Red Cat Holdings, Inc.
For the period ended Jun 30, 2025. Filed Aug 14, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 14, 2025
RCAT$4.04+18.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-14.
0001641172-25-010350
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-14.
0001641172-25-024075
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 50 previous paragraphs and 61 current paragraphs.
31 unchanged; 14 reworded; 12 added; 5 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 4 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
Consolidated gross profit totaled $375,054 during the 2025 period compared to a gross profit of $267,804 during the 2024 period representing an increase of $107,250, or 40%. On a percentage basis, gross profit was 12% during the 2025 period compared to a gross profit of 4% during the 2024 period. The gross profit increase was primarily due to lower warranty expenses in the 2025 period compared to the 2024 period.
Current report
Research and development expenses totaled $3,598,267 during the 2025 period compared to $289,016 during the 2024 period, representing an increase of $3,309,251, or more than 11 times. The increase was primarily due to a higher headcount, including the addition of employees from the FlightWave acquisition.
Current report
Other Expense
Current report
Other expense totaled $632,413 during the 2025 period compared to $2,784,001 during the 2024 period, representing a decrease of $2,151,588 or 77%. This decrease is primarily related to a loss of $2,295,000 recognized in the 2024 period on the impairment of the investment in Unusual Machines, Inc.
Current report
Discussion and Analysis of the Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024
Current report
Revenues
Current report
Gross Profit
Current report
Operating Expenses
Current report
Other Expense
Current report
Net Loss from Continuing Operations
Current report
Net loss from continuing operations totaled $36,402,311 for the 2025 period compared to $13,567,642 for the 2024 period, resulting in an increase of $22,834,669 or 168%.
Current report
In November 2024, the FASB issued guidance expanding disclosure requirements related to certain income statement expenses. The amendments require tabular disclosure of certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments are effective for our fiscal year ending December 31, 2027 and may be applied retrospectively. While the Company is still evaluating the specific impacts and adoption method, the Company anticipates this guidance will have a significant impact on our consolidated financial statement disclosures.
Removed paragraphs (5)
Previous report
Recent Developments
Previous report
In April 2025, we entered into the First and Second Amendments to the February 2025 SPA with Lind. Additionally, in April 2025, we entered into a securities purchase agreement with certain institutional investors pursuant to which we agreed to issue and sell, in a registered direct offering. See Note 19 for further information.
Previous report
Other Income
Previous report
Going Concern
Previous report
We have never been profitable and have incurred net losses related to acquisitions, as well as costs incurred to pursue our long-term growth strategy. During the three months ended March 31, 2025, we incurred a net loss of $23,123,351 and used cash in operating activities of $15,907,737. As of March 31, 2025, working capital totaled $506,116. These financial results and our financial position at March 31, 2025 raise substantial doubt about our ability to continue as a going concern. We have recently taken actions to strengthen its liquidity through additional financings. Additionally, in November 2024, we were selected as the winner of the U.S. Army’s Short Range Reconnaissance (SRR) Program of Record which we are currently in negotiations regarding the initial purchase. We are currently in the process of scaling our production manufacturing facility in order to increase revenue and improve gross margins in hopes to increase cash flows from operations. As described in Note 12, we closed financings with proceeds of $7,681,000, $5,775,000, $14,432,880 in September 2024, November 2024, and February 2025, respectively. Additionally, our Form S-3 became effective on December 11, 2024 and as described in Note 19, on April 10, 2025, we raised an additional $30 million. Management has concluded that these recent positive developments alleviate any substantial doubt about our ability to continue our operations, and meet our financial obligations, for twelve months from the date these consolidated financial statements are issued.
Reworded paragraphs (14)
Previous wording
Since April 2016, the Company’s primary business has been to provide products, services, and solutions to the drone industry which it presently does through its wholly owned consolidated subsidiaries. Beginning in January 2020, the Company expanded the scope of its drone products and services through five acquisitions, including:
Current wording
Since April 2016, the Company’s primary business has been to provide products, services, and solutions to the drone industry which it presently does through its wholly owned consolidated subsidiaries.
Previous wording
Consolidated revenues totaled $1,629,662 during the three months ended March 31, 2025 (or the “2025 period”) compared to $6,614,029 during the three months ended March 31, 2024 (or the “2024 period”) representing a decrease of $4,984,367, or 75%. The decrease related to lower product revenue as the Company has begun shifting manufacturing focus from the Teal 2 to the Black Widow.
Current wording
Consolidated revenues totaled $3,218,577 during the three months ended June 30, 2025 (or the “2025 period”) compared to $6,419,669 during the three months ended June 30, 2024 (or the “2024 period”) representing a decrease of $3,201,092, or 50%. The decrease related to lower product revenue as the Company has begun shifting manufacturing focus from the Teal 2 to the Black Widow.
