Item 3. Legal Proceedings
ITEM
3. LEGAL PROCEEDINGS
On March 15, 2022, Robert Stang
filed an action against Teal Drones, Inc. and George Matus in the United States District Court for the Northern District of California,
Robert Stang v. Teal Drones, Inc. and George Matus (No. 22-cv-01586-JSC) and on September 15, 2022 filed a First Amended Complaint naming
Teal’s former director Benjamin Lambert and the Company as additional defendants. The complaint asserts claims for breach of contract
and unlawful conversion and sale of shares of common stock that plaintiff alleges to have purchased. The Complaint also alleges breach
of fiduciary duty and seeks in excess of $1 million in damages. The Company believes it has a right to indemnification under the Teal
acquisition agreements and has notified the sellers of its intention to pursue indemnification claims under the Teal acquisition agreement
and set off claims against escrowed shares of the Company for such purpose.
On September 29, 2022, we, and our wholly-owned subsidiary
Teal Drones, Inc., initiated a legal proceeding (the “Lawsuit”) against Autonodyne LLC (“Autonodyne”) and its
principal equity owner Daniel Schwinn (“Schwinn”), in Delaware Chancery Court. The case is captioned as Red Cat Holdings,
Inc., et al. v. Autonodyne LLC, et al., C.A. No. 2022-0878. The case arises from Autonodyne’s unilateral purported termination
of a software licensing agreement entered between Teal Drones and Autonodyne in May 2022. The Lawsuit alleges causes of action for Breach
of Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Tortious Interference with Contractual Relations and Prospective
Contractual Relations, Declaratory Judgment, and Injunctive Relief, and seeks both actual damages and injunctive relief. Before the defendants
answered, we filed a First Amended Complaint on December 5, 2022, which the defendants have moved to dismiss. The hearing on the motion
to dismiss is presently scheduled for October 23, 2023. No discovery or other significant developments in the Lawsuit have occurred.
ITEM
4. MINE SAFETY DISCLOSURES
None.
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PART
II
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