Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Apr. 30, 2021 | Aug. 09, 2021 | Oct. 31, 2020 | |
Document And Entity Information | |||
Entity Registrant Name | Red Cat Holdings, Inc. | ||
Entity Central Index Key | 0000748268 | ||
Document Type | 10-K | ||
Document Period End Date | Apr. 30, 2021 | ||
Entity Incorporation, State or Country Code | NV | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --04-30 | ||
Entity File Number | 000-31587 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
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 Public Float | $ 107,391,705 | ||
Entity Common Stock, Shares Outstanding | 48,244,219 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Entity Shell Company | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Current Assets | ||
Cash | $ 277,347 | $ 236,668 |
Accounts Receivable, net | 321,693 | |
Inventory | 362,072 | 78,650 |
Other | 678,898 | 3,020 |
Total Current Assets | 1,640,010 | 318,338 |
Goodwill | 8,017,333 | 2,466,073 |
Intangible assets, net | 2,032,169 | 20,000 |
Other | 3,853 | 3,853 |
TOTAL ASSETS | 11,693,365 | 2,808,264 |
Current Liabilities | ||
Accounts payable | 541,903 | 249,050 |
Accrued expenses | 614,050 | 89,342 |
Notes payable | 269,045 | 118,771 |
Note payable to related party | 390,209 | 333,684 |
Customer deposits | 46,096 | 38,419 |
Warrant derivative liability | 2,812,767 | |
Total Current Liabilities | 4,674,070 | 829,266 |
Convertible debentures, net | 450,000 | |
Due to related party | 1,753,000 | |
Total Long Term Liabilities | 1,753,000 | 450,000 |
Commitments and contingencies | ||
Stockholders' Equity | ||
Series A Preferred Stock - shares authorized 2,200,000; outstanding 158,704 and 208,704; Series B Preferred Stock - shares authorized 4,300,000; outstanding 1,968,676 and 3,681,623 | 21,274 | 38,903 |
Common stock - shares authorized 500,000,000; outstanding 29,431,264 and 20,011,091 | 29,431 | 20,011 |
Additional paid-in capital | 21,025,518 | 4,043,837 |
Accumulated deficit | (15,809,928) | (2,573,753) |
Total Stockholders' Equity | 5,266,295 | 1,528,998 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 11,693,365 | $ 2,808,264 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Apr. 30, 2021 | Apr. 30, 2020 |
Preferred stock, shares authorized | 6,500,000 | 6,500,000 |
Preferred stock, shares issued | 2,127,380 | 3,890,327 |
Preferred stock, shares outstanding | 2,127,380 | 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 | 29,431,264 | 20,011,091 |
Common stock, shares outstanding | 29,431,264 | 20,011,091 |
Series A Preferred Stock | ||
Preferred stock, shares authorized | 2,200,000 | 2,200,000 |
Preferred stock, shares issued | 158,704 | 208,704 |
Preferred stock, shares outstanding | 158,704 | 208,704 |
Series B Preferred Stock | ||
Preferred stock, shares authorized | 4,300,000 | 4,300,000 |
Preferred stock, shares issued | 1,968,676 | 3,681,623 |
Preferred stock, shares outstanding | 1,968,676 | 3,681,623 |
Consolidated Operations Stateme
Consolidated Operations Statements - USD ($) | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Income Statement [Abstract] | ||
Revenues | $ 4,999,517 | $ 403,940 |
Cost of goods sold | 3,929,832 | 325,379 |
Gross Margin | 1,069,685 | 78,561 |
Operating Expenses | ||
Operations | 590,342 | |
Research and development | 516,084 | 488,990 |
Sales and marketing | 172,182 | |
General and administrative expenses | 1,279,471 | 949,636 |
Stock based compensation | 3,388,216 | 269,895 |
Total operating expenses | 5,946,295 | 1,708,521 |
Operating loss | (4,876,610) | (1,629,960) |
Other Expense (Income) | ||
Derivative expense | 4,630,288 | |
Change in fair value of derivative liability | 2,492,894 | |
Interest expense | 1,223,767 | 29,186 |
Other, net | 12,616 | (57,215) |
Other Expense (Income) | 8,359,565 | (28,029) |
Net loss | $ (13,236,175) | $ (1,601,931) |
Loss per share - basic and diluted | $ (0.56) | $ (0.12) |
Weighted average shares outstanding - basic and diluted | 23,655,743 | 13,732,205 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Series A Preferred Stock | Series B Preferred Stock | Common stock | Additional Paid in Capital | Accumulated Deficit | Total |
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 | 684,186 | 684,200 | |||
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, shares | (1,960,364) | (531,022) | 16,778,683 | |||
Conversion of Preferred Stock, amount | $ (19,604) | $ (5,310) | $ 16,779 | 8,135 | ||
Exercise of warrants, shares | 469,874 | |||||
Exercise of warrants, amount | $ 470 | 151,769 | 152,239 | |||
Merger with Rotor Riot, shares | 2,219,650 | |||||
Merger with Rotor Riot, amount | $ 2,220 | 1,817,893 | 1,820,113 | |||
Stock based compensation, amount | 269,895 | 269,895 | ||||
Shares Issued for Services, shares | 151,570 | |||||
Shares Issued for Services, amount | $ 152 | 273,848 | 274,000 | |||
Net Loss | (1,601,931) | (1,601,931) | ||||
Ending balance, shares at Apr. 30, 2020 | 208,704 | 3,681,623 | 20,011,091 | |||
Ending balance, amount at Apr. 30, 2020 | $ 2,087 | $ 36,816 | $ 20,011 | 4,043,837 | (2,573,753) | 1,528,998 |
Conversion of Debt, shares | 1,857,935 | |||||
Conversion of Debt, amount | $ 1,858 | 6,336,768 | 6,338,626 | |||
Conversion of Preferred Stock, shares | (50,000) | (1,712,947) | 1,843,956 | |||
Conversion of Preferred Stock, amount | $ (500) | $ (17,129) | $ 1,844 | 15,785 | ||
Exercise of warrants, shares | 178,509 | |||||
Exercise of warrants, amount | $ 178 | 895,376 | 895,554 | |||
Acquisition of Fat Shark, shares | 5,227,273 | |||||
Acquisition of Fat Shark, amount | $ 5,227 | 6,345,849 | 6,351,076 | |||
Stock based compensation, shares | 312,500 | |||||
Stock based compensation, amount | $ 313 | 3,387,903 | 3,388,216 | |||
Net Loss | (13,236,175) | (13,236,175) | ||||
Ending balance, shares at Apr. 30, 2021 | 158,704 | 1,968,676 | 29,431,264 | |||
Ending balance, amount at Apr. 30, 2021 | $ 1,587 | $ 19,687 | $ 29,431 | $ 21,025,518 | $ (15,809,928) | $ 5,266,295 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Cash Flows from Operating Activities | ||
Net loss | $ (13,236,175) | $ (1,601,931) |
Stock based compensation | 3,388,216 | 269,895 |
Common stock issued for services | 204,000 | |
Amortization of intangible assets | 36,831 | |
Amortization of debt discount | 1,100,000 | |
Derivative expense | 4,630,288 | |
Change in fair value of derivative | 2,492,894 | |
Changes in operating assets and liabilities | ||
Accounts receivable | (72,534) | |
Inventory | (60,042) | 48,761 |
Other | (291,646) | 124,979 |
Customer deposits | (17,517) | 38,419 |
Accounts payable | 13,818 | 68,068 |
Accrued expenses | 616,866 | 36,225 |
Net cash used in operating activities | (1,399,001) | (811,584) |
Cash Flows from Investing Activities | ||
Acquired through acquisition | 46,327 | |
Payment for acquisition, net of cash acquired | (48,368) | |
Net cash (used in) provided by investing activities | (48,368) | 46,327 |
Cash Flows from Financing Activities | ||
Proceeds from exercise of warrants | 201,249 | 152,239 |
Proceeds from related party obligations | 79,000 | |
Payments under related party obligations | (22,475) | (12,725) |
Proceeds from notes payable | 660,919 | |
Payments under notes payable | (510,645) | (91,027) |
Proceeds from convertible debentures | 1,080,000 | 450,000 |
Net cash provided by financing activities | 1,488,048 | 498,487 |
Net increase (decrease) Cash | 40,679 | (266,770) |
Cash, beginning of period | 236,668 | 503,438 |
Cash, end of period | 277,347 | 236,668 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 15,835 | |
Cash paid for taxes | ||
Noncash transactions | ||
Common stock issued for services | 204,000 | |
Fair value of shares exchanged in acquisitions | 6,351,076 | 1,937,867 |
Elimination of derivative liability | 5,390,415 | |
Issuance of note payable – related party | 1,753,000 | |
Conversion of notes into common stock | 1,550,000 | |
Conversion of accrued interest into common stock | $ 92,515 |
The Business
The Business | 12 Months Ended |
