1033-00006 · Redstone Gaming Corp · Mediation & Settlement

settlement-authority-memo.docx DOCUMENT Litigation

16 / 36 ← → ✕

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

This memorandum is protected by the attorney-client privilege and the work-product doctrine. It is intended solely for the use of the addressee and authorized recipients identified herein. Any disclosure, distribution, or copying of this communication by any person other than the intended recipients is strictly prohibited. If you have received this document in error, please notify the sender immediately and destroy all copies.

MEMORANDUM

November 25, 2024

FROM: Francesca Morano, Responsible Partner Calderwood & Harkness LLP 333 South Grand Avenue, Suite 4800 Los Angeles, CA 90071

TO: Derek Olafson, General Counsel Redstone Gaming Corp. 8800 Crimson Ridge Parkway, Suite 1200 Las Vegas, NV 89113

RE: Request for Board-Level Settlement Authority — Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles

COPIES: Marcus J. Calloway, Chief Executive Officer, Redstone Gaming Corp. — For Information Only Samuel Eklund, Billing Partner, Calderwood & Harkness LLP — Internal

Right-click to update Table of Contents

I. PURPOSE AND EXECUTIVE SUMMARY

The purpose of this memorandum is to request that the Board of Directors of Redstone Gaming Corp. ("RGC" or the "Company") grant settlement authority in advance of the mediation currently scheduled for December 3–4, 2024, before the Honorable Gerald K. Matsuda (Ret.) at Westside Mediation Center, 11601 Wilshire Boulevard, Suite 1200, Los Angeles, CA 90025. This mediation represents the most significant opportunity to date to resolve this litigation on favorable terms, and meaningful participation requires that RGC's representative attend with full authority to consummate a settlement within defined parameters.

After careful evaluation of the strengths and risks of the case, the defendants' financial capacity and insurance coverage, the costs and uncertainties of trial, and the strategic value of the non-monetary relief obtainable through settlement, Calderwood & Harkness LLP ("C&H") recommends that the Board authorize settlement on terms no less favorable than the following:

(a) A monetary payment to RGC of no less than $12 million;

(b) A corrective publication of not fewer than 1,500 words acknowledging material inaccuracies in all three Grizzly Peak Research reports, to be posted on grizzlypeakresearch.com and to remain posted for not less than twenty-four (24) months;

(c) A social media corrective statement of not fewer than 280 characters posted on the @GrizzlyPeakRes account on X (formerly Fenmore Solutions), linking to the full corrective publication;

(d) A stipulated permanent injunction barring defendants from republishing the three reports or substantially similar statements about RGC and barring defendants from trading in RDGM securities (including derivatives) for a period of five (5) years from the effective date of the settlement; and

(e) Mutual releases with customary carve-outs for obligations arising under the settlement agreement.

This memorandum should be treated as attorney-client privileged in its entirety. It should not be shared beyond members of the Board of Directors, in-house counsel, and Priya Ramaswaran, Chief Financial Officer, as needed for financial analysis of the settlement terms.

As discussed more fully below, this case is in a strong posture for RGC. The complaint was filed on February 5, 2024, and the First Amended Complaint was filed on March 18, 2024, adding Grizzly Peak Capital Partners LP ("GPCP") and Tobias Fenchurch individually as defendants. The defendants' anti-SLAPP motion was denied on June 7, 2024, by Judge Patricia Yamamoto. The defendants' motion for summary judgment was filed on October 22, 2024, and denied on November 15, 2024. Fact and expert discovery is complete, encompassing fourteen (14) depositions, approximately 87,000 documents, three contested discovery motions, and the exchange of expert reports on September 9, 2024. The case is trial-ready.

Notwithstanding RGC's strong position, the practical realities of collection, the costs and timeline of continued litigation through trial and potential appeal, and the unique strategic value of non-monetary relief that can only be obtained through a negotiated settlement all counsel in favor of resolving this matter at the upcoming mediation on the terms described herein.

II. BACKGROUND — THE DEFAMATORY PUBLICATIONS AND THEIR IMPACT

A. The Three GPR Reports

Between February 7, 2024, and February 21, 2024, Grizzly Peak Research LLC ("GPR") published three lengthy research reports targeting RGC. Each report was published on GPR's website, grizzlypeakresearch.com, and simultaneously distributed via GPR's X account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time of publication. The reports were as follows:

Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" — published February 7, 2024 (48 pages). This report alleged that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions, asserting that the Company had inflated its top-line figures through a series of round-trip payments between RGC subsidiaries and purportedly affiliated entities.

Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" — published February 14, 2024 (36 pages). This report alleged that RGC manipulated its random-number-generator ("RNG") software to artificially inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"), suggesting that the Company's gaming operations were fraudulently misrepresenting compliance with regulatory requirements governing slot-machine payout ratios.

Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" — published February 21, 2024 (29 pages). This report alleged the existence of undisclosed related-party dealings between CEO Marcus J. Calloway and a purported shell entity called Vermilion Holdings LLC, implying that Mr. Calloway was siphoning corporate resources through an undisclosed personal financial interest in a Company counterparty.

Each of the three reports contained a standard disclaimer disclosing that GPR maintained short positions in RDGM common stock. As discussed in Section II.D below, the short position was substantial — approximately 680,000 shares — and was timed to coincide precisely with the serial publication of the reports.

The three core false allegations contained across these reports can be summarized as follows: (a) the fabrication of approximately $410 million in FY 2023 revenue via fictitious intercompany transactions; (b) the manipulation of RNG software to inflate payout statistics reported to the NGCB; and (c) undisclosed related-party dealings between CEO Marcus J. Calloway and Vermilion Holdings LLC. As set forth in Section II.B below, each of these allegations has been independently and conclusively disproven.

B. Vindication of RGC

The Company has been fully vindicated with respect to each of the three core allegations.

Revenue Fabrication Allegation. Pinnacle Audit & Advisory LLP (engagement partner Walter Ng, CPA), which has served as RGC's independent auditor since FY 2019, confirmed the Company's FY 2023 revenue figures of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%). Pinnacle issued clean, unqualified audit opinions for each of fiscal years 2021, 2022, and 2023. In addition, at the direction of the Audit Committee of the Board and following the publication of the GPR reports, Pinnacle conducted a supplemental forensic audit at a cost of $1.46 million. That forensic audit specifically examined the intercompany transaction flows identified in Report 1 and found no evidence whatsoever supporting the revenue-fabrication allegation. The forensic audit report, which was completed in April 2024, confirmed that all intercompany transactions were conducted at arm's length, were properly eliminated in consolidation, and had no impact on reported consolidated revenue.

RNG Manipulation Allegation. The Nevada Gaming Control Board completed an independent audit of RGC's RNG systems on March 29, 2024. The NGCB's audit was conducted by the Board's Technology Division and included a comprehensive review of source code, real-time testing of RNG output distributions, and comparison of reported payout statistics with actual operational data. The NGCB's findings cleared RGC entirely, confirming that the Company's RNG software operated in full compliance with Nevada Gaming Commission Regulation 14.040 and that all payout statistics reported to the NGCB were accurate.

Related-Party / Vermilion Holdings Allegation. The U.S. Securities and Exchange Commission opened an informal inquiry in March 2024, shortly after the publication of the GPR reports, to examine the related-party allegations concerning Vermilion Holdings LLC. The SEC closed that inquiry with no action on August 16, 2024. Separately, discovery in this litigation has confirmed that the related-party allegation regarding Vermilion Holdings LLC was based on incomplete information and was materially misleading. As established through deposition testimony and documentary evidence, Vermilion Holdings LLC is a legitimate, independently managed real estate investment vehicle. Mr. Calloway's connection to the entity — a passive, minority limited-partnership interest — was properly disclosed in RGC's proxy statements in accordance with Item 404 of Regulation S-K, a fact that GPR's analysts either failed to discover or deliberately omitted from their report.

C. Stock-Price Impact

The publication of the GPR reports caused immediate, severe, and measurable harm to RGC's stock price and market capitalization. The following table summarizes the price action during the relevant period:

With 73.8 million shares of RDGM common stock outstanding, the aggregate market-capitalization loss at the February 21, 2024 trough was approximately $1.427 billion ($19.34 × 73,800,000 shares). The Company's pre-publication market capitalization of approximately $6.8 billion declined to approximately $4.95 billion at the trough — a loss of more than one-quarter of the Company's total equity value in the space of just two weeks.

As of the date of this memorandum, RDGM has experienced a partial recovery and is trending toward an approximate market capitalization of $6.1 billion. While the recovery is encouraging and reflects the vindication discussed in Section II.B above, the Company's share price has not yet returned to pre-publication levels, and the remaining approximately $700 million shortfall in market capitalization continues to be attributed, at least in part, to lingering market uncertainty associated with the GPR reports.

D. Damages Quantification

Event-Study Analysis. Dr. Elena Vostrikova of Meridian Forensic Economics LLC (1901 Avenue of the Stars, Suite 900, Los Angeles, CA 90067) prepared a comprehensive event-study analysis to quantify the damages directly attributable to the GPR reports. Dr. Vostrikova's methodology — the standard approach in securities-related damages analysis — isolated the impact of the GPR publications by removing the effects of general market movements and gaming-sector beta from RDGM's price changes during the event windows. After these adjustments, Dr. Vostrikova concluded that the statistically significant, abnormal stock-price decline attributable specifically to the false statements in the GPR reports resulted in a shareholder-value loss of $327.6 million. This figure represents the damages that can be causally linked to the defamatory content of the reports, net of any price movements attributable to broader market or sector trends.

Out-of-Pocket Costs. In addition to the shareholder-value losses, RGC has incurred direct out-of-pocket costs totaling $4.627 million as a result of the GPR publications:

• Crisis communications and public relations (Crestline Equity Partners Group Inc.): $2.18 million. This engagement was initiated immediately following the publication of Report 1 and has included media-response strategy, investor-communication support, analyst-call preparation, and ongoing reputation-management services.

• Supplemental forensic audit (Pinnacle Audit & Advisory LLP): $1.46 million. As discussed in Section II.B, this audit was conducted at the direction of the Audit Committee to address the revenue-fabrication allegations and provide an independent basis for the Company's public response.

• Regulatory response costs (Hargrove & Sato LLP, Nevada gaming counsel): $987,000. RGC engaged Hargrove & Sato to coordinate the Company's response to the NGCB's independent RNG audit and to manage communications with the SEC in connection with its informal inquiry.

Defendants' Short-Sale Profit. As disclosed in its own reports and confirmed through discovery, GPR maintained a short position of approximately 680,000 shares of RDGM common stock. The notional value of this short position at the pre-publication price of $92.14 per share was approximately $62.66 million. Based on documentary evidence produced in discovery, GPR closed its short position by mid-March 2024 at an estimated average price of approximately $72.80 per share. GPR's estimated short-sale profit was therefore approximately $13.15 million (($92.14 − $72.80) × 680,000 shares). This figure is significant because it represents the direct financial benefit that GPR derived from the publication of its false reports and provides an independent, disgorgement-based theory supporting a monetary recovery in the range of $12–16 million.