Previous wording
General and administrative expenses totaled $4,880,448 during the 2025 period compared to $3,084,495 during the 2024 period, representing an increase of $1,795,953 or 58%. The increase was mainly due to a higher headcount, including the addition of employees from the FlightWave acquisition. In anticipation of winning the production contract under the Army’s Short Range Reconnaissance program of record, the Company increased investment in personnel necessary to fulfill the contract as well as anticipated demands for future products.
Current wording
General and administrative expenses totaled $6,235,749 during the 2025 period compared to $2,738,285 during the 2024 period, representing an increase of $3,497,464 or 128%. The increase was mainly due to a higher headcount, including the addition of employees from the FlightWave acquisition. In anticipation of winning the production contract under the Army’s Short Range Reconnaissance program of record, the Company increased investment in personnel necessary to fulfill the contract as well as anticipated demands for future products.
Previous wording
During the 2025 period, we incurred stock-based compensation costs of $1,598,972 compared to $805,634 in the 2024 period, resulting in an increase of $793,338 or 98%.
Current wording
During the 2025 period, we incurred stock-based compensation costs of $2,035,061 compared to $958,406 in the 2024 period, resulting in an increase of $1,076,655 or 112%.
Previous wording
Net loss from continuing operations totaled $23,123,351 for the 2025 period compared to $5,407,623 for the 2024 period, resulting in an increase of $17,715,728 or 328%.
Current wording
Net loss from continuing operations totaled $13,278,960 for the 2025 period compared to $8,160,019 for the 2024 period, resulting in an increase of $5,118,941 or 63%.
Previous wording
Consolidated gross loss totaled $850,410 during the 2025 period compared to a gross profit of $1,121,204 during the 2024 period representing a decrease of $1,971,614, or 176%. On a percentage basis, gross loss was 52% during the 2025 period compared to a gross profit of 17% during the 2024 period. The gross loss in the 2025 period was due to lower-than-planned manufacturing levels due to the transition to the Black Widow which resulted in higher relative overhead costs compared to the 2024 period. Our manufacturing facility is presently producing drones at a lower level than it is designed for, and these lower production levels, combined with higher overhead costs, continue to result in lower than targeted gross margins.
Current wording
Consolidated gross loss totaled $475,356 during the 2025 period compared to a gross profit of $1,389,008 during the 2024 period representing a decrease of $1,864,364, or 134%. On a percentage basis, gross loss was 10% during the 2025 period compared to a gross profit of 11% during the 2024 period. The gross loss in the 2025 period was due to inventory write-offs occurring as we transition sales and production from the Teal 2 to the Black Widow.
Previous wording
Research and development expenses totaled $3,432,593 during the 2025 period compared to $2,669,502 during the 2024 period, representing an increase of $763,091, or 29%. The increase was primarily due to a higher headcount, including the addition of employees from the FlightWave acquisition.
Current wording
Research and development expenses totaled $7,030,860 during the 2025 period compared to $2,958,518 during the 2024 period, representing an increase of $4,072,342, or 138%. The increase was primarily due to a higher headcount, including the addition of employees from the FlightWave acquisition.
Previous wording
Sales and marketing costs totaled $3,314,748 during the 2025 period compared to $1,410,506 during the 2024 period, representing an increase of $1,904,242 or 135%. The increase was driven by higher payroll expenses due to an increased headcount and an increase in tradeshow attendance in efforts to spread awareness of new products and the Red Cat Futures Initiative.
Current wording
Sales and marketing costs totaled $6,502,333 during the 2025 period compared to $3,614,028 during the 2024 period, representing an increase of $2,888,305 or 80%. The increase was driven by higher payroll expenses due to an increased headcount and an increase in tradeshow attendance in efforts to spread awareness of new products and the Red Cat Futures Initiative.
Previous wording
Other expense totaled $10,645,152 during the 2025 period compared to other income of $635,676 during the 2024 period, representing an increase of $11,280,828 or more than 17 times. This increase is primarily related to a loss of $10,699,677 recognized in the 2025 period on the February 2025 Note to Lind, based on its fair value.
Current wording
Other expense totaled $11,277,565 during the 2025 period compared to $2,148,325 during the 2024 period, representing an increase of $9,129,240 or more than 4 times. This increase is primarily related to a fair value adjustment loss of $6,864,056 recognized in the 2025 period on the February 2025 Note to Lind, based on its fair value and loss on extinguishment of convertible notes payable of $4,623,335.
