EX-99.1 2 umac_ex9901.htm LETTER TO SHAREHOLDERS

Exhibit 99.1

 

Unusual Machines Issues Letter to Shareholders

CEO Allan Evans shares Q1 2025 highlights and provides insight into the Company’s future plans

 

ORLANDO, Florida – May 8, 2025 (ACCESSWIRE) – Unusual Machines, Inc. (NYSE American: UMAC) (“Unusual Machines” or the “Company”), a drone and drone components manufacturer, today announced it filed its Form 10-Q with the U.S. Securities and Exchange Commission for the first quarter of 2025 and provided the following letter to its shareholders from CEO Allan Evans.

 

Dear Shareholders,

 

This shareholder letter follows the completion of our first quarter of 2025. It has been another great quarter and a solid start to the year. We recently closed a major financing for $40M and continue to have substantial interest from shareholders. We want 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 first quarter was about $2.05 million in sales which represents a year over year increase for the quarter of approximately 59%. This is our best revenue quarter of all time for the fourth consecutive quarter and was achieved in a quarter where we typically see a drop off from holiday sales. Approximately 15% of our Q1 revenue was from enterprise sales and we expect this to expand throughout 2025.

 

Cash Position

 

We prioritize managing our cash position and cash flow. We started the fourth quarter with $3.8 million and finished the quarter with $5.0 million. The breakdown of the cash position change over the quarter (Table 1) provides greater detail our expenses. Total expenses were above expectations, as there were annual costs like D&O insurance and public listing fees that occur annually. This cash position has been augmented by our $40M public financing in Q2.

 

No Margin Accounts

 

Before we talk about the latest good news, there are always some Debbie Downers who want to push our stock price down. One key way they do it is through short selling. If someone wants to short sell our stock that person has to borrow shares. The obvious source is from broker-dealers who lend your shares as part of their business. But they can only do that if your stock is in a margin account. So to our loyal shareholders, please make sure your stock is not sitting in a margin account. Call your broker.

 

Financing and use of proceeds

 

The nature of the company was recently and dramatically changed by the company raising $40M at $5.00 per share on May 6th. Net proceeds after expenses are about $36M leaving the company with over $40M in cash. This injection of capital will be used for capital expenditures to build out our domestic drone motor factory in Orlando, Florida and operations. The majority of the money will sit in the bank, earn interest at a competitive rate, and will provide Unusual Machines with a very healthy balance sheet. This creates a major competitive advantage at scale; the large companies that are our enterprise customers want stability and financial health from their suppliers. Our material suppliers want the same things as we place large orders so they have confidence in getting paid. To be clear, we still absolutely prioritize prudent spending and are seeking to get to cash flow positive in 4-6 quarters.

 

 

 

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Cap Table Changes

 

The financing has changed our capitalization table substantially. Unusual Machines now has 24,830,170 fully diluted shares with no shareholder to our knowledge owning more than 9.9% of the total. We have over $40M in cash (which includes the May financing), and $0 in debt. Given the cash position, limited cash burn, improving revenues, and diversified shareholder base; we believe the company is in a very strong position to grow quickly throughout 2025.

 

Tariff and Regulatory Impacts

 

The regulatory environment is dynamic. Tariffs have been implemented, paused, changed, and are challenging to keep up with. The impacts from tariffs both internally and externally are expected to create an anomalous second quarter. Internally, Unusual Machines is placing larger inventory orders during the tariff pause to reduce uncertainty from policies that may be implemented at the end of the 90-day pause. We expect tariffs to create reduced margins and higher costs in the second quarter due to tariffs on the delivery of orders we placed prior to tariffs being implemented. This negative impact from tariffs on our business should be short lived as we have already transitioned our supply chains and our accelerating our domestic production and procurement of components, although we are seeing higher costs from some of our new suppliers.

 

Externally, tariffs and the uncertain regulatory environment are creating unusual market conditions that may be difficult to anticipate. These impacts are likely to influence our consumer business in ways we find challenging to model. While we expect to continue to see consumer sales growth, it may slow down a little depending on how things play out. At the same time, we see an uptick in interest on the enterprise side as other businesses look to us for components and general predictability. We believe the impacts of tariffs will ultimately benefit Unusual Machines more than hinder us, but we don’t expect to see GAAP validation of that expectation until the third quarter.

 

Looking Ahead

 

Our priorities moving forward are clear:

 

·Grow Revenue: We plan on being aggressive. We will continue to invest in and expand Rotor Riot’s operations, driving both top-line growth and improved margins while introducing more U.S. made components at competitive prices. We plan to take advantage of the tariffs to improve gross margins, and we anticipate substantial capital expense outlay as we work to very quickly scale a motor factory in Orlando.
   
