[PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=6&type=section&id=ITEM%201.%20Financial%20Statements) The company's financial statements show a significant increase in total assets driven by financing activities, a sharp decline in revenue, and a widening net loss [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash | $65,930,475 | $9,154,297 | +$56,776,178 | | Total current assets | $91,573,633 | $25,798,257 | +$65,775,376 | | Total Assets | $121,367,851 | $55,604,267 | +$65,763,584 | | **Liabilities & Equity** | | | | | Convertible notes payable | $19,434,004 | $0 | +$19,434,004 | | Total current liabilities | $24,129,516 | $4,178,650 | +$19,950,866 | | Total liabilities | $25,802,729 | $5,484,714 | +$20,318,015 | | Total stockholders' equity | $95,565,122 | $50,119,553 | +$45,445,569 | - The company's cash position increased dramatically from **$9.2 million to $65.9 million**, primarily due to financing activities[16](index=16&type=chunk) - Total assets more than doubled, while total liabilities increased nearly fivefold, mainly from the issuance of convertible notes[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $3,218,577 | $6,419,669 | $4,848,239 | $13,033,698 | | Gross Profit (Loss) | $375,054 | $267,804 | $(475,356) | $1,389,008 | | Operating Loss | $(12,646,547) | $(5,376,018) | $(25,124,746) | $(11,419,317) | | Net Loss from Continuing Operations | $(13,278,960) | $(8,160,019) | $(36,402,311) | $(13,567,642) | | Loss Per Share (Basic & Diluted) | $(0.15) | $(0.11) | $(0.41) | $(0.18) | - Revenues for the three and six months ended June 30, 2025, **decreased by 50% and 63%** respectively compared to the same periods in 2024[18](index=18&type=chunk) - Operating expenses more than doubled in both periods, driven by significant increases in R&D, sales & marketing, and general & administrative costs, leading to substantially higher operating and net losses[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) - Total stockholders' equity increased from **$50.1 million** at the end of 2024 to **$95.6 million** by June 30, 2025[21](index=21&type=chunk)[22](index=22&type=chunk) - This increase was primarily driven by **$71.8 million** raised from public offerings and **$4.8 million** from the conversion of notes, which offset the **$13.3 million** net loss for the quarter[21](index=21&type=chunk)[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for the Six Months Ended June 30 (Unaudited) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(28,804,656) | $(6,569,510) | | Net cash (used in) provided by investing activities | $(579,626) | $912,937 | | Net cash provided by (used in) financing activities | $86,160,460 | $(297,819) | | **Net increase (decrease) in Cash** | **$56,776,178** | **$(6,149,361)** | - The company's cash balance increased by **$56.8 million** in the first six months of 2025, driven by **$86.2 million** in cash from financing activities[24](index=24&type=chunk) - This influx from public offerings and convertible notes more than compensated for the **$28.8 million** cash used in operations[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key corporate events including acquisitions and divestitures, significant financing activities, and an updated going concern assessment - The company acquired substantially all assets of FlightWave Aerospace Systems Corporation for an aggregate purchase price of **$14 million** in company stock, treated as a business combination[50](index=50&type=chunk) - On February 16, 2024, the company sold its consumer segment (Rotor Riot and Fat Shark) to Unusual Machines, Inc (UMAC) for a total consideration valued at **$20 million**[55](index=55&type=chunk) - The company raised approximately **$15 million** in February 2025 through a Senior Convertible Promissory Note, followed by two direct offerings in April and June 2025 raising gross proceeds of approximately **$30 million** and **$46.75 million**, respectively[78](index=78&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - Management has concluded that there is **no longer substantial doubt** about the company's ability to continue as a going concern due to recent capital raises and a major U.S. Army contract[49](index=49&type=chunk) - Subsequent to the quarter's end, the company obtained a contract with the U.S. Army to deliver up to **690 SRR Black Widow systems** in July 2025[104](index=104&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the revenue decline and gross loss to a strategic manufacturing shift, while rising operating expenses were driven by acquisitions and investments [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Comparison of Six Months Ended June 30, 2025 and 2024 | Metric | Six Months 2025 | Six Months 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $4,848,239 | $13,033,698 | -63% | | Gross Profit (Loss) | $(475,356) | $1,389,008 | -134% | | R&D Expenses | $7,030,860 | $2,958,518 | +138% | | Sales & Marketing | $6,502,333 | $3,614,028 | +80% | | General & Admin | $11,116,197 | $5,822,780 | +91% | | Net Loss from Continuing Ops | $(36,402,311) | $(13,567,642) | +168% | - The decrease in revenue and gross profit is attributed to the company shifting its manufacturing focus from the Teal 2 to the Black Widow drone, which also resulted in inventory write-offs[117](index=117&type=chunk)[118](index=118&type=chunk) - The surge in operating expenses was primarily due to increased headcount from the FlightWave acquisition and strategic investments in personnel to support the anticipated U.S. Army SRR contract[119](index=119&type=chunk)[121](index=121&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity Position as of June 30, 2025 | Metric | Amount | | :--- | :--- | | Cash | $65,930,475 | | Current Assets | $91,573,633 | | Current Liabilities | $24,129,516 | | Net Working Capital | $67,444,117 | - Cash provided by financing activities was **$86.2 million** for the six months ended June 30, 2025, a stark contrast to the **$0.3 million** used in the same period of 2024, reflecting proceeds from stock offerings and convertible notes[127](index=127&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Management identifies several significant estimates critical to its financial statements, including purchase price accounting, impairment evaluation, inventory valuation, and fair value of convertible notes[131](index=131&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," the company is not required to provide this information - As a "smaller reporting company," Red Cat Holdings, Inc. is exempt from the requirement to provide quantitative and qualitative disclosures about market risk[144](index=144&type=chunk) [Controls and Procedures](index=35&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of June 30, 2025, due to a persistent material weakness in internal financial reporting controls - The CEO and CFO concluded that as of June 30, 2025, the company's **disclosure controls and procedures were not effective**[145](index=145&type=chunk) - A **material weakness** in internal control over financial reporting was identified, stemming from insufficient resources for adequate supervision and segregation of duties, and the lack of a formalized accounting policies manual[149](index=149&type=chunk) - Management is actively working to implement enhanced procedures and controls to address the identified material weakness[149](index=149&type=chunk)[150](index=150&type=chunk) [PART II - OTHER INFORMATION](index=37&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in routine legal proceedings not expected to materially impact its financial condition - The company does not expect any pending legal proceedings to have a material adverse effect on its business, financial position, or cash flows[100](index=100&type=chunk)[154](index=154&type=chunk) [Risk Factors](index=37&type=section&id=ITEM%201A.%20Risk%20Factors) Key risks include potential asset foreclosure from secured debt, uncertainty in winning government contracts, and the identified material weakness in internal controls - A default on obligations to Lind, which are secured by company assets, could lead to foreclosure and liquidation of those assets, potentially requiring the company to cease operations[156](index=156&type=chunk) - The company's success is highly dependent on winning government contracts, which involves a lengthy, uncertain, and competitive process with substantial upfront costs[161](index=161&type=chunk) - The company has identified a **material weakness** in its internal control over financial reporting, which could result in an inability to accurately and timely report financial results and may erode investor confidence[165](index=165&type=chunk)[167](index=167&type=chunk) - A significant portion of potential revenue is derived from U.S. Government contracts, which are subject to risks such as termination for convenience, funding cuts, and congressional appropriation delays[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[175](index=175&type=chunk) [Defaults Upon Senior Securities](index=41&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[177](index=177&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[178](index=178&type=chunk) [Other Information](index=41&type=section&id=ITEM%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter - No directors or officers adopted or terminated Rule 10b5-1 trading plans during the quarter[178](index=178&type=chunk) [Exhibits](index=41&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including financing agreements and officer certifications - The report includes various exhibits, such as amendments to notes and warrants, securities purchase agreements, and certifications required by the Sarbanes-Oxley Act[178](index=178&type=chunk)

