Unusual Machines Issues Letter to Shareholders

CEO Allan Evans shares Q4 2024 highlights and provides insight into the Company's future plans

ORLANDO, FLORIDA / ACCESS Newswire / March 27, 2025 / Unusual Machines, Inc. (NYSE American:UMAC) ("Unusual Machines" or the "Company"), a drone and drone components manufacturer, today announced it filed its Form 10-K with the U.S. Securities and Exchange Commission (the "SEC") for the fiscal year ended December 31, 2024 and provided the following letter to its shareholders from CEO Allan Evans.

Dear Shareholders,

This shareholder letter follows the completion of our fiscal year 2024. This is our first year being public. It has been an excellent fourth quarter and an incredible year. We continue to see great interest in the company and receive questions from shareholders. We would like to take this opportunity to provide context and deeper insights into our operations and what these represent for Unusual Machines' future.

Operations Update

Unusual Machines revenue for the fourth quarter revenue was over $2.0 million which represents a sequentially quarter over quarter increase of approximately 31%. This is our best revenue quarter of all time (again) and was done while improving gross margins slightly to 28%. With the launch of our Blue Framework products, approximately 15% of our Q4 revenue was from enterprise sales. Our total revenue of $5.65M for FY2024 exceeded our target of $5M for 2024 by 13%. This growth was achieved without customer concentration as no single customer represented more than 5% of our total revenue for 2024.

GAAP Loss

The elephant in the room is the large net loss Unusual Machines realized in fiscal year 2024. Due to GAAP accounting practices, we realized a net loss of $31.98M. This is almost entirely due to accounting requirements that have no cash flow impact on the operations or health of the business. Two particularly significant examples are a $10M non-cash loss on goodwill as an adjustment required from the acquisitions of Rotor Riot and Fat Shark and a $16M non-cash expense from derivates related to the debt conversion. Our practical operating loss for 2024 is approximately $4.6M (which also excludes stock compensation expense). Please reference the reconciliation between GAAP net loss and our practical operating loss in Table 2. As the large non-cash losses are due to derivate accounting incurred from our debt conversion and clean-up of the capitalization table we don't expect similar losses in the future.

Cash Position

We view managing our cash position and cash flow as the most important aspects of our business. We started the fourth quarter with $1.69M and finished the quarter with $3.76M. The breakdown of the cash position change over the quarter (Table 1) provides greater detail on our expenses. We kept normal operations cash burn below $0.9M even though they did come in slightly above expectations. This was due to additional costs associated with our PIPE financing. This cash position has been bolstered by the conversion of $2.4M in warrants in Q1 of 2025 and we plan to continue limiting our cash burn as part of our long-term focus on cash flow.

Cap Table and Corporate Health

2024 was a very dynamic year for the cap table and financial health of Unusual Machines. Right after the IPO, Unusual Machines had 11,207,717 fully diluted shares, roughly $3M in cash, and $4M in debt. 47% of those shares were owned by Red Cat Holdings and the Company. There were several different transactions throughout 2024 as management worked to improve the long-term viability of the Company. At the end of 2024, there were 16,999,597 fully diluted shares, roughly $5.78M in cash (which includes the cash at year end and the Feb 2025 converted warrants), and $0 in debt. There is not any one entity that owns 10% or more of Unusual Machines Stock. Given the cash position, limited cash burn, improving revenues and margins, and diversified shareholder base; we believe the Company is in a very strong position going into 2025.

Odds and Ends

There are substantial market dynamics with the conflicts in Europe and Israel, tariffs, and a variety of other legislative impacts from the current administration and the work of DOGE. In general, we do not expect these different factors to have a negative impact on our business. One major change has actually created a larger marketplace for our enterprise segment. In January, JIANGXI XINTUO ENTERPRISE CO LTD was added to the Specially Designated Nationals and Blocked Persons (SDN) List. This company owns and operates T-Motor, a high-quality Chinese motor company that also sells other drone components in our core categories. For many years T-Motor has provided drone motors to drone manufacturers across the globe. Their addition to the SDN list means that sanctions have been placed against them; All US persons and companies are not permitted to conduct any further business with T-Motor. These sanctions have created a major market opportunity for us.

Unusual Machines is in very healthy position, so we decided to work with the NYSE to enable options trading on our stock. This went into effect on Monday March 24, 2025. We are now eligible to file a form S-3 Registration Statement, and we expect to do that in the coming weeks. The anticipated Aloft transaction is still in process. Finally, the management team has put in place 10b5-1 programs to occasionally sell stock to pay for taxes associated with equity compensation.

Looking Ahead

Our priorities moving forward are clear:

We are enthusiastic about the future of Unusual Machines. The company is in a great position to grow enterprise sales, and the legislative environment is favorable for growth through 2025. We thank you for your trust and continued confidence in our vision. We are still a small company and appreciate shareholder feedback. Please reach out with any questions or comments.

Sincerely,

Allan Evans
CEO of Unusual Machines

Fourth 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 component 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 expectation that we will not incur similar losses as we incurred in Q4 2024 in the future, our ability to continue to limit our cash burn and improve our margins, cash flow and revenues, our expectation that tariffs will not have a significant impact on our business, our ability to close the Aloft transaction, our ability to expand Rotor Riot's operations, driving both top-line growth and improved margins while introducing U.S. made components at competitive prices; our ability to take advantage of tariffs to improve our margins, our ability get more products listed on the Blue UAS Framework of the U.S. Department of Defense, more products to get Blue Framework certified, our anticipation that our B2B sales will represent a higher percentage of our revenue going forward, our ability to quickly scale a motor factory in Orlando, and our ability to capitalize enterprise sales and the legislative environment to drive substantial growth through 2025. 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 the impact of the recent U.S. presidential election on (i) advancing the sale of non-Chinese drone parts, (ii) on the economy, and (iii) the war in Ukraine, governmental delays, future interest rates, and 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2025. 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.

Contact:

CS Investor Relations
917-633-8980
investors@unusualmachines.com

Table 1

Table 2

Unusual Machines, Inc.
Balance Sheets

Unusual Machines, Inc.
Statements of Operations

SOURCE: Unusual Machines, Inc.