The deferredAt October 31, 2019 and April 30, 2019, we had accumulated deficits of approximately $1.5 million and $972,000, respectively. Deferred tax asset comprisesassets related to the future benefit of the recognition ofthese net operating losses for tax purposes.purposes totaled approximately $60,000 and $40,000, respectively, based on the Act 20 rate of 4%.  Currently, we focus on projected future taxable income in evaluating whether it is more likely thannot that these deferred assets will be realized. Based on the fact that we have not generated any revenues since inception, we have applied a full valuation allowance against our deferred tax assets at October 31, 2019 and April 30, 2018.

Note 5 – Common Stock

We are authorized to issue 500,000,000 shares of common stock. Each share of common stock is entitled to one vote.

Note 6 – Preferred Stock

Our Series A Preferred Stock (“Series A Stock”) is convertible to common stock at a ratio of 8.33 shares of common stock for each share of Series A Stock, and votes together with the common stock on an as-converted basis. The Series A Preferred Stock was originally issued under the Securities Exchange Agreement, as further described in Note 1. The Series A Stock was automatically converted into shares of common stock upon the effectiveness of our reverse stock split in August 2019, except for 208,704 shares which were subject to a limitation on the number of shares of common stock that can be held by the holder of those shares of Series A Stock.

Our Series B Preferred Stock (“Series B Stock”) is convertible into common stock at a ratio of 0.8334 shares of common stock for each share of Series B Stock held and votes together with the common stock on an as-converted basis. The Series B Preferred Stock was originally issued under the Exchange Agreement, as further described in Note 5 - Income Taxes (continued)1. In August 2019, a total of 240,000 shares of Series B Stock were converted into 200,000 shares of common stock.

Note 7 - Warrants

In May 2019, as part of the Share Exchange Agreement, we issued warrants to purchase 469,874 shares of common stock at an exercise price of $0.324 per share of common stock. The valuation allowancevalue of these warrants was considered to be a nominal amount at Julythe time of issuance. In September 2019, we received $152,239 in connection with the exercise of these warrants. The holder did not provide the required paperwork to complete the exercise until November 2019 and the shares are not expected to be issued until December 2019. As a result, the amount received has been reported as Common Stock to be Issued in the liabilities section of the Balance Sheet at October 31, 2019. We also assumed a fully vested, restricted stock unit agreement requiring the issuance of 41,667 shares of common stock in May 2021, as well as a warrant to purchase 5,556 shares of common stock at an exercise price of $60.00 per share. This warrant expires in March 2021.

Note 8 – Share Based Awards

Effective August 2019, shareholders approved the 2019 Equity Incentive Plan (the “Plan”) which allows us to incentivize key employees, consultants, and directors with long term compensation awards such as stock options, restricted stock, and restricted stock units (collectively, the “Awards”). The number of shares issuable in connection with Awards under the Plan may not exceed 8,750,000.

In October 2019, we issued options to purchase 350,000 shares of common stock valued at $477,500. 200,000 of the options vest ratably over a 2 year period and expire in October 2029. 150,000 of the options vest ratably over a 3 year period and expire in October 2024. All of the options were issued at an exercise price of $2.10 which equaled the stock price on the date of issuance. None of the options were exercisable as of October 31, 2019. The remaining weighted average contractual term of the options outstanding at October 31, 2019 is $530,263.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or allwas 7.80 years. The aggregate intrinsic value of the deferred income tax assets will not be realized. The ultimate realizationoptions, representing the excess of deferred income tax assets is dependent upon the generationstock price over the exercise price, was zero at October 31, 2019.

We recognized stock compensation expense of future taxable income$12,067 during the periodsthree months ended October 31, 2019, of which $8,815 was included in which those temporary differences become deductible. Management considersgeneral and administrative expenses and $3,252 was included in research and development expenses. We used the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relativeBlack-Scholes Model to estimate the realizationfair value of the deferred income tax asset balances to assessstock options issued using the applicationfollowing assumptions: (i) expected volatility – 75%, (ii) risk free interest rate – 1.59% or 1.74%, (iii) expected life – 5 or 10 years, and (iv) expected dividend yield of a valuation allowance as of July 31, 2019, and December 31, 2018.0%.