III. CURRENT LITIGATION POSTURE AND ASSESSMENT OF TRIAL STRENGTHS

A. Causes of Action

RGC's First Amended Complaint asserts four causes of action against GPR, GPCP, and Tobias Fenchurch:

1. Trade Libel (Cal. Civ. Code § 46(3)) — alleging that the GPR reports constituted false and disparaging statements concerning the quality of RGC's business, products, and financial performance, published with knowledge of their falsity or reckless disregard for their truth, resulting in special damages.

2. Intentional Interference with Prospective Economic Advantage — alleging that defendants engaged in wrongful conduct (the publication of knowingly false reports) intended to interfere with RGC's economic relationships with investors, customers, regulators, and business counterparties.

3. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200) — alleging that defendants' conduct constituted unfair, unlawful, and fraudulent business practices, including the short-and-distort scheme by which defendants profited from the publication of false information about RGC.

4. Negligent Misrepresentation (added via the First Amended Complaint filed March 18, 2024) — alleging that defendants published false statements of fact concerning RGC without reasonable grounds for believing them to be true, causing foreseeable economic harm to RGC.

All four causes of action have survived dispositive challenges. The defendants' special motion to strike under California's anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16) was denied by Judge Patricia Yamamoto on June 7, 2024. Judge Yamamoto found that while the publications arose from protected activity, RGC had demonstrated a probability of prevailing on the merits sufficient to defeat the motion. The defendants' motion for summary judgment, filed on October 22, 2024, was denied on November 15, 2024. Judge Yamamoto's order on summary judgment found triable issues of material fact on each cause of action, including the questions of falsity, actual malice, and causation of damages.

B. Strengths of RGC's Position

RGC's trial position is strong across multiple dimensions.

Actual-Malice Evidence. Perhaps the most critical element of the case is the evidence of actual malice. In trade libel cases involving public figures or matters of public concern, California law requires proof that the defendant published the statements with knowledge of their falsity or reckless disregard for their truth. Here, the evidence of actual malice is robust and multi-faceted:

• GPR maintained a 680,000-share short position in RDGM timed precisely to the serial publication of the three reports. The magnitude and timing of this position provide powerful evidence of financial motive and, by implication, a willingness to publish damaging allegations without adequate verification.

• Internal communications and Meridian Solutions messages produced in discovery demonstrate that GPR's analysts were aware that the revenue-fabrication allegations in Report 1 were not fully supported by the data they had gathered. In particular, messages between Tobias Fenchurch and senior analyst Ava Lin, exchanged in the days before publication of Report 1, reflect awareness that the "intercompany" transaction analysis did not conclusively demonstrate the existence of fictitious revenue.

• Ava Lin's deposition testimony (August 29, 2024) was particularly damaging to defendants. Ms. Lin acknowledged under oath that she did not contact the Nevada Gaming Control Board before publishing the RNG-manipulation allegations in Report 2. She further conceded that her analysis of RNG output data was based on a limited and non-representative sample of publicly available payout reports, rather than any direct testing or examination of RGC's software.

• Tobias Fenchurch instructed that Report 3 be published before completing verification of the Vermilion Holdings LLC allegation. Specifically, emails produced in discovery show that Mr. Fenchurch directed publication on February 21, 2024, despite an outstanding request from a junior analyst to review Mr. Calloway's proxy disclosures — disclosures that, had they been reviewed, would have revealed the proper Item 404 disclosure of Mr. Calloway's passive interest in Vermilion Holdings.

Independent Disproof of Core Allegations. As detailed in Section II.B, all three of the core allegations asserted in the GPR reports have been independently and conclusively disproven by credible third parties: Pinnacle Audit & Advisory (revenue fabrication), the Nevada Gaming Control Board (RNG manipulation), and the SEC (related-party / Vermilion Holdings). The fact that the allegations have been disproven not only by RGC's own auditor but also by independent regulatory bodies lends exceptional credibility to RGC's position at trial.

Damages Model. Dr. Vostrikova's event-study analysis provides a robust, well-supported damages model with a clear causal link between the GPR publications and the decline in RGC's share price. Event-study methodology is the standard analytical framework accepted by courts in cases involving stock-price impact, and Dr. Vostrikova's credentials and methodology are strong. Her analysis isolates the publication-specific effect from broader market and sector movements, providing a defensible basis for the $327.6 million damages estimate.

Judicial signals. Judge Yamamoto's rulings on both the anti-SLAPP motion and the motion for summary judgment are favorable to RGC and signal the Court's receptivity to RGC's legal theories. While the Court has not prejudged the merits, its findings that RGC demonstrated a probability of prevailing (on the anti-SLAPP motion) and that triable issues of material fact exist on all four causes of action (on summary judgment) suggest that the Court views the case as strong for plaintiff.

Documentary Evidence. The discovery record is extensive and favorable. Approximately 87,000 documents have been produced by the parties, including the internal Brightmoor Data Systems and emails discussed above, financial records establishing the scope of GPR's short position, and regulatory correspondence confirming RGC's vindication. This documentary record provides a strong foundation for trial presentation.

C. Litigation Risks

Despite RGC's strong position, several material litigation risks must be candidly assessed.

Special-Damages Requirement for Trade Libel. Under California law, trade libel requires proof of special damages — that is, specific pecuniary losses caused by the defamatory publication. While Dr. Vostrikova's event-study analysis is strong and well-supported, defendants will challenge causation at trial by attributing the decline in RDGM's stock price to broader market conditions, gaming-sector headwinds, or other factors unrelated to the GPR reports. Defense expert testimony on this point is expected to be vigorous, and the causation question — particularly with respect to the magnitude of damages — will ultimately be determined by the jury.

Actual-Malice Standard. The actual-malice standard remains a high bar, even with the favorable evidence discussed above. At trial, defendants will argue that their research, while imperfect, was conducted in good faith and that the short position is a standard feature of short-seller research that does not, by itself, establish actual malice. Defendants will also invoke the protections of the First Amendment and frame their reports as expressions of opinion rather than statements of fact. While the commercial-speech exception and the short-and-distort financial motive significantly undermine this defense, a jury may nonetheless be sympathetic to a "free speech" framing, particularly in Los Angeles County.

First Amendment Defenses. GPR will invoke First Amendment defenses at trial and will argue that its reports constitute opinion, fair comment, or are protected by a qualified privilege for financial commentary on public companies. While Judge Yamamoto's anti-SLAPP and MSJ rulings suggest skepticism toward these defenses, they will be presented to the jury and cannot be dismissed.

Jury Unpredictability. Defamation-adjacent cases in Los Angeles present inherent unpredictability. Jury sympathies are difficult to forecast, and there is a non-trivial risk that a jury could find for defendants on one or more causes of action, or could award damages materially lower than RGC's provable losses. The reverse is also true — a jury could award a substantial verdict — but the range of possible outcomes is wide.

Appeal Risk. Even if RGC obtains a favorable verdict, the defendants will almost certainly appeal. Defamation and trade libel verdicts are subject to heightened appellate scrutiny under First Amendment principles, and there is a meaningful risk that a large verdict could be reduced or reversed on appeal. An appeal would extend the timeline of this litigation by twelve to twenty-four months and would impose additional legal costs estimated at $500,000–$750,000.

Collection Risk. As discussed in greater detail in Section V, GPR and GPCP have limited non-insurance assets relative to the scale of RGC's damages. GPR's estimated cash and receivables are approximately $22 million. GPCP's estimated assets under management are approximately $185 million, but fund assets are held for the benefit of investors and may not be directly reachable to satisfy a judgment against the general partner or GPR. Tobias Fenchurch's personal assets are not fully known but are likely modest relative to the claimed damages. Even with a nine-figure verdict, actual recovery may be limited to insurance proceeds plus a fraction of GPR and GPCP's liquid assets.

IV. TRIAL COST ESTIMATE

If this matter does not resolve at mediation and proceeds to trial — currently projected for mid-2025 — RGC will incur significant additional litigation costs. The following estimates are based on current case posture and Calderwood & Harkness's experience with comparable commercial litigation.

Estimated Additional Litigation Costs Through Trial:

Current Fees and Costs Incurred to Date. As of the date of this memorandum, total discounted legal fees incurred by Calderwood & Harkness in this matter are approximately $2,800,623, with an additional $187,450 in costs advanced (court fees, deposition transcripts, service of process, expert retainers, e-discovery vendor costs, and travel). Total engagement fees, including the success premium component of the fee arrangement, would be approximately $3,220,716 upon a successful resolution.

Total Projected Legal Spend. If this matter proceeds to trial and through post-trial motions, RGC's all-in legal spend — inclusive of fees incurred to date, additional trial costs, and the success premium — could approach $4.5 to $5.0 million before any appeal. In the event of an appeal, total legal spend could exceed $5.5 million.

These projections do not include the indirect costs of continued litigation, including the time commitment required of RGC management (particularly Mr. Olafson, Mr. Calloway, and CFO Priya Ramaswaran for trial testimony and preparation), continued business disruption, and the ongoing reputational overhang associated with unresolved litigation.

V. DEFENDANTS' FINANCIAL CAPACITY AND INSURANCE COVERAGE

A. GPR and GPCP Financial Profile

An assessment of the defendants' financial capacity is critical to evaluating the realistic range of collectible recovery and, consequently, the appropriate settlement parameters.

Grizzly Peak Research LLC. GPR is an operating limited liability company focused on short-seller research and analysis. Based on information obtained through discovery, GPR's estimated cash and receivables as of year-end 2024 are approximately $22 million. The company's hard assets are modest, consisting primarily of office equipment, software licenses, and intellectual property. GPR does not own significant real estate or other capital assets.

Grizzly Peak Capital Partners LP. GPCP is the investment fund associated with GPR. Based on publicly available regulatory filings and information obtained through discovery, GPCP has estimated assets under management ("AUM") of approximately $185 million. However, as a matter of fundamental fund structure, the assets held by GPCP are held for the benefit of the fund's limited-partner investors and are not directly available to satisfy a judgment against the general partner, GPR, or any individual defendant. Piercing the fund structure to reach investor assets would require separate litigation and would face substantial legal hurdles.

Tobias Fenchurch. Mr. Fenchurch was added as an individual defendant via the First Amended Complaint. His personal financial profile has not been fully disclosed through discovery, and while he is believed to hold an ownership interest in GPR and a carried interest in GPCP, his personal assets are likely modest relative to the scale of RGC's claimed damages. Execution on a judgment against Mr. Fenchurch individually would require asset identification and potentially additional collection proceedings.

