COVID-19 creates an opportunity for drone technology; Lens on MOB and DRO

In an era where artificial intelligence, machine learning, and cloud computing are gaining prominence, drone tech is proving to be a vital part of technology to combat the COVID-19 pandemic. While the world is grappling with the coronavirus crisis, companies engaged in drone technology are playing their role in coming up with innovative ideas to help the governments.

The Australian Department of Defence, the University of South Australia, Vital Intelligence Inc. (health data and deep learning Company) and Draganfly (drone Company) started an initiative, which intends to establish a global technology group to fight against pandemics such as coronavirus.

GOOD READ: Next Hot Segment on ASX- Drone Technology

Three primary benefits of using drones during the crisis induced by COVID-19 pandemic are mentioned below:

1. Surveillance: While several governments have directed their citizens to stay at home, drones are beneficial in keeping a check on the movement of people. By performing surveillance via drones, the likelihood of citizens adhering to the norms increases.
2. Broadcast: Drones are playing a vital role in delivering relevant information and messages about lockdown in rural areas. For communication purpose, the manufactured drones are equipped with loudspeakers. China and several other European countries have taken this initiative.
3. Disinfectant Spraying: Several infected countries around the globe are using agriculture drones as it can disinfect large public places. This initiative can stop the further spread of coronavirus. Also, it is efficient in covering more land in relatively less time as compared to traditional methods.

Let us look at two ASX-listed drone tech players and their recent activities during COVID-19.

Mobilicom Limited (ASX:MOB)

Melbourne headquartered infotech Company, Mobilicom Limited develops, designs, and delivers communication solutions without the need for any infrastructure.

MOB has two business units: SkyHopper and Mobilicom. Former provides solutions for mission-critical communication in Enterprise and the Government sector. Latter targets to Commercial Drone & Robotics sector and provides end-to-end equipment and solution.

Quarterly Activities: MOB announced the activities, financials, and COVID-19 business update for first quarter FY 2020 (period ended 31 March 2020). Key highlights are mentioned below:

• Financials: On 28 April 2020, Mobilicom said that it had more than $2.1 million of backlog of orders.
  • The Company will receive nearly $260,000 in receipts in the second quarter from government grants.
  • MOB had $1.5 million of cash receipts from customers, an increase of 169 per cent from Q1 FY 2019. Also, the Company maintained $4.1 million of cash balance.
• Delivery to Australian Government: The Company received its first order from an Australian developer of robotics and drones for communication and controller products. These products are to be integrated into robotics and drones of the Australian Company. Ultimately, the Australian government will use these robotics and drones in Defense and Homeland Security.
• Update on Elbit Systems Contract: As announced by the Company on 18 December 2019, Elbit Systems has chosen MOB for a $2.1 million contract. As per the agreement, MOB is a vendor to Elbit for controllers for tactical drones. As an update, MOB notified that it had met the milestones as per its agreement with Elbit. Further, MOB also stated that during Q3 FY 2020, it expects to deliver the first commercial batch of controllers.
• New and existing business wins: While MOB is getting repeat orders from its current customers, the Company is also receiving new customers.

SkyHopper received orders from Denmark, Israel, France, and the UK; with one existing and three new customers.

• On the receipts of $250,000 in Q1 FY 2020, the Company provided a commercial drone upgrade solution.
• COVID-19 Business Update: Majority of the Company’s workforce is released or on unpaid leave. The remaining staff has agreed to a 50 per cent cut in salary for one month. Started from 19 April 2020 until the situation wrought by coronavirus gets improve, the Company has decided to continue its operations with limited staff. Also, the founders are taking 35 per cent salary reduction, and employees agreed to a salary cut of 10 - 20 per cent.

Stock performance: On 06 May 2020, MOB shares were trading at $0.05 (at 02:06 PM AEST), in line with the previous close. Mobilicom’s market cap is $12.9 million, and the Company has ~257.94 million outstanding shares.

DroneShield Limited (ASX:DRO)

DRO has developed distinctive solutions of drone security to safeguard organisations, people, and crucial infrastructure from interference from drones. DroneShield is based out in Australia (Sydney), UK (London), and USA (Washington DC and Virginia).

R&D Grant Loan Facility: Recently, the Company entered into an agreement with R&D Capital Partners Pty Ltd. which will provide DRO with the ability to get R&D Capital funds comparable to most of the R&D Tax Incentive expected by the Company from the R&D Grant by the end of the year.

• Concerning the Company’s research and development activities in 2019, DRO is likely to receive nearly $880,000 in May 2020. Similarly, for 2020 research and development activities, DroneShield expects to get the R&D Grant in the first half of 2021.
• The Company mentioned that under the agreement, it had elected to draw down $600000.
• The total expected proceeds of $1,480,000 from both the sources mentioned above is likely to be used for sales and marketing, R&D, and general working capital.

Quarterly Update: DRO provided an update on its activities during the three-month period ended 31 March 2020. DroneShield’s customer cash receipts reduced to $424,000. The snippet of other updates is provided below:

• Australian Department of Defence: DRO is actively engaged with Australian Government agencies and Department of Defence (DoD). Recently, the Company had received $300,000 from DoD during the quarter.
  • Four main reasons that DRO continues to secure contracts of Australian DoD are:
    • Having 100 per cent Australian IP.
    • DRO is the only indigenous Australian manufacturer of the counter drone.
    • Having a local manufacturing operation in Western Sydney.
    • The effort of the Australian government to expand its domestic defence industry.
  • DroneShield is a member of the Advanced Manufacturing Growth Centre (Australian industry body) which promotes Australian manufacturers.
  • DRO is maintaining its joint venture for R&D with the University of Technology, Sydney.
• Recently, the New Zealand Government agency had ordered for RfPatrol^TM from DroneShield.
• The Company sent a substantial batch of equipment to the Ministry of Defence of the Middle East. Once the customer receives the shipment, the Company expects a payment of around $2.9 million.
• COVID-19 effect:
  • Due to the coronavirus outbreak, the Company is facing challenges such as delays in installation approvals and payments, logistics for a short while, delays of customer travel, and payments for products shipped.
  • DRO also mentioned that no order for its products is cancelled in the prevailing crisis, and a total of $4.2 million payment is expected from recently delivered products.

Stock Performance: On 06 May 2020, DRO shares were trading at $ 0.11 (at 02:06 PM AEST), a decline of 4.545 per cent compared to the previous close. The stock has generated a positive 1-month return of 10 per cent. DroneShield’s market cap is $27.77 million, and the Company has around 252.46 million outstanding shares.