficit | $ (1,948,064) | $ (971,822) |
Approximate deferred tax assets related to future benefit of net operating losses | $ 78,000 | $ 39,000 |
Common Stock, Preferred Stock_2
Common Stock, Preferred Stock and Warrants (Details Narrative) - USD ($) | 9 Months Ended | |
Jan. 31, 2020 | 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 | 9 Months Ended | ||
Jan. 31, 2020 | Oct. 31, 2019 | Oct. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | |
Number of shares issuable in connection with Awards under the Plan, maximum | 8,750,000 | ||||
Stock compensation expense recognized | $ 149,462 | $ 12,067 | $ 161,529 | ||
Options exercisable, amount | 147,475 | 147,475 | |||
Remaining weighted average contractural term of options outstanding | 9 years 5 months 19 days | ||||
Aggregate intrinsic value of outstanding options | $ 1,147,677 | $ 1,147,677 | |||
October 2019 Issuances | |||||
Options issued, number of common stock shares available for purchase | 350,000 | ||||
Options issued, value | $ 477,500 | ||||
Assumptions used, expected volatility | 75.00% | ||||
Assumptions used, risk free interest rate, minimum | 1.59% | ||||
Assumptions used, risk free interest rate, maximum | 1.74% | ||||
Assumptions used, expected life, minimum | 5 years | ||||
Assumptions used, expected life, maximum | 10 years | ||||
Assumptions used, expected dividend yield | 0.00% | ||||
January 2020 Issuances (1) | |||||
Options issued, number of common stock shares available for purchase | 1,100,000 | ||||
Options issued, value | $ 707,300 | ||||
Assumptions used, expected volatility | 75.00% | ||||
Assumptions used, risk free interest rate, maximum | 1.74% | ||||
Assumptions used, expected life, maximum | 10 years | ||||
Assumptions used, expected dividend yield | 0.00% | ||||
January 2020 Issuances (2) | |||||
Options issued, number of common stock shares available for purchase | 147,475 | ||||
Options issued, value | $ 94,826 | ||||
Assumptions used, expected volatility | 75.00% | ||||
Assumptions used, risk free interest rate, maximum | 1.74% | ||||
Assumptions used, expected life, maximum | 10 years | ||||
Assumptions used, expected dividend yield | 0.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Dec. 20, 2019 | Jul. 31, 2019 | Jan. 31, 2020 | Jan. 31, 2019 | Apr. 30, 2019 | |
Shares Issued for Services, shares | 1,570 | ||||
Shares Issued for Services, amount | $ 70,000 | $ 70,000 | |||
Rent expense | $ 8,100 | ||||
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) | 9 Months Ended |
Jan. 31, 2020USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease agreement, annual amount | $ 26,638 |