# Red Cat Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2018 - Company: [Red Cat Holdings, Inc.](/companies/rcat.md) (CIK 748268) - Form: 10-Q - Filed: 2018-05-21 - Accepted by EDGAR: May 21, 2018, 10:16 ET - Period: 2018-03-31 - Accession: 0001554795-18-000141 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/748268/000155479518000141/tfvr0518form10q.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/748268/000155479518000141/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2018-03-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Operating income | 3 months, 2018-01-01 to 2018-03-31 | −$636.5k | us-gaap:OperatingIncomeLoss | | Net income | 3 months, 2018-01-01 to 2018-03-31 | −$452.1k | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2018-01-01 to 2018-03-31 | $0.00 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2018-01-01 to 2018-03-31 | $0.00 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2018-01-01 to 2018-03-31 | 114,181,237 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 3 months, 2018-01-01 to 2018-03-31 | −$344.9k | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 3 months, 2018-01-01 to 2018-03-31 | $52.1k | us-gaap:PaymentsToAcquireProductiveAssets | | Cash and equivalents | at 2018-03-31 | $1.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2018-03-31 | $1.5m | us-gaap:AssetsCurrent | | Total assets | at 2018-03-31 | $1.6m | us-gaap:Assets | | Current liabilities | at 2018-03-31 | $2.1m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2018-03-31 | $2.4m | us-gaap:Liabilities | | Shareholders' equity | at 2018-03-31 | −$821.6k | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 10,146 characters. *The following Management's Discussion and Analysis should be read in conjunction with TimefireVR Inc. financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, cryptocurrency business, business objectives, and intentions of pursuing business in the cryptocurrency area. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. Investors should review the Risk Factors in the Company’s Form 10-K for the year ended December 31, 2017. Except as required by U.S. securities laws, the Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.* *The following discussion should be read in conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this 10-Q. See also the notes to our consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2017.* ### OVERVIEW The Company is a Nevada corporation incorporated on April 10, 2002. On November 21, 2016, we changed our name to TimefireVR, Inc. We are currently in the process of changing our name to TeraForge Ventures Inc., subject to shareholder approval. Effective September 13, 2016, the Company acquired TLLC, a Phoenix-based virtual reality content developer. As consideration for the Merger Agreement, the Company issued the equity holders of TLLC a total of 41,400,000 shares of the Company's common stock and 2,800,000 five-year warrants. On January 3, 2018, the Company effected the sale of TLLC to a group which included its former owners including two of our former executive officers and directors. The Company received: (i) $100,000 in cash and (ii) a secured promissory note in the principal amount of $120,000 bearing 6% annual interest that matures in September 2018. Additionally, the buyers of TLLC assumed certain of the Company’s liabilities totaling approximately $558,054. The Company’s business model in the virtual reality business was not successful and the Company was unable to continue to finance its business due to a loss of confidence in the virtual reality business by the Company’s investors and threats of resignation from the Company’s officers, directors and lead technologist and TLLC employees. While shareholder approval was required by Nevada law, the purchasers refused to fund TLLC unless we closed immediately. Certain investors that had financed the Company had agreed to provide further funding if we sold TLLC and received a release from key liabilities including past due promissory notes. Rather than cease operations and have no working capital, we adhered to the TLLC purchasers' demands and closed the sale. Pending finalization of the sale of TLLC over the year-end holidays, investors lent us approximately $669,000 on December 21, 2017 and cancelled past due notes held by the investors on January 3, 2018 as explained in the following paragraph. Because we needed to eliminate state law liabilities, we opted to get irrevocable proxies which would permit us to seek shareholder ratification. We have filed a preliminary proxy statement which has not yet been finalized. We expect to file an amendment by mid-May 2018. Effective January 3, 2018, the Company entered into an exchange agreement with certain of the Company’s investors pursuant to which the Company issued 303,714 shares of the Company’s new Convertible Series E Preferred Stock in exchange for the cancellation of the Company’s Series A, Series A-1, Series C, the March 2017 Notes, the August 2017 Notes, and certain of the Company’s outstanding Warrants. This exchange had the effect of simplifying our capital structure and eliminating past due secured debt while substantially increasing future potential dilution. On March 6, 2018, we borrowed $1 million from these