Practical Collection Risk. The practical implication of the foregoing analysis is that even if RGC obtains a nine-figure verdict at trial, actual recovery may be limited to insurance proceeds plus a fraction of GPR's and GPCP's liquid assets. The gap between a potential verdict and the practically collectible amount is significant and weighs heavily in favor of settlement.

B. Ironclad Surety & Insurance Co. Coverage

The defendants are insured under a directors-and-officers / media-liability policy issued by Ironclad Surety & Insurance Co. The relevant policy details are as follows:

• Insurer: Ironclad Surety & Insurance Co. (home office: 200 Park Avenue South, 14th Floor, New York, NY 10003)

• Policy Number: ML-2023-07714

• Coverage: Claims arising from media publications, including defamation, trade libel, and related torts. The policy covers both defense costs and indemnity for covered claims.

• Claims Adjuster: Daniel Royce

• Engagement in Defense: Ironclad has been actively engaged in the defense of this matter since the filing of the complaint. Defense counsel, Caldwell, Tseng & Barrow LLP, is being funded in substantial part by Ironclad.

• Settlement Posture: Based on representations made by defense counsel during informal mediation discussions and pre-mediation communications, Ironclad has signaled a willingness to contribute to settlement. The expected range of Ironclad's insurance contribution is $8–12 million, based on defense counsel's representations and our assessment of the policy terms and Ironclad's exposure.

Insurance proceeds are expected to represent the primary source of settlement funding. The availability of insurance coverage at meaningful levels is a significant factor supporting settlement, as it provides a reliable and immediately accessible funding source that does not depend on defendants' willingness or ability to pay out of their own assets.

C. Implications for Settlement Range

Taking into account the defendants' financial profile and insurance coverage, the realistic collectible recovery at trial — even assuming a substantial verdict — is likely capped at approximately $20–30 million. This figure represents the expected insurance-policy contribution plus GPR's liquid assets, reduced by defense costs already incurred against the policy. A verdict in excess of this amount, while symbolically significant, would face severe practical collection challenges.

Against this backdrop, a settlement in the range of $12–18 million would capture a significant portion of the practically collectible damages. Moreover, a settlement in this range would eliminate collection risk entirely, avoid the costs and delays of appeal, and provide certain, immediate recovery. The non-monetary relief available through settlement — particularly the corrective statements and permanent injunction — provides additional value that may not be obtainable through a trial verdict, as discussed in Section VI.

VI. NON-MONETARY SETTLEMENT TERMS — STRATEGIC VALUE

While the monetary component of any settlement is important, the non-monetary terms described below are of equal or greater strategic value to RGC. These terms directly address the Company's core objectives of public vindication, investor-confidence restoration, and prevention of future harm. Critically, several of these forms of relief — particularly the corrective statements — would not be available through a trial verdict, which would be limited to monetary damages.

A. Corrective Statements

Corrective Publication. Under the proposed settlement terms, GPR would be required to publish a corrective statement of not fewer than 1,500 words on grizzlypeakresearch.com within five (5) business days of the effective date of the settlement. The corrective publication must remain posted on the website for a period of not less than twenty-four (24) months. The content of the corrective publication must specifically acknowledge the following:

(i) That the three GPR reports — "House of Cards: Redstone Gaming's Manufactured Earnings," "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," and "Double Down on Fraud: Redstone's Related-Party Shell Game" — contained material inaccuracies;

(ii) That the revenue-fabrication allegation — asserting that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions — was unfounded;

(iii) That the RNG-manipulation allegation was disproven by the independent audit conducted by the Nevada Gaming Control Board; and

(iv) That the related-party allegation regarding Vermilion Holdings LLC was based on incomplete information and was misleading.

Social Media Corrective. In addition to the full corrective publication, GPR would be required to post a corrective statement of not fewer than 280 characters on its @GrizzlyPeakRes account on X (formerly Fenmore Solutions), with a link to the full corrective publication on grizzlypeakresearch.com. Given that the original reports were disseminated to GPR's approximately 142,000 followers through this channel, a social media corrective is essential to reaching the same audience that received the original false statements.

Strategic Value of Corrective Statements. The corrective statements are critically important to RGC for several reasons. First, they directly address the Company's core concern — the ongoing reputational harm caused by the continued availability of the GPR reports online. While the NGCB audit, the SEC closure, and the Pinnacle forensic audit have all vindicated the Company, the GPR reports remain accessible on the internet and continue to be cited by market commentators and short-seller aggregation platforms. A corrective publication in GPR's own name, posted on GPR's own website, carries a unique form of credibility that cannot be replicated by the Company's own communications. Second, the corrective statements are essential for investor confidence, regulatory relationships, and the Company's broader reputational recovery. Third, and perhaps most critically, a trial verdict — even a favorable one — would not compel GPR to publish specific corrective language. A damages award addresses the financial harm but does nothing to remediate the ongoing informational harm of the false reports. Only a negotiated settlement can achieve this result.

RGC's investor relations and communications teams are prepared to amplify the corrective publication through the Company's own channels upon its posting. Coordination with Crestline Equity Partners Group Inc. (lead contact: Simone Arecchi) and RGC's Vice President of Investor Relations, Janelle Hu, has already been initiated in anticipation of a potential settlement, and a detailed amplification plan is in development.

B. Permanent Injunction

Republication Bar. Under the proposed settlement terms, defendants would be permanently enjoined from republishing the three GPR reports or any substantially similar statements about RGC. This injunction would be entered as a stipulated court order, providing immediate enforceability and subjecting any violation to contempt proceedings.

Securities Trading Bar. Defendants would also be permanently enjoined from trading in RDGM securities — including common stock, options, and any derivative instruments — for a period of five (5) years from the effective date of the settlement. This trading bar is designed to eliminate any financial incentive for GPR, GPCP, or Fenchurch to engage in future short-and-distort campaigns targeting RGC.

Strategic Value of the Permanent Injunction. The stipulated injunction provides critical protections that would be difficult and uncertain to obtain through litigation. Obtaining a permanent injunction at trial would require a separate motion, a heightened evidentiary showing, and would face significant First Amendment scrutiny from the Court. A stipulated injunction, by contrast, provides immediate enforceability without these procedural and evidentiary burdens. Moreover, the trading bar — which would not be available as a remedy in a trade libel action — ensures that defendants cannot profit from future attacks on the Company's reputation.

C. Non-Disparagement

The proposed settlement would include a mutual non-disparagement clause with a term of three (3) years from the effective date. Under this provision, GPR, Fenchurch, Ava Lin, and their respective agents and affiliates would be prohibited from making further negative public statements about RGC, its officers, directors, employees, products, or financial performance. RGC would undertake a reciprocal obligation not to make disparaging statements about GPR, Fenchurch, or Lin. This mutual structure is standard in settlements of this nature and would provide an additional layer of protection against future reputational harm.

D. Confidentiality

The proposed confidentiality structure is designed to maximize RGC's strategic interests. Under the proposed terms:

• The monetary amount of the settlement would be confidential and would not be disclosed publicly.

• The existence of the settlement and the corrective statements would not be subject to confidentiality and would be publicly available.

This structure allows RGC to publicize the vindication reflected in the corrective statements — which is essential for investor relations and reputational recovery — while maintaining discretion regarding the monetary terms. Confidentiality of the monetary amount protects against potential negative inferences (i.e., commentary that the settlement amount was "too low" relative to RGC's provable damages) and avoids setting a public benchmark that could invite future short-seller attacks by other market participants.

VII. RECOMMENDED SETTLEMENT PARAMETERS

Based on the foregoing analysis, Calderwood & Harkness recommends that the Board grant settlement authority within the following parameters.

A. Monetary Floor

Minimum acceptable monetary payment: $12 million.

Recommended target range: $14–16 million.

The rationale for these parameters is as follows:

(i) A settlement of $12 million or more exceeds or closely approximates GPR's estimated short-sale profit of approximately $13.15 million. A recovery at or above this level would effectively require defendants to disgorge the profits of their wrongful conduct — a result that carries significant deterrent value and satisfies a disgorgement theory of recovery.

(ii) A settlement in the recommended range more than covers RGC's direct out-of-pocket costs of $4.627 million (crisis communications, forensic audit, and regulatory response) with a significant surplus, ensuring that the Company is made whole for its direct expenditures with meaningful additional recovery.

(iii) A settlement in this range represents a substantial portion of the practically collectible damages, given the defendants' financial capacity and the realistic limits on post-judgment collection discussed in Section V.

(iv) A monetary recovery of $12–16 million falls within the expected range of Ironclad Surety & Insurance Co.'s willingness to contribute ($8–12 million), leaving a manageable balance to be funded by GPR and GPCP jointly. This structure maximizes the likelihood of closing a deal at mediation by keeping the demands within a range that both the insurer and the defendants can meet.

Allocation Between Insurance and Defendants. We anticipate that the monetary settlement payment would be funded through a combination of insurance proceeds and direct contributions from the defendants. Based on pre-mediation discussions with defense counsel, we expect Ironclad to contribute in the range of $8–12 million under Policy No. ML-2023-07714, with the balance contributed by GPR and/or GPCP jointly. The specific allocation between insurance and defendant contributions will be negotiated at mediation but is not a material consideration for RGC, so long as the total monetary payment meets the minimum threshold.

B. Non-Monetary Minimums

The following non-monetary terms are non-negotiable and should not be conceded during mediation:

• Corrective publication of not fewer than 1,500 words addressing all three GPR reports and their specific false allegations, to be posted on grizzlypeakresearch.com within five (5) business days of the effective date.

• Social media corrective of not fewer than 280 characters on the @GrizzlyPeakRes account, with a hyperlink to the full corrective publication.

• Posting duration of not less than twenty-four (24) months for the corrective publication.

• Permanent injunction barring republication of the three reports or any substantially similar statements.

• Five-year securities trading bar prohibiting defendants from trading in RDGM securities, including derivatives.

As discussed in Section VI, these non-monetary terms are of equal or greater strategic value to RGC than the monetary payment. They address the Company's core objectives of public vindication and prevention of future harm, and they provide forms of relief that cannot be obtained through a trial verdict. Any settlement that omits these terms would not adequately serve RGC's interests and should not be consummated.

C. Other Terms

The following additional settlement terms are standard and should be included in any final agreement:

• Mutual releases: Broad mutual releases of all claims, counterclaims, and cross-claims arising from or related to the matters at issue in the litigation, with customary carve-outs for obligations arising under the settlement agreement itself.

• Stipulated dismissal with prejudice: The action would be dismissed with prejudice, with the Court retaining jurisdiction to enforce the settlement agreement pursuant to Cal. Code Civ. Proc. § 664.6.

• Fees and costs: Each party bears its own attorneys' fees and costs. RGC would not seek recovery of its legal fees as part of the settlement.

