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Unusual Machines Issues Letter to Shareholders

ORLANDO, Fla., May 15, 2024 (GLOBE NEWSWIRE) —  Unusual Machines, Inc. (NYSE American: UMAC) (“Unusual Machines” or the “Company”), a drone and drone components manufacturer, today announced it filed its 10-Q with the U.S. Securities and Exchange Commission for the first quarter of 2024 and provided the following letter to its shareholders from CEO Allan Evans.

Dear Shareholders,

We are excited to present our first shareholder letter following our recent IPO. This marks a milestone in our journey and we are incredibly grateful for your support and confidence in Unusual Machines. The IPO, financial results, and recent press releases have led to a significant number of questions from shareholders.  We would like to take this opportunity to provide more context and hopefully a deeper of our operations and what these represent for Unusual Machines’ future.

Recent IPO and Acquisitions

In our first quarter, we successfully completed our initial public offering (IPO) on the NYSE American, raising gross proceeds of $5 million. Simultaneously, we closed the acquisitions of Rotor Riot and Fat Shark from Red Cat Holdings. The costs associated with our public listing and these strategic acquisitions are detailed in our 10-Q filing. These one-time expenses impact our short-term financials and can make it challenging to discern the basic operations of the company from the financial statements alone.

Cash Position

We view managing our cash position and cash flow as the most important aspect of our business. During the first quarter, we incurred one-time expenses as we finalized our IPO and had costs related to the integration of Fat Shark and Rotor Riot. We will continue to streamline and closely manage our cash spend. We ended the quarter with approximately $3.2 million in cash, which we believe provides sufficient operating capacity to achieve our growth objectives as discussed below.

Operational Overview

Rotor Riot and Fat Shark form the underpinning of Unusual Machines operations. Historically, Rotor Riot has generated revenue through the sale of first-person view (FPV) drones and drone parts via its e-commerce platform. Fat Shark is the basis of our B2B sales, supplying products through the Rotor Riot store and to other retailers. For the 45 days post-acquisition in the first quarter, we generated approximately $619,000 in combined sales. While it is a limited operating period, we achieved over 30% gross margins combined, which we aim to sustain and improve as we scale.

Importantly, the Rotor Riot e-commerce site has consistently grown 20-30% over the past few years. We intend to continue leveraging this platform as our primary consumer sales channel. Meanwhile, Fat Shark will be integrated with our other premium branded products like Hype Train Motors as we expand our customized B2B sales offerings.

Expanding into the Defense Sector

Historically, our operations have focused on producing and selling drone parts to enthusiasts through our e-commerce channel. Recognizing the growing importance of drones in combat, we have initiated a strategic initiative to begin developing NDAA-compliant drone components for the defense sector. The critical role drones have played in recent conflicts, such as in Ukraine and Israel, has heightened the U.S. Department of Defense’s demand for cost-effective drones and a reliable non-Chinese supply chain. We are confident that our expertise and partnerships Initiative will position us to start to win business and secure necessary Blue UAS certifications that will enable us to rapidly enter this emerging market.

Corporate Changes

Since our IPO, we have implemented several strategic corporate changes. We relocated our headquarters to Orlando to better align with our operations and reincorporated in Nevada to reduce costs. Additionally, we appointed a new auditor and worked with them to finalize our first quarter 10-Q filing with the SEC. These steps underscore our commitment to financial transparency and integrity as we grow.

Looking Ahead

Our priorities moving forward are clear: 

We are enthusiastic about the future of Unusual Machines. The acquisitions and our strategic shift towards the defense market present significant opportunities along with some uncertainty. Your support is invaluable, and we thank you for your trust and confidence in our vision.  We are a small company and appreciate your feedback. Please reach out with any questions or comments.

Sincerely,
Allan Evans
CEO of Unusual Machines

First Quarter Financial Results

For further information concerning our financial results, see the tables attached to this shareholders’ letter.