Core Insights - Red Cat Holdings, Inc. is positioned for significant growth in the unmanned systems sector, bolstered by recent certifications, partnerships, and government contracts [2][3] - The company reported a strong financial position with cash and receivables totaling $66.9 million and inventory valued at $21.0 million, enabling it to pursue its strategic goals [2][6] - The second quarter of 2025 saw revenues of $3.2 million, with a notable operating loss of $12.6 million, reflecting ongoing investments in research and development [10][11] Recent Operational Highlights - Red Cat achieved AS9100 certification, enhancing its credibility in the aerospace and defense sectors [6] - The company secured a contract with the U.S. Army to deliver up to 690 SRR Black Widow systems, indicating strong demand for its products [6] - Strategic partnerships, such as the one with ESAero, are expected to support manufacturing capabilities for the Black Widow [6] Financial Performance - For the second quarter ended June 30, 2025, Red Cat reported revenues of $3.2 million, a decrease from $6.4 million in the same period of 2024 [10] - The cost of goods sold for the quarter was $2.8 million, leading to a gross profit of $375,054 [10] - Total operating expenses reached $13.0 million, resulting in a net loss of $13.3 million for the quarter [11] Balance Sheet Overview - As of June 30, 2025, total assets amounted to $121.4 million, a significant increase from $55.6 million at the end of 2024 [8] - The company’s liabilities totaled $25.8 million, with stockholders' equity at $95.6 million, reflecting a strong capital position [8] Cash Flow Analysis - Net cash used in operating activities for the first half of 2025 was $28.8 million, compared to $6.6 million in the same period of 2024 [13] - The company generated $86.2 million in net cash from financing activities, primarily from the issuance of common stock and convertible notes [13]