• Escrow: Settlement funds would be deposited in escrow through Great Basin Trust Company, N.A. (3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV 89169). Deposit would be required within thirty (30) calendar days of execution of the settlement agreement.

• Non-disparagement: Mutual non-disparagement clause with a three (3) year term, as described in Section VI.C.

• Confidentiality: Monetary terms confidential; existence of settlement and corrective statements non-confidential, as described in Section VI.D.

VIII. COMPARISON: SETTLEMENT VS. TRIAL

The following table provides a structured comparison of the expected outcomes under a settlement scenario versus continued litigation through trial and potential appeal.

In sum, settlement provides a certain, efficient, and strategically superior outcome across virtually every dimension. While the monetary recovery at settlement is lower than the theoretical maximum recovery at trial, the practically collectible amount at trial is substantially less than the headline verdict figure, and the non-monetary relief obtainable through settlement — corrective statements and a permanent injunction — is uniquely valuable and unavailable through litigation.

IX. MEDIATION LOGISTICS

The mediation is scheduled for December 3–4, 2024, and the logistical details are as follows:

Mediator: Hon. Gerald K. Matsuda (Ret.)

Venue: Westside Mediation Center, 11601 Wilshire Boulevard, Suite 1200, Los Angeles, CA 90025

Defense Counsel: Raymond Caldwell and Natalie Orenstein of Caldwell, Tseng & Barrow LLP, 555 California Street, Suite 3100, San Francisco, CA 94104. We understand that Daniel Royce of Ironclad Surety & Insurance Co. will also attend or be available by telephone with settlement authority on behalf of the insurer.

Confidential Mediation Brief: Calderwood & Harkness's confidential mediation brief will be submitted to Judge Matsuda by November 27, 2024, consistent with the mediator's scheduling order. The mediation brief will present the factual and legal merits of RGC's claims, the damages analysis, and the non-monetary relief sought, while maintaining flexibility on final terms.

Recommended RGC Attendees. We recommend that the following individuals attend the mediation on behalf of RGC:

• Derek Olafson, General Counsel — as the Company's designated representative with full Board-level settlement authority to negotiate and consummate a settlement within the parameters described in Section VII, without the need for further Board approval during the mediation session;

• Francesca Morano, Responsible Partner, Calderwood & Harkness LLP — lead outside counsel;

• Samuel Eklund, Billing Partner, Calderwood & Harkness LLP — for financial and fee-related matters; and

• Carlos Espinoza, Senior Associate, Calderwood & Harkness LLP — for document review and real-time factual support during negotiations.

It is essential that settlement authority be in place prior to December 3, 2024, to allow meaningful negotiation. Mediations of this nature often move quickly, and the ability to respond to proposals in real time — without the need to caucus with the Board or seek additional authorization — is critical to RGC's ability to negotiate effectively and to take advantage of the mediator's engagement with both sides.

X. REQUEST FOR BOARD ACTION

Calderwood & Harkness respectfully requests that the Board of Directors of Redstone Gaming Corp. adopt a resolution granting Derek Olafson, in his capacity as General Counsel, authority to approve a settlement of Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Case No. 24STCV-01892, on terms consistent with the parameters set forth in Section VII of this memorandum. Specifically, the resolution should authorize Mr. Olafson to approve a settlement that includes, at a minimum, the following terms:

(a) A monetary payment to RGC of no less than $12 million;

(b) A corrective publication of not fewer than 1,500 words addressing all three GPR reports and their specific false allegations, to be posted on grizzlypeakresearch.com within five (5) business days of the effective date and to remain posted for not less than twenty-four (24) months;

(c) A social media corrective statement of not fewer than 280 characters on the @GrizzlyPeakRes account, linking to the full corrective publication;

(d) A permanent injunction barring defendants from republishing the three reports or substantially similar statements, and a five-year securities trading bar prohibiting defendants from trading in RDGM securities;

(e) Mutual releases with customary carve-outs for obligations under the settlement agreement;

(f) Mutual non-disparagement for a term of three (3) years; and

(g) Confidentiality of the monetary settlement amount, with the existence of the settlement and corrective statements to remain non-confidential.

We further request that the resolution authorize Mr. Olafson to exercise reasonable discretion on the final terms of the settlement within these parameters — including the specific monetary amount, the precise language of the corrective publication and social media corrective (subject to the substantive requirements described above), and the administrative and procedural details of the settlement agreement — without requiring further Board approval during the course of mediation negotiations.

We request that the resolution be adopted no later than December 2, 2024 — one day prior to the commencement of the mediation — to ensure that Mr. Olafson attends the mediation with clear, documented authority.

XI. CONCLUSION

Calderwood & Harkness strongly recommends settlement within the parameters described in this memorandum. RGC has built a strong case, and the evidence supports a substantial recovery. However, the realities of defendants' financial capacity, the costs and timeline of continued litigation through trial and appeal, and the inherent uncertainties of jury verdicts in defamation-adjacent cases all counsel in favor of a negotiated resolution at the upcoming mediation.

Most importantly, the non-monetary relief obtainable through settlement — the corrective statements and the permanent injunction — achieves RGC's core objectives of public vindication and prevention of future harm in a manner that cannot be replicated through a trial verdict. The corrective publication, in GPR's own name and on GPR's own platforms, will provide a definitive public acknowledgment that the three reports contained material inaccuracies. The permanent injunction will bar defendants from republishing the false reports or profiting from future attacks on RGC's stock price. These are the forms of relief that matter most to the Company, its shareholders, and its regulatory relationships — and they are available only through settlement.

The monetary recovery, while a fraction of the Company's provable damages of $327.6 million, represents a realistic and efficient outcome given the defendants' limited non-insurance assets and the practical constraints on post-judgment collection. A settlement in the $12–18 million range captures a significant portion of the practically collectible damages, exceeds or approximates GPR's short-sale profits, fully covers RGC's out-of-pocket costs, and avoids the expenditure of an additional $1.2–$1.6 million in trial costs and the risk of an extended appeal.

The Calderwood & Harkness engagement team — Francesca Morano, Samuel Eklund, Carlos Espinoza, and Hannah Brinkley — stands ready to discuss this recommendation with Mr. Olafson, the Board, or any member thereof, and to proceed to mediation upon receipt of authority. We are available at your convenience and will coordinate with your office to schedule any briefing or discussion that the Board may require.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Francesca Morano Partner 333 South Grand Avenue, Suite 4800 Los Angeles, CA 90071 Telephone: (213) 555-4200 Facsimile: (213) 555-4201

Email: fmorano@calderwoodharkness.com

ENCLOSURES AND ATTACHMENTS

The following materials are referenced in this memorandum and are available upon request. They have not been attached to this memorandum in order to limit the distribution of sensitive work-product materials, but can be provided to any authorized recipient upon instruction from Mr. Olafson.

1. Expert Report of Dr. Elena Vostrikova, Meridian Forensic Economics LLC (dated September 9, 2024) — Event-study analysis and damages quantification.

2. Summary of Key Deposition Testimony — Including deposition of Tobias Fenchurch (August 20, 2024) and deposition of Ava Lin (August 29, 2024), with excerpted transcript citations relevant to actual-malice evidence.

3. Summary of Ironclad Surety & Insurance Co. Policy Terms — Policy No. ML-2023-07714, including coverage provisions, policy limits, defense-cost erosion analysis, and assessment of expected insurance contribution range.

4. Litigation Cost Summary to Date — Prepared by Samuel Eklund, Billing Partner, Calderwood & Harkness LLP, reflecting all discounted fees and costs advanced through November 22, 2024.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT This document and the information contained herein are protected by the attorney-client privilege and the work-product doctrine. This memorandum is intended solely for the use of the addressee and authorized recipients identified on the first page. Unauthorized disclosure, copying, or distribution is prohibited. Receipt by any unauthorized person does not constitute a waiver of the privilege.

Date	Event	Closing Price (RDGM)	Per-Share Decline	Cumulative Decline
February 6, 2024	Pre-publication close	$92.14	—	—
February 7, 2024	Report 1 published	$84.37	($7.77) / (8.4%)	($7.77) / (8.4%)
February 14, 2024	Report 2 published	$78.52	($5.85) / (6.9%)	($13.62) / (14.8%)
February 21, 2024	Report 3 published / Trough	$72.80	($5.72) / (7.3%)	($19.34) / (21.0%)
Cost Category	Estimated Range
Calderwood & Harkness attorneys' fees (estimated 1,200–1,500 additional hours across the trial team at discounted rates)	$900,000 – $1,125,000
Expert witness trial preparation and testimony (Dr. Vostrikova, Meridian Forensic Economics LLC)	$150,000 – $200,000
Jury consultants, demonstrative exhibits, and trial technology	$175,000 – $250,000
Subtotal — Pre-Trial and Trial	$1,225,000 – $1,575,000
Post-trial motions and potential appeal (if necessary)	$500,000 – $750,000
Total — Through Appeal	$1,725,000 – $2,325,000
Factor	Settlement	Trial
Monetary Recovery	$12–18 million (certain)	Verdict potentially $100M+ but practically collectible recovery estimated at $20–30M (with appeal risk of reduction or reversal)
Timeline to Resolution	Matter closes within 60–90 days of execution	Trial projected for mid-2025; appeal could extend resolution by 12–24 months beyond verdict
Additional Legal Costs	Approximately $200,000–$300,000 to negotiate and paper the settlement agreement	Approximately $1.2–$1.6 million in additional pre-trial and trial costs; $500,000–$750,000 if appealed
Corrective Statements	Achieves specific, negotiated corrective language in GPR's own name, posted on GPR's website and social media	No guarantee of corrective relief; damages verdict alone does not compel GPR to publish any corrective language
Injunctive Relief	Stipulated permanent injunction with immediate enforceability; includes republication bar and 5-year trading bar	Requires separate motion and heightened evidentiary showing; subject to First Amendment scrutiny; trading bar likely unavailable as trial remedy
Certainty of Outcome	Guaranteed, defined outcome within agreed parameters	Jury verdict is inherently unpredictable; appeal risk adds further uncertainty
Confidentiality	Settlement amount confidential; corrective statements public	All aspects of trial and verdict are public record
Business Disruption	Minimal further disruption; matter resolves without additional management testimony or preparation	CEO and CFO trial testimony required; continued media attention; investor and analyst distraction

