Replies to post #16484 on Red Cat Holdings Inc (RCAT)

[investor2004]

Yes, been on vacation and tried to disconnect. Just hard to watch this one when felt like we were so close to it taking off before it crashed down again. Oh well, par for the course. We are used to it here of course.

[nickmerck]

It's quite concerning that you would call this ER good. 4M revenue is not good for two companies that you almost paid 25M for, and that can't even get a gross margin of 20%. Loss 2x higher than revenues. Declining market shares. Zero moat. Fatshark also even acknowledged declining market share and surrendered technological superiority. Just like I predicted many months ago.

What I missed, but found interesting in this ER: the "Fatshark" that RedCat bought is just a shell company located in the Caymans. All the manufacturing is done by the wife, using her companies. Anyone know how to spell "transfer pricing"? Due to the reported gross margin (20%), and actual gross margin being somewhere near 100% on such products, you do the maths where the money is flowing.

Stock compensations almost equalized revenue. Which is strange, considering this company is supposed to have a bright future. So either the owners are bailing, or they're diluting shares. Neither explanation is positive for the longs.

The only positive outlook is that DroneBox is pretty much confirmed to never be a product. They have shifted their strategy from being a services company (last ER) to being a manufacturer (this ER). The marketing genius it must require to do a complete 180 on your business model and somehow not have one of the strategies declared a total failure? In either case, it's good news they at least recognize that DroneBox has no regulatory backing and very little chance of becoming a viable business.

Little tidbit for the perma-bulls here: Teal and Rotor Riot already once had a cooperation. The Teal One Race drone was manufactured by Teal, but was the brainchild of Kapper. No doubt that Rotor Riot collected a fine commission fee, as hinted at by some of their previous pilots in interviews. The product was a giant fail, if I had to guess they never sold more than double digit units. Why Matus would allow to get fooled twice shows the amount of options left on his plate.

Hoping for another pump so I can short this turd again. I feel bad for closing my position at $2.60 ...