About Unusual Machines

Unusual Machines manufactures and sells drone components and drones across a diversified brand portfolio, which includes Fat Shark, the leader in FPV (first-person view) ultra-low latency video goggles for drone pilots. The Company also retails small, acrobatic FPV drones and equipment directly to consumers through the curated Rotor Riot e-commerce store. With a changing regulatory environment, Unusual Machines seeks to be a dominant Tier-1 parts supplier to the fast-growing multi-billion-dollar US drone industry and the global defense business. According to Fact.MR, the global drone accessories market is currently valued at $17.5 billion and is set to top $115 billion by 2032. 

For more information visit Unusual Machines at https://www.unusualmachines.com/.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements include: our investment in an expansion of Rotor Riot’s operations to drive top-line growth and improved margins, our ability to get Blue UAS certification, our ability to sell our components to the Department of Defense and our ability to secure non-dilutive financing. The results expected by some or all of these forward-looking statements may not occur. Factors that affect our ability to achieve these results include our ability to select, negotiate and close any acquisition targets, the sufficiency of our cash resources and future stock price, our ability to enhance our existing products, develop new products and create new services for our customers and future customers, and the risk factors contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 and on our investor call scheduled for May 15, 2024, a transcript of which is available on our website. . Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. Any forward-looking statement made by us herein speaks only as of the date on which it is made. We undertake no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

SOURCE: Unusual Machines, Inc.

 Unusual Machines, Inc.
Consolidated Condensed Balance Sheets
           
    March 31,
2024
    December 31, 2023  
    (Unaudited)        
ASSETS                
Current assets:                
Cash and cash equivalents   $ 3,208,606     $ 894,773  
Accounts receivable     1,933        
Inventory     1,641,839        
Prepaid inventory     998,254        
Deferred offering costs           512,758  
Other current assets     278,258       120,631  
Total current assets     6,128,890       1,528,162  
                 
Non-current assets:                
Property and equipment, net     1,083       1,254  
Operating lease right-of-use assets     373,131        
Goodwill and intangible assets     17,666,162        
Other non-current assets     59,426        
Total non-current assets     18,099,802       1,254  
                 
Total assets   $ 24,228,692     $ 1,529,416  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable and accrued expenses   $ 455,764     $ 114,497  
Operating lease liabilities     59,946        
Deferred revenue     176,268        
Total current liabilities     691,978       114,497  
                 
Long-term liabilities                
Convertible note     2,000,000        
Operating lease liabilities – long term     313,896        
                 
Total liabilities     3,005,875       114,497  
                 
Commitments and contingencies (See note 12)                
                 
Stockholders’ equity:                
Series B preferred stock – $0.01 par value, 10,000,000 authorized and 70 and 190 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively     1       2  
Common stock – $0.01 par value, 500,000,000 authorized and 9,333,341 and 3,217,255 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively     93,334       32,173  
Additional paid in capital     25,568,529       4,715,790  
Accumulated deficit     (4,439,047 )     (3,333,046 )
Total stockholders’ equity     21,222,817       1,414,919  
                 
Total liabilities and stockholders’ equity   $ 24,228,692     $ 1,529,416  
     Unusual Machines, Inc.
Consolidated Condensed Statement of Operations
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
 
 
    Three Months Ended March 31,  
    2024     2023  
Sales   $ 618,915     $  
                 
Cost of goods sold     414,748        
                 
Gross profit     204,167        
                 
Operating expenses:                
Operations     112,322        
Research and development     16,796        
Selling and marketing     157,058        
General and administrative     998,874       588,516  
Depreciation and amortization     5,470       381  
Total operating expenses     1,290,519       588,897  
                 
Loss from operations     (1,086,352 )     (588,897 )
                 
Other income and (expense):                
Interest expense     (19,649 )      
Total other income and (expense)     (19,649 )      
                 
Net loss before income tax     (1,106,001 )     (588,897 )
                 
Income tax benefit (expense)            
                 
Net loss   $ (1,106,001 )   $ (588,897 )
                 
Net loss per share attributable to common stockholders                
Basic and diluted   $ (0.18 )   $ (0.17 )
                 
Weighted average common shares outstanding                
Basic and diluted     6,065,857       3,412,255  

 


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