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
This memorandum is protected by the attorney-client privilege and the work-product doctrine. It is intended solely for the use of the addressee and authorized recipients identified herein. Any disclosure, distribution, or copying of this communication by any person other than the intended recipients is strictly prohibited. If you have received this document in error, please notify the sender immediately and destroy all copies.
MEMORANDUM
November 25, 2024
FROM: Francesca Morano, Responsible Partner Calderwood & Harkness LLP 333 South Grand Avenue, Suite 4800 Los Angeles, CA 90071
TO: Derek Olafson, General Counsel Redstone Gaming Corp. 8800 Crimson Ridge Parkway, Suite 1200 Las Vegas, NV 89113
RE: Request for Board-Level Settlement Authority — Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Case No. 24STCV-01892, Superior Court of California, County of Los Angeles
COPIES: Marcus J. Calloway, Chief Executive Officer, Redstone Gaming Corp. — For Information Only Samuel Eklund, Billing Partner, Calderwood & Harkness LLP — Internal
Right-click to update Table of Contents
I. PURPOSE AND EXECUTIVE SUMMARY
The purpose of this memorandum is to request that the Board of Directors of Redstone Gaming Corp. ("RGC" or the "Company") grant settlement authority in advance of the mediation currently scheduled for December 3–4, 2024, before the Honorable Gerald K. Matsuda (Ret.) at Westside Mediation Center, 11601 Wilshire Boulevard, Suite 1200, Los Angeles, CA 90025. This mediation represents the most significant opportunity to date to resolve this litigation on favorable terms, and meaningful participation requires that RGC's representative attend with full authority to consummate a settlement within defined parameters.
After careful evaluation of the strengths and risks of the case, the defendants' financial capacity and insurance coverage, the costs and uncertainties of trial, and the strategic value of the non-monetary relief obtainable through settlement, Calderwood & Harkness LLP ("C&H") recommends that the Board authorize settlement on terms no less favorable than the following:
(a) A monetary payment to RGC of no less than $12 million;
(b) A corrective publication of not fewer than 1,500 words acknowledging material inaccuracies in all three Grizzly Peak Research reports, to be posted on grizzlypeakresearch.com and to remain posted for not less than twenty-four (24) months;
(c) A social media corrective statement of not fewer than 280 characters posted on the @GrizzlyPeakRes account on X (formerly Fenmore Solutions), linking to the full corrective publication;
(d) A stipulated permanent injunction barring defendants from republishing the three reports or substantially similar statements about RGC and barring defendants from trading in RDGM securities (including derivatives) for a period of five (5) years from the effective date of the settlement; and
(e) Mutual releases with customary carve-outs for obligations arising under the settlement agreement.
This memorandum should be treated as attorney-client privileged in its entirety. It should not be shared beyond members of the Board of Directors, in-house counsel, and Priya Ramaswaran, Chief Financial Officer, as needed for financial analysis of the settlement terms.
As discussed more fully below, this case is in a strong posture for RGC. The complaint was filed on February 5, 2024, and the First Amended Complaint was filed on March 18, 2024, adding Grizzly Peak Capital Partners LP ("GPCP") and Tobias Fenchurch individually as defendants. The defendants' anti-SLAPP motion was denied on June 7, 2024, by Judge Patricia Yamamoto. The defendants' motion for summary judgment was filed on October 22, 2024, and denied on November 15, 2024. Fact and expert discovery is complete, encompassing fourteen (14) depositions, approximately 87,000 documents, three contested discovery motions, and the exchange of expert reports on September 9, 2024. The case is trial-ready.
Notwithstanding RGC's strong position, the practical realities of collection, the costs and timeline of continued litigation through trial and potential appeal, and the unique strategic value of non-monetary relief that can only be obtained through a negotiated settlement all counsel in favor of resolving this matter at the upcoming mediation on the terms described herein.
II. BACKGROUND — THE DEFAMATORY PUBLICATIONS AND THEIR IMPACT
A. The Three GPR Reports
Between February 7, 2024, and February 21, 2024, Grizzly Peak Research LLC ("GPR") published three lengthy research reports targeting RGC. Each report was published on GPR's website, grizzlypeakresearch.com, and simultaneously distributed via GPR's X account, @GrizzlyPeakRes, which had approximately 142,000 followers at the time of publication. The reports were as follows:
Report 1: "House of Cards: Redstone Gaming's Manufactured Earnings" — published February 7, 2024 (48 pages). This report alleged that RGC fabricated approximately $410 million in fiscal year 2023 revenue through fictitious intercompany transactions, asserting that the Company had inflated its top-line figures through a series of round-trip payments between RGC subsidiaries and purportedly affiliated entities.
Report 2: "Rigged Reels: How Redstone's Slot Software Cheats the Regulators" — published February 14, 2024 (36 pages). This report alleged that RGC manipulated its random-number-generator ("RNG") software to artificially inflate payout statistics reported to the Nevada Gaming Control Board ("NGCB"), suggesting that the Company's gaming operations were fraudulently misrepresenting compliance with regulatory requirements governing slot-machine payout ratios.
Report 3: "Double Down on Fraud: Redstone's Related-Party Shell Game" — published February 21, 2024 (29 pages). This report alleged the existence of undisclosed related-party dealings between CEO Marcus J. Calloway and a purported shell entity called Vermilion Holdings LLC, implying that Mr. Calloway was siphoning corporate resources through an undisclosed personal financial interest in a Company counterparty.
Each of the three reports contained a standard disclaimer disclosing that GPR maintained short positions in RDGM common stock. As discussed in Section II.D below, the short position was substantial — approximately 680,000 shares — and was timed to coincide precisely with the serial publication of the reports.
The three core false allegations contained across these reports can be summarized as follows: (a) the fabrication of approximately $410 million in FY 2023 revenue via fictitious intercompany transactions; (b) the manipulation of RNG software to inflate payout statistics reported to the NGCB; and (c) undisclosed related-party dealings between CEO Marcus J. Calloway and Vermilion Holdings LLC. As set forth in Section II.B below, each of these allegations has been independently and conclusively disproven.
B. Vindication of RGC
The Company has been fully vindicated with respect to each of the three core allegations.
Revenue Fabrication Allegation. Pinnacle Audit & Advisory LLP (engagement partner Walter Ng, CPA), which has served as RGC's independent auditor since FY 2019, confirmed the Company's FY 2023 revenue figures of $3.42 billion and EBITDA of $812 million (an EBITDA margin of approximately 23.7%). Pinnacle issued clean, unqualified audit opinions for each of fiscal years 2021, 2022, and 2023. In addition, at the direction of the Audit Committee of the Board and following the publication of the GPR reports, Pinnacle conducted a supplemental forensic audit at a cost of $1.46 million. That forensic audit specifically examined the intercompany transaction flows identified in Report 1 and found no evidence whatsoever supporting the revenue-fabrication allegation. The forensic audit report, which was completed in April 2024, confirmed that all intercompany transactions were conducted at arm's length, were properly eliminated in consolidation, and had no impact on reported consolidated revenue.
RNG Manipulation Allegation. The Nevada Gaming Control Board completed an independent audit of RGC's RNG systems on March 29, 2024. The NGCB's audit was conducted by the Board's Technology Division and included a comprehensive review of source code, real-time testing of RNG output distributions, and comparison of reported payout statistics with actual operational data. The NGCB's findings cleared RGC entirely, confirming that the Company's RNG software operated in full compliance with Nevada Gaming Commission Regulation 14.040 and that all payout statistics reported to the NGCB were accurate.
Related-Party / Vermilion Holdings Allegation. The U.S. Securities and Exchange Commission opened an informal inquiry in March 2024, shortly after the publication of the GPR reports, to examine the related-party allegations concerning Vermilion Holdings LLC. The SEC closed that inquiry with no action on August 16, 2024. Separately, discovery in this litigation has confirmed that the related-party allegation regarding Vermilion Holdings LLC was based on incomplete information and was materially misleading. As established through deposition testimony and documentary evidence, Vermilion Holdings LLC is a legitimate, independently managed real estate investment vehicle. Mr. Calloway's connection to the entity — a passive, minority limited-partnership interest — was properly disclosed in RGC's proxy statements in accordance with Item 404 of Regulation S-K, a fact that GPR's analysts either failed to discover or deliberately omitted from their report.
C. Stock-Price Impact
The publication of the GPR reports caused immediate, severe, and measurable harm to RGC's stock price and market capitalization. The following table summarizes the price action during the relevant period:
With 73.8 million shares of RDGM common stock outstanding, the aggregate market-capitalization loss at the February 21, 2024 trough was approximately $1.427 billion ($19.34 × 73,800,000 shares). The Company's pre-publication market capitalization of approximately $6.8 billion declined to approximately $4.95 billion at the trough — a loss of more than one-quarter of the Company's total equity value in the space of just two weeks.
As of the date of this memorandum, RDGM has experienced a partial recovery and is trending toward an approximate market capitalization of $6.1 billion. While the recovery is encouraging and reflects the vindication discussed in Section II.B above, the Company's share price has not yet returned to pre-publication levels, and the remaining approximately $700 million shortfall in market capitalization continues to be attributed, at least in part, to lingering market uncertainty associated with the GPR reports.
D. Damages Quantification
Event-Study Analysis. Dr. Elena Vostrikova of Meridian Forensic Economics LLC (1901 Avenue of the Stars, Suite 900, Los Angeles, CA 90067) prepared a comprehensive event-study analysis to quantify the damages directly attributable to the GPR reports. Dr. Vostrikova's methodology — the standard approach in securities-related damages analysis — isolated the impact of the GPR publications by removing the effects of general market movements and gaming-sector beta from RDGM's price changes during the event windows. After these adjustments, Dr. Vostrikova concluded that the statistically significant, abnormal stock-price decline attributable specifically to the false statements in the GPR reports resulted in a shareholder-value loss of $327.6 million. This figure represents the damages that can be causally linked to the defamatory content of the reports, net of any price movements attributable to broader market or sector trends.
Out-of-Pocket Costs. In addition to the shareholder-value losses, RGC has incurred direct out-of-pocket costs totaling $4.627 million as a result of the GPR publications:
• Crisis communications and public relations (Crestline Equity Partners Group Inc.): $2.18 million. This engagement was initiated immediately following the publication of Report 1 and has included media-response strategy, investor-communication support, analyst-call preparation, and ongoing reputation-management services.
• Supplemental forensic audit (Pinnacle Audit & Advisory LLP): $1.46 million. As discussed in Section II.B, this audit was conducted at the direction of the Audit Committee to address the revenue-fabrication allegations and provide an independent basis for the Company's public response.
• Regulatory response costs (Hargrove & Sato LLP, Nevada gaming counsel): $987,000. RGC engaged Hargrove & Sato to coordinate the Company's response to the NGCB's independent RNG audit and to manage communications with the SEC in connection with its informal inquiry.
