Item 2.01 - Completion of Acquisition or Disposition of Assets

On May 7, 2021, we closed on the acquisition of Skypersonic, Inc., (“Skypersonic”) a Michigan corporation. As previously disclosed in our Current Report on Form 8-K filed February 17, 2021, our acquisition of Skypersonic was made pursuant to Share Purchase and Liquidity Event Agreements (the “Agreements”) among us, Red Cat Skypersonic, Inc., a Nevada corporation (“Acquisition”) and wholly-owned subsidiary of ours, Giuseppe Santangelo the founder and majority shareholder of Skypersonic, and certain holders of common stock and SAFE agreements representing 97.46% of Skypersonic (the “Sellers”) and Wayne State University Anderson Engineering Ventures Institute. Pursuant to the Agreements, we acquired all of the issued and outstanding share capital of Skypersonic in exchange for issuance of $3,000,000 of our common stock, at the Volume Weighted Average Price (VWAP) of our common stock on May 7, 2021 of $4.0154 per share. At closing, we issued 857,124 shares common stock to the Sellers (the “Share Consideration”). Fifty percent of the Share Consideration (the “Escrow Shares”) was deposited in an escrow account for a period of twelve (12) months as security for indemnification obligations and any purchase price adjustments due to working capital deficiencies and any other claims or expenses arising under the Agreements. Under the Agreements, closing date working capital deficits in excess of $300,000 shall result in a reduction of the Share Consideration on a dollar of dollar basis. If, within 12 months following closing of the Acquisition, we issue Common Stock for a price of less than $2.50 per share in a Qualified Offering (defined as a public offering or equity or convertible securities in which the Company raises a minimum of $2 million), we will be required to issue the Sellers additional shares of our common stock equal to the difference between the number of shares issued and the quotient of the Purchase Price divided by the Qualified Offering Price. Mr. Santangelo and certain former principal shareholders of Skypersonic have agreed to indemnification obligations, on a pro-rata basis, subject to certain limitations, which shall survive for a period of eighteen (18) months following closing. The indemnification obligations feature a basket amount of twenty-five thousand dollars ($25,000) before any claim can be asserted payable by cancellation of and subject to a cap equal to the value of the Escrow Shares. For a period of three (3) years following closing, Mr. Santangelo is prohibited from engaging in a business competing with or providing products, services or solutions to the drone industry, first person view (“FPV”) business, navigation and software solutions that provide analytics, storage or services for or in conjunction with the drone industry.