Apr. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Business | Note 1 - The Business Red Cat Holdings (“Red Cat” or the “Company”) was originally incorporated in February 1984. Since April 2016, the Company’s primary business has been to provide products, services and solutions to the drone industry which it presently does through its four wholly owned subsidiaries. Fat Shark Holdings is a provider of First Person View (FPV) video goggles to the drone industry. Rotor Riot sells FPV drones and equipment, primarily to the consumer marketplace through its digital storefront located at www.rotorriot.com. Rotor Riot enjoys high visibility in social media through its Facebook page and its sponsorship of a professional drone racing team which has won numerous championships. Skypersonic provides software and hardware solutions that enable drones to complete inspection services in locations where GPS (global positioning systems) are not available, yet still record and transmit data even while being operated from thousands of miles away. Red Cat Propware is developing a software-as-a-solution (“SaaS”) platform to provide drone flight data analytics and storage, as well as diagnostic products and services. Corporate developments during the two years ended April 30, 2021 include: A. The Share Exchange Agreement Effective May 15, 2019, the company, then operating as TimeFireVR, Inc., (“TimeFire”), closed a Share Exchange Agreement (the “SEA”) with Red Cat Propware. Under the SEA, Red Cat Propware acquired approximately 83.33% of TimeFire’s outstanding share capital on a fully-diluted basis. The Company issued: (i) 196,667 shares of common stock, (ii) 2,169,068 shares of newly-designated Series A Preferred Stock, and (iii) 4,212,645 shares of newly-designated Series B Preferred Stock. In total, the common stock, Series A Preferred Stock, and Series B Preferred Stock issued under the SEA were valued at $117,754, and resulted in cash acquired of $24,704 and goodwill of $93,050. The transaction was accounted for as a “reverse acquisition” as the stockholders of Red Cat possessed majority voting control of the company immediately following the acquisition. 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. Series A Preferred Stock is convertible to common stock at a ratio of 8.33 shares of common stock for each share 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 except for shares subject to an ownership limitation. 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. Series B Preferred Stock is convertible to common stock at a ratio of 0.83 shares of common stock for each share and votes together with the common stock on an as-converted basis. The 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. B. Organizational 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 Propware, Inc. 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 report to shares of the Company’s common stock, including prices per share of its common stock, reflect the Reverse Stock Split. 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. On January 23, 2020, the Merger Agreement was consummated under which Rotor Riot Acquisition Corp, a wholly owned subsidiary of the Company, merged with and into Rotor Riot, with Rotor Riot continuing as the surviving entity and a wholly owned subsidiary of the Company. 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 (B) the volume weighted average price (“VWAP”) of the Company’s common stock for the twenty trading days prior to the closing of the Merger. Based on a share issuance value of $2,784,437 and a VWAP of $1.25445, the Company issued an aggregate of 2,219,650 shares of common stock to the members of Rotor Riot. Following the closing of the Merger Agreement, the former members of Rotor Riot owned approximately 10.4% of the Company. In addition, the Company’s management controls the operating decisions of the combined company. Accordingly, we have accounted for the transaction as an acquisition of Rotor Riot by the Company. 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 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 Brand name 578,000 Customer relationships 39,000 Goodwill 1,756,023 Total assets acquired $ 2,574,410 Liabilities Assumed Accounts payable and accrued expenses $ 171,651 Notes payable 209,799 Due to related party 197,846 Total liabilities assumed 579,296 Net assets acquired $ 1,995,114 During the year ended April 30, 2021, the Company adjusted the initial carrying value of Goodwill to reflect the values of other intangible assets acquired as determined by an independent valuation services firm. These included Customer Relationships with a value of $39,000 and Brand Name with a value of $578,000. Customer relationships are being amortized over 7 years. The carrying value of Brand Name is not being amortized but will be evaluated on a quarterly basis, including a formal evaluation at year end. D. Fat Shark Acquisition On September 30, 2020, the Company entered into a share purchase agreement (“Share Purchase Agreement”) with Greg French (“French”), the founder and sole shareholder of Fat Shark Holdings (“Fat Shark”), to acquire all of the issued and outstanding shares of Fat Shark and its subsidiaries. The transaction closed on November 2, 2020 and was valued at $8,354,076 based on (i) the issuance of 5,227,273 shares of common stock with a value of $6,351,076 on the date of closing (ii) a senior secured promissory note in the original principal amount of $1,753,000 which matures on November 1, 2023, and (iii) a cash payment of $250,000. The Share Purchase Agreement includes indemnification provisions, a two year non-compete agreement, and registration rights for the shares issued in the transaction. A summary of the purchase price and its related allocation is as follows: I. Purchase Price Shares issued $ 6,351,076 Promissory note issued 1,753,000 Cash 250,000 Total Purchase Price $ 8,354,076 II. Purchase Price Allocation Assets Acquired Cash $ 201,632 Accounts receivable 249,159 Other assets 384,232 Inventory 223,380 Brand name 1,144,000 Proprietary technology 272,000 Non-compete agreement 16,000 Goodwill 6,168,260 Total assets acquired $ 8,658,663 Liabilities Assumed Accounts payable and accrued expenses $ 279,393 Customer deposits 25,194 Total liabilities assumed 304,587 Net assets acquired $ 8,354,076 The Company initially allocated the excess of the purchase price above the net assets acquired to goodwill. The amount allocated to goodwill was subsequently adjusted based on the values of other intangible assets as determined by an independent valuation services firm. These intangible assets included proprietary technology and non-compete agreement which are being amortized over 5 and 3 years, respectively. The carrying value of Brand Name is not being amortized but will be reviewed quarterly and formally evaluated at year end. E. Skypersonic Acquisition On February 11, 2021, the Company entered into Share Purchase and Liquidity Event Agreements (the “Skypersonic Agreements”) with the founder and majority shareholder of Skypersonic, Inc., (“Skypersonic”) and the holders of common stock and SAFE agreements representing 97.46% of Skypersonic (the “Sellers”), pursuant to which, subject to the satisfaction of certain closing conditions, the Company will acquire all of the issued and outstanding share capital of Skypersonic for an aggregate of $3,000,000 in shares (the “Share Consideration”) of the Company’s common stock, based upon the VWAP of the Company’s common stock at closing of the transaction (the “Skypersonic Transaction”). The transaction closed on May 7, 2021 and was paid through the issuance of 747,124 shares of common stock with an agreed value of $3,000,000. Fifty (50%) percent of the Share Consideration (the “Escrow Shares”) were deposited in an escrow account for a period of twelve (12) months as security for indemnification obligations and any purchase price adjustments due to working capital deficiencies and any other claims or expenses arising under the Skypersonic Agreements. Under