Red Cat, Inc., has not filed corporate income tax returns for Federal or state purposes.

Note 9 - Related-Party Transactions

Note 6 - Related-Party Transactions

Shares Issued for Services - On– In May 7, 2019, the Companywe issued 1,570 shares of common stock valued at $70,000 to a consultantshareholder for legal services provided.provided to us.

Office Space RentalLease – Red CatWe rented office space from Red Cat’s CEO forour Chief Executive Officer during parts of the fiscal years ended April 30, 2019 and 2018, years forand made payments totaling $8,100 and $7,200. This office space arrangement ended March 31, 2019. Rent expense is classified within general$7,200, respectively.

Convertible Note Financing – In December 2019, we completed a convertible note financing with a member of the Board of Directors for $125,000 and administrative expenses.with our Chief Executive Officer for $25,000. See Note 11 for details on the terms of the transaction.

Note 710 - Commitments and Contingencies

Office Lease– In December 2018, Red Catwe entered into a one year lease arrangement for its office space located in San Juan, Puerto Rico, for $26,638 per anum. Red Cat pays $2,220 per month for this space.annually. There are no renewal terms. Rent expense is classified within general and administrative expenses.

Note 811 - Subsequent Events

Letter of Intent - On June 4, 2019, we executed a Letter of Intent with Rotor Riot, LLC. The LOI, which is non-binding, sets forth the terms for our contemplated acquisition of Rotor Riot, a drone technology and media company. Any acquisition of Rotor Riot will be subject to the completion of due diligence, the negotiation of a definitive agreement, and other conditions.

EndIn November 2019 we issued a convertible note in the principal amount of Condensed Consolidated Financial Statements$300,000 to one accredited investor and in December 2019 we issued a convertible note in the principal amount of $125,000 to a director and a convertible note in the principal amount of $25,000 to our chief executive officer (collectively, the “Notes”). The Notes have a term of 2 years and bear interest at a rate of 12% which accrues and is payable in full when the Notes mature. Interest on the Notes may be paid in cash or in shares of common stock of the Company at the Conversion Price (as defined below).The Notes are convertible into shares of common stock at the holder’s sole discretion as follows: (A) prior to consummating an equity financing which generates gross proceeds of not less than $3,000,000 (a “Qualified Offering”), then at the 30 day volume weighted average of the closing price of a share of our common stock as listed or quoted on the market in which the shares are then traded or listed, or (B) after we have consummated a Qualified Offering, at 40% of the price per share of common stock sold in the Qualified Offering (the “Conversion Price”) . We may, upon 10 business days advance notice, elect to pre-pay the Note, including all accrued interest, in whole or in part, provided that any such prepayment prior to the one-year anniversary of the Note issuance shall be at a price equal to 112% of the then outstanding original principal amount. Upon an event of default, as described in the Notes, the outstanding principal and interest shall become immediately due and payable. Additionally, under the Note, unless waived by the holder, the holder shall not be entitled to convert the Note if such conversion would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the outstanding shares of common stock of the Company on such date.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial data included elsewhere in this 10-Q.Quarterly Report on Form10-Q. See also the audited financial statements and notes thereto forfootnotes in our recently-acquired operating subsidiary, Red Cat Propware, Inc.,Current Report Form 8-K/A filed with the SEC on July 31, 2019 on Form 8-K/A. 2019.

The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements relating to our liquidity, and our plans in for our business focusing on cloud-based analytics, storage, and services for drones. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Quarterly Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of severalmany factors. Investors should also review the Risk Factorsrisk factors in the Company’s Current Report on Form 8-K filed with the SEC on May 16, 2019. Except

All forward-looking statements speak only as required by U.S. securities laws,of the date on which they are made. The Company does not undertake any obligation to update such forward-looking statements to reflect events that occur or circumstances occurringthat exist after the date of this Quarterly Report on Form 10-Q.10-Q except as required by federal securities law.

