I want to talk about drones in this video and drone companies, specifically, i think it’s kind of an exciting time for drone companies, because the us government is changing uh drone regulations with the drone securities act, and i think that has the potential to reduce the dominant Position that some chinese companies have in in drone technologies and in the drone market sort of creating a bit of a shake up and making room for these um domestic drone companies within north america uh creating new opportunities open up market share. All that kind of thing. It’S also a pretty exciting time for drone technology right now, i think the technology is converging to the point where we’re seeing the beginnings of commercial viability in a lot of different use cases. You know drones are seeing greater lift capability they’re, seeing huge improvements in batteries. You know we see this across the entire ev space, uh we’re, seeing better software control systems in drones and we’re, seeing a hugely increased range in drones right, so all of those technology drivers are coming together and i think we’re you know, probably getting to that. Inflection point where the technology might actually take off and make some serious inroads now into commercial applications, so i’m, probably going to do a series of videos here in a few different drone companies and the first one up that i’d like to take a look at, is One called drone delivery. Canada let’s get into it.
So this is a small canadian company and they trade on the venture exchange here in canada, under the symbol, flt dot v for venture and you can actually buy them over the counter in the u.s market as well and uh they’re the symbol, uh t a k O f take off so they went public back in late 2017 uh. You know they didn’t do so well after the ipo, the price, you know steadily declined since then, but uh. There was a recent spike this year in in this particular company. For two reasons i think one is you know the the disruption that’s happening right now in the u.s market, with respect to the drone securities act, what’s, the upside potential, okay, so bull case first off, i like the fact that these guys are focused on a very Particular use case here in the domestic market within canada, which is logistical support in terms of package delivery to these remote northern communities within canada. You know, canada is a big country, small population, very, very widely spread out. So we have a lot of challenges in terms of logistics to these remote communities, especially in the winter time um you know and as the seasons change over with the complications around ice, roads and flights into these remote communities. So we’re talking emergency medical supplies, we’re talking about routine goods, um we’re, talking about easing the supply chain crunch that a lot of companies have in terms of getting goods shipped up to these communities, and this company in particular, has had some early successes with these remote.
First, nations, communities: these are good stories for the company and it’s, also a key government priority here in canada, right it’s, it’s, something that the government wants to see and i think it’s going to cause the government to work more closely with these guys into the future. So i love the fact they’re tackling a real world problem right now that has some uh firm drivers behind it, both in terms of the commercial sector and government support point number two i’ll make here is that these guys have a turnkey solution for a drone logistics System so they’re, not just a hardware manufacturer, they do it all. They have a fairly sophisticated control suite in terms of the software. You know they actually assist their customers or they will assist their customers. I should say, with regulatory compliance and navigating that whole landscape. In terms of permits and applications, and that kind of thing they offer a completely managed service. You know in terms of depots and battery swap outs and maintenance and upgrades, and all that kind of thing, so they actually support uh and offer all of those ancillary services into their customers when they sell a logistics solution. So all of this is vertical integration. To a degree right, so they can offer this this turnkey solution that a customer can just step into and begin drone operations right from day one, and then they can stick with that customer base, and i think you know recognize recurring revenue, streams from support and upgrades And operational capability uh into the future, the third point i’ll make here is that this looks to be a very healthy market opportunity you know arc here has, i think, done a pretty good job of defining the total addressable market and, as they point out here, we’re At a pretty exciting point on the curve, you know, i think we’re now coming into the years, where we’re going to see that explosive growth in the total addressable market, specifically for drone delivery and drone logistics, uh they’re forecasting, some pretty impressive numbers here, go forward and At least in the early stages, it looks as though this company is beginning to position themselves to capitalize on this.
You know they’re very, very early stage, but they are signing a lot of these letters of intent with these companies. Now you can argue that a letter of intent means nothing right, it’s, it’s kind of meaningless it’s, not an order it’s, nothing like that, but there are a lot of them with this particular company and they’ve gone out and they’ve struck up uh. You know at least the beginnings of deals with key customers and uh key players in this logistics last mile delivery sort of space, so at least there’s an indication that people are taking them very seriously, and i think it puts them in a good position to start To recognize um, some of that uh explosive market growth that should be present in drone delivery, and the last point i’ll make here in the bull case is that these guys seem really really well positioned to navigate the regulatory landscape. So they have a vp on the team here, that is a veteran of transport, canada. He literally wrote the book on drone regulations in canada and participated in a lot of the development of u.s standards as well, both within the military and and at the government level. You know so i think it’s really key, that they have a guy like this to help them navigate that regulatory landscape, because nothing is more important to a company like this than the ability to successfully deal with the regulatory framework that’s in place right now and sort Of crack open those rules with you know, technology improvements and compliance, and all that kind of thing is going to be critical to their business and they seem to have a guy here that can absolutely get it done.