the Skypersonic Agreements, closing date working capital deficits in excess of $300,000 shall result in a reduction of the Share Consideration on a dollar of dollar basis. The Company agreed that in the event that within 12 months following closing of the Acquisition, the Company issues common stock for a price per share less than $2.50 per share in a public offering of equity or convertible securities in which the Company raises a minimum of $2,000,000 (“Qualified Offering”), the Company shall issue Sellers additional shares of common stock equal to the difference between the number of shares issued and the quotient of the purchase price divided by the price of securities sold in the Qualified Offering. The founder and certain principal shareholders have agreed to indemnification obligations, on a pro-rata basis, subject to certain limitations, which shall survive for a period of eighteen (18) months following closing, and which include a basket amount of $25,000 before any claim can be asserted subject to a cap equal to the value of the Escrow Shares or the Share Consideration. For a period of three (3) years following closing, the founder shall not engage in a business competing with or providing products, services or solutions to the drone industry, first person view (“FPV”) business, navigation and software solutions that provide analytics, storage or services for or in conjunction with the drone industry. The Company determined that the financial position and results of operations of Skypersonic were not material to the overall financial condition and results of operations of the Company on a consolidated basis. |
Going Concern
Going Concern | 12 Months Ended |
Apr. 30, 2021 | |
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 had negative working capital of $3,034,060 at April 30, 2021 and have accumulated losses totaling approximately $15.8 million through April 30, 2021. 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 additional commercial products and (c) pursue acquisitions of complementary, revenue generating companies which are accretive to our operating results. In May 2021, we completed an offering of common stock which raised gross proceeds of $16 million and net proceeds of approximately $14.6 million. In July 2021, we completed an offering of common stock which raised gross proceeds of $60 million and net proceeds of approximately $55.5 million. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Apr. 30, 2021 | |
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 Accounts Receivable, net Inventory Goodwill We 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. Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities and Related Disclosures The fair value measurements and disclosure guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The levels of the fair value hierarchy are described below: ● Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for the asset. The observable inputs are used in valuation models to calculate the fair value for the asset. ● Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market activity for the asset. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. Disclosures for Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis The Company’s financial instruments mainly consist of cash, receivables, current assets, accounts payable and accrued expenses and debt. The carrying amounts of its cash, receivables, current asserts, accounts payable, accrued expenses and current debt approximates fair value due to the short-term nature of these instruments. Convertible Securities and Derivatives When the Company issues convertible debt or equity instruments that contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds from the convertible host instruments are first allocated to the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, resulting in those instruments being recorded at a discount from their face value but no lower than zero. Any excess amount is recognized as a derivative expense. Derivative Liabilities The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. In October 2020 and January 2021, the Company entered into convertible note agreements which included provisions under which the conversion price was equal to the lesser of an initial stated amount or the conversion price of a future offering. This variable conversion feature was recognized as a derivative. Both financings included the issuance of warrants which contained similar variable conversion features. The Company values these convertible notes and warrants using the multinomial lattice method that values the derivative liability within the notes based on a probability weighted discounted cash flow model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations. Revenue Recognition Research and Development Income Taxes Recent Accounting Pronouncements Comprehensive Loss Stock-Based Compensation Basic and Diluted Net Loss per Share Related Parties |
Other Current Assets
Other Current Assets | 12 Months Ended |
Apr. 30, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Current Assets | Note 4 – Other Current Assets Other current assets as of April 30, 2021 and 2020 included: 2021 2020 Prepaid inventory $ 478,939 $ — Prepaid expenses 115,587 — Security deposits 9,372 — Due from related party 75,000 3,020 Total $ 678,898 $ 3,020 |
Notes Payable
Notes Payable | 12 Months Ended |
Apr. 30, 2021 | |
Debt Disclosure [Abstract] | |
Notes Payable | Note 5 - Notes Payable A. PayPal 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 Company has entered into multiple agreements under which PayPal provides an advance on customer payments, and then retains a portion of customer payments until the advance is repaid. PayPal charges a fee which the Company recognizes in full upon entering an agreement. A November 2019 agreement under which PayPal advanced $100,000 and charged a transaction fee of $6,900 was completed in January 2021. A January 2021 agreement under which PayPal advanced $75,444 and charged a transaction fee of $2,444 had a remaining balance of $32,461 at April 30, 2021. B. Shopify Capital Shopify Capital is an affiliate of Shopify, Inc. which provides sales software and services to the Company. The Company processes customer transactions ordered on the e-commerce site for Rotor Riot through Shopify. Shopify Capital has entered into multiple agreements with the Company in which it has “purchased receivables” at a discount. Shopify retains a portion of the Company’s daily receipts until the purchased receivables have been paid. The Company recognizes the discount as a transaction fee, in full, in the month in which the agreement is executed. The Company assumed an existing agreement when it acquired Rotor Riot in January 2020. This agreement was repaid in May 2020. Since then, the Company has entered into the following agreements with Shopify: Date of Transaction Purchased Receivables Payment to Company Transaction Fees Withholding Rate Balance at April 30, 2021 May 2020 $158,200 $140,000 $18,200 17% Completed – October 2020 September 2020 $209,050 $185,000 $24,050 17% $84 April 2021 $236,500 $215,000 $21,500 17% $236,500 |
Due to Related Party
Due to Related Party | 12 Months Ended |
Apr. 30, 2021 | |
Notes to Financial Statements | |
Due to Related Party | Note 6 - Due to Related Party A. Short Term I. Note Payable to BRIT, LLC BRIT, LLC, formally known as Brains Riding in Tanks, LLC, was the largest shareholder of Rotor Riot. Following the Merger Agreement, BRIT is a significant shareholder in the Company. The controlling shareholder of BRIT is now employed in a management role with the Company. 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. The balance outstanding, including accrued interest, totaled $159,679 and $166,466 at April 30, 2021 and 2020, respectively. The Company repaid $50,000 in May 2021 and began making monthly payments of $3,500 in July 2021. II. Obligations of BRIT, LLC BRIT incurred certain financial obligations in support of the operations of Rotor Riot which the Company assumed responsibility to pay at the effective time of the Merger. These obligations bear interest at annual rates ranging from 5.5% to 11.99%. The outstanding balance totaled $166,529 at April 30, 2021. III. Payable to Aerocarve In August 2020 and December 2020, the Company received advances totaling $79,000 from Aerocarve, which is controlled by the Company’s Chief Executive Officer. The parties agreed that the funds would bear interest at 5% annually until repaid. The balance owed at April 30, 2021 was $74,000. In May 2021, the Company made a payment of $70,000. B. Note Payable to Related Party In connection with the acquisition of Fat Shark in November 2020, the Company issued a secured promissory note in the amount of $1,753,000 to the seller who is now an employee. The note bears interest at 3% annually and matures in full in November 2023. Accrued interest totaled $25,791 at April 30, 2021. |
Convertible Notes
Convertible Notes | 12 Months Ended |
Apr. 30, 2021 | |
Notes to Financial Statements | |
Convertible Notes | Note 7 - Convertible Notes In November 2019, the Company issued a convertible note in the principal amount of $300,000 to one accredited investor and in December 2019, the Company 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 “2019 Notes”). The Notes had a term of 2 years and accrued interest at an annual rate of 12% through the date of conversion. In September and October 2020, the entire $450,000 of 2019 Notes, plus accrued interest totaling $45,204, was converted into 710,444 shares of common stock. October 2020 Financing On October 5, 2020, the Company closed a private offering of convertible promissory notes (the “2020 Notes”) in the aggregate principal amount of $600,000. The 2020 Notes accrued interest at 12% annually, had a two year term, and were convertible into common stock at the lower of $1.00 or a 25% discount of the price per share of Common Stock offered in a future, qualified offering. The financing also included the issuance of warrants to purchase 399,998 shares of common stock. The Warrants are exercisable for a period of five years at a price equal to the lower of (1) $1.50 per share, or (2) at a price equal to 75% of the price per share of the common stock offered in a future, qualified offering. The Company determined that the provision associated with a potential reduction in the conversion price of the notes and the exercise price of the warrant represented an embedded derivative financial liability. The derivative liability was initially valued at $728,587, of which $580,000 was applied as a debt discount to reduce the initial carrying value of the notes to zero with the remaining $20,000 applied against transaction fees. The excess of the liability over the net proceeds totaled $148,587 which was recognized as a derivative expense. The derivative liability was valued using a multinomial lattice model as further described in Note 13 with $460,588 and $267,999 related to the derivate features of the notes and warrants, respectively. In March 2021, the entire $600,000 of 2020 Notes, plus accrued interest totaling $34,257, were converted into 634,257 shares of common stock at a conversion price equal to $1.00 per share. Since the initial accounting had reduced the carrying value of the 2020 Notes to zero, the Company recognized $600,000 of interest expense in connection with the 2020 Notes. In addition, since the conversion of the notes resulted in the elimination of the derivative liability in the notes, the derivative liability was reduced by $2,589,393 with a corresponding increase in additional paid in capital. January 2021 Financing On January 27, 2021, the Company closed a private offering of convertible promissory notes (the “2021 Notes”) in the aggregate principal amount of $500,000. The 2021 Notes accrued interest at 12% annually, had a two year term, and were convertible into shares of the Company’s common stock at the lower of $1.00 or a 25% discount of the price per share of Common Stock offered in a future, qualified offering. The financing also included the issuance of warrants to purchase 675,000 shares of common stock. The Warrants are exercisable for a period of five years at a price equal to the lower of (i) $1.50 per share, or (ii) a 25% discount to the price per share of common stock offered in a future qualified offering. The Company determined that the provision associated with a potential reduction in the conversion price of the notes and the exercise price of the warrant represented an embedded derivative financial liability. The derivative liability was initially valued at $4,981,701, of which $500,000 was applied as a debt discount to reduce the initial carrying value of the notes to zero. The excess of the liability over the net proceeds totaled $4,481,701 which was recognized as a derivative expense. The derivative liability was valued using a multinomial lattice model as further described in Note 13 with $2,111,035 and $2,870,666 related to the derivate features of the notes and warrants, respectively. In March 2021, the entire $500,000 of 2021 Notes, plus accrued interest totaling $13,234, were converted into 513,234 shares of common stock at a conversion price equal to $1.00 per share. Since the initial accounting had reduced the carrying value of the 2021 Notes to zero, the Company recognized $500,000 of interest expense in connection with the 2021 Notes. In addition, since the conversion of the notes resulted in the elimination of the derivative liability in the notes, the derivative liability was reduced by $2,106,717 with a corresponding increase in additional paid in capital. |
Income Taxes
Income Taxes | 12 Months Ended |
Apr. 30, 2021 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8 - Income Taxes Our operating subsidiary, Red Cat Propware, Inc., 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 April 30, 2021 and April 30, 2020, we had accumulated deficits of approximately $15,800,000 and $2,600,000, respectively. Deferred tax assets related to the future benefit of these net operating losses for tax purposes totaled approximately $632,000 and $104,000, 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 April 30, 2021 and 2020. |
Common Stock
Common Stock | 12 Months Ended |
Apr. 30, 2021 | |
Stockholders' Equity Note [Abstract] | |
Common Stock | Note 9 - Common Stock Our common stock has a par value of $0.001 per share. We are authorized to issue 500,000,000 shares of common stock. Each share of common stock is entitled to one vote. |
Preferred Stock
Preferred Stock | 12 Months Ended |
Apr. 30, 2021 | |
Equity [Abstract] | |
Preferred Stock | Note 10 - 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-if-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. Shares outstanding at April 30, 2021 totaled 158,704 which are convertible into 1,322,004 shares of common 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-if-converted basis. The Series B Preferred Stock was originally issued under the Exchange Agreement, as further described in Note 1. Shares outstanding at April 30, 2021 totaled 1,968,676 which are convertible into 1,640,563 shares of common stock. |
Warrants
Warrants | 12 Months Ended |
Apr. 30, 2021 | |
Notes to Financial Statements | |