OVERVIEWRecent Developments

We are a Nevada corporation incorporated on April 10, 2002. The Share Exchange Agreement

Effective July 24, 2019, we changed our name to Red Cat Holdings, Inc. On May 15, 2019, we acquired Red Cat Propware, Inc. (“Red Cat”), a company offering secure, cloud-based analytics, storage, and services for drones. We are focusing primarily on the business of Red Cat going forward.

Acquisition of Red Cat Propware, Inc.

We acquired Red Cat underclosed a Share Exchange Agreement (the “SEA”) with Red Cat and each of the shareholders of Red Cat.TimeFireVR, Inc., (“TimeFire”), a Nevada corporation. Under the SEA, we acquired allapproximately 83.33% of the issued andTimeFire’s outstanding share capital stock of Red Cat, in exchange for our issuance to the Red Cat shareholders of:on a fully-diluted basis. We issued: (i) 236,000,000196,667 shares of our common stock, and (ii) 2,169,068.05542,169,068 shares of our newly-designated Series A Preferred Stock, and (iii) 4,212,645 shares of our newly-designated Series B Preferred Stock. In total, the common stock and

Our new Series A Preferred Stock issued Red Cat Propware’s shareholders under the SEA constituted approximately 83.33% of our issued an outstanding share capital on a fully-diluted basis. These numbers do not give effect to our reverse stock split effective August 1, 2019.

With the exception of shares held by the President of Red Cat and our current CEO, Jeffrey Thompson, the convertibility of shares of Series A Preferred Stock is limited such that a holder of Series A Preferred Stock may not convert Series A Preferred Stock to our common stock to the extent that the number of shares of common stock to be issued pursuant to such conversion, when aggregated with all other shares of common stock owned by the holder at such time, would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) more than 4.99% of all of our common stock outstanding. Effective August 1, 2019, we conducted a 1 for 1,200 reverse split of our common stock. The effectiveness of the reverse split resulted in the automatic conversion of all Series A Preferred Stock to common stock, with exception of certain Series A Preferred shares affected by the 4.99% conversion blocker. Following the reverse split, our remaining shares of Series A Preferred Stock are convertible to common stock at a ratio of approximately 8.33 shares of common stock for each share of preferred stock held, and votes together with the common stock on an as-converted basis. The new Series A Preferred Stock.

Exchange Agreements with HoldersStock will convert automatically to common stock upon the effectiveness of Series E Convertible Preferred Stock, Promissory Notes, Options, and Warrants

Immediately prior to the closing of the SEA, we entered into Securities Exchange Agreements (the “Exchange Agreements”) with each of the holdersany future reverse split of our outstandingcommon stock. This common stock and Series E Convertible Preferred Stock, Promissory Notes, Options, and Warrants (collectively, the “Exchange Securities”). The holders of the Exchange Securities were issued, in exchange for their Exchange Securities, a total of 4,212,645.28 shares of our newly-designated Series B Preferred Stock. In total, the Series BA Preferred Stock issued under the Exchange Agreements constitutedSEA will constitute approximately 15.64%83.33% of our issued anand outstanding share capital on a fully-diluted basis. Following the reverse split, our

Our new Series B Preferred Stock is convertible to common stock at a ratio of approximately 0.8330.83 shares of common stock for each share of Series B Preferred Stock. The convertibility of shares ofpreferred stock held, and votes together with the common stock on an as-converted basis. This Series B Preferred Stock is also limited such thatissued under the SEA will constitute approximately 15.64% of our issued and outstanding share capital on a holder offully-diluted basis.

In total, the common stock, Series A Preferred Stock, and Series B Preferred Stock may not convert Series B Preferred Stock to our commonissued under the SEA are valued at $117,754.

