Note 5 - Income Taxes

At June 30, 2019 and 2018, income tax benefits consisted of the following:

The deferred tax asset comprises of the recognition of net operating losses for tax purposes.

The valuation allowance at June 30, 2019, is $447,106.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers 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 relative to the realization of the deferred income tax asset balances to assess the application of a valuation allowance as of June 30, 2019, and December 31, 2018.

Note 5 - Income Taxes (continued)

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