Red Cat Holdings, Inc.

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Red Cat Holdings Fiscal Third Quarter 2022 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through June 17th, 2022. I would now like to turn the call over to Mr. Scott Gordon, President of CoreIR, the company's investor relations firm. Please go ahead, sir.

Thank you, Vaishnavi. And good afternoon, everyone, and thank you for joining us for the Red Cat Holdings Fiscal Third Quarter 2022 Financial Results and Corporate Update Conference Call. Joining us today from Red Cat Holdings are Jeff Thompson, Chief Executive Officer of Red Cat Holdings, and Joseph Hernon, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address REDCAT's expectations for future performance or operational results, particularly. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in REDCAT's most recently filed periodic reports on Form 10-K and Form 10-Q and REDCAT's press release that accompanies this call, particularly the cautionary statements in it. The content of this call contains time-sensitive information that is accurate only as of today, March 17, 2022. Except as required by law, REDCAT disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Jeff Thompson, Chief Executive Officer. Jeff, please go ahead.

Thanks, Scott. Thanks for joining our third quarter 2022 earnings call. First, I would like to thank all the employees at Fat Shark, Rotor Riot, Skypersonic, and Teal Drones. They have all worked hard to get their businesses on a path to scale and grow. And we expect different contributions at different timelines to grow revenues over the next three or four quarters. Again, good work, team. Batshark has new products coming. Batshark will be playing a key role in the infrastructure inspection space. Rotor Riot continues to grow. and build an audience. And their annual event, Rampage, which hopefully I get to this year, is sold out. Next, let's talk about Teal Drones, and I'm sure there's going to be a lot of activity around this from the recent weeks. But let me start with some housekeeping. The number one question we get is supply chain. We have just under 4,000 chipsets to build just under 4,000 Golden Eagles, which would equate to over 50 million in revenue. I want to start by talking about Ukraine demand for drones before we dive into SRR Tranche 2 contract award that we received this week. Since last Thursday, we have been slammed with inbound inquiries from many countries looking for thousands of drones not made by the Chinese to deliver to Ukraine. We have been working through all hours of the night, all weekends, every hour to respond to these proposals. And we hope to have something soon in the near future to report on this as it just started development last week. From various sources, We expect large and continued demand for drones in the teal category, basically that teal-style drone, in Ukraine. And for obvious reasons, they're not looking for Chinese drones. This is already creating a giant demand vacuum, not just in Ukraine but across all segments like police and first responders, because everything from every manufacturer that exists today or is being built is now being sold. So regardless if the drones are sold to Ukraine or sold to the police, we expect this massive demand spike to outstrip the potential supply from all non-Chinese alternatives for at least the next 12 months. We are working as aggressively as possible to scale up production because of this. Let's move on to Teal Drones SRR contract. Teal Drones was awarded a prototype contract for SRR which is Small Range Reconnaissance Tronch 2. This contract award was for $1.5 million. Teal was one of two who received the Tronch 2 contract. Let's get some details on the SRR program. I get a lot of questions about it. Tronch 1 had five contracts awarded for prototypes. Teal was one of those five contracts. This was two years ago. There was one tranche one production award for $100 million. There's been some confusion about that because it just came out in February, even though it was awarded two years ago, mostly because of COVID. Tranche two has two prototype contracts, and we will be competing for the tranche two production contract, very similar to what happened in tranche one. Each tranche has a production contract. So we are pretty happy about this. We're very proud to be one of two chosen. And this is pretty exciting news. This is going to be a long-term relationship with the Army. But with those statistics, I think we have at least a 50-50 chance for the production contract. But anyway, I'm looking forward to your questions, and I'm sure there will be a bunch. There's a lot going on in the world right now. And with that, I'm going to hand it over to Joseph Hernon.