Red Cat Holdings, Inc.

Current report

Our business has been significantly dependent on U.S. Department of War contracts and programs, and we face risks associated with the transition of our revenue base to a broader portfolio of government and international customers.

Current report

A significant portion of our recent historical revenue has been derived from contracts, agreements, and programs with agencies of the U.S. Department of War ("DoW"). Our future operating results are dependent, in part, on our ability to successfully execute, maintain and grow relationships with new and existing government customers, perform under current contracts, obtain follow-on awards, and secure additional government and international business. There can be no assurance that we will successfully complete efforts on new revenue opportunities or that anticipated replacement revenues from new programs and customers will be realized in the timeframes or at the levels we expect.

Current report

Government contracts and programs are subject to numerous risks and uncertainties beyond our control. These include changes in military priorities, national security strategy, procurement policies, budgetary constraints, congressional appropriations, continuing resolutions, agency funding decisions, competitive procurements, bid protests, evolving operational requirements, and changes in applicable laws or regulations. Government agencies generally have broad rights to modify, delay, reduce the scope of, or terminate contracts and agreements, including for convenience.

Previous report

We may be subject to litigation, legal proceedings, and class action claims that could adversely affect our business and financial condition.

Previous report

From time to time, we are subject to claims, legal proceedings, and class action lawsuits arising in the ordinary course of our business or otherwise. For example, we and certain of our current and former executive officers and directors are defendants in a federal class action securities lawsuit filed in May 2025 and two related federal shareholder derivative lawsuits filed in August 2025 and January 2026. Each lawsuit alleges that, among other items, the defendants made false and/or misleading statements related to the production capacity of the Company’s manufacturing facility in Salt Lake City and the potential value of the Company’s contract for the U.S. Army’s SRR Program of Record. Although we do not currently believe that any pending or threatened legal proceedings or claims will have a material adverse effect on our business, financial condition, or results of operations, we cannot provide assurance that pending legal matters, including the class action and derivative lawsuits, will not result in significant liabilities. The defense of litigation, regardless of its merit, can be costly and time-consuming, may divert management's attention and resources, and could result in settlements, judgments, or other outcomes that adversely affect our business, financial condition, and results of operations. Any adverse resolution of such matters could also harm our reputation and negatively impact our relationships with customers, partners, and government agencies.

Previous report

Our pending acquisition of Quaze Technologies, Inc. (“Quaze”) is subject to customary closing conditions, including regulatory approval under the Investment Canada Act, which may delay, prevent, or impose burdensome conditions on the consummation of the transaction, potentially materially adversely affecting our business, financial condition, and stock price.

Previous report

The completion of our proposed acquisition of Quaze (the "Acquisition") is subject to customary closing conditions, including the receipt of required regulatory approvals. Specifically, the Acquisition is subject to review and clearance under the Investment Canada Act (the "ICA"). There can be no assurance that the necessary clearances under the ICA will be obtained in a timely manner, or at all. The Canadian governmental authorities possess significant discretion in their review process.

Previous report

If we fail to satisfy any of the closing conditions, including failing to obtain the required ICA clearance, or if the governmental authorities seek to impose conditions that are unacceptable to us or that permit either party to terminate the definitive transaction agreement, the Acquisition may not close. If the Acquisition is delayed or not consummated:

Previous report

•the market price of our common stock may decline to the extent that the current market price reflects a market assumption that the transaction will be completed;

Previous report

•we will have incurred significant transaction costs, including legal, accounting, and advisory fees, and committed substantial management time and resources, which must be absorbed regardless of whether the Acquisition is completed; and

Previous report

•we will not realize the anticipated strategic and financial benefits of the Acquisition, which could adversely affect our future business plans and growth strategy.