Warrants | Note 11 - Warrants In September 2019, we received $152,239 in connection with the exercise of 469,874 warrants which had been issued in May 2019 as part of the Share Exchange Agreement. 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 expired in March 2021. In October 2020, the Company issued five-year warrants to purchase a total of 399,998 shares in connection with the issuance of $600,000 of convertible notes. The warrants have an initial exercise price of $1.50 which may be reduced to (i) a 25% discount of the price per share of Common Stock offered in a future qualified offering. The warrants were valued at $267,999 using the multinomial lattice model and are considered derivative liabilities under ASC 815-40. In January 2021, the Company issued five-year warrants to purchase a total of 675,000 shares in connection with the issuance of $500,000 of convertible notes. The warrants have an initial exercise price of $1.50 which may be reduced to (i) a 25% discount of the price per share of Common Stock offered in a future qualified offering and also include a ratchet provision. The warrants were valued at $2,870,666 using the multinomial lattice model and are considered derivative liabilities under ASC 815-40. In March and April 2021, we received $201,249 in connection with the exercise of 201,666 warrants which had been issued in October 2020 and January 2021 as part of the convertible note financings described in note 7. Since these exercises resulted in the elimination of the derivative liability in the warrants, the derivative liability was reduced by $694,305 with a corresponding increase in additional paid in capital. The following table presents the assumptions used to estimate the fair values of the stock warrants granted: April 30, 2021 Expected volatility 86-89 % Expected dividends 0 % Expected term 4.42-5 Years Risk-free interest rate 0.29-0.61 % The following table summarizes the changes in warrants outstanding issued to non-employees of the Company during the year ended April 30, 2021. Number of Shares Weighted-average Exercise Price per Share Weighted-average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance as of April 30, 2020 — $ $ Granted 1,074,998 1.50 Exercised (201,666 ) 1.50 Outstanding as of April 30, 2021 873,332 $ 1.50 4.62 $ 2,218,263 |
Share Based Awards
Share Based Awards | 12 Months Ended |
Apr. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Share Based Awards | Note 12 - 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. Options exercisable as of April 30, 2021 totaled 1,305,810. The remaining weighted average contractual term of the options outstanding at April 30, 2021 was 8.68 years. The aggregate intrinsic value of outstanding options, representing the excess of the stock price at April 30, 2021 of $4.04 over the exercise price of each option, was $4,943,870. As of April 30, 2021 and 2020, there was $914,915 and $1,009,731 of unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, which is expected to be recognized over the weighted average period of 1.08 years. The table below sets forth the assumptions used on the date of grant for estimating the fair value of options granted during the years ended April 30, 2020 and April 30, 2021: 2021 2020 Exercise price 2.01 - 3.95 0.82 - 2.10 Stock price on date of grant 2.01 - 3.95 0.82 - 2.10 Volatility 88.60% - 91.44 % 75 % Risk-free interest rate 0.38% - 1.66 % 1.59 - 1.74 % Expected term (years) 5.87 - 10.00 5.00 - 10.00 Dividend yield — — A summary of activity under the Plan for the two years ended April 30, 2021 is as follows: Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding as of April 30, 2019 — — Granted 1,597,475 $ 1.10 Exercised — — Forfeited or expired — — Outstanding as of April 30, 2020 1,597,475 1.10 Granted 600,000 3.63 Exercised — — Forfeited or expired — — Outstanding as of April 30, 2021 2,197,475 $ 1.79 8.68 $ 4,943,870 Exercisable as of April 30, 2021 1,305,810 $ 2.21 9.00 $ 2,388,208 Stock compensation expense for the years ended April 30, 2021 and 2020 was as follows: 2021 2020 General and administrative $ 1,688,025 $ 213,959 Research and development 1,269,987 55,936 Operations 220,048 — Sales and marketing 210,156 — Total $ 3,388,216 $ 269,895 |
Derivatives
Derivatives | 12 Months Ended |
Apr. 30, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivatives | Note 13 – Derivatives The Company completed financings in October 2020 and January 2021 which included notes and warrants which contain embedded features subject to derivative accounting. See Note 7 for a full description of these financings. Both the notes and the warrants included provisions which provided for a reduction in the conversion and exercise prices, respectively, if the Company completed a future qualified offering at a lower price. These provisions represent embedded derivatives which are valued separately from the host instrument (meaning the notes and warrants) and recognized as derivative liabilities on the Company’s balance sheet. The Company initially measures these financial instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. The Company also measures these financial instruments on the date of settlement (meaning when the note is converted or the warrant is exercised) at their estimated fair value and recognizes changes in their estimated fair value in results of operations. Any discount on the carrying value of the note is fully amortized on the date of settlement and recognized as interest expense. The Company estimated the fair value of these embedded derivatives using a multinomial lattice mode1. The range of underlying assumptions used in the binomial model to determine the fair value of the derivative warrant liability upon issuance, at the end of each fiscal reporting quarter, and upon settlement of the derivative liability are set forth below. In addition, the Company’s stock price on each measurement date was used in the model. April 30, 2021 Risk-free interest rate 0.08-0.61% Expected dividend yield — Expected term (in years) 1.54-5.00 Expected volatility 86.74-110.56 % The fair value of the derivative liabilities recognized upon the closing of the October 2020 and January 2021 financings exceeded the net proceeds totaling $1,080,000 from those financings. Therefore, a derivative expense totaling $4,630,288 was recognized, of which $148,587 and $4,481,701 related to the October 2020 and January 2021 financings, respectively. Changes in the derivative liability during the year ended April 30, 2021 were as follows: Recognized upon closing of October 2020 financing $ 728,587 Recognized upon closing of January 2021 financing 4,981,701 Eliminated upon conversion of notes/exercise of warrants (5,390,415 ) Changes in fair value from issuance through April 30, 2021 2,492,894 Derivative liability at April 30, 2021 $ 2,812,767 Changes in the fair value of derivates during the fiscal year ended April 30, 2021 resulted in an expense of $2,492,894, and primarily related to an increase in the Company’s stock price following the closings of the financings. As of April 30, 2021, all of the notes had been converted into common stock and 873,332 of the warrants were outstanding. The fair value of the remaining derivatives at April 30, 2021 totaled $2,812,767 using the following assumptions: April 30, 2021 Current stock price $ 4.04 Risk-free interest rate 0.08-0.61% Expected dividend yield — Expected term (in years) 1.54-5.00 Expected volatility 86.74-110.56 % |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Apr. 30, 2021 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 14 - Related-Party Transactions Shares Issued for Services – In May 2019, we issued 1,570 shares of common stock valued at $70,000 to a shareholder for legal services provided to us. In April 2020, we issued 150,000 shares of common stock with a fair market value of $204,000 to a different law firm for services provided to us. Convertible Note Financing – In December 2019, we completed a convertible note financing with a member of the Board of Directors for $125,000 and with our Chief Executive Officer for $25,000. The same Board member invested $300,000 and $100,000 in the convertible note financings completed in October 2020 and January 2021, respectively. Another board member invested $50,000 in the convertible note financing completed in January 2021. See Note 7 for details on the terms of the transaction. Payable to Aerocarve – In August 2020 and December 2020, the Company received advances totaling $79,000 from Aerocarve, which is controlled by the Company’s Chief Executive Officer. The parties agreed that the funds would bear interest at 5% annually until repaid. During the year ended April 30, 2021, the Company made principal repayments of this note totaling $5,000. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Apr. 30, 2021 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 15 - Subsequent Events Subsequent events have been evaluated through the date of this filing and there are no subsequent events which require disclosure except as set forth below: A. Common Stock Offering On May 4, 2021, the Company closed an offering of 4 million shares of common stock which generated gross proceeds of $16 million and net proceeds of approximately $14.6 million. On July 21, 2021, the Company closed an offering of 13,333,334 shares of common stock which generated gross proceeds of $60 million and net proceeds of approximately $55.5 million. B. Closing of Skypersonic Acquisition On May 7, 2021, we closed on the acquisition of Skypersonic, as further described in Note 1. At closing, we acquired all of the issued and outstanding share capital of Skypersonic in exchange for issuance of $3,000,000 of our common stock, at the Volume Weighted Average Price (VWAP) of $4.0154 per share resulting in the issuance of 857,124 shares of common stock to the Sellers (the “ Share Consideration Escrow Shares C. Signing of Teal Drones Acquisition On July 13, 2021, the Company and Teal Acquisition I Corp., (“Acquisition”), a wholly-owned subsidiary, entered into an Agreement and Plan of Merger (the “Agreement”) with Teal Drones, Inc. (“Teal”). Under the terms of the Agreement, subject to the satisfaction of certain closing conditions, Acquisition will acquire Teal by merger of Acquisition with and into Teal, with Teal as the surviving corporation (the “Merger”). At the Effective Time of the Merger. all of the issued and outstanding share capital of Teal will be exchanged for an aggregate of Fourteen Million Dollars ($14,000,000) of Company common stock, (the “Common Stock”) and Series C Convertible Preferred Stock, (the “Series C Preferred”, and together with the Common Stock, the “Share Consideration”). The Company will at closing issue such number of shares equal to the Share Consideration divided by the VWAP of the Company (the “Closing Date VWAP”) which shall be equal to the average of the Daily VWAP for the twenty (20) trading days ending on and including the Closing Date. “Daily VWAP” means, for any trading day, the per share volume-weighted average price of the Company’s Common Stock as reported by Nasdaq. Fifteen (15%) percent of the Share Consideration (the “Escrow Shares”) shall be held in an escrow account for a period of eighteen (18) months as security for indemnification obligations and any purchase price adjustments due to working capital deficiencies and any other claims or expenses arising under the Agreement. In addition, the Share Consideration may be increased upon the achievement of certain milestones (the “Earn-Out Consideration”). A total of $16 million in Earn Out Consideration will be issued if sales and services of Teal’s Golden Eagle drones (“Teal Sales”) total $36 million during the 24 month period following the Closing (the “Earn-Out Period”). A total of $10 million in Earn Out Consideration will be issued if Teal Sales total at least $24 million but less than $36 million during the Earn-Out Period. A total of $4 million in Earn Out Consideration will be issued if Teal Sales total at least $18 million but less than $24 million. Additional Share Consideration, if earned, is issuable at the VWAP of the Company within thirty (30) days of the determination that Earn-Out Consideration is payable. Under the Agreement, the Share Consideration to be paid on the Closing Date shall be reduced by any indebtedness of Teal, including up to $2 million of senior secured debt to be assumed by the Company (the “Assumed Debt”) and any working capital deficit, on a dollar of dollar basis. In addition, it is anticipated that $1 million of the Share Consideration payable to the shareholders of Teal in connection with the Merger, has been agreed to be paid to the Assumed Debt holder to secure consent to the Merger and the transactions contemplated thereby. The closing is subject to customary closing conditions including (i) stockholder approval by shareholders of both the Company and Teal, (ii) approval by Nasdaq of the shares issuable to Teal, (iii) approval of the terms of the Assumed Debt by the Company and the lender, and (iv) completion of audits of Teal and the filing of other information required by Regulation S-X. It is anticipated that management and employees of the Company will hold more than 49% of the voting power of the Company and will vote in favor of the Merger. D. Related Party Transaction In July 2021, the Company entered into a consulting agreement with a director resulting in monthly payments of $6,000. In addition, the Company issued 150,000 options to purchase common stock at $2.51 which vest quarterly over the one-year term of the agreement. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Apr. 30, 2021 | |
Accounting Policies [Abstract] | |
Basis of Accounting | Basis of Accounting |
Principles of Consolidation | Principles of Consolidation |
Use of Estimates | Use of Estimates |
Cash | Cash |
Accounts Receivable, net | Accounts Receivable, net |
Inventory | Inventory |
Goodwill | Goodwill We 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. |
Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities and Related Disclosures | Fair Values, Inputs and Valuation Techniques for Financial Assets and Liabilities and Related Disclosures The fair value measurements and disclosure guidance defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level fair value hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The levels of the fair value hierarchy are described below: ● Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset, either directly or indirectly, for substantially the full term of the asset. Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active and inputs other than quoted prices that are observable in the marketplace for the asset. The observable inputs are used in valuation models to calculate the fair value for the asset. ● Level 3 inputs are unobservable but are significant to the fair value measurement for the asset, and include situations where there is little, if any, market activity for the asset. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset. A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. Disclosures for Non-Financial Assets Measured at Fair Value on a Non-Recurring Basis The Company’s financial instruments mainly consist of cash, receivables, current assets, accounts payable and accrued expenses and debt. The carrying amounts of its cash, receivables, current asserts, accounts payable, accrued expenses and current debt approximates fair value due to the short-term nature of these instruments. Convertible Securities and Derivatives When the Company issues convertible debt or equity instruments that contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds from the convertible host instruments are first allocated to the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, resulting in those instruments being recorded at a discount from their face value but no lower than zero. Any excess amount is recognized as a derivative expense. Derivative Liabilities The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. In October 2020 and January 2021, the Company entered into convertible note agreements which included provisions under which the conversion price was equal to the lesser of an initial stated amount or the conversion price of a future offering. This variable conversion feature was recognized as a derivative. Both financings included the issuance of warrants which contained similar variable conversion features. The Company values these convertible notes and warrants using the multinomial lattice method that values the derivative liability within the notes based on a probability weighted discounted cash flow model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations. |
Revenue Recognition | Revenue Recognition |
