Red Cat Holdings, Inc. (NasdaqCM:RCAT) entered into a definitive agreement to acquire Teal Drones, Inc. on July 13, 2021. As per the terms, the transaction is an all-stock deal. An aggregate of $14 million of Red Cat common stock and Series C Convertible Preferred Stock, par value $0.001 per share. Under the agreement, the share consideration to be paid on the closing date shall be reduced by any indebtedness of Teal, including up to $2 million of senior secured debt to be assumed by Red Cat and any working capital deficit, on a dollar of dollar basis. In addition, it is anticipated that $1 million of the share consideration payable to the shareholders of Teal in connection with the merger, has been agreed to be paid to the assumed debt holder to secure consent to the merger and the transactions contemplated thereby. In addition, the share consideration may be increased upon the achievement of certain milestones. Additional shares of common stock may become issuable by Red Cat in the event that within twenty-four months following closing of the merger, Teal realizes revenues of at least $18 million. A total of $16 million in earn out consideration may become issuable in the event that sales and services of Teal’s Golden Eagle drones shall have equaled at least $36 million. A total of $10 in Earn Out consideration may become issuable in the event that sales and services of Teal’s Golden Eagle drones shall have equaled at least $24 million but less than $36 million. A total of $4 million in Earn Out consideration may become issuable in the event that sales and services of Teal’s Golden Eagle drones shall have equaled at least $18 million but less than $24 million. Red Cat and stockholders of Teal have agreed to indemnification obligations, on a pro-rata basis, subject to certain limitations, which shall survive for a period of 18 months following closing and includes a basket amount of $0.5 million before any claim can be asserted and a cap equal to the value of the escrow shares or the share consideration, other than in cases involving fraud or willful misconduct. Post the transaction Teal will be the surviving corporation. The transaction is subject to approval of Red Cat and Teal's shareholders and approval NASDAQ of the issuance of shares of common stock. As a condition to closing Red Cat has agreed that Teal shall enter into an employment agreement with George Matus, founder and Chief Executive Officer of Teal. Jeffrey Steele of Holland and Hart, LLP acted as legal advisor to Teal Drones, Inc., whereas Harvey Kesner of Law office of Harvey Kesner acted as legal advisor to Red Cat Holdings, Inc.