Welcome to Alpha Wolf Capital. I'm Tim, and I want to personally thank you for stopping by. This channel is designed to help small companies, both public and private, gain exposure with potential consumers, investors, even partners. Take for example today's guest, CEO Jeff Thompson from Red Cat Holdings. Red Cat Holdings, as many of you are already aware, is a US-made, US manufacturer of drones for our military, our war fighters. Recently awarded a contract from the US Army. Hey there folks, please forgive me, I am coming off a bad bout of food poisoning, but felt this was important enough that we had to do this. Red Cat has become the focal point of a short and distort campaign. I've been around long enough to see that when you have a company that's worked really hard to get where they are, one of the first things some people try to do is discredit all of that hard work that they have done. I'm not going to go any further than that, but Jeff is here to clear the air on some of the things that have been stated. This is not to be taken as investment advice. I am not a certified financial planner. This is for education and entertainment purposes only. I encourage everyone to do their own due diligence.
Hey everybody, Tim from Alpha Wolf Capital coming at you with a very anticipated... wanted to do this Red Cat update. And I'm not going to name the company that has some opinions about Red Cat, but I can say that I think those opinions are off base. Anytime that I've come across a short and distort campaign, they have always been written extremely well. And the reason they are written so extremely well is because there's some half truths within there, and that's what gets people. I just want to say this: I read a comment about what Jeff needs to do in response to these misleading statements, and one of the things was not to be doing some podcast with less than 2,000 followers. And you know what, you're absolutely right. Jeff has no obligation whatsoever to do a podcast with a guy that's got less than 2,000 followers. But this is what is different about Jeff: the guy has integrity. Because I have been following Jeff for, I would say, three years now, and I always believed that they were going to be here. And because of that, I do believe that is why Jeff does the podcast with me. It's called loyalty, and that to me is a big attribute. So Jeff, I want to thank you, man, because I realize you do not have to do this with me. You got Wall Street Journal, you got probably anybody you want to talk to. I appreciate you.
So yeah, so let me start with the traditional—let's just try to keep this short, which never happens. I do prefer long form. Almost every firm out there in the world says you don't respond to this type of stuff, you just perform and don't do press releases—you can't get all the messaging across. But I'm just going to point out some discrepancies. People have their right to their opinion in a short report. I'm not going to get in a mudslinging situation here. I'm just going to review some of the facts. People have forgotten some of the facts of what we stated in our town hall, and some of these things that people are using as references—either live by the sword or die by the sword. So I'm just going to start with: there's this document, it's dated March 2024. It's called the President's Budget, also with the nickname of JBook. But it was done by the Biden administration way before there was actually a winner selected for SRR. And the bottom line of this document, which we looked at as soon as it came out, which does have some relevance—but as of yesterday at 12 o'clock with the new administration, it has zero relevance. This document is completely useless because the new administration is going to rewrite the President's Budget and the continuing resolution. The President's Budget probably not going to be out till April. Now it's going to redo this entire document, and then the continuing resolution is not going to be here till May. So no one knows what's going to be in the budget in the continuing resolution for any program—SRR, LRR, Lockheed, F-35s. We all have to fight for this. Even with a program of record for five years, you still have to fight for your money every year.
So for a second here, let's actually pretend this document is still valid. The numbers in it—there isn't a single number that's been correct so far in the past. So the first thing I'll point out is if you look at 2023 and 2024, it has money for systems for Skydio. They won the production contract October 28, 2021. Then they got their production contract first week of February, I think February 7th, 2022. We were down-selected for production on October 28th, same day this year. But what they were awarded was not those two numbers combined—207 and the 459 is 666, kind of a funny number for them—but they got awarded 1,803 systems in their production contract. So that number was completely wrong from this, I guess, Bible that people are using as their investment thesis. And so that number is absolutely 100% wrong.
October of last year they announced—so let me actually back up a second. So there's a line item in there, $69 million, that's been very prevalent through a lot of different reports. The NDAA, which also doesn't matter—that's just Santa's wish list—appropriations is the only thing that matters. That is the only thing that matters. Everything else is kind of not even worth your time. So if you look at the MRR number that they say in here, because they break up the 69 with 21 for SRR, 25 for what they call company level, which is another word for MRR, and then they have 25 million for COTS, which is commercial off-the-shelf training—we're actually, if they put that out, we will bid for it, because no one knows how to train our products better than we do. So on this old document, if we're saying this document's real, that would be 21 plus maybe 23 for 2025 SRR, the last year of prototyping for the SRR program. So MRR is wrong, the Skydio numbers are wrong, and then the numbers they have for drones, which is $66,000 or $65,000—so the only number that's been consistent and hasn't changed is the amount of systems that they want to field, which is 5,880 systems. Actually, that's also a wrong number, because it used to be 6,963 or something like that, but they got the thousand systems so now it's down to 5,880. If you say 5,880 and then the price is $65,000, that's a completely different number than what we have been mentioning.