Red Cat Propware, Inc.

On May 15, 2019, we acquired TimeFireVR, Inc., in a $117,754 stock transaction classified as a reverse-merger transaction. The acquisition will provide access to the extent thatpublic markets and support the numberdevelopment of sharesour product platform. In this reverse merger, the financial results of common stockRed Cat Propware, Inc., (the accounting acquirer), have been presented as the continuing operations of the Company since inception.

The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies and benefits from the combination of the two companies, including access to the public markets to raise capital, and is expected to be issued pursuant to such conversion, when aggregated with all other shares of common stock owned by the holder at such time, would result in the holder beneficially owning (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) more than 4.99% of all of our common stock outstanding. Series B Preferred Stock does not have an automatic conversion feature.deductible for tax purposes.

BusinessPlan of Operations

Following the acquisition, we are focused on the business operations of Red Cat Propware, Inc.

Through our recently-acquired operating subsidiary, Red Cat, we are inwhich is developing products to provide distributed data storage, analytics and related services to the businessdrone industry. The Company plans to utilize blockchain based technologies and offer its solutions as a Software-as-a-Service platform. Potential customers include regulators to track and review flight data, insurance companies for coverage and claims administration, and pilots to maintain compliance with regulations. The Company is targeting the first half of providing secure, cloud-based analytics, storage, and services2020 for drones. Our primarythe release of its first product, is Black“Black Box by Red Cat. Black Box by Red Cat is a blockchain technology that records all information from a drone much like a traditional airliner black box.  Red Cat sendsCat” although no assurances can be provided regarding the information directly to the cloud and clones the drone in real time. This information can then be viewed using Red Cat’s analytics platform with a secure login. actual release date.

Effective August 6, 2019, our BoardResults of Directors approved a change in our fiscal year end to April 30, which is the accounting year-end for our operating subsidiary Red Cat. Following this Quarterly Report, an additional report on Form 10-Q will be filed covering the transition period.Operations

Results of OperationsThree Months Ended October 31, 2019 and October 31, 2018

The following discussion analyzesRevenue

We have not generated any revenues since our results of operationsinception.

Operating Expenses

During the three months ended October 31, 2019, we incurred research and development expenses totaling $76,724 compared to $112,096 for the three months ended JulyOctober 31, 2019. The following information should be considered together with2018 resulting in a decrease of $35,372, or 32%. During the 2018 period, a substantial portion of our financial statements for such periodsactivities were focused on the research and development of our first product. During the accompanying notes thereto.

We generated no revenues during the three months ended July 31, 2019 period, we completed our first fiscal quarter as a publicly traded entity and have not generated revenuespent considerable efforts assimilating this change which resulted in a lower percentage allocation of certain operating costs to date from our current operations.research and development. During the three months ended JulyOctober 31, 2019, we incurred $321,502 in total expenses from continuing operations, consisting of $185,695 in research and development, $105,696 in professional fees, $29,974 in general and administrative expenses and $7,137 in payroll expenses. By comparison, during the three months ended July 31, 2018, we incurred $146,450 in expenses from continuing operations, consisting of $107,668 in research and development, $3,973 in professional fees, $1,264 in general and administrative expenses, and $33,546 in payroll expenses.

Our expenses and our net losstotaling $139,397 compared to $45,785 for the three months ended JulyOctober 31, 2018 resulting in an increase of $93,612, or 204%. Professional services costs were significantly higher in the 2019 are greater than those experienced duringperiod which was the same period last year duefirst full quarter operating as a publicly traded entity.

Net Loss

Since we have not generated any revenues to costs associated with Red Cat becoming a public company throughdate, the SEA, and increased costs associated withchanges in our Net Loss can be explained by the expansion of the company.changes in our operating expenses. As we continue to developexpand our business,operating activities in preparation for the launch of our first product, “Black Box by Red Cat”, we expect that operating costs and net losses will continue to increase until such time as we begin generating material revenue from salesrevenues.