Defendants' Short-Sale Profit. As disclosed in its own reports and confirmed through discovery, GPR maintained a short position of approximately 680,000 shares of RDGM common stock. The notional value of this short position at the pre-publication price of $92.14 per share was approximately $62.66 million. Based on documentary evidence produced in discovery, GPR closed its short position by mid-March 2024 at an estimated average price of approximately $72.80 per share. GPR's estimated short-sale profit was therefore approximately $13.15 million (($92.14 − $72.80) × 680,000 shares). This figure is significant because it represents the direct financial benefit that GPR derived from the publication of its false reports and provides an independent, disgorgement-based theory supporting a monetary recovery in the range of $12–16 million.
III. CURRENT LITIGATION POSTURE AND ASSESSMENT OF TRIAL STRENGTHS
A. Causes of Action
RGC's First Amended Complaint asserts four causes of action against GPR, GPCP, and Tobias Fenchurch:
1. Trade Libel (Cal. Civ. Code § 46(3)) — alleging that the GPR reports constituted false and disparaging statements concerning the quality of RGC's business, products, and financial performance, published with knowledge of their falsity or reckless disregard for their truth, resulting in special damages.
2. Intentional Interference with Prospective Economic Advantage — alleging that defendants engaged in wrongful conduct (the publication of knowingly false reports) intended to interfere with RGC's economic relationships with investors, customers, regulators, and business counterparties.
3. Unfair Business Practices (Cal. Bus. & Prof. Code § 17200) — alleging that defendants' conduct constituted unfair, unlawful, and fraudulent business practices, including the short-and-distort scheme by which defendants profited from the publication of false information about RGC.
4. Negligent Misrepresentation (added via the First Amended Complaint filed March 18, 2024) — alleging that defendants published false statements of fact concerning RGC without reasonable grounds for believing them to be true, causing foreseeable economic harm to RGC.
All four causes of action have survived dispositive challenges. The defendants' special motion to strike under California's anti-SLAPP statute (Cal. Code Civ. Proc. § 425.16) was denied by Judge Patricia Yamamoto on June 7, 2024. Judge Yamamoto found that while the publications arose from protected activity, RGC had demonstrated a probability of prevailing on the merits sufficient to defeat the motion. The defendants' motion for summary judgment, filed on October 22, 2024, was denied on November 15, 2024. Judge Yamamoto's order on summary judgment found triable issues of material fact on each cause of action, including the questions of falsity, actual malice, and causation of damages.
B. Strengths of RGC's Position
RGC's trial position is strong across multiple dimensions.
Actual-Malice Evidence. Perhaps the most critical element of the case is the evidence of actual malice. In trade libel cases involving public figures or matters of public concern, California law requires proof that the defendant published the statements with knowledge of their falsity or reckless disregard for their truth. Here, the evidence of actual malice is robust and multi-faceted:
• GPR maintained a 680,000-share short position in RDGM timed precisely to the serial publication of the three reports. The magnitude and timing of this position provide powerful evidence of financial motive and, by implication, a willingness to publish damaging allegations without adequate verification.
• Internal communications and Meridian Solutions messages produced in discovery demonstrate that GPR's analysts were aware that the revenue-fabrication allegations in Report 1 were not fully supported by the data they had gathered. In particular, messages between Tobias Fenchurch and senior analyst Ava Lin, exchanged in the days before publication of Report 1, reflect awareness that the "intercompany" transaction analysis did not conclusively demonstrate the existence of fictitious revenue.
• Ava Lin's deposition testimony (August 29, 2024) was particularly damaging to defendants. Ms. Lin acknowledged under oath that she did not contact the Nevada Gaming Control Board before publishing the RNG-manipulation allegations in Report 2. She further conceded that her analysis of RNG output data was based on a limited and non-representative sample of publicly available payout reports, rather than any direct testing or examination of RGC's software.
• Tobias Fenchurch instructed that Report 3 be published before completing verification of the Vermilion Holdings LLC allegation. Specifically, emails produced in discovery show that Mr. Fenchurch directed publication on February 21, 2024, despite an outstanding request from a junior analyst to review Mr. Calloway's proxy disclosures — disclosures that, had they been reviewed, would have revealed the proper Item 404 disclosure of Mr. Calloway's passive interest in Vermilion Holdings.
Independent Disproof of Core Allegations. As detailed in Section II.B, all three of the core allegations asserted in the GPR reports have been independently and conclusively disproven by credible third parties: Pinnacle Audit & Advisory (revenue fabrication), the Nevada Gaming Control Board (RNG manipulation), and the SEC (related-party / Vermilion Holdings). The fact that the allegations have been disproven not only by RGC's own auditor but also by independent regulatory bodies lends exceptional credibility to RGC's position at trial.
Damages Model. Dr. Vostrikova's event-study analysis provides a robust, well-supported damages model with a clear causal link between the GPR publications and the decline in RGC's share price. Event-study methodology is the standard analytical framework accepted by courts in cases involving stock-price impact, and Dr. Vostrikova's credentials and methodology are strong. Her analysis isolates the publication-specific effect from broader market and sector movements, providing a defensible basis for the $327.6 million damages estimate.
Judicial signals. Judge Yamamoto's rulings on both the anti-SLAPP motion and the motion for summary judgment are favorable to RGC and signal the Court's receptivity to RGC's legal theories. While the Court has not prejudged the merits, its findings that RGC demonstrated a probability of prevailing (on the anti-SLAPP motion) and that triable issues of material fact exist on all four causes of action (on summary judgment) suggest that the Court views the case as strong for plaintiff.
Documentary Evidence. The discovery record is extensive and favorable. Approximately 87,000 documents have been produced by the parties, including the internal Brightmoor Data Systems and emails discussed above, financial records establishing the scope of GPR's short position, and regulatory correspondence confirming RGC's vindication. This documentary record provides a strong foundation for trial presentation.
C. Litigation Risks
Despite RGC's strong position, several material litigation risks must be candidly assessed.
Special-Damages Requirement for Trade Libel. Under California law, trade libel requires proof of special damages — that is, specific pecuniary losses caused by the defamatory publication. While Dr. Vostrikova's event-study analysis is strong and well-supported, defendants will challenge causation at trial by attributing the decline in RDGM's stock price to broader market conditions, gaming-sector headwinds, or other factors unrelated to the GPR reports. Defense expert testimony on this point is expected to be vigorous, and the causation question — particularly with respect to the magnitude of damages — will ultimately be determined by the jury.
Actual-Malice Standard. The actual-malice standard remains a high bar, even with the favorable evidence discussed above. At trial, defendants will argue that their research, while imperfect, was conducted in good faith and that the short position is a standard feature of short-seller research that does not, by itself, establish actual malice. Defendants will also invoke the protections of the First Amendment and frame their reports as expressions of opinion rather than statements of fact. While the commercial-speech exception and the short-and-distort financial motive significantly undermine this defense, a jury may nonetheless be sympathetic to a "free speech" framing, particularly in Los Angeles County.
First Amendment Defenses. GPR will invoke First Amendment defenses at trial and will argue that its reports constitute opinion, fair comment, or are protected by a qualified privilege for financial commentary on public companies. While Judge Yamamoto's anti-SLAPP and MSJ rulings suggest skepticism toward these defenses, they will be presented to the jury and cannot be dismissed.
Jury Unpredictability. Defamation-adjacent cases in Los Angeles present inherent unpredictability. Jury sympathies are difficult to forecast, and there is a non-trivial risk that a jury could find for defendants on one or more causes of action, or could award damages materially lower than RGC's provable losses. The reverse is also true — a jury could award a substantial verdict — but the range of possible outcomes is wide.
Appeal Risk. Even if RGC obtains a favorable verdict, the defendants will almost certainly appeal. Defamation and trade libel verdicts are subject to heightened appellate scrutiny under First Amendment principles, and there is a meaningful risk that a large verdict could be reduced or reversed on appeal. An appeal would extend the timeline of this litigation by twelve to twenty-four months and would impose additional legal costs estimated at $500,000–$750,000.
Collection Risk. As discussed in greater detail in Section V, GPR and GPCP have limited non-insurance assets relative to the scale of RGC's damages. GPR's estimated cash and receivables are approximately $22 million. GPCP's estimated assets under management are approximately $185 million, but fund assets are held for the benefit of investors and may not be directly reachable to satisfy a judgment against the general partner or GPR. Tobias Fenchurch's personal assets are not fully known but are likely modest relative to the claimed damages. Even with a nine-figure verdict, actual recovery may be limited to insurance proceeds plus a fraction of GPR and GPCP's liquid assets.
IV. TRIAL COST ESTIMATE
If this matter does not resolve at mediation and proceeds to trial — currently projected for mid-2025 — RGC will incur significant additional litigation costs. The following estimates are based on current case posture and Calderwood & Harkness's experience with comparable commercial litigation.
Estimated Additional Litigation Costs Through Trial:
Current Fees and Costs Incurred to Date. As of the date of this memorandum, total discounted legal fees incurred by Calderwood & Harkness in this matter are approximately $2,800,623, with an additional $187,450 in costs advanced (court fees, deposition transcripts, service of process, expert retainers, e-discovery vendor costs, and travel). Total engagement fees, including the success premium component of the fee arrangement, would be approximately $3,220,716 upon a successful resolution.
Total Projected Legal Spend. If this matter proceeds to trial and through post-trial motions, RGC's all-in legal spend — inclusive of fees incurred to date, additional trial costs, and the success premium — could approach $4.5 to $5.0 million before any appeal. In the event of an appeal, total legal spend could exceed $5.5 million.
These projections do not include the indirect costs of continued litigation, including the time commitment required of RGC management (particularly Mr. Olafson, Mr. Calloway, and CFO Priya Ramaswaran for trial testimony and preparation), continued business disruption, and the ongoing reputational overhang associated with unresolved litigation.
V. DEFENDANTS' FINANCIAL CAPACITY AND INSURANCE COVERAGE
A. GPR and GPCP Financial Profile
An assessment of the defendants' financial capacity is critical to evaluating the realistic range of collectible recovery and, consequently, the appropriate settlement parameters.
Grizzly Peak Research LLC. GPR is an operating limited liability company focused on short-seller research and analysis. Based on information obtained through discovery, GPR's estimated cash and receivables as of year-end 2024 are approximately $22 million. The company's hard assets are modest, consisting primarily of office equipment, software licenses, and intellectual property. GPR does not own significant real estate or other capital assets.
Grizzly Peak Capital Partners LP. GPCP is the investment fund associated with GPR. Based on publicly available regulatory filings and information obtained through discovery, GPCP has estimated assets under management ("AUM") of approximately $185 million. However, as a matter of fundamental fund structure, the assets held by GPCP are held for the benefit of the fund's limited-partner investors and are not directly available to satisfy a judgment against the general partner, GPR, or any individual defendant. Piercing the fund structure to reach investor assets would require separate litigation and would face substantial legal hurdles.