Core Insights - Red Cat Holdings, based in San Juan, Puerto Rico, is a prominent player in the drone technology sector, focusing on military, government, and commercial applications, with a stock surge of approximately 500% over the past year and a market capitalization of $890.2 million [1][2] Company Overview - The company has a diverse portfolio, including subsidiaries Teal Drones and FlightWave Aerospace, and products like the Golden Eagle and Black Widow drones, which are approved for military use [2] - Red Cat's strategic partnerships and technological advancements, such as collaboration with Palantir Technologies for AI-driven navigation, enhance its military offerings [6] Financial Performance - For fiscal year 2024, Red Cat reported a 286% revenue increase to $17.8 million, with Q4 contributing $6.3 million, primarily from Teal 2 drone sales [3] - In Q2 fiscal 2025, revenues dropped to $1.5 million from $3.9 million year-over-year due to a strategic pause in Teal 2 production [3] - The company maintains a solid balance sheet with $5.7 million in cash and accounts receivable, supported by $46.75 million raised through stock offerings and $20 million in debt financing [4] Market Outlook - The global drone market is projected to reach $90 billion by 2030, growing at a 32% CAGR from a valuation of $15.2 billion in 2020, driven by demand for autonomous systems and AI integration [7] - Red Cat's focus on "Made in America" drones aligns with U.S. policies, providing a competitive edge over foreign competitors like DJI [7] Growth Projections - The company projects revenues of $80–120 million for 2025, including $25–65 million from Black Widow sales, a significant increase from its current trailing revenue of $12 million [6] Ownership Structure - Red Cat's ownership structure includes 37.3% held by management and insiders, indicating strong internal confidence, while 53.7% is held by retail investors, suggesting broad interest but potential volatility [12]