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) | 12 Months Ended |
Apr. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Values of purchase consideration, assets acquired, and liabilities assumed from reverse-merger and merger | 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 Brand name 578,000 Customer relationships 39,000 Goodwill 1,756,023 Total assets acquired $ 2,574,410 Liabilities Assumed Accounts payable and accrued expenses $ 171,651 Notes payable 209,799 Due to related party 197,846 Total liabilities assumed 579,296 Net assets acquired $ 1,995,114 D. Fat Shark Acquisition I. Purchase Price Shares issued $ 6,351,076 Promissory note issued 1,753,000 Cash 250,000 Total Purchase Price $ 8,354,076 II. Purchase Price Allocation Assets Acquired Cash $ 201,632 Accounts receivable 249,159 Other assets 384,232 Inventory 223,380 Brand name 1,144,000 Proprietary technology 272,000 Non-compete agreement 16,000 Goodwill 6,168,260 Total assets acquired $ 8,658,663 Liabilities Assumed Accounts payable and accrued expenses $ 279,393 Customer deposits 25,194 Total liabilities assumed 304,587 Net assets acquired $ 8,354,076 |
Other Current Assets (Tables)
Other Current Assets (Tables) | 12 Months Ended |
Apr. 30, 2021 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other current assets | 2021 2020 Prepaid inventory $ 478,939 $ — Prepaid expenses 115,587 — Security deposits 9,372 — Due from related party 75,000 3,020 Total $ 678,898 $ 3,020 |
Notes Payable (Tables)
Notes Payable (Tables) | 12 Months Ended |
Apr. 30, 2021 | |
Debt Disclosure [Abstract] | |
Agreements | Date of Transaction Purchased Receivables Payment to Company Transaction Fees Withholding Rate Balance at April 30, 2021 May 2020 $158,200 $140,000 $18,200 17% Completed – October 2020 September 2020 $209,050 $185,000 $24,050 17% $84 April 2021 $236,500 $215,000 $21,500 17% $236,500 |
Warrants (Tables)
Warrants (Tables) | 12 Months Ended |
Apr. 30, 2021 | |
Stockholders' Equity Note [Abstract] | |
Assumptions used to estimate fair value of warrants | April 30, 2021 Expected volatility 86-89 % Expected dividends 0 % Expected term 4.42-5 Years Risk-free interest rate 0.29-0.61 % |
Changes in warrants outstanding issued to non-employees of the Company | Number of Shares Weighted-average Exercise Price per Share Weighted-average Remaining Contractual Term (in years) Aggregate Intrinsic Value Balance as of April 30, 2020 — $ $ Granted 1,074,998 1.50 Exercised (201,666 ) 1.50 Outstanding as of April 30, 2021 873,332 $ 1.50 4.62 $ 2,218,263 |
Share Based Awards (Tables)
Share Based Awards (Tables) | 12 Months Ended |
Apr. 30, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Assumptions used for estimating fair value of options | 2021 2020 Exercise price 2.01 - 3.95 0.82 - 2.10 Stock price on date of grant 2.01 - 3.95 0.82 - 2.10 Volatility 88.60% - 91.44 % 75 % Risk-free interest rate 0.38% - 1.66 % 1.59 - 1.74 % Expected term (years) 5.87 - 10.00 5.00 - 10.00 Dividend yield — — |
Summary of activity under 2019 Equity Incentive Plan | Options Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding as of April 30, 2019 — — Granted 1,597,475 $ 1.10 Exercised — — Forfeited or expired — — Outstanding as of April 30, 2020 1,597,475 1.10 Granted 600,000 3.63 Exercised — — Forfeited or expired — — Outstanding as of April 30, 2021 2,197,475 $ 1.79 8.68 $ 4,943,870 Exercisable as of April 30, 2021 1,305,810 $ 2.21 9.00 $ 2,388,208 |
Stock compensation expense | 2021 2020 General and administrative $ 1,688,025 $ 213,959 Research and development 1,269,987 55,936 Operations 220,048 — Sales and marketing 210,156 — Total $ 3,388,216 $ 269,895 |
Derivatives (Tables)
Derivatives (Tables) | 12 Months Ended |
Apr. 30, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Assumptions used to determine fair value of derivative warrant liability | April 30, 2021 Risk-free interest rate 0.08-0.61% Expected dividend yield — Expected term (in years) 1.54-5.00 Expected volatility 86.74-110.56 % |
Changes in derivative liability | Recognized upon closing of October 2020 financing $ 728,587 Recognized upon closing of January 2021 financing 4,981,701 Eliminated upon conversion of notes/exercise of warrants (5,390,415 ) Changes in fair value from issuance through April 30, 2021 2,492,894 Derivative liability at April 30, 2021 $ 2,812,767 |
Assumptions used to determine fair value of remaining derivative liability | April 30, 2021 Current stock price $ 4.04 Risk-free interest rate 0.08-0.61% Expected dividend yield — Expected term (in years) 1.54-5.00 Expected volatility 86.74-110.56 % |
The Business - Values of purcha
The Business - Values of purchase consideration, assets acquired, and liabilities assumed from reverse-merger and merger (Details) - USD ($) | 12 Months Ended | ||
Apr. 30, 2021 | Apr. 30, 2020 | Jan. 31, 2020 | |
Merger Agreement with Rotor Riot, LLC | |||
Purchase Price | |||
Shares issued | 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 | ||
Brand name | 578,000 | ||
Customer relationships | 39,000 | ||
Goodwill | 1,756,023 | ||
Total assets acquired | 2,574,410 | ||
Liabilities Assumed | |||
Accounts payable and accrued expenses | 171,651 | ||
Notes payable | 209,799 | ||
Due to related party | 197,846 | ||
Total liabilities assumed | 579,296 | ||
Net assets acquired | $ 1,995,114 | ||
Fat Shark Acquisition | |||
Purchase Price | |||
Shares issued | 6,351,076 | ||
Promissory note issued | $ 1,753,000 | ||
Cash | 250,000 | ||
Total Purchase Price | 8,354,076 | ||
Assets Acquired | |||
Cash | 201,632 | ||
Accounts receivable | 249,159 | ||
Other assets | 384,232 | ||
Inventory | 223,380 | ||
Brand name | 1,144,000 | ||
Proprietary technology | 272,000 | ||
Non-compete agreement | 16,000 | ||
Goodwill | 6,168,260 | ||
Total assets acquired | 8,658,663 | ||
Liabilities Assumed | |||
Accounts payable and accrued expenses | 279,393 | ||
Customer deposits | 25,194 | ||
Total liabilities assumed | 304,587 | ||
Net assets acquired | $ 8,354,076 |
The Business (Details Narrative
The Business (Details Narrative) - USD ($) | Aug. 02, 2019 | Apr. 30, 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 ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Negative working capital | $ (3,034,060) | |
Accumulated losses | $ (15,809,928) | $ (2,573,753) |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Accounting Policies [Abstract] | ||
Customer deposits | $ 46,096 | $ 38,419 |
Other Current Assets - Other cu
Other Current Assets - Other current assets (Details) - USD ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid inventory | $ 478,939 | |
Prepaid expenses | 115,587 | |
Security deposits | 9,372 | |
Due from related party | 75,000 | 3,020 |
Total | $ 678,898 | $ 3,020 |
Notes Payable - Agreements (Det
Notes Payable - Agreements (Details) | 12 Months Ended |
Apr. 30, 2021USD ($) | |
May 2020 Shopify | |
Purchased receivables | $ 158,200 |
Payment to Company | 140,000 |
Transaction fees | $ 18,200 |
Withholding rate | 17.00% |
Ending balance | |
September 2020 Shopify | |
Purchased receivables | 209,050 |
Payment to Company | 185,000 |
Transaction fees | $ 24,050 |
Withholding rate | 17.00% |
Ending balance | $ 84 |
April 2021 Shopify | |
Purchased receivables | 236,500 |
Payment to Company | 215,000 |
Transaction fees | $ 21,500 |
Withholding rate | 17.00% |
Ending balance | $ 236,500 |
Disclosure - Notes Payable (Det
Disclosure - Notes Payable (Details Narrative) | Apr. 30, 2021USD ($) |
Note Payable to PayPal | |
Notes Payable | |
Notes payable assumed in connection with merger agreement, balance outstanding | $ 75,369 |
Note Payable to Shopify Capital | |
Notes Payable | |
Notes payable assumed in connection with merger agreement, balance outstanding | $ 101,910 |
Due to Related Party (Details N
Due to Related Party (Details Narrative) - USD ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Note Payable to BRIT, LLC | ||
Due to Related Party | ||
Due to related party, outstanding principal balance | $ 159,679 | $ 166,466 |
Obligations of BRIT, LLC | ||
Due to Related Party | ||