Previous wording
Net cash used in operating activities was $15,907,737 during the 2025 period compared to net cash used in operating activities of $4,375,260 during the 2024 period, representing an increase of $11,532,477 or 264%. The increased use of cash primarily related to lower gross profit and higher cash based operating expenses compared to the 2024 period. Net cash used in operations, net of non-cash expenses, totaled $12,886,204 during the 2025 period, compared to $1,129,679 during the 2024 period, resulting in an increase of $11,756,525, or more than 10 times. Net cash used related to changes in operating assets and liabilities totaled $5,670,590 during the 2025 period, compared to $97,316 during the 2024 period, representing an increase of $5,573,274. Changes in operating assets and liabilities can fluctuate significantly from period to period depending upon the timing and level of multiple factors, including inventory purchases, vendor payments, and customer collections.
Current wording
Net cash used in operating activities was $28,804,656 during the six months ended June 30, 2025 (or the “2025 period”) compared to net cash used in operating activities of $6,569,510 during the six months ended June 30, 2024 (or the “2024 period”), representing an increase of $22,235,146 or 338%. The increased use of cash primarily related to lower gross profit and higher cash based operating expenses compared to the 2024 period. Net cash used in operations, net of non-cash expenses, totaled $16,232,815 during the 2025 period, compared to $5,813,615 during the 2024 period, resulting in an increase of $10,419,200, or 179%. Net cash used related to changes in operating assets and liabilities totaled $8,635,160 during the 2025 period, compared to net cash provided of $1,184,517 during the 2024 period, representing a decrease of $9,819,677. Changes in operating assets and liabilities can fluctuate significantly from period to period depending upon the timing and level of multiple factors, including inventory purchases, vendor payments, and customer collections.
Previous wording
Net cash used by investing activities was $273,103 during the 2025 period compared to net cash provided by investing activities of $924,009 during the 2024 period, resulting in a decrease of $1,197,112 or 130%. During the 2025 period, proceeds from the divestiture of the consumer segment was $0 compared to $1,000,000 during the 2024 period.
Current wording
Net cash used by investing activities was $579,626 during the 2025 period compared to net cash provided by investing activities of $912,937 during the 2024 period, resulting in a decrease of $1,492,563 or 163%. During the 2025 period, proceeds from the divestiture of the consumer segment was $0 compared to $1,000,000 during the 2024 period.
Previous wording
Net cash provided by financing activities totaled $14,748,953 during the 2025 period compared to net cash used in financing activities of $147,147 during the 2024 period. The increase related to the proceeds from the issuance of convertible notes payable during the 2025 period.
Current wording
Net cash provided by financing activities totaled $86,160,460 during the 2025 period compared to net cash used in financing activities of $297,819 during the 2024 period. The increase relates to the proceeds from the issuance of common stock and convertible notes payable during the 2025 period.
Previous wording
At March 31, 2025, we reported current assets totaling $29,412,488, current liabilities totaling $28,906,372 and net working capital of $506,116. Cash totaled $7,722,410 at March 31, 2025. Inventory related balances, including pre-paid inventory, totaled $17,107,860.
Current wording
At June 30, 2025, we reported current assets totaling $91,573,633, current liabilities totaling $24,129,516 and net working capital of $67,444,117. Cash totaled $65,930,475 at June 30, 2025. Inventory related balances, including pre-paid inventory, totaled $20,996,936.
Previous wording
We have 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 we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.
Current wording
We have 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 we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations, except as follows:
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Sales and marketing costs totaled $3,187,585 during the 2025 period compared to $2,203,522 during the 2024 period, representing an increase of $984,063 or 45%. The increase was driven by higher payroll expenses due to an increased headcount.
Current report — wording carried from elsewhere
Consolidated revenues totaled $4,848,239 during the six months ended June 30, 2025 (or the “2025 period”) compared to $13,033,698 during the six months ended June 30, 2024 (or the “2024 period”) representing a decrease of $8,185,459, or 63%. The decrease related to lower product revenue as the Company has begun shifting manufacturing focus from the Teal 2 to the Black Widow.
Current report — wording carried from elsewhere
General and administrative expenses totaled $11,116,197 during the 2025 period compared to $5,822,780 during the 2024 period, representing an increase of $5,293,417 or 91%. The increase was mainly due to a higher headcount, including the addition of employees from the FlightWave acquisition. In anticipation of winning the production contract under the Army’s Short Range Reconnaissance program of record, the Company increased investment in personnel necessary to fulfill the contract as well as anticipated demands for future products.
Current report — wording carried from elsewhere
During the 2025 period, we incurred stock-based compensation costs of $3,634,033 compared to $1,764,042 in the 2024 period, resulting in an increase of $1,869,991 or 106%.