Core Viewpoint - Bragar Eagel & Squire, P.C. is investigating potential claims against Red Cat Holdings, Inc. due to allegations of misleading statements and breaches of fiduciary duties by the company's board of directors during a specified class period [2][4]. Company Overview - Red Cat Holdings, Inc. operates in the drone industry, providing products and solutions, including the "Teal 2" drone designed for nighttime military operations [3]. Legal Allegations - The class action lawsuit against Red Cat claims that the company made false or misleading statements regarding its production capacity at the Salt Lake City facility and the value of its Short Range Reconnaissance Program contract [4]. - On July 27, 2023, Red Cat disclosed that its Salt Lake City facility could only produce 100 drones per month, with potential future capacity of 1,000 drones per month contingent on additional investments [5]. - Following this announcement, Red Cat's stock price fell nearly 9% [5]. - On September 23, 2024, Red Cat reported a loss per share of $0.17 and revenue of $2.8 million, both missing consensus estimates, leading to a stock price drop of over 25% [6]. - A report published by Kerrisdale Capital on January 16, 2025, alleged that the SRR contract was smaller and less favorable than previously indicated, resulting in a stock price decline of more than 21% [7].

Core Insights - Red Cat Holdings, Inc. has announced that its subsidiary, Teal Drones, has achieved AS9100 certification, a significant milestone for the company in the aerospace and defense sector [1][3][4] Group 1: Certification Details - The AS9100 standard is a globally recognized benchmark for quality management in aviation, space, and defense, ensuring quality control, safety, and traceability [2] - Teal Drones' certification confirms compliance with stringent aerospace quality and safety standards across the entire product lifecycle, enhancing reliability and performance for customers [2][3] Group 2: Impact on Operations - The certification process involved a rigorous audit, validating Teal's commitment to operational excellence and continuous improvement, which will lead to increased product reliability and customer satisfaction [3] - The achievement of AS9100 certification coincides with the expansion of Teal Drones' facilities and manufacturing capabilities to meet rising demand for its products [4] Group 3: Product Significance - The Black Widow drone, part of Red Cat's Family of Systems, is a secure, NDAA-compliant ISR drone selected for the U.S. Army's Short-Range Reconnaissance Program, designed for real-time intelligence delivery [4] - The AS9100 certification reinforces Red Cat's position as a trusted domestic manufacturer, contributing to the resilience of the U.S. drone industrial base [4] Group 4: Company Overview - Red Cat Holdings, Inc. is a provider of advanced drone and robotic solutions for defense and national security, developing American-made hardware and software through its subsidiaries [5] - The company is expanding its capabilities into maritime domains, including uncrewed surface vessels and autonomous underwater vehicles, enhancing multi-domain mission effectiveness [5]

SAN DIEGO, Aug. 12, 2025 /PRNewswire/ -- The Shareholders Foundation, Inc. announced that a lawsuit was filed for certain investors in shares of Red Cat Holdings, Inc. (NASDAQ: RCAT). Investors who purchased shares of Red Cat Holdings, Inc. (NASDAQ: RCAT) prior to March 2022 and continue to hold any of thoseNASDAQ: RCAT shares, also have certain options and should contact the Shareholders Foundation at [email protected] or call +1(858) 779 - 1554. Those who purchased shares of Red Cat Holdings, Inc. (NASDAQ ...

Core Viewpoint - Red Cat Holdings presents a unique investment opportunity due to a recent pullback in share price, despite analysts projecting significant growth potential driven by a major military contract and a solid execution strategy [1][2]. Group 1: Company Overview - Red Cat operates a Family of Systems strategy, developing a diverse portfolio of unmanned platforms for defense and industrial missions, which provides multiple growth avenues [3]. - The Black Widow drone, central to Red Cat's offerings, is designed for reconnaissance with advanced thermal sensors and is certified for procurement by federal agencies, enhancing its competitive edge [4]. - The company is expanding into maritime operations with Unmanned Surface Vessels (USVs), supported by recent capital raises, which diversifies its product suite and reduces reliance on single products [5]. Group 2: Military Contract Impact - Red Cat has been selected for the U.S. Army's Short Range Reconnaissance (SRR) contract, aiming to procure up to 5,880 Black Widow drones, which is expected to drive significant revenue growth [7]. - Revenue guidance for calendar year 2025 is projected between $80 million and $120 million, a substantial increase from the $1.63 million reported for the quarter ending March 31, 2025 [8]. Group 3: Operational Readiness - Red Cat has partnered with Empirical Systems Aerospace, Inc. (ESAero), an AS9100-certified manufacturer, to ensure quality production and address capacity concerns [10]. - The company is utilizing advanced software from Palantir to optimize supply chain efficiency and enhance the operational capabilities of its drones [11]. - Recent capital raises have secured over $75 million in gross proceeds, providing the necessary funds to build inventory and scale production [12]. Group 4: Market Dynamics - Red Cat's stock is currently undervalued, with a 12-month price forecast of $13.00, indicating a potential upside of 58.73% from the current price of $8.19 [13]. - The stock has a high short interest of 15.86 million shares, representing over 20% of publicly available stock, which could lead to a short squeeze if positive news emerges [15]. - Positive developments, such as strong earnings or large-scale deliveries, could trigger a buying frenzy among short-sellers, exerting upward pressure on the stock price [16].