Due to related party, outstanding principal balance | 166,529 | |
Payable to Aerocarve | ||
Due to Related Party | ||
Due to related party, outstanding principal balance | 74,000 | |
Note Payable to Related Party | ||
Due to Related Party | ||
Due to related party, outstanding accrued interest | 25,791 | |
Due to related party, long term, outstanding balance | $ 1,753,000 |
Convertible Notes (Details Narr
Convertible Notes (Details Narrative) | 12 Months Ended |
Apr. 30, 2021USD ($) | |
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% |
October 2020 Financing | |
Convertible Debentures | |
Proceeds from Convertible Note financing | $ 600,000 |
January 2021 Financing | |
Convertible Debentures | |
Proceeds from Convertible Note financing | $ 500,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | Apr. 30, 2021 | Apr. 30, 2020 |
Income Tax Disclosure [Abstract] | ||
Accumulated deficit | $ (15,809,928) | $ (2,573,753) |
Approximate deferred tax assets related to future benefit of net operating losses | $ 632,000 | $ 104,000 |
Warrants - Assumptions used to
Warrants - Assumptions used to estimate fair value of warrants (Details) - Warrants | 12 Months Ended |
Apr. 30, 2021 | |
Expected volatility, minimum | 86.00% |
Expected volatility, maximum | 89.00% |
Expected dividends | 0.00% |
Expected term, minimum | 4 years 5 months 1 day |
Expected term, maximum | 5 years |
Risk-free interest rate, minimum | 0.29% |
Risk-free interest rate, maximum | 0.61% |
Warrants - Changes in warrants
Warrants - Changes in warrants outstanding issued to non-employees of the Company (Details) - Warrants issued to non-employees | 12 Months Ended |
Apr. 30, 2021USD ($)$ / sharesshares | |
Shares outstanding, beginning | |
Shares granted | 1,074,998 |
Weighted-average exercise price, shares granted | $ / shares | $ 1.50 |
Shares exercised | (201,666) |
Weighted-average exercise price, shares exercised | $ / shares | $ 1.50 |
Shares outstanding, ending | 873,332 |
Weighted-average exercise price, shares outstanding, ending | $ / shares | $ 1.50 |
Weighted-average remaining contractual term, shares outstanding | 4 years 7 months 13 days |
Aggregate intrinsic value, shares outstanding | $ | $ 2,218,263 |
Warrants (Details Narrative)
Warrants (Details Narrative) - USD ($) | 1 Months Ended | 2 Months Ended | 12 Months Ended | |||
Jan. 31, 2021 | Oct. 31, 2020 | Sep. 30, 2019 | Apr. 30, 2021 | Apr. 30, 2021 | Apr. 30, 2020 | |
Notes to Financial Statements | ||||||
Proceeds received in connection with exercise of warrants | $ 152,239 | $ 201,249 | $ 201,249 | $ 152,239 | ||
Exercise of warrants, number | 469,874 | 201,666 | ||||
Warrants issued to purchase shares, number of shares | 675,000 | 399,998 | ||||
Warrants issued to purchase shares, value | $ 2,870,666 | $ 267,999 | ||||
Reduction in derivative liability due to warrant exercises | $ (694,305) |
Share Based Awards - Assumption
Share Based Awards - Assumptions used for estimating fair value of options (Details) - Assumptions used - fair value of options - $ / shares | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Exercise price, minimum | $ 2.01 | $ 0.82 |
Exercise price, maximum | 3.95 | 2.10 |
Stock price on date of grant, minimum | 2.01 | 0.82 |
Stock price on date of grant, maximum | $ 3.95 | $ 2.10 |
Expected volatility, minimum | 88.60% | |
Expected volatility, maximum | 91.44% | 75.00% |
Risk-free interest rate, minimum | 0.38% | 1.59% |
Risk-free interest rate, maximum | 1.66% | 1.74% |
Expected term, minimum | 5 years 10 months 13 days | 5 years |
Expected term, maximum | 10 years | 10 years |
Expected dividends |
Share Based Awards - Summary of
Share Based Awards - Summary of activity under 2019 Equity Incentive Plan (Details) - Options - USD ($) | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Shares outstanding, beginning | 1,597,475 | |
Weighted-average exercise price, shares outstanding, beginning | $ 1.10 | |
Shares granted | 600,000 | 1,597,475 |
Weighted-average exercise price, shares granted | $ 3.63 | $ 1.10 |
Shares exercised | ||
Weighted-average exercise price, shares exercised | ||
Shares forfeited or expired | ||
Weighted-average exercise price, shares forfeited or expired | ||
Shares outstanding, ending | 2,197,475 | 1,597,475 |
Weighted-average exercise price, shares outstanding, ending | $ 1.79 | $ 1.10 |
Weighted-average remaining contractual term, shares outstanding | 8 years 8 months 5 days | |
Aggregate intrinsic value, shares outstanding | $ 4,943,870 | |
Shares exercisable, ending | 1,305,810 | |
Weighted-average exercise price, shares exercisable | $ 2.21 | |
Weighted-average remaining contractual term, shares exercisable | 9 years | |
Aggregate intrinsic value, shares exercisable | $ 2,388,208 |
Share Based Awards - Stock comp
Share Based Awards - Stock compensation expense (Details) - USD ($) | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | ||
General and administrative | $ 1,688,025 | $ 213,959 |
Research and development | 1,269,987 | 55,936 |
Operations | 220,048 | |
Sales and marketing | 210,156 | |
Total | $ 3,388,216 | $ 269,895 |
Share Based Awards (Details Nar
Share Based Awards (Details Narrative) - USD ($) | 12 Months Ended | |
Apr. 30, 2021 | Apr. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | ||
Number of shares issuable in connection with Awards under the Plan, maximum | 8,750,000 | 8,750,000 |
Unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures | $ 914,915 | $ 1,009,731 |
Derivatives - Assumptions used
Derivatives - Assumptions used to determine fair value of derivative warrant liability (Details) - Fair value of derivative warrant liability | 12 Months Ended |
Apr. 30, 2021 | |
Risk-free interest rate, minimum | 0.08% |
Risk-free interest rate, maximum | 0.61% |
Expected dividend yield | |
Expected term, minimum | 1 year 6 months 15 days |
Expected term, maximum | 5 years |
Expected volatility, minimum | 86.74% |
Expected volatility, maximum | 110.56% |
Derivatives - Changes in deriva
Derivatives - Changes in derivative liability (Details) | 12 Months Ended |
Apr. 30, 2021USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Recognized upon closing of October 2020 financing | $ 728,587 |
Recognized upon closing of January 2021 financing | 4,981,701 |
Eliminated upon conversion of notes/exercise of warrants | (5,390,415) |
Changes in fair value from issuance through April 30, 2021 | 2,492,894 |
Derivative liability, ending | $ 2,812,767 |
Derivatives - Assumptions use_2
Derivatives - Assumptions used to determine fair value of remaining derivative liability (Details) - Fair value of remaining derivatives | 12 Months Ended |
Apr. 30, 2021$ / shares | |
Current stock price | $ 4.04 |
Risk-free interest rate, minimum | 0.08% |
Risk-free interest rate, maximum | 0.61% |
Expected dividend yield | |
Expected term, minimum | 1 year 6 months 15 days |
Expected term, maximum | 5 years |
Expected volatility, minimum | 86.74% |
Expected volatility, maximum | 110.56% |
Derivatives (Details Narrative)
Derivatives (Details Narrative) | 12 Months Ended |
Apr. 30, 2021USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative expense recognized | $ 4,630,288 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 1 Months Ended | 12 Months Ended | |||||
Jan. 31, 2021 | Oct. 31, 2020 | Apr. 30, 2020 | Dec. 31, 2019 | May 31, 2019 | Apr. 30, 2021 | Apr. 30, 2020 | |
Shares Issued for Services, shares | 150,000 | 1,570 | |||||
Shares Issued for Services, amount | $ 204,000 | $ 70,000 | $ 274,000 | ||||
Convertible note financing with related parties | $ 79,000 | ||||||
Member of Board of Directors | |||||||
Convertible note financing with related parties | $ 100,000 | $ 300,000 | $ 125,000 | ||||
Chief Executive Officer | |||||||
Convertible note financing with related parties | $ 25,000 | ||||||
Non-employee director (2) | |||||||
Convertible note financing with related parties | $ 50,000 | ||||||
Aerocarve | |||||||
Advances from related party | 79,000 | ||||||
Repayments of principal on related party note payable | $ 5,000 |