Red Cat Holdings, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Notes Payable

Notes Payable	3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]
Notes Payable	6. Notes Payable On December 21, 2017, the Company closed on an offering with three institutional investors pursuant to which the Company issued and sold convertible notes (convertible at $0.03 per share) in the aggregate principal amount of $703,947 (the “December 2017 Notes”). The December 2017 Notes had an original issue discount of 5%, for proceeds to the Company in the amount of $668,750. The notes matured on January 20, 2018, bear interest at 8%, and require the repayment of 120% of principal and accrued interest at maturity. On March 6, 2018, the holders of $70,000 of Notes issued in October 2017 and the December 2017 Notes agreed to extend the due date of these notes to April 15, 2019 as discussed below. On March 6, 2018, the Company closed on a private placement offering with institutional investors pursuant to which the Company issued and sold Senior Secured Convertible Notes (the “2018 Notes”) to the Investors in the aggregate principal amount of $1,052,632 with an original issue discount of 5% and received gross proceeds of $1,000,000. The 2018 Notes matured on April 15, 2019, bear interest at 8% per annum and are in default. The 2018 Notes are secured by a first lien on all of the assets of the Company. On the maturity date, the Company was to repay an amount equal to 120% of the outstanding principal and accrued interest. Beginning on the six-month anniversary of the issuance of the 2018 Notes, the investors may elect to convert the 2018 Notes into common stock of the Company at $0.03 per share, subject to adjustment. As additional consideration, the Company issued the investors a total of 35,087,720 five-year warrants to purchase the Company’s common stock, which are exercisable on or after the six-month anniversary of the issuance at $0.06 per share. In addition, the Investors agreed to extend the due date of the October 2017 Notes and December 2017 Notes. On August 7, 2018, the Company borrowed $76,000 from an institutional investor and issued a 5% original issue discount promissory note in the total principal amount of $80,000. This note matured on the sixth month anniversary of the effective date and bears interest at 12% per annum. The Note automatically becomes due and payable upon the Company closing a financing through which the Company receives proceeds of at least $125,000. This note was repaid upon receipt of the funds for the below listed August 21, 2018 note. On August 21, 2018, the Company borrowed $150,000 from an institutional investor and issued a convertible promissory note in the total principal amount of $156,250. The note matured on April 15, 2019, bears interest at 8% per annum and is in default. On the maturity date, the Company was to repay an amount equal to 120% of the outstanding principal and accrued interest. Beginning on the six-month anniversary of the issuance date, the Investor may elect to convert the note into common stock of the Company at $0.03 per share, subject to adjustment. As additional consideration, the Company issued the investor a total of 5,000,000 five-year warrants to purchase the Company’s common stock, which are exercisable on or after the six-month anniversary of the issuance date at $0.06 per share. On October 12, 2018, the Company entered into a promissory note with its Chief Executive Officer in the amount of $15,000. The note bears interest at a rate of 2.55%. This note was repaid in January 2019. On November 21, 2018, the Company borrowed $75,000 from an institutional investor and issued the investor a promissory note in the total principal amount of $75,000. The note matured on February 19, 2019, bears interest at 5% and is in default. The aggregate principal amount of the above described convertible notes that remain outstanding is $1,982,829, which is shown in the accompanying balance sheet as of March 31, 2019, net of $2,189 debt discount, as convertible notes payable-net. The principal amount of the remaining note payable totals $75,000. Accrued interest amounted to $601,910 as of that date and interest expense aggregated $121,097 for the three months ended March 31, 2019. The Notes are all in default.

Notes Payable

3 Months Ended

Mar. 31, 2019

6. Notes Payable

On December 21, 2017, the Company closed on an offering with three institutional investors pursuant to which the Company issued and sold convertible notes (convertible at $0.03 per share) in the aggregate principal amount of $703,947 (the “December 2017 Notes”). The December 2017 Notes had an original issue discount of 5%, for proceeds to the Company in the amount of $668,750. The notes matured on January 20, 2018, bear interest at 8%, and require the repayment of 120% of principal and accrued interest at maturity.

On March 6, 2018, the holders of $70,000 of Notes issued in October 2017 and the December 2017 Notes agreed to extend the due date of these notes to April 15, 2019 as discussed below.

On March 6, 2018, the Company closed on a private placement offering with institutional investors pursuant to which the Company issued and sold Senior Secured Convertible Notes (the “2018 Notes”) to the Investors in the aggregate principal amount of $1,052,632 with an original issue discount of 5% and received gross proceeds of $1,000,000. The 2018 Notes matured on April 15, 2019, bear interest at 8% per annum and are in default. The 2018 Notes are secured by a first lien on all of the assets of the Company. On the maturity date, the Company was to repay an amount equal to 120% of the outstanding principal and accrued interest. Beginning on the six-month anniversary of the issuance of the 2018 Notes, the investors may elect to convert the 2018 Notes into common stock of the Company at $0.03 per share, subject to adjustment. As additional consideration, the Company issued the investors a total of 35,087,720 five-year warrants to purchase the Company’s common stock, which are exercisable on or after the six-month anniversary of the issuance at $0.06 per share. In addition, the Investors agreed to extend the due date of the October 2017 Notes and December 2017 Notes.

On August 7, 2018, the Company borrowed $76,000 from an institutional investor and issued a 5% original issue discount promissory note in the total principal amount of $80,000. This note matured on the sixth month anniversary of the effective date and bears interest at 12% per annum. The Note automatically becomes due and payable upon the Company closing a financing through which the Company receives proceeds of at least $125,000. This note was repaid upon receipt of the funds for the below listed August 21, 2018 note.

On August 21, 2018, the Company borrowed $150,000 from an institutional investor and issued a convertible promissory note in the total principal amount of $156,250. The note matured on April 15, 2019, bears interest at 8% per annum and is in default. On the maturity date, the Company was to repay an amount equal to 120% of the outstanding principal and accrued interest. Beginning on the six-month anniversary of the issuance date, the Investor may elect to convert the note into common stock of the Company at $0.03 per share, subject to adjustment. As additional consideration, the Company issued the investor a total of 5,000,000 five-year warrants to purchase the Company’s common stock, which are exercisable on or after the six-month anniversary of the issuance date at $0.06 per share.

On October 12, 2018, the Company entered into a promissory note with its Chief Executive Officer in the amount of $15,000. The note bears interest at a rate of 2.55%. This note was repaid in January 2019.

On November 21, 2018, the Company borrowed $75,000 from an institutional investor and issued the investor a promissory note in the total principal amount of $75,000. The note matured on February 19, 2019, bears interest at 5% and is in default.

The aggregate principal amount of the above described convertible notes that remain outstanding is $1,982,829, which is shown in the accompanying balance sheet as of March 31, 2019, net of $2,189 debt discount, as convertible notes payable-net. The principal amount of the remaining note payable totals $75,000. Accrued interest amounted to $601,910 as of that date and interest expense aggregated $121,097 for the three months ended March 31, 2019. The Notes are all in default.