Group 1: Market Trends and Short Squeeze Dynamics - The market is experiencing a resurgence of meme stocks and short squeezes, reminiscent of events in 2021, with a new presidential administration influencing market dynamics [1][2] - Small-cap stocks are showing parabolic gains driven by retail volume, indicating a potential for short squeeze opportunities [2] - Short squeezes are characterized by high volatility and are often associated with stocks that appear unattractive at first glance, such as struggling movie chains and unprofitable tech firms [3][4] Group 2: Key Metrics for Short Squeeze Candidates - Important factors for identifying short squeeze candidates include short interest, days to cover, volatility, and catalysts [5][4] - High short interest indicates a bearish sentiment, while a high days to cover metric suggests difficulty for short sellers to exit their positions [5] - Catalysts such as positive earnings reports or regulatory changes can trigger a feedback loop, driving demand for shares [5] Group 3: Company-Specific Insights - **Navitas Semiconductor**: Currently has 32% short interest on a 134 million share float, with shorts controlling approximately $385 million of its $1.72 billion market cap. The company reported $83 million in sales over the last 12 months and is facing negative EPS [6][7] - **Red Cat Holdings**: Short interest has increased to 20% of the float, with a significant earnings miss in Q1. However, the company anticipates profitability by year-end and is gaining interest from the U.S. government due to its drone capabilities [8][9] - **QuantumScape**: Despite only 14% short interest, the stock has seen a 123% gain recently, driven by the announcement of a new battery technology. The stock has experienced volatility but received a price target increase from $6 to $11 [11][12]

Core Viewpoint - A class action securities lawsuit has been filed against Red Cat Holdings, Inc. for alleged securities fraud affecting investors between March 18, 2022, and January 15, 2025 [1][2]. Group 1: Lawsuit Details - The lawsuit claims that the defendants made false statements regarding the production capacity of the Salt Lake City Facility and the value of the U.S. Army's Short Range Reconnaissance Program of Record Tranche 2 contract, leading to materially false and misleading public statements [2]. - Investors who suffered losses during the specified timeframe have until July 22, 2025, to request to be appointed as lead plaintiff, although participation does not require serving in this role [3]. Group 2: Legal Representation - Levi & Korsinsky, LLP has a strong track record in securities litigation, having secured hundreds of millions of dollars for shareholders over the past 20 years and consistently ranking among the top securities litigation firms in the U.S. [4].

Core Viewpoint - A class action lawsuit has been filed against Red Cat Holdings, Inc. for violations of securities laws, specifically related to misleading statements about production capabilities and contract valuations [1][2]. Group 1: Lawsuit Details - The lawsuit claims that Red Cat made false and misleading statements regarding the production capabilities of its Salt Lake City facility [2]. - The company allegedly inflated the value of its Short Range Reconnaissance Program of Record Tranche 2 agreement, leading to materially false public disclosures throughout the class period [2]. - Investors who purchased securities between March 18, 2022, and January 15, 2025, are encouraged to participate in the lawsuit [1]. Group 2: Law Firm Background - DJS Law Group specializes in securities class actions, corporate governance litigation, and M&A appraisals, focusing on enhancing investor returns through advocacy [3]. - The firm represents some of the largest hedge funds and alternative asset managers, emphasizing the value of litigation claims as significant assets [3].