I love their alignment with government policy here. You know, like i say the the government is, is keenly interested in support for these remote communities and they’re going to be very uh cooperative. I think, with a company that is looking to work within the regulatory framework and sort of relax some of those barriers in order to recognize the benefits right, which is support for these remote communities. The government is going to be keenly interested in this, and you know these guys have a key regulatory advantage here in canada right now. Drone operations within north america are limited to line of sight and and really the key uh or the next key milestone is beyond visual line of sight and you’ll see this acronym bvlos and that’s what it means. The ability to operate, a drone that you can’t see. Uh, you know, and so obviously that’s going to be key for autonomous drone operation and even for long range drone operation. The technology is there, but we have to actually get to the point where the regulations are allowing it and that’s way more likely here in canada. We have a lot more use cases where it would make sense to relax the line of sight. Um regulatory restrictions makes it easier to get permits to operate beyond visual line of sight. All that kind of thing is true. I think this company is really well positioned to make use of the opportunity that they have here within canada to sort of develop the technology, push the envelope off the regulatory framework and actually grow the um, the offering into commercial viability.
Let’S talk about risk. Okay, now let’s take a look at the bad news. Uh first off is the financial picture that this company is in. You know, they’re very early stage, they’re burning a tremendous amount of cash uh. If you look at what happened to them last year, they burned. You know between 13 and 15 million dollars at the moment, the balance sheet shows uh about a year’s worth of runway in the bank in terms of their ability to survive. Now, after the 2020 numbers were finalized, they got a little bit of a cash infusion. Uh early in 2021 of an additional 13 million dollars from a convertible securities arrangement. So you know that helped a lot and – and i would say that yeah they probably have a couple years: money in the bank uh. You know at the current burn rate and and will that get them to profitability in say, 2022. You know uh. It looks like that that is likely, but at that rate it leaves no room for growth right, so so where’s the money to fuel, additional growth and additional r d investment, and that kind of thing it’s a very thin uh balance sheet. You know to to fund survivability until you can get to that profitability number. So i think, given that situation, i think debt is more likely for these guys they don’t have any at the moment, but i think it’s highly likely that they’re going to take on some significant amount of debt in order to grow or dilution right would be the Other thing, i think, if the stock price does well, then they’re going to be tempted to dilute, and anybody that buys now is probably going to feel the effect of that in a year’s time.
Two years time you know i i can see the stock price being weakened. I think the second point in the bear case here has to be competition. You know this particular use case for drones. This uh, this fully integrated stack of drone delivery and and package delivery. Obviously, it’s amazon in the us right and google to a lesser extent, so the technology and the regulatory framework there are being driven by these gigantic companies in the us. I think you know these guys are going to want to penetrate the us market, but how on earth do you do that with these dominant players that are are doing the exact same thing in the us now? The only saving grace i think on this is that these companies are pushing drone delivery in fairly narrow use cases um. You know there may be lots of niches left over for these smaller companies uh to actually specialize into so i think, that’s something to keep an eye on for these guys into the future, but still it’s a huge barrier to entry and it’s a huge competitive force. Uh in the us not to mention these guys have competition domestically. This company called dragonfly here in canada, that’s doing a similar sort of thing and there’s other drone companies too rather gag eagle and a bunch of other ones. You know so it’s not like they’re. The only company out there that’s doing this they’re the competitive landscape is quite healthy and, of course, any bear case for a drone company is going to have to address the regulatory headwinds that are out there right now.
You know uh, the us and canada have spent the last several years, building up a body of regulations to safely operate drones, and so navigating that complexity is really difficult and governments are going to be very, very careful about how they open up those regulations over time And that’s the game i think right go forward into the future. Is these companies are going to have to demonstrate safety, effectiveness, increased uh technological capability, and then i think, as the regulatory bodies see, that they’ll start letting some of these uh harsher regulations that are limiting drone operations? They’Ll start to let those fall away, but that’s going to take a long time right at the speed of government, okay, so what’s. The final analysis here you know the bull case is all about the massive market opportunity it’s, truly impressive, and i think we see that you know everything is absolutely on a very obvious road. We’Re going to get there right, like this technology makes sense, solves a problem. It’S incredibly cost effective, so yeah in a few years time, we’re absolutely going to see delivery drones on our doorstep. That seems completely inevitable. The bear case, though, of course, is just based on how long it’s going to take to get there right and how difficult it’s going to be and all of the uncertainty in terms of that competitive landscape is a small company like this going to be able to Survive to the point where the technology does become commercially viable and yeah, you know i think the answer is yes.
I think these guys are well positioned to survive. In fact, i think they’re at the head of the pack. I think the bull case is really really strong, based on where these guys are and what the overall market opportunity is. I think you have to keep a very close eye on them and if you invested them today, you’d have to be prepared for a really volatile ride over the next couple of years uh. That said, i think these guys absolutely will be here in a couple years and i think they’ll be doing very, very well so that’s the story guys, please throw the video a like. It really helps me out.