Welcome to the Red Cat Holdings 2021 Year-End Financial Results and Corporate Update Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jules Abraham with Core IR. Please go ahead.

Thank you, Kate, and good afternoon, everyone. Thank you for joining us for the Red Cat Holdings 2021 year-end 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 Red Cat Holdings' expectations for future performance or operational results. 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 Red Cat's most recently filed periodic reports on Form 10-K and Form 10-Q and the Form 8-K filed with the SEC today. The contents of this call contain time-sensitive information that is accurate only as of today, August 12, 2021, and accepted as required by law, Red Cat disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It's now my pleasure to turn the call over to Jeff Thompson, Chief Executive Officer. Jeff?

Thank you for that introduction. To recap our last year, we hit many material milestones. Starting from almost zero revenue to $5 million is a substantial milestone for a new company and specifically in a new space. I'd like to congratulate everyone at the Red Cat companies for an amazing job. We closed three acquisitions: Fat Shark, Skypersonic, and Rotor Riot. We announced our fourth acquisition, Teal Drone, which is one of the few companies approved to sell to the Department of Defense. We reorganized the company into consumer and enterprise divisions, giving our teams a clear path forward. We integrated Dronebox into Skypersonic's software platform and uplifted to the NASDAQ, seeing our liquidity expand. Although I'm excited and proud of what Red Cat has accomplished over the last four quarters, I'm more excited about the next couple of years. We believe there are two significant catalysts that will grow our opportunity exponentially. Number one, the infrastructure bill. There are 617,000 bridges in the US and 3.5 million miles of storm sewers. Before you take the bridge or sewer pipe, you need to inspect it. These two categories alone, among many others in the infrastructure space, would expand the already $20 billion inspection space. We believe this immediate revenue opportunity fits perfectly with the Skypersonic Dronebox platform. We continue to gain traction with large potential customers in the inspection space and will inform our investors as we secure these customer wins. Number two: recent bipartisan legislation to ban all Chinese drones from federal funds for five years supports public safety and first responders across the US to use Made in USA drones, where we are well positioned. This represents an entire segment that currently goes to Chinese drone manufacturers. These two catalysts will drive the entire drone ecosystem. I would also like to provide an update on our Teal Drones acquisition. We are working to close the transaction as quickly as possible as they are starting to gain sales traction. After we announced the Teal Drone's definitive agreement, they received several orders from the federal government, state and local agencies, defense contractors, and commercial entities. Just yesterday, they have been downselected to continue being evaluated for a potential OTA contract award with the US Army for their SRR or Short-Range Reconnaissance program. We believe the team at Teal Drones has built a premier Made in USA drone platform that the Department of Defense can rely on. We expect Teal Drones to have a great 2022. Drones are the new EVs that fly, and we believe they're going to change the world. With that, I'm going to hand the call over to Joseph Hernon, our Chief Financial Officer.

Thanks, Jeff. I'm going to comment on some of the financial aspects related to the points that Jeff just made. As he noted, we reported an approximately tenfold increase in our revenues during fiscal 2021, increasing from approximately $400,000 to almost $5 million. This represents a tremendous increase in our first year as a truly commercial enterprise. The revenue mix during the recently completed fiscal year was about 75% from Fat Shark and about 25% from Rotor Riot. We expect both of those divisions, subsidiaries, to continue growing in fiscal 2022. But even more exciting, as Jeff noted, we expect Skypersonic to really leverage the opportunity of the new infrastructure bill and contribute to some meaningful revenue, and beyond that, towards the end of this fiscal year after we close Teal, we expect them to also contribute revenues. So, we feel really good about revenue growth in fiscal '22 and beyond that, but it's good to see some strong growth right in the near term. On an operating basis, while we did report a significant net loss of $13 million, it's misleading when we back out some of the big non-cash charges that we had. We had some pretty complex financings during fiscal 2021, whereas we've recently conducted simpler financings, which represents a good contrast of our evolution as a company, both operationally and in how the market has viewed us. We had some complex securities that we issued to raise capital, which resulted in substantial non-cash charges. Collectively, these non-cash charges totaled more than $11 million. Our true cash burn during fiscal 2021 was only approximately $1.6 million. As the Chief Financial Officer, I feel great about that. We had that very modest cash burn, even while integrating three different acquisitions throughout the year, which can be a real challenge for the company. Recently, we had great recognition by the market; we raised $16 million in a straight common stock offering in May and followed that up with an even bigger stock offering in July for $40 million. So, we have a very strong balance sheet right now and the financial resources to execute on the clear growth opportunities we see in front of us. We feel really good from a financial perspective. We just completed our first quarter for fiscal '22, but the rest of the year is looking really great. Lastly, I want to express how gratified Jeff and I have been to see the management teams from each of the acquired companies choose to join in leadership roles at Red Cat. This happened at Rotor Riot, Fat Shark, Skypersonic, and is scheduled to happen at Teal. We are really heartened to see talented entrepreneurs recognize the opportunity of joining the Red Cat team, and we're excited about the next 1 to 5 to 10 years as drones make a significant impact on many commercial opportunities.

Jules, I think we can hand it over to questions now.

Our first question is from Mike Marinac of NECS. Please go ahead.

Hello? How is everyone doing?

Doing great.

You can hear me, okay?

We can hear you.

Okay. My question is for whoever would like to take the lead. I don't really have a specific question. But I've been following along with Red Cat, and as far as I understood, before the acquisitions of Fat Shark, Skypersonic, and Rotor Riot, it was a very small business, maybe with 6 or 8 individuals involved. So, I don't know. It looks like for you guys, whoever would like to field the question, just to discuss what has changed regarding Red Cat and growth and the ability to manage all these subsidiaries. Additionally, would you guys be able to describe your interest in pursuing drone deliveries and other aspects, or if that's too far down the timeline and you are focused on current inspection and military contracts that you have been discussing?

Yes, thanks for the question. As a high-level overview, the original founding team of Red Cat has largely integrated into the Dronebox platform, which has now been integrated alongside the Skypersonic platform. The company currently has approximately 43 employees before the Teal acquisition closes. Regarding the delivery world, we consider that to be a bit too far out for us right now. We prefer to focus on immediate revenue, which we believe the inspection space is offering. Much of this work is not controlled by FAA rules, which are slowing down many drone companies because most inspections are done in confined spaces indoors. Therefore, we focus on that type of revenue. The Teal acquisition is already beginning to bear fruit, with significant revenue opportunities in the next 12 months through various DoD offerings. As Joe mentioned, we are genuinely excited about the next 12 months and beyond.

Am I still on the line?

Yes.

Yes, you are.

Okay. So the residential or commercial delivery aspect, if you were sought after by perhaps a large entity, you would not be in a position to provide technology or components to them at this time?

No, we are absolutely in a position to help drone delivery companies. We would expect that if they wish to remain compliant, they could utilize the Dronebox platform for compliance and insurance. There are also other aspects that we bring to the table, from workflow to recording of the flight. So there's a lot we can do for delivery drone service providers, but we believe that market is still small in the short term.

Okay. Thanks for the explanation.

Yes.

There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks.

Yes, thanks to everyone for joining. It's our first call, and it looks like we had a pretty large attendance, as I see right now. I also want to let everyone know that the Red Cat team will be at the AUVSI Exponential Conference in Atlanta next week, and hopefully, we'll see you there. Thanks, everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.