If once we negotiate SRR contracts, then no one knows what's going to be in these budgets. I don't know, program office doesn't know until that continuing resolution is signed. Nobody on the planet knows. So if you're saying that these numbers are solid, we've already proven that all of these numbers on this document have been incorrect, and there's going to be a new one soon. So that's kind of an important thing I just wanted to point out, because defense contracting is very tricky to figure out where the budgeting is, and every single budget is fluid. Once budgets actually are done, then they start horse trading and they move stuff around. So we have not changed our guidance whatsoever since this report. The minimum is still 80 million for 2025, and the top is 120. Which brings us to the next subject. This is the only subject that a lot of our larger shareholders that I met with the last few days were like, 'Hey, what's going on? You can't do thousands of drones, you don't have a factory.' I'm like, what? We built the factory in 2021 going into 2022. We don't need to put any capex into the factory. At Teal, we've been building drones there for years now, mostly Teal drones until recently. But if you look at our guidance, so everyone's talking about thousands of drones, and the bottom line is we don't need to do thousands of drones a month.
Even—we can do a thousand if we had to. If we want to meet our minimum guidance of 80 million for 2025, we have to do 123 drones a month. I mean, it's silly. To meet the top end of our guidance, we need to do 213 drones a month. These are not hard numbers. These are numbers we've already done with the Teal 2. So it gets just ridiculous that we can't build these drones. We did that no problem. But if you want to look at the numbers: if we do 300 drones a month, we do 133 million. If we do 400 drones a month, 178 million. If we do 500 drones a month, it's 223 million. So we don't need to do a thousand drones to get over 200 million in revenue. If we get to a thousand drones, it's almost a half a billion dollar production—and that's just for the Black Widow, no other product.
So our factory is fine. Our factory is in great shape. Everything is going really well there. So that is the only other real question I got from real large investors, large funds that I met with this week. And the final thing is, what's great is when you have a pretty large biz dev team right now and they're all ex-operators—when you tell them that everyone's saying that they're fraud, and their territory for 10 years was NATO, and you tell them that everyone's not believing that you're going to get a contract, they don't like that. So the bottom line is, as we've mentioned, NATO—we've been working on some of these large contracts for years, just like SRR. No one liked that they didn't give us the notification in September. I didn't like it. And it ended up happening later. They did tell us in September they were waiting to see if we won SRR, which we got to notify them in late November. Then the holidays hit, people just got back to work last week. We have not changed our tune whatsoever on NATO contracts. So those are the three buckets that people that know the company had questions on, and that's it. Everything else they read through and said that's—I'm not going to go into the mud with all that stuff.
I appreciate that. I'm not looking for compliments. We're building a business. These types of attacks—they affect the shareholders, they affect our employees. So I'm going to protect and fight for our shareholders, the retail side too. So that's why people say don't go on these long-form things on here and don't go on TikTok, but a single-page press release can't get any of this across with any meanings that are truly important. So now that we've got a lot of people that are actually using this as a buying opportunity, all we're going to do is put our heads down, continue to operate the company. Nothing's changed from last week, other than I got some great meetings. I don't know if it's because of this, I've had meetings with three of the top 10 banks. One of them, I've met with three of their analysts. Actually just got invited to the TD Cohen defense show on February 12th in Washington DC. We're moving up in banks. Talked to Deutsche Bank on Friday. We're on the radar, which is good in some aspects, but in this type of stuff it's bad. So the bottom line is we're just going to continue to execute, go grab these contracts, get into production, do all the things that we have to do to meet our bottom line guidance of 80 or our top line of 120. That's it, game over. I don't want to get into any more of this mud.
The only thing I do want to talk about, because we don't talk about it a lot, and this actually came up—I was just talking to a bunch of people on a teach-in that had questions at a large bank, and their question was they thought the stock was going down because of the fire near Santa Monica and that people were worried about our factory. I was worried. We're moving stuff—we got two factories, we got to move stuff out of the old one into the new. We did have a two-day warning on the old factory, and it wasn't really—it's not really a factory, it's kind of more like a research location. The new place will be more like a factory, it'll look like Teal in six months. But we're safe, we're sound, everything's good. The Edge 130 is starting to get a lot of traction. You'll see a lot of milestone releases from them—getting some good sales here, good sales there. All we need to do is get to 500 systems for them for our guidance of 25 million. Their 25 million of our total guidance, which is—if we subtract the first two months of the year and say we don't make any drones, then it's only 50 drones for the following 10 months, a month at that factory. So these numbers are not daunting, and we hope are only going to go up. So I just wanted to lay out some of the facts on how these processes go. And the bottom line is nobody really knows what's going to happen until the continuing resolution gets finally printed. The good news is we've got a brand new administration that's been talking about only switching to drone warfare. Hegseth is a war fighter. They mentioned war fighter 15 times when he went in front for his cabinet nomination. He wants to take care of the war fighter. 5,880 systems for the US Army is less than 0.2% of soldiers getting a drone. So that number is antiquated from a long time ago, and we're hoping to push on that going forward. But that's all I got. Hopefully you can go back to bed. I know you didn't feel good yesterday. You had some bad food.
