Red Cat Holdings, Inc. (NASDAQ:RCAT) announced on Nov 19 that it has been awarded a contract through its subsidiary, Teal Drones, by the U.S. Army to provide its next-generation reconnaissance drone, known as the Black Widow, for the Short Range Reconnaissance (SRR) Program of Record. The company said that the selection of their small unmanned aircraft system (sUAS) was made after multiple tests and evaluation processes completed by the Army Project Management Office for Uncrewed Aircraft Systems, Army Maneuver Battle Lab, Army Test and Evaluation Command, and Army Operational Test Center. The contract is for 5,880 systems over a 5-year period.
Red Cat is a drone technology company that integrates robotic hardware and software for military, government, and commercial operations. It operates through its two subsidiaries, Teal Drones and FlightWave Aerospace. The company currently offers a family of drones that are used in surveillance and reconnaissance, in addition to precision strike systems. Fang, their new strike drone, is the industry's first line of NDAA-compliant FPV drones optimized for military operations with precision strike capabilities.
Red Cat’s share price was $4.74 at the close of the day the company announced their awarded contract. This makes it a penny stock by the definition. However, the shares reached $9 at the close of the last trading session. If it maintains its price above $5, then it’s only fair to say that Red Cat is not a penny stock company anymore.
The war in Ukraine made changes to the idea of warfare. The importance of drones is firmly established at this point. According to Defense One, the US Army acquisition chief Doug Bush said that the Army wants to buy drones in the “kind of quantities” it buys munitions. President Volodymyr Zelenskiy has said that Ukraine has already contracted to produce 1.5 million drones this year and that Ukraine is now capable of producing 4 million drones annually.
Red Cat was founded back in 2016. It originally provided distributed data storage and analytics for drones using blockchain-based technology. Besides individuals, the company’s SaaS was targeted at regulators and insurance companies as a form of compliance monitoring solution. In May of 2019, the company went public through a reverse merger with an OTC company called TimeFireVR, Inc., and started operating under TimeFireVR’s name ,and traded under its ticker TFVR. This pivotal moment was followed by a rebranding in August 2019, when the company officially changed back to its original name, Red Cat Holdings, Inc. Subsequently, a couple of weeks later, Red Cat began trading under the new symbol RCAT. In April of 2021, after a $16 million public offering, Red Cat uplisted from OTC and started trading on Nasdaq.
Red Cat started a series of acquisitions in January of 2020 when it acquired Rotor Riot, an e-commerce store specializing in drones and drone accessories. This was followed by the acquisition of Fat Shark in November 2020, the leading provider of headsets and goggles for professional drone racers and pilots, which had an estimated market share of 85% at the time. Red Cat continued its growth trajectory by acquiring Skypersonic in May 2021, a company specializing in remote inspection by utilizing drones fitted into a cage to avoid damage to the drone and the inspected areas. This acquisition was part of a broader strategy that led to the restructuring of Red Cat into two segments: Enterprise and Consumer, as the company announced in June 2021.
In September 2021, Red Cat expanded its enterprise segment by acquiring Teal Drones for $14 million in an all-stock deal. Teal itself was founded in 2015 and had already established itself as a developer and manufacturer of drones that are aimed at the defense industry. Red Cat also appointed George Matus, the founder and CEO of Teal Drones, as Red Cat’s chief technology officer later in November 2023.
In November 2022, Red Cat announced that it had entered a deal with Unusual Machines (NASDAQ:UMAC) to sell its consumer division for $18 million in a mix of cash and securities of Unusual Machines. Red Cat’s chief operating officer, Mike Evans, was to depart and become Unusual Machines’ CEO. The announcement also mentioned that the closing of this deal was subject to the completion of Unusual Machines’ IPO and listing on Nasdaq. Unusual Machines closed the IPO and acquired the consumer division simultaneously in February of 2024 for $20 million after the deal was renegotiated.
Red Cat announced the close of its acquisition of FlightWave Aerospace System in September of 2024. This acquisition added FlightWave’s Edge 130, which the company described in the announcement as “a military-grade tricopter for long-range mapping, inspection, surveillance, and reconnaissance needs”, to Red Cat’s family of drones. The Edge 130 is approved by the US Department of Defense as a “Blue UAS”, and that basically means it’s vetted for use in military and government operations.