Tobias Fenchurch. Mr. Fenchurch was added as an individual defendant via the First Amended Complaint. His personal financial profile has not been fully disclosed through discovery, and while he is believed to hold an ownership interest in GPR and a carried interest in GPCP, his personal assets are likely modest relative to the scale of RGC's claimed damages. Execution on a judgment against Mr. Fenchurch individually would require asset identification and potentially additional collection proceedings.
Practical Collection Risk. The practical implication of the foregoing analysis is that even if RGC obtains a nine-figure verdict at trial, actual recovery may be limited to insurance proceeds plus a fraction of GPR's and GPCP's liquid assets. The gap between a potential verdict and the practically collectible amount is significant and weighs heavily in favor of settlement.
B. Ironclad Surety & Insurance Co. Coverage
The defendants are insured under a directors-and-officers / media-liability policy issued by Ironclad Surety & Insurance Co. The relevant policy details are as follows:
• Insurer: Ironclad Surety & Insurance Co. (home office: 200 Park Avenue South, 14th Floor, New York, NY 10003)
• Policy Number: ML-2023-07714
• Coverage: Claims arising from media publications, including defamation, trade libel, and related torts. The policy covers both defense costs and indemnity for covered claims.
• Claims Adjuster: Daniel Royce
• Engagement in Defense: Ironclad has been actively engaged in the defense of this matter since the filing of the complaint. Defense counsel, Caldwell, Tseng & Barrow LLP, is being funded in substantial part by Ironclad.
• Settlement Posture: Based on representations made by defense counsel during informal mediation discussions and pre-mediation communications, Ironclad has signaled a willingness to contribute to settlement. The expected range of Ironclad's insurance contribution is $8–12 million, based on defense counsel's representations and our assessment of the policy terms and Ironclad's exposure.
Insurance proceeds are expected to represent the primary source of settlement funding. The availability of insurance coverage at meaningful levels is a significant factor supporting settlement, as it provides a reliable and immediately accessible funding source that does not depend on defendants' willingness or ability to pay out of their own assets.
C. Implications for Settlement Range
Taking into account the defendants' financial profile and insurance coverage, the realistic collectible recovery at trial — even assuming a substantial verdict — is likely capped at approximately $20–30 million. This figure represents the expected insurance-policy contribution plus GPR's liquid assets, reduced by defense costs already incurred against the policy. A verdict in excess of this amount, while symbolically significant, would face severe practical collection challenges.
Against this backdrop, a settlement in the range of $12–18 million would capture a significant portion of the practically collectible damages. Moreover, a settlement in this range would eliminate collection risk entirely, avoid the costs and delays of appeal, and provide certain, immediate recovery. The non-monetary relief available through settlement — particularly the corrective statements and permanent injunction — provides additional value that may not be obtainable through a trial verdict, as discussed in Section VI.
VI. NON-MONETARY SETTLEMENT TERMS — STRATEGIC VALUE
While the monetary component of any settlement is important, the non-monetary terms described below are of equal or greater strategic value to RGC. These terms directly address the Company's core objectives of public vindication, investor-confidence restoration, and prevention of future harm. Critically, several of these forms of relief — particularly the corrective statements — would not be available through a trial verdict, which would be limited to monetary damages.
A. Corrective Statements
Corrective Publication. Under the proposed settlement terms, GPR would be required to publish a corrective statement of not fewer than 1,500 words on grizzlypeakresearch.com within five (5) business days of the effective date of the settlement. The corrective publication must remain posted on the website for a period of not less than twenty-four (24) months. The content of the corrective publication must specifically acknowledge the following:
(i) That the three GPR reports — "House of Cards: Redstone Gaming's Manufactured Earnings," "Rigged Reels: How Redstone's Slot Software Cheats the Regulators," and "Double Down on Fraud: Redstone's Related-Party Shell Game" — contained material inaccuracies;
(ii) That the revenue-fabrication allegation — asserting that RGC fabricated approximately $410 million in FY 2023 revenue through fictitious intercompany transactions — was unfounded;
(iii) That the RNG-manipulation allegation was disproven by the independent audit conducted by the Nevada Gaming Control Board; and
(iv) That the related-party allegation regarding Vermilion Holdings LLC was based on incomplete information and was misleading.
Social Media Corrective. In addition to the full corrective publication, GPR would be required to post a corrective statement of not fewer than 280 characters on its @GrizzlyPeakRes account on X (formerly Fenmore Solutions), with a link to the full corrective publication on grizzlypeakresearch.com. Given that the original reports were disseminated to GPR's approximately 142,000 followers through this channel, a social media corrective is essential to reaching the same audience that received the original false statements.
Strategic Value of Corrective Statements. The corrective statements are critically important to RGC for several reasons. First, they directly address the Company's core concern — the ongoing reputational harm caused by the continued availability of the GPR reports online. While the NGCB audit, the SEC closure, and the Pinnacle forensic audit have all vindicated the Company, the GPR reports remain accessible on the internet and continue to be cited by market commentators and short-seller aggregation platforms. A corrective publication in GPR's own name, posted on GPR's own website, carries a unique form of credibility that cannot be replicated by the Company's own communications. Second, the corrective statements are essential for investor confidence, regulatory relationships, and the Company's broader reputational recovery. Third, and perhaps most critically, a trial verdict — even a favorable one — would not compel GPR to publish specific corrective language. A damages award addresses the financial harm but does nothing to remediate the ongoing informational harm of the false reports. Only a negotiated settlement can achieve this result.
RGC's investor relations and communications teams are prepared to amplify the corrective publication through the Company's own channels upon its posting. Coordination with Crestline Equity Partners Group Inc. (lead contact: Simone Arecchi) and RGC's Vice President of Investor Relations, Janelle Hu, has already been initiated in anticipation of a potential settlement, and a detailed amplification plan is in development.
B. Permanent Injunction
Republication Bar. Under the proposed settlement terms, defendants would be permanently enjoined from republishing the three GPR reports or any substantially similar statements about RGC. This injunction would be entered as a stipulated court order, providing immediate enforceability and subjecting any violation to contempt proceedings.
Securities Trading Bar. Defendants would also be permanently enjoined from trading in RDGM securities — including common stock, options, and any derivative instruments — for a period of five (5) years from the effective date of the settlement. This trading bar is designed to eliminate any financial incentive for GPR, GPCP, or Fenchurch to engage in future short-and-distort campaigns targeting RGC.
Strategic Value of the Permanent Injunction. The stipulated injunction provides critical protections that would be difficult and uncertain to obtain through litigation. Obtaining a permanent injunction at trial would require a separate motion, a heightened evidentiary showing, and would face significant First Amendment scrutiny from the Court. A stipulated injunction, by contrast, provides immediate enforceability without these procedural and evidentiary burdens. Moreover, the trading bar — which would not be available as a remedy in a trade libel action — ensures that defendants cannot profit from future attacks on the Company's reputation.
C. Non-Disparagement
The proposed settlement would include a mutual non-disparagement clause with a term of three (3) years from the effective date. Under this provision, GPR, Fenchurch, Ava Lin, and their respective agents and affiliates would be prohibited from making further negative public statements about RGC, its officers, directors, employees, products, or financial performance. RGC would undertake a reciprocal obligation not to make disparaging statements about GPR, Fenchurch, or Lin. This mutual structure is standard in settlements of this nature and would provide an additional layer of protection against future reputational harm.
D. Confidentiality
The proposed confidentiality structure is designed to maximize RGC's strategic interests. Under the proposed terms:
• The monetary amount of the settlement would be confidential and would not be disclosed publicly.
• The existence of the settlement and the corrective statements would not be subject to confidentiality and would be publicly available.
This structure allows RGC to publicize the vindication reflected in the corrective statements — which is essential for investor relations and reputational recovery — while maintaining discretion regarding the monetary terms. Confidentiality of the monetary amount protects against potential negative inferences (i.e., commentary that the settlement amount was "too low" relative to RGC's provable damages) and avoids setting a public benchmark that could invite future short-seller attacks by other market participants.
VII. RECOMMENDED SETTLEMENT PARAMETERS
Based on the foregoing analysis, Calderwood & Harkness recommends that the Board grant settlement authority within the following parameters.
A. Monetary Floor
Minimum acceptable monetary payment: $12 million.
Recommended target range: $14–16 million.
The rationale for these parameters is as follows:
(i) A settlement of $12 million or more exceeds or closely approximates GPR's estimated short-sale profit of approximately $13.15 million. A recovery at or above this level would effectively require defendants to disgorge the profits of their wrongful conduct — a result that carries significant deterrent value and satisfies a disgorgement theory of recovery.
(ii) A settlement in the recommended range more than covers RGC's direct out-of-pocket costs of $4.627 million (crisis communications, forensic audit, and regulatory response) with a significant surplus, ensuring that the Company is made whole for its direct expenditures with meaningful additional recovery.
(iii) A settlement in this range represents a substantial portion of the practically collectible damages, given the defendants' financial capacity and the realistic limits on post-judgment collection discussed in Section V.
(iv) A monetary recovery of $12–16 million falls within the expected range of Ironclad Surety & Insurance Co.'s willingness to contribute ($8–12 million), leaving a manageable balance to be funded by GPR and GPCP jointly. This structure maximizes the likelihood of closing a deal at mediation by keeping the demands within a range that both the insurer and the defendants can meet.
Allocation Between Insurance and Defendants. We anticipate that the monetary settlement payment would be funded through a combination of insurance proceeds and direct contributions from the defendants. Based on pre-mediation discussions with defense counsel, we expect Ironclad to contribute in the range of $8–12 million under Policy No. ML-2023-07714, with the balance contributed by GPR and/or GPCP jointly. The specific allocation between insurance and defendant contributions will be negotiated at mediation but is not a material consideration for RGC, so long as the total monetary payment meets the minimum threshold.
B. Non-Monetary Minimums
The following non-monetary terms are non-negotiable and should not be conceded during mediation:
• Corrective publication of not fewer than 1,500 words addressing all three GPR reports and their specific false allegations, to be posted on grizzlypeakresearch.com within five (5) business days of the effective date.
• Social media corrective of not fewer than 280 characters on the @GrizzlyPeakRes account, with a hyperlink to the full corrective publication.
• Posting duration of not less than twenty-four (24) months for the corrective publication.
• Permanent injunction barring republication of the three reports or any substantially similar statements.
• Five-year securities trading bar prohibiting defendants from trading in RDGM securities, including derivatives.
