| Note 2 – Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting
Policies Basis of Accounting Restatement of Previously Issued Consolidated Financial Statements The impacts of these restatements are detailed
in the tables below:
Consolidated Balance Sheet As of April 30, 2023
Originally Reported As Restated Change
Operating lease right-of-use assets $ 620,307 $ 1,600,434 $ 980,127
Total long-term assets 28,018,078 28,568,316 550,238
Operating lease liabilities, current 281,797 159,423 (122,374 )
Warrant derivative liability 588,205 — (588,205 )
Total current liabilities 4,760,616 4,050,037 (710,579 )
Operating lease liabilities, long-term 379,466 1,481,967 1,102,501
Total long-term liabilities 822,849 1,925,350 1,102,501
Additional paid-in capital 109,993,100 112,642,726 2,649,626
Accumulated deficit (54,586,793 ) (57,078,103 ) (2,491,310 )
Total shareholders’ equity 54,609,625 54,767,941 158,316
Total liabilities and stockholders’ equity $ 60,193,090 $ 60,743,328 $ 550,238
Consolidated Statement of Operations For the year ended April 30, 2023
Originally Reported As Restated Change
Change in fair value of derivative liability $ (1,019,292 ) $ — $ 1,019,292
Net loss $ (27,087,737 ) $ (28,107,029 ) $ (1,019,292 ) Amounts
presented as originally reported as of April 30, 2023 are exclusive of Discontinued Operations with the exception of (i) change in fair
value of derivative liability, (ii) net loss, and (iii) Consolidated Balance Sheet totals. The Consolidated Statement of Cash Flows is
not presented above as there was no change in net cash used in operating activities of continuing operations. Principles of Consolidation Our consolidated financial statements include the accounts of our wholly owned subsidiaries
which include Teal and Skypersonic as well as Rotor Riot and Fat Shark which were sold on February 16, 2024. Non-majority owned investments,
including the formerly wholly owned subsidiaries Rotor Riot and Fat Shark, are accounted for using the equity method when the Company
is able to significantly influence the operating policies of the investee. Intercompany transactions and balances have been eliminated. The
Consumer segment businesses are characterized as discontinued operations in these financial statements. The operating results and
cash flows of discontinued operations are separately stated in those respective financial statements. See Note 3. Use of Estimates The
preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
reflected in these financial statements include those used to (i) complete purchase price accounting for acquisitions, (ii) the evaluation of long-term assets, including goodwill, for impairment,
and (iii) the evaluation of other-than-temporary-impairment of equity method investments. Cash and Cash Equivalents 6,067,169 Marketable Securities We have elected to present accrued interest income
separately from marketable securities on our consolidated balance sheets. Accrued interest income was $ 0 151,671 Accounts Receivable, net Accounts
receivable are recorded at the invoiced amount less allowances for doubtful accounts. The Company's estimate of the allowance for doubtful
accounts is based on a multitude of factors, including historical bad debt levels for its customer base, experience with a specific customer,
the economic environment, and other factors. Accounts receivable balances are written off against the allowance when it is probable that
the receivable will not be collected. Concentration
of Credit Risk
April 30,
2024 2023
Customer A 53 % 20 %
Customer B 24 % *
Customer C * 24 %
Customer D * 14 %
Customer E * 10 % * Accounts Receivable was less than 10% As of April 30, 2024, three customers accounted for equal to or greater
than 10% of total revenue, totaling 28%, 23% and 10%, respectively. As of April 30, 2023, two customers accounted for equal to or greater
than 10% of total revenue, totaling 22% and 20%, respectively. Inventories – Inventories,
which consist of raw materials, work-in-process, and finished goods, are stated at the lower of cost or net realizable value, and
are measured using the first-in, first-out method. Cost components include direct materials, direct labor, indirect overhead, as
well as in-bound freight. At each balance sheet date, the Company evaluates the net realizable value of its inventory using various
reference measures including current product selling prices and recent customer demand, as well as evaluating for excess quantities
and obsolescence. Goodwill and Long-lived
Assets ASC
350, Intangibles – Goodwill and Other, The estimate of fair value
of a reporting unit is computed using either an income approach, a market approach, or a combination of both. Under the income approach,
we utilize the discounted cash flow method to estimate the fair value of a reporting unit. Significant assumptions inherent in estimating
the fair values include the estimated future cash flows, growth assumptions for future revenues (including gross profit, operating expenses,
and capital expenditures), and a rate used to discount estimated future cash flow projections to their present value based on estimated
weighted average cost of capital (i.e., the selected discount rate). Our assumptions are based on historical data, supplemented by current
and anticipated market conditions, estimated growth rates, and management’s plans. Under the market approach, fair value is derived
from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable
businesses is based on the markets in which the reporting units operate and consider risk profiles, size, geography, and diversity of
products and services. Goodwill for Teal is ascribed
to its existing relationship with several U.S. government agencies including its classification as an approved vendor. The Company expects
that the Goodwill recognized in each transaction will be deductible for tax purposes. The Company has reported net losses since
its inception and is presently unable to determine when and if the tax benefit of this deduction will be realized. Property and equipment Property
and equipment is stated at cost less accumulated depreciation which is calculated using the straight-line method over the estimated useful
life of the asset. The estimated useful lives of our property and equipment are generally: (i) furniture and fixtures - seven years,
(ii) equipment and related - two to five years, and (iii) leasehold improvements – nine to fifteen years. Equity Method Investment The
equity method of accounting is applied to investments in which the Company has an ownership interest of between 20% and 50%. The Company
evaluates its equity method investments each reporting period for evidence of a loss in value that is other than a temporary decline.
