Unidentified Analyst: Okay. So, you anticipate being able to knock out the backlog quickly. Is that correct?
Jeff Thompson: Well, the good news is we have been doing that with these huge increases in revenue every quarter, and we continue to sell more. So we kind of have the best of both worlds. But we will continue to increase our production to not get the backlog too high and to meet the time frames that our customers want. So, if our customers need 90 days, we’re going to make sure they get it in 90 days. They need it in 120, we’ll make sure they get at 120, if they need it in 60, we’ll increase production and get it in 60. So, we have to adjust to our customers.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Thompson, for pre-submitted questions and closing remarks.
Jeff Thompson: Just a bit more coming in. Leah, do you have them?
Leah Lunger: Listen, would you like me to read the first one?
Operator: Yes. The first question is, when do you think we could get to profitability, what revenue or what margin or a combination?
Jeff Thompson: Okay. Great. Well, Leah, you’re going to keep being in the hot seat today. I’ll hand that one to you.
Leah Lunger: That’s great. Yes. So based on our current quarterly operating expenses of about $5.5 million, if we reach 50% gross margins as we hope to, then we we’d expect to reach profitability at approximately $11 million in quarterly revenue.
Operator: Next is you’ve mentioned several partnerships. Do you expect to continue to look at acquisitions?
Jeff Thompson: Yes, that’s another good question, and we get asked that quite a bit. As you see, we’ve done a lot of partnerships in the past, you’ve seen us do partnerships and then you do acquisitions. But right now, we are fine with partnering with a lot of our software friends. We would definitely not do acquisitions down here, where it would be so dilutive, but we are continuing to build relationships with all of our partners. And we think maybe next year, we start looking at acquisitions again. But right now, our revenue is growing so rapidly and we’re right on the cusp of getting some basically game-changing large contracts. So, we’re going to stay focused on making the Teal 2 great and then when we finalized the SRR, the next-generation bird, which will be the new SRR bird. So, we’re going to hold tight for a little bit.
Operator: The final question is, now that you’ve closed the sale to Unusual Machines, does this mean you will not be going back to the market?
Jeff Thompson: No, that’s a great question. That was a new one. So yes, actually, I’ll let Leah review some of that, and then I’ll give some final comments after that.
Leah Lunger: Yes, for sure. So, the sale to Unusual Machines as I mentioned previously, we received a $1 million cash payment after the closing of the sale as well as a $2 million note payable to Red Cat. The note is interest-bearing at 8% and the interest is payable monthly in cash with the principal payment due in full on the maturity date after 2.5 years. However, if you might complete an offering of over $5 million and the note becomes payable in full, which would be just another good opportunity for funding for us. And we are working on finalizing the closing working capital usually with these types of deals that we have, we expect to complete that within six to nine months of the closing date and the closing working capital, which we currently expect to be around $3 million will be either payable in cash or added to the note, and that is that determination is up to Red Cat. Jeff, do you want to comment on the stock that we own in UMAC?
Jeff Thompson: Yes. We also own 4.25 million shares. We are probably going to do some sort of a dividend. We haven’t made that decision yet as a Board to existing Red Cat shareholders. But any other remaining shares that we keep, we would never sell and hurt UMAC stock. But if they had a block buyer or things of that nature, there’s ways for us to continue to raise non-dilutive money. So, as you can see with the revenue ramp, and we’ve started to proven that we beat guidance three times in a row now, with our revenue ramp and our costs continuing to come down, we believe that we’re not going back to the market at all. And to be very frank, if we get an SRR award or Replicator award, all of those are — give you a chunk of money upfront. So, our thought process and our modeling is, we are out of the market. So, we’re pretty excited about that.
