What changed in this filing

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Item 3. Legal Proceedings

2024-08-08 compared with 2023-07-27 · 32 added, 29 removed, 3 unchanged (95% of the section changed)

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.

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,

Autonodyne LLC, et al., C.A.

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.

MINE SAFETY DISCLOSURES

The case arises from Autonodyne’s unilateral purported termination of

a software licensing agreement entered between Teal Drones and Autonodyne in May 2022.

Before the defendants answered, we filed a First

Amended Complaint on December 5, 2022, which the defendants moved to dismiss.

The court partially granted that motion, dismissing

the claims asserted against Autonodyne, but not against Schwinn.

For jurisdictional reasons, the case subsequently was transferred to

Delaware Superior Court.

The Lawsuit alleges a cause of action against Schwinn for Tortious Interference with Contractual Relations and

Prospective Contractual Relations, concerning a Software Licensing Agreement between Teal Drones and Autonodyne.

No discovery or other

significant developments in the Lawsuit have occurred.

On May 9, 2024, Autonodyne

LLC filed a complaint against wholly-owned Red Cat subsidiary Teal Drones, Inc.

in the Superior Court of the State of Delaware.

The Complaint

alleges a single cause of action, asserting that Teal breached a Software Licensing Agreement between it and Autonodyne (the “SLA”)

by disclosing confidential information contained in the SLA.

Autonodyne alleges that it rightfully terminated the SLA, and at that point

it became entitled to $8.25 million of accelerated payments, pursuant to section 14.4(e) of the SLA.

Teal Drones has answered the Complaint,

but no discovery has been served yet.

As any litigation is subject to many uncertainties, it is not possible to predict the ultimate outcome

of this claim or to estimate the loss, if any, which may result.

Accordingly, the outcome of the claim is not yet determinable, and the

extent to which an outflow of funds may be required to settle this possible obligation cannot be reliably determined.

The Company plans

to vigorously assert defenses to the complaint.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings