The Law Offices of Timothy L. Miles Has Launched an Investigation into Certain Officers and/or Directors for Possible Breaches of Fiduciary Duty and Other Possible Violations of State and/or Federal Law
The Law Offices of Timothy L. Miles, who has been leading the fight to protect shareholder rights for nearly 25 years, is investigating whether certain officers and/or directors of Red Cat Holdings, Inc. (RCAT), who, along with certain officers, are currently being sued for violating the federal securities laws in the Red Cat class action lawsuit, also, along with other directors and/or offices, may have also breached their fiduciary duties to shareholders and the Company and possibly committed other violations of state and federal law.
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Background to the Red Cat Investigation: Allegations in the Red Cat Class Action Lawsuit
The Red Cat class action lawsuit centers on claims of false and misleading statements made during the Class Period. Legal documents show that executives thought over misrepresenting two key aspects of company operations.
Red Cat’s claims about its Salt Lake City facility’s production capabilities came under scrutiny. The company boasted about its ability to produce “thousands of drones per month” or “tens of thousands of drones per year” throughout 2022. Management confirmed in March 2023 that
“The Salt Lake City factory is complete and ready to go” and “We now have the capacity to produce thousands of drones per month”. Plaintiffs claim the reality was starkly different – the facility could only produce 100 drones monthly.
The Red Cat class action lawsuit also targets Red Cat’s SRR Contract value inflation. The company described the agreement’s worth as “hundreds of millions to over a billion dollars” and showed confidence in generating $50-79.5 million in revenue from this contract in fiscal year 2025. Kerrisdale Capital’s analysis of U.S. Army budget documents revealed the contract’s actual value was just $20-25 million. The plaintiffs also point out that Red Cat “announced the win without Army approval”, which could affect future negotiations.
The Red Cat class action lawsuit highlights suspicious insider activities. George Matus, the company’s former CTO who created the SRR-winning drone design, stepped down and sold most of his stock right after securing the Army contract. CEO John Thompson also sold his shares during this time.
The company’s financial statements showed no major capital spending toward building the promised mass production infrastructure, which contradicted their public statements. The defendants’ positive claims about Red Cat’s business operations and future prospects were “materially misleading and/or lacked a reasonable basis at all relevant times”, supporting the securities fraud claims.
Damage to the Red Cat Holdings, Inc.
As a result of the foregoing, the company lost over twenty-percent of its market capitalization and has been sued by it shareholders in federal court for violating the federal securities laws for which the Company will have to pay substantial compensation to defend, and may face a judgment or settlement in the millions of dollars which the Company will be required to pay. The investigation seeks to determine whether Red Cat’s executive officers and/or directors breached their fiduciary duties to the Company and its stockholders and/or committed other violations of state and/or federal law.
Red Cat Shareholders Urged to Contact the Firm
If you purchased or are a holder of Red Cat securities, have information, or have any questions concerning this announcement, the Red Cat investigation, or your rights or interests with respect to these matters, please contact Timothy L. Miles, Esquire, at 855-846-6529, or by email, at tmiles@timmileslaw.com. If you inquire by email please include your mailing address, telephone number, and the number shares owned. (24/7/365).
For additional information on the Red Cat investigation, please visit our Investigations Page.
Timothy L. Miles, Esq. Law Offices of Timothy L. Miles Tapestry at Brentwood Town Center 300 Centerview Dr. #247 Mailbox #1091 Brentwood,TN 37027 Phone: (855) Tim-MLaw (855-846-6529) Email: tmiles@timmileslaw.com Website: www.classactionlawyertn.com
Ryan Myers is a business blog author and writer. He graduated from the University of California, Berkeley in 2009 with a degree in Political Science. His favorite topics to write about are blogging for small businesses and becoming an entrepreneur.