As discussed in Section VI, these non-monetary terms are of equal or greater strategic value to RGC than the monetary payment. They address the Company's core objectives of public vindication and prevention of future harm, and they provide forms of relief that cannot be obtained through a trial verdict. Any settlement that omits these terms would not adequately serve RGC's interests and should not be consummated.
C. Other Terms
The following additional settlement terms are standard and should be included in any final agreement:
• Mutual releases: Broad mutual releases of all claims, counterclaims, and cross-claims arising from or related to the matters at issue in the litigation, with customary carve-outs for obligations arising under the settlement agreement itself.
• Stipulated dismissal with prejudice: The action would be dismissed with prejudice, with the Court retaining jurisdiction to enforce the settlement agreement pursuant to Cal. Code Civ. Proc. § 664.6.
• Fees and costs: Each party bears its own attorneys' fees and costs. RGC would not seek recovery of its legal fees as part of the settlement.
• Escrow: Settlement funds would be deposited in escrow through Great Basin Trust Company, N.A. (3960 Howard Hughes Parkway, Suite 500, Las Vegas, NV 89169). Deposit would be required within thirty (30) calendar days of execution of the settlement agreement.
• Non-disparagement: Mutual non-disparagement clause with a three (3) year term, as described in Section VI.C.
• Confidentiality: Monetary terms confidential; existence of settlement and corrective statements non-confidential, as described in Section VI.D.
VIII. COMPARISON: SETTLEMENT VS. TRIAL
The following table provides a structured comparison of the expected outcomes under a settlement scenario versus continued litigation through trial and potential appeal.
In sum, settlement provides a certain, efficient, and strategically superior outcome across virtually every dimension. While the monetary recovery at settlement is lower than the theoretical maximum recovery at trial, the practically collectible amount at trial is substantially less than the headline verdict figure, and the non-monetary relief obtainable through settlement — corrective statements and a permanent injunction — is uniquely valuable and unavailable through litigation.
IX. MEDIATION LOGISTICS
The mediation is scheduled for December 3–4, 2024, and the logistical details are as follows:
Mediator: Hon. Gerald K. Matsuda (Ret.)
Venue: Westside Mediation Center, 11601 Wilshire Boulevard, Suite 1200, Los Angeles, CA 90025
Defense Counsel: Raymond Caldwell and Natalie Orenstein of Caldwell, Tseng & Barrow LLP, 555 California Street, Suite 3100, San Francisco, CA 94104. We understand that Daniel Royce of Ironclad Surety & Insurance Co. will also attend or be available by telephone with settlement authority on behalf of the insurer.
Confidential Mediation Brief: Calderwood & Harkness's confidential mediation brief will be submitted to Judge Matsuda by November 27, 2024, consistent with the mediator's scheduling order. The mediation brief will present the factual and legal merits of RGC's claims, the damages analysis, and the non-monetary relief sought, while maintaining flexibility on final terms.
Recommended RGC Attendees. We recommend that the following individuals attend the mediation on behalf of RGC:
• Derek Olafson, General Counsel — as the Company's designated representative with full Board-level settlement authority to negotiate and consummate a settlement within the parameters described in Section VII, without the need for further Board approval during the mediation session;
• Francesca Morano, Responsible Partner, Calderwood & Harkness LLP — lead outside counsel;
• Samuel Eklund, Billing Partner, Calderwood & Harkness LLP — for financial and fee-related matters; and
• Carlos Espinoza, Senior Associate, Calderwood & Harkness LLP — for document review and real-time factual support during negotiations.
It is essential that settlement authority be in place prior to December 3, 2024, to allow meaningful negotiation. Mediations of this nature often move quickly, and the ability to respond to proposals in real time — without the need to caucus with the Board or seek additional authorization — is critical to RGC's ability to negotiate effectively and to take advantage of the mediator's engagement with both sides.
X. REQUEST FOR BOARD ACTION
Calderwood & Harkness respectfully requests that the Board of Directors of Redstone Gaming Corp. adopt a resolution granting Derek Olafson, in his capacity as General Counsel, authority to approve a settlement of Redstone Gaming Corp. v. Grizzly Peak Research LLC, et al., Case No. 24STCV-01892, on terms consistent with the parameters set forth in Section VII of this memorandum. Specifically, the resolution should authorize Mr. Olafson to approve a settlement that includes, at a minimum, the following terms:
(a) A monetary payment to RGC of no less than $12 million;
(b) A corrective publication of not fewer than 1,500 words addressing all three GPR reports and their specific false allegations, to be posted on grizzlypeakresearch.com within five (5) business days of the effective date and to remain posted for not less than twenty-four (24) months;
(c) A social media corrective statement of not fewer than 280 characters on the @GrizzlyPeakRes account, linking to the full corrective publication;
(d) A permanent injunction barring defendants from republishing the three reports or substantially similar statements, and a five-year securities trading bar prohibiting defendants from trading in RDGM securities;
(e) Mutual releases with customary carve-outs for obligations under the settlement agreement;
(f) Mutual non-disparagement for a term of three (3) years; and
(g) Confidentiality of the monetary settlement amount, with the existence of the settlement and corrective statements to remain non-confidential.
We further request that the resolution authorize Mr. Olafson to exercise reasonable discretion on the final terms of the settlement within these parameters — including the specific monetary amount, the precise language of the corrective publication and social media corrective (subject to the substantive requirements described above), and the administrative and procedural details of the settlement agreement — without requiring further Board approval during the course of mediation negotiations.
We request that the resolution be adopted no later than December 2, 2024 — one day prior to the commencement of the mediation — to ensure that Mr. Olafson attends the mediation with clear, documented authority.
XI. CONCLUSION
Calderwood & Harkness strongly recommends settlement within the parameters described in this memorandum. RGC has built a strong case, and the evidence supports a substantial recovery. However, the realities of defendants' financial capacity, the costs and timeline of continued litigation through trial and appeal, and the inherent uncertainties of jury verdicts in defamation-adjacent cases all counsel in favor of a negotiated resolution at the upcoming mediation.
Most importantly, the non-monetary relief obtainable through settlement — the corrective statements and the permanent injunction — achieves RGC's core objectives of public vindication and prevention of future harm in a manner that cannot be replicated through a trial verdict. The corrective publication, in GPR's own name and on GPR's own platforms, will provide a definitive public acknowledgment that the three reports contained material inaccuracies. The permanent injunction will bar defendants from republishing the false reports or profiting from future attacks on RGC's stock price. These are the forms of relief that matter most to the Company, its shareholders, and its regulatory relationships — and they are available only through settlement.
The monetary recovery, while a fraction of the Company's provable damages of $327.6 million, represents a realistic and efficient outcome given the defendants' limited non-insurance assets and the practical constraints on post-judgment collection. A settlement in the $12–18 million range captures a significant portion of the practically collectible damages, exceeds or approximates GPR's short-sale profits, fully covers RGC's out-of-pocket costs, and avoids the expenditure of an additional $1.2–$1.6 million in trial costs and the risk of an extended appeal.
The Calderwood & Harkness engagement team — Francesca Morano, Samuel Eklund, Carlos Espinoza, and Hannah Brinkley — stands ready to discuss this recommendation with Mr. Olafson, the Board, or any member thereof, and to proceed to mediation upon receipt of authority. We are available at your convenience and will coordinate with your office to schedule any briefing or discussion that the Board may require.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Francesca Morano Partner 333 South Grand Avenue, Suite 4800 Los Angeles, CA 90071 Telephone: (213) 555-4200 Facsimile: (213) 555-4201
Email: fmorano@calderwoodharkness.com
ENCLOSURES AND ATTACHMENTS
The following materials are referenced in this memorandum and are available upon request. They have not been attached to this memorandum in order to limit the distribution of sensitive work-product materials, but can be provided to any authorized recipient upon instruction from Mr. Olafson.
1. Expert Report of Dr. Elena Vostrikova, Meridian Forensic Economics LLC (dated September 9, 2024) — Event-study analysis and damages quantification.
2. Summary of Key Deposition Testimony — Including deposition of Tobias Fenchurch (August 20, 2024) and deposition of Ava Lin (August 29, 2024), with excerpted transcript citations relevant to actual-malice evidence.
3. Summary of Ironclad Surety & Insurance Co. Policy Terms — Policy No. ML-2023-07714, including coverage provisions, policy limits, defense-cost erosion analysis, and assessment of expected insurance contribution range.
4. Litigation Cost Summary to Date — Prepared by Samuel Eklund, Billing Partner, Calderwood & Harkness LLP, reflecting all discounted fees and costs advanced through November 22, 2024.
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION — ATTORNEY WORK PRODUCT This document and the information contained herein are protected by the attorney-client privilege and the work-product doctrine. This memorandum is intended solely for the use of the addressee and authorized recipients identified on the first page. Unauthorized disclosure, copying, or distribution is prohibited. Receipt by any unauthorized person does not constitute a waiver of the privilege.
Date | Event | Closing Price (RDGM) | Per-Share Decline | Cumulative Decline
February 6, 2024 | Pre-publication close | $92.14 | — | —
February 7, 2024 | Report 1 published | $84.37 | ($7.77) / (8.4%) | ($7.77) / (8.4%)
February 14, 2024 | Report 2 published | $78.52 | ($5.85) / (6.9%) | ($13.62) / (14.8%)
February 21, 2024 | Report 3 published / Trough | $72.80 | ($5.72) / (7.3%) | ($19.34) / (21.0%)
Cost Category | Estimated Range
Calderwood & Harkness attorneys' fees (estimated 1,200–1,500 additional hours across the trial team at discounted rates) | $900,000 – $1,125,000
Expert witness trial preparation and testimony (Dr. Vostrikova, Meridian Forensic Economics LLC) | $150,000 – $200,000
Jury consultants, demonstrative exhibits, and trial technology | $175,000 – $250,000
Subtotal — Pre-Trial and Trial | $1,225,000 – $1,575,000
Post-trial motions and potential appeal (if necessary) | $500,000 – $750,000
Total — Through Appeal | $1,725,000 – $2,325,000
Factor | Settlement | Trial
Monetary Recovery | $12–18 million (certain) | Verdict potentially $100M+ but practically collectible recovery estimated at $20–30M (with appeal risk of reduction or reversal)
Timeline to Resolution | Matter closes within 60–90 days of execution | Trial projected for mid-2025; appeal could extend resolution by 12–24 months beyond verdict
Additional Legal Costs | Approximately $200,000–$300,000 to negotiate and paper the settlement agreement | Approximately $1.2–$1.6 million in additional pre-trial and trial costs; $500,000–$750,000 if appealed
Corrective Statements | Achieves specific, negotiated corrective language in GPR's own name, posted on GPR's website and social media | No guarantee of corrective relief; damages verdict alone does not compel GPR to publish any corrective language
Injunctive Relief | Stipulated permanent injunction with immediate enforceability; includes republication bar and 5-year trading bar | Requires separate motion and heightened evidentiary showing; subject to First Amendment scrutiny; trading bar likely unavailable as trial remedy
Certainty of Outcome | Guaranteed, defined outcome within agreed parameters | Jury verdict is inherently unpredictable; appeal risk adds further uncertainty
Confidentiality | Settlement amount confidential; corrective statements public | All aspects of trial and verdict are public record
Business Disruption | Minimal further disruption; matter resolves without additional management testimony or preparation | CEO and CFO trial testimony required; continued media attention; investor and analyst distraction