Six Months Ended October 31, 2019 and October 31, 2018

Revenue

We have not generated any revenues since our inception.

Operating Expenses

During the six months ended October 31, 2019, we incurred research and development expenses totaling $262,419 compared to $219,764 for the six months ended October 31, 2018, resulting in an increase of $42,655, or 19%. The increase primarily related to higher payroll costs in the 2019 period compared to the 2018 period. During the six months ended October 31, 2019, we incurred general and administrative expenses totaling $275,204 compared to $84,567 for the six months ended October 31, 2018 resulting in an increase of $190,637, or 225%. Professional services costs were significantly higher in the 2019 period during which we completed a reverse merger transaction and became a publicly traded entity.

Net Loss

Since we have not generated any revenues to date, the changes in our Net Loss can be explained by the changes in our operating expenses. As we continue to expand our operating activities in preparation for the launch of our is Blackfirst product, “Black Box by Red Cat product.Cat”, we expect that operating costs and net losses will continue to increase until we begin generating revenues.

Cash Flows

Operating Activities

Net cash used in operating activities was $415,848 during the six months ended October 31, 2019 compared to net cash used in operating activities of $304,433 representing an increase of $111,415, or 37%. This increase in net cash used primarily related to an operating loss which was $233,792 higher in the 2019 period, partially offset by a positive contribution related to changes in operating assets and liabilities of $109,708.

Investing Activities

Net cash provided by investing activities was $24,704 during the six months ended October 31, 2019 period compared to $0 during the 2018 six months ended October 31, 2018. The Company acquired $24,704 of cash in connection with a reverse merger acquisition completed in the 2019 period.

Financing Activities

Net cash used provided by financing activities totaled $152,239 during the six months ended October 31, 2019 compared to $50,000 during the six months ended October 31, 2018, representing an increase of $102,239. Amounts received in both periods related to capital raised from common stock transactions which can vary from period to period.

Liquidity and Capital Resources

As of JulyOctober 31, 2019, we had current assets in the amounttotaling $289,533 primarily related to cash balances of $400,766, consisting of cash in the amount of $330,227 and prepaid expenses of $70,539. Our current$264,533. Current liabilities as of JulyOctober 31, 2019 totaled $172,723, and consisted$222,957 consisting of accounts payable of $60,926,$60,895, accrued expenses of $89,196, payroll liabilities of $20,801,totaling $9,823, and capitalcommon stock to be returned in the amountissued of $1,800.$152,239. Our net working capital as of JulyOctober 31, 2019 was $228,043. During the three months ended July 31, 2019, our operations used $155,329 in cash, investing activities used $135,636 in cash, and financing activities provided $117,754 in cash, resulting in a net decrease of $173,211 over the period. $66,576.

We doSince inception, we have not generated any revenues. To date, we have any long term liabilities and, to date, the business of Red Cat has been funded our operations through private offerings of common stock sourced primarily from individual private investors. We will require additional capital in order to execute on our business plan and begin generating net revenue from the Red Cat business. We do not have sufficient cash resources to meet our working capital needs for the next 12 months. months and will require additional capital in order to execute our business plan. Such transactions may be insufficient to fund our cash requirements.

