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TICKERS: RCAT

Drone Focused Co. Positioned to Turn Profitable in FY23
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Aided by the burgeoning drone industry, this company is expected to grow its revenue enough in the next 12 months to move into the black, noted a ThinkEquity report.

Red Cat Holdings Inc. (RCAT:NASDAQ) could break even in Q4 of fiscal year 2023 (FY23), ending next April, with an estimated revenue of $8 million ($8M)," purported ThinkEquity analyst Dr. Ashok Kumar in an August 8, 2022 research note. For the entire FY23, the investment bank projects Red Cat will generate $19.3M of revenue, up from $6.4M in FY22.

"The forecast revenue growth is an indication of how the company is gaining traction across all of its subsidiaries as drone technology becomes more pervasive," Kumar added.

Red Cat provides products, services and solutions to the drone industry through its four subsidiaries. Its newest subsidiary, acquired a year ago, is Teal Drones, which sells drone systems commercially and to governments. It is one of a handful of companies qualified to sell to the U.S. Department of Defense. Since the transaction closed, Kumar explained, Red Cat has expanded Teal Drones' staff and facilities in preparation for upcoming revenue generating opportunities.

Today, "the Teal Drone[s] production line is in full swing and producing high-quality drones," Kumar relayed. "The company expects to go into mass production in the fall with a new camera payload."

Teal Drones is now fulfilling an order from a NATO country for 15 Golden Eagle drones, the subsidiary's unmanned aerial vehicle approved by the U.S. Department of Defense for reconnaissance, public safety and inspection, according to Kumar.

The analyst pointed out the subsidiary also finished developing, in partnership with Autonodyne, a next generation drone system, which gives Teal Drones and, thus Red Cat, a competitive advantage.

The four-drone system will come in two configurations: 4-Ship and 4-Ship+. With both, one pilot can control up to four Golden Eagle drones for a full 360-degree view. The 4-Ship+ version will include two extra Golden Eagle units so the pilot can swap out two with drained batteries for two with fresh batteries. The 4-Ship+ configuration also will include an additional linked controller so the pilot can give another pilot control.

"We believe that 4-Ship is a disruptive technology that alters the approach to intelligence, surveillance and reconnaissance," Kumar noted.

Kumar also indicated Red Cat is set financially to keep pursuing its growth programs throughout the rest of FY23. The company had $49M in cash and marketable securities and less than $2M in debt at the end of FY22, or April 30, 2022.

Regarding the market opportunity for Red Cat moving forward, Kumar provided some statistics that suggest continued expansion is expected for the drone industry. The number of "Internet of Things enterprise drones" to be shipped is estimated to reach 4.7M by 2031, up from 1M in 2021. Of this total, most of the UAVs are to be used primarily for construction monitoring and retail sales, and at least 25% are forecasted to go to North America.

"Red Cat is well-positioned for the domestic opportunity," wrote Kumar.


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Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with Red Cat Holdings Inc. Please click here for more information.

3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.  As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Red Cat Holdings Inc., a company mentioned in this article.

Disclosures for Think Equity, Red Cat Holdings Inc., August 8, 2022

Analyst Certification:  The analyst, Ashok Kumar, responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

The analyst, Ashok Kumar, has no financial interest in the debt or equity securities of the subject company of this report. Further, no member of his
household has any financial interest in the securities of the subject company. Neither the analyst, nor any member of his household, is an officer, director, or advisory board member of the issuer(s) or has another significant affiliation with the issuer(s) that is the subject of this research report.

The analyst has not received compensation from the subject company. The CEO of ThinkEquity, LLC., owns shares in the company. At the time of this research report, the analyst does not know, or have reason to know, of any other material conflict of interest.

Company Specific Disclosures: ThinkEquity, LLC is a member of FINRA and SIPC. ThinkEquity, LLC or an affiliate has a client relationship with and has received compensation from this subject company Red Cat Holdings, Inc. in the last 12 months.

ThinkEquity, LLC is a member of FINRA and SIPC. ThinkEquity expects to receive or intends to seek investment banking business from the subject company in the next three months. ThinkEquity does not make a market in the securities of the subject company of this report at the time of publication. ThinkEquity does not hold a beneficial ownership of more than 1% or more of any class of common equity securities of the subject company.

This report is for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of an offer to buy any security. While the information contained in this report has been obtained from sources believed to be reliable, we have not independently verified the information and we do not represent or guarantee that the report is accurate or complete and it should not be relied upon as such. Any references or citations to, or excerpts from, third-party information or data sources (including, but not limited to, Bloomberg and Capital IQ) do not and are not intended to provide financial or investment advice and are not to be relied upon by anyone as providing financial or investment advice. Based on public information available to us, prices and opinions expressed in this report reflect judgments as of the date hereof and are subject to change without notice. The securities covered by or mentioned in this report involve substantial risk and should generally be purchased only by investors able to accept such risk. This research report and the securities mentioned herein, some of which may not be registered under the Securities Act of 1933, are intended only for Qualified Institutional Buyers (QIBs), as defined under Rule 144A. Any opinions expressed assume that this type of investment is suitable for the investor. 




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