Red Cat Holdings, Inc.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 19, 2026 (“Annual Report”), as supplemented by our Quarterly Reports on Form 10-Q. Except for the risk factors described below, there have been no material changes in our risk factors from those previously disclosed in our Annual Report. You should carefully consider the risks described in such reports which could materially affect our business, financial condition or future results. The risks described in such reports are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

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.

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.

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.

The loss of, or a material reduction in, one or more significant government contracts or programs, or our inability to secure new contracts — whether with other branches of the U.S. armed services, allied foreign governments, or other customers, could have a material adverse effect on our business, financial condition, results of operations, cash flows, and prospects.