In November 2019 we issued a convertible note in the principal amount of $300,000 to one accredited investor and in December 2019 we issued a convertible note in the principal amount of $125,000 to a director and a convertible note in the principal amount of $25,000 to our chief executive officer. (collectively, the “Notes”). The Notes have a term of 2 years and bear interest at a rate of 12% which accrues and is payable in full when the Notes mature. Interest on the Notes may be paid in cash or in shares of common stock of the Company at the Conversion Price (as defined below).The Notes are convertible into shares of common stock at the holder’s sole discretion as follows: (A) prior to consummating an equity financing which generates gross proceeds of not less than $3,000,000 (a “Qualified Offering”), then at the 30 day volume weighted average of the closing price of a share of our common stock as listed or quoted on the market in which the shares are then traded or listed, or (B) after we have consummated a Qualified Offering, at 40% of the price per share of common stock sold in the Qualified Offering (the “Conversion Price”) . We may, upon 10 business days advance notice, elect to pre-pay the Note, including all accrued interest, in whole or in part, provided that any such prepayment prior to the one-year anniversary of the Note issuance shall be at a price equal to 112% of the then outstanding original principal amount. Upon an event of default, as described in the Notes, the outstanding principal and interest shall become immediately due and payable. Additionally, under the Note, unless waived by the holder, the holder shall not be entitled to convert the Note if such conversion would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the outstanding shares of common stock of the Company on such date.

Until we are able to sustain our ongoing operations through sales revenue,the sale of products and services, we intendwill continue to fund operations through equity and/or debt transactions. We can provide no assurance that the financing arrangements, which maydescribed above will be insufficientsufficient to fund our capital expenditures, working capital, or other cash requirements. We do not have any formal commitments or arrangements foroperations until we are able to sustain operations through the salessale of stock or the advancement or loan of funds at this time. Thereproducts and services. In addition, there can be no assurance that such additional financing, if required, will be available to us on acceptable terms, or at all.

Going Concern

We have experienced losses from operations since inception. To date, the Red Cat businesswe have not been able to producegenerate product sales or to become cash flow positive and profitable.positive. The success of our business plan during the next 12 months and beyond will be contingent upon generating sufficient revenue to cover our costs of operations and/or upon obtaining additional financing. ForThe report from our independent registered public accounting firm for the fiscal year ended April 30, 2019 includes an explanatory paragraph stating the Company has recurring net losses from operations, negative operating cash flows, does not yet generate revenue from operations and will need additional working capital for ongoing operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern.

We are presently seeking to address these reasons,going concern doubts through a number of actions including efforts to (a) raise capital through the public markets, (b) release our auditor has raised substantial doubtfirst commercial product and (c) pursue acquisitions of complementary, revenue generating companies which are accretive to our operating results. We can provide no assurance that any of these efforts will be successful or, that even if successful, that they will alleviate doubts about our ability to continue as a going concern.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.arrangements.

Recently Issued Accounting Pronouncements

The Company has 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 the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”) and are not required to provide the information under this item.information.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.rules. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of JulyOctober 31, 2019.

ForOur disclosure controls and procedures are not effective for the following reasons:

In November 2019, we engaged an experienced financial consultant to assist us in reviewing the financial statements for the quarter ended JulyOctober 31, 2019 we have identifiedto ensure their completeness, consistency and compliance with GAAP including the following material weaknesses in our internal controls over financial reporting:

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.statement presentation and disclosures related thereto.

Changes in Internal Control over Financial Reporting

Our management has also evaluatedDuring the period covered by this report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.reporting.

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From timeThere are no pending legal proceedings to time,which the Company may become subject to various legal proceedings that are incidentalis a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the ordinary conduct of its business. AlthoughCompany or has a material interest adverse to the Company cannot accurately predictCompany. The Company's property is not the amountsubject of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information andpending legal advice and may be adjusted from time to time according to developments.proceedings.

ITEM 1A. RISK FACTORS

None applicable.We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 (the “Exchange Act”) and are not required to provide the information.

ITEM 2. RECENT UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have previously disclosed allThere were no sales of equity securities without registrationsold during the period covered by this Report that were not registered under the Securities Act of 1933.and were not previously reported in a Current Report on Form 8-K filed by the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.  

ITEM 4. MINE SAFETY DISCLOSURES

N/A.Not applicable 

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

EXHIBIT INDEX

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Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to Red Cat Holdings, Inc., at the address on the cover page of this report, Attention: Corporate Secretary.

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SIGNATURES

In accordance withPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereuntothereunto duly authorized, this 23^rd day of September, 2019.authorized.

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