·Get to Cash Flow Positive: We plan to grow in a controlled manner with the focus of our efforts driving us toward positive cash flow. We expect to need $15-20M in an annual revenue run rate to reach this target and are working toward getting there in 4-6 quarters depending on how the enterprise market materializes in the second half of 2025 and the continuation of tariff policies.

 

We are enthusiastic about the future of Unusual Machines. The company is in a great position to capitalize on enterprise sales and take advantage of the regulatory environment and macroeconomic factors to rapidly scale. We appreciate you all for the confidence and support in our vision. Please reach out with any questions or comments.

 

Sincerely,

Allan Evans

CEO of Unusual Machines

 

 

 

 

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First Quarter Financial Results

 

·Sales totaled approximately $2.05 million for the three months ended March 31, 2025 as compared to pro forma revenue of $1.2 million for the three months ended March 31, 2024 which was a 59% increase for the first quarter year over year.
·Gross margin for the first quarter was approximately 24%, which was impacted by the increase in tariffs.
·Our loss from operations was approximately $3.3 million for the three months ended March 31, 2025 as compared to an operating loss of $1.3 million for the three months ended March 31, 2024. Included in this is non-cash stock compensation expense of $1.9 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively.
·Net loss attributable to common shareholders for the first quarter 2025 was approximately $3.3 million or $0.21 per share as compared to a net loss of approximately $1.1 million for the first quarter 2024 or $0.18 per share. The decrease primarily relates to the increase in non-cash stock compensation expense incurred in 2025.
·We had approximately $5.0 million of cash as of March 31, 2025 as compared to $3.7 million as of December 31, 2024. The increase in cash primarily relates to the cash exercise of warrants in February 2025 from our private placement. See table 1 for additional details.

 

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 expand enterprise sales throughout 2025, our ability to become cash flow positive and the timing, our ability to achieve rapid growth, our expectation concerning the impact from tariffs, our ability to anticipate market conditions, and the impact that the uncertain regulatory environment may have on our ability to accurately model for and grow our consumer business. 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 and duration of the tariff policies, including (i) on the availability and cost of alternate supplies of drone parts, , (ii) on the economy, and (iii) the wars in Ukraine and Israel, as well as 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 Form 10-Q, filed with the SEC on May 8, 2025, Prospectus Supplement filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2025 and in our Form 10-K for the year ended December 31, 2024. 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

 

SOURCE: Unusual Machines, Inc.

 

 

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Table 1

 

Cash balance at December 31, 2024  $3.7M
      
Q4 cash financings:     
Warrant exercises from Oct 2024 private placement   2.4M
      
Q4 cash spend:     
Normal operations   (0.8M)
Non-recurring legal and transition expenses   (0.1M)
D&O insurance premiums for 2025   (0.2M)
      
Cash Balance at March 31, 2025  $5.0M 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Unusual Machines, Inc.

Consolidated Condensed Balance Sheets

 

  

March 31,

2025

   December 31,
2024		 
   (Unaudited)     
ASSETS          
Current assets:          
Cash and cash equivalents  $5,000,661   $3,757,323 
Accounts receivable   50,950    66,575 
Inventories   1,214,290    1,335,503 
Prepaid inventory   835,279    904,728 
Other current assets   205,147    31,500 
Total current assets   7,306,327    6,095,629 
           
Non-current assets:          
Property and equipment, net   399    570 
Operating lease right-of-use assets   306,250    323,514 
Other assets   59,426    59,426 
Goodwill   7,402,906    7,402,906 
Intangible assets, net   2,205,108    2,225,530 
Total non-current assets   9,974,089    10,011,946 
           
Total assets  $17,280,416   $16,107,575 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Current liabilities          
Accounts payable and accrued expenses  $860,554   $668,732 
Operating lease liability   70,654    67,820 
Deferred revenue   117,171    197,117 
Total current liabilities   1,048,379    933,669 
           
Long-term liabilities          
Deferred tax liability   93,793    93,793 
Operating lease liability – long term   243,242    262,171 
           
Total liabilities   1,385,414    1,289,633 
           
Commitments and contingencies (See note 13)          
           
Stockholders’ equity:          
Preferred stock - $0.01 par value, 10,000,000 authorized          
Series A preferred stock - $0.01 par value, 4,250 designated and 0 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively   –    – 
Series B preferred stock - $0.01 par value, 1,000 designated and 0 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively   –    – 
Series C preferred stock - $0.01 par value, 3,000 designated and 0 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively   –    – 
Common stock - $0.01 par value, 500,000,000 authorized and 16,830,170 and 15,122,018 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively   168,302    151,221 
Additional paid in capital   54,906,493    50,580,235 
Accumulated deficit   (39,179,793)   (35,913,514)
Total stockholders’ equity   15,895,002    14,817,942 
           
Total liabilities and stockholders’ equity  $17,280,416   $16,107,575 

 

 

 

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Unusual Machines, Inc.