Evidence of a loss in value might include, but would not necessarily be limited to, absence of an ability to recover the carrying amount
of the investment or the inability of the investee to sustain an earnings capacity that would justify the carrying amount of the investment.
The Company performed this analysis and concluded that its investment in UMAC was other-than-temporarily impaired and recognized an impairment
charge of $ 11,353,875 Leases The
Company determines if a contract is a lease or contains a lease at inception. Operating lease liabilities are measured, on each reporting
date, based on the present value of the future minimum lease payments over the remaining lease term. The Company's leases do not provide
an implicit rate. Therefore, the Company uses an effective discount rate of 12% based on its last debt financing. Operating
lease assets are measured by adjusting the lease liability for lease incentives, initial direct costs incurred and asset impairments.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with the operating lease asset reduced
by the amount of the expense. Lease terms may include options to extend or terminate a lease when they are reasonably certain to occur. Fair Values, Inputs and Valuation Techniques for
Financial Assets and Liabilities, and Related Disclosures 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 guidance establishes
three levels of the fair value hierarchy as follows: Level 1 Level 2 Level 3 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, accrued expenses and debt. The carrying amounts of these instruments approximates
fair value due to their short-term nature. Revenue Recognition 53,939 155,986 1,477,859 0 The following table presents the Company’s
revenue disaggregated by revenue type:
Year Ended April 30,
2024 2023
Contract related $ 4,173,005 $ 1,312,427
Product related 13,663,377 3,308,407
Total $ 17,836,382 $ 4,620,834 Research and Development Product
Warranty 372,000 90,000 Income Taxes Recent Accounting Pronouncements Management
does not believe that recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements. Foreign Currency Comprehensive Loss 865,738 864,165 1,573 609,155 610,129 974 Stock-Based Compensation tock
options are valued using the estimated grant-date fair value method of accounting in accordance with ASC Topic 718, Compensation –
Stock Compensation. Fair value is determined based on the Black-Scholes Model using inputs reflecting our estimates of expected volatility,
term and future dividends. We recognize forfeitures as they occur. The fair value of restricted stock is based on our stock price on the
date of grant. Compensation cost is recognized on a straight-line basis over the service period which is the vesting term. Basic and Diluted Net Loss per Share
April 30, 2024 April 30, 2023
Series B Preferred Stock, as converted 3,896 822,230
Stock options 6,779,934 4,784,809
Warrants 2,275,999 1,539,999
Restricted stock 175,130 781,060
Total 9,234,959 7,928,098 Related Parties Liquidity
and Going Concern 21,526,696 17,687,063 18,746,419 at April
30, 2024 raise substantial doubt about our ability to continue as a going concern. However, the Company has recently taken actions
to strengthen its liquidity. On December 11, 2023, we completed a public offering of 18,400,000 shares of common stock which
generated net proceeds of approximately $8,400,000 as further described in Note 1 and Note 16. In addition, the Company’s operating
plan for the next twelve months has been updated to reflect recent operating improvements. Revenues have accelerated and are expected
to continue growing. The Company’s manufacturing facility is scaling production and gross profits are projected to increase. If necessary, the Company will seek
to obtain additional debt financing for which there can be no guarantee. |