same investors and issued them $1,052,632 of the 2018 Notes which are due on April 15, 2019. The 2018 Notes pay 8% per annum interest and are convertible at $0.03 per share. On the maturity date, we must pay 120% of the principal of the 2018 Notes. The 2018 Notes are secured by a first lien on the Company's assets. On March 6, 2018, the investors extended their October 2017 Notes and December 2017 Notes to April 15, 2019. On January 3, 2018, we announced our entry into the cryptocurrency business. The Company’s current business is focused on the mining of bitcoin from a location in Brooklyn, NY. The Company is expanding that business and looking at other locations. In order to enter the cryptocurrency mining business, we entered into the Advisory Agreement with two parties on March 16, 2018. See Note 7. ### Results of Operations ### Comparison of the Three Months Ended March 31, 2018 and 2017 The following discussion analyzes our results of operations for the three months ended March 31, 2018 and 2017. The following information should be considered together with our financial statements for such period and the accompanying notes thereto. Revenues for the three months ended March 31, 2018 and 2017 were $0. Operating expenses for the quarter ended March 31, 2018 amounted to $636,505 as compared to $450,772 (net of loss from discontinued operations) for the quarter ended March 31, 2017. This was primarily due to increased officer compensation and professional fees expense. The net loss for the three months ended March 31, 2018 was $452,078 as compared to a net income of $1,428,692 for the quarter ended March 31, 2017. This difference is primarily due to the change in fair value of derivative, which created a non-cash gain for the three months ended March 31, 2017. ### Liquidity and Capital Resources Historically, our primary source of liquidity has been from the issuances of debt financing. The primary uses of cash are payroll related expenses and professional fees. Our balance sheet as of March 31, 2018 reflects $1,161,773 in cash. As of May 15, 2018, the Company had approximately $795,000 in cash. Management is continuing to pursue financing from various sources, including private placements from investors and institutions. We do not have capital to satisfy our estimated needs for the next 12 months. Because of the uncertainty regarding the cryptocurrency business costs as well as the sums we owe our principal lenders, we cannot predict, with certainty, the outcome of our actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate enough liquidity. At this time, our Company does not have a commitment from any party to provide additional financing. There is no assurance that any additional financing will be available or if available, on terms that will be acceptable. Any financing will be extremely dilutive to our common shareholders. If we cannot obtain financing, we will cease operations. ### Going Concern The Company has incurred losses since inception and requires additional funds for future operating activities. The Company’s selling activity has not reached a level of revenue sufficient to fund its operating activities. These factors create an uncertainty as to how the Company will fund its operations and maintain sufficient cash flow to operate as a going concern. The combination of these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. ### Critical Accounting Policies and Estimates Our financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparation of financial statements in conformity 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 revenues and expenses during the reporting periods. We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. ### Off-Balance Sheet Arrangements We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders. ### Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. ## Market risk As filed, 683 characters. On March 6, 2017, the Company issued the March 2017 Notes in the aggregate principal amount of $750,000 which matured on September 3, 2017. On the maturity date the Company was unable to repay the March 2017 Notes. On August 18, 2017, the Company issued the August 2017 Notes in the aggregate principal amount of $63,158 which matured on September 3, 2017. On the maturity date the Company was unable to repay the August 2017 Notes. The March 2017 Notes and August 2017 Notes were converted on January 3, 2018 into the Series E. See Note 8 On March 6, 2018, the holders of the October 2017 Notes and December 2017 Notes agreed to extend the due date of its debt to April 15, 2019. ## Controls and procedures As filed, 2,037 characters. ### Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2018. Because of our working capital limitations, our management is presently unable to spend any efforts in remediating these control deficiencies. ### Changes in Internal Control over Financial Reporting Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation. The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting. ## Risk factors As filed, 144 characters. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item. Filed May 21, 2018. Source: SEC EDGAR, the filing index for accession 0001554795-18-000141. Last ingested by Listed: Oct 30, 2026, 20:55 ET. No prices; not investment advice.