Consolidated Condensed Statement of Operations

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

 

 

   Three Months Ended March 31, 
   2025   2024 
Sales  $2,042,300   $618,915 
           
Cost of goods sold   1,545,493    414,748 
           
Gross profit   496,807    204,167 
           
Operating expenses:          
Operations   302,602    112,322 
Research and development   7,903    16,796 
Selling and marketing   207,616    157,058 
General and administrative   3,225,904    1,004,173 
Depreciation and amortization   20,593    171 
Total operating expenses   3,764,618    1,290,519 
           
Loss from operations   (3,267,811)   (1,086,352)
           
Other income and (expense):          
Interest income   1,532    – 
Interest expense   –    (19,649)
Total other income and (expense)   1,532    (19,649)
           
Net loss before income tax   (3,266,279)   (1,106,001)
           
Income tax benefit (expense)   –    – 
           
Net loss  $(3,266,279)  $(1,106,001)
           
Net loss per share attributable to common stockholders          
Basic and diluted  $(0.21)  $(0.18)
           
Weighted average common shares outstanding          
Basic and diluted   15,902,473    6,065,857 

 

 

 

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Unusual Machines, Inc.

Consolidated Condensed Statement of Changes in Stockholders’ Equity

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

 

 

Three Months Ended March 31, 2024

 

   Series B,
Preferred Stock		   Common
Stock		   Additional Paid-In   Accumulated   Total Stockholders’ 
   Shares   Value   Shares   Value   Capital   Deficit   Equity 
Balance, December 31, 2023   190   $2    3,217,255   $32,173   $4,715,790   $(3,333,046)  $1,414,919 
                                    
Issuance of common stock as settlement   –    –    16,086    161    64,183    –    64,344 
Issuance of common shares, initial public offering, net of offering costs   –    –    1,250,000    12,500    3,837,055    –    3,849,555 
Issuance of common shares, business combination   –    –    4,250,000    42,500    16,957,500    –    17,000,000 
Conversion of preferred shares   (120)   (1)   600,000    6,000    (5,999)   –    – 
Net loss   –    –    –    –    –    (1,106,001)   (1,106,001)
                                    
Balance, March 31, 2024   70   $1    9,333,341   $93,334   $25,568,529   $(4,439,047)  $21,222,817 

 

Three Months Ended March 31, 2025

 

   Series A,
Preferred Stock		   Series B,
Preferred Stock		   Series C,
Preferred Stock		   Common
Stock		   Additional Paid-In   Accumulated   Total Stockholders’ 
   Shares   Value   Shares   Value   Shares   Value   Shares   Value   Capital   Deficit   Equity 
Balance, December 31, 2024   –   $–    –   $–    –   $–    15,122,018   $151,221   $50,580,235   $(35,913,514)  $14,817,942 
                                                        
Issuance of restricted common stock, equity incentive plan   –    –    –    –    –    –    483,546    4,835    (4,835)   –    – 
Cash exercise of warrants   –    –    –    –    –    –    1,224,606    12,246    2,424,720    –    2,436,966 
Stock compensation expense - vested stock   –    –    –    –    –    –    –    –    1,883,433    –    1,883,433 
Stock option compensation expense   –    –    –    –    –    –    –    –    22,940    –    22,940 
Net loss   –    –    –    –    –    –    –    –    –    (3,266,279)   (3,266,279)
                                                        
Balance, March 31, 2025   –   $–    –   $–    –   $–    16,830,170   $168,302   $54,906,493   $(39,179,793)  $15,895,002 

 

 

 

 

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Unusual Machines, Inc.

Consolidated Condensed Statement of Cash Flows

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

 

 

   Three Months Ended March 31, 
   2025   2024 
Cash flows from operating activities:          
Net loss  $(3,266,279)  $(1,106,001)
Depreciation and amortization   20,593    171 
Share-based compensation expense   1,906,373    64,344 
Change in assets and liabilities:          
Accounts receivable   15,625    4,865 
Inventory   121,213    148,765 
Prepaid inventory   69,449    (377,144)
Other assets   (156,383)   (41,567)
Accounts payable and accrued expenses   191,822    53,722 
Operating lease liabilities   (16,095)   (4,586)
Deferred revenue and other current liabilities   (79,946)   61,827 
Net cash used in operating activities   (1,193,628)   (1,195,604)
           
Cash flows from investing activities          
Cash portion of consideration paid for acquisition of businesses, net of cash received   –    (852,876)
Net cash used in investing activities   –    (852,876)
           
Cash flows from financing activities:          
Proceeds from issuance of common shares   –    5,000,000 
Proceeds from issuance of common shares, warrant exercises   2,436,966    – 
Common share issuance offering costs   –    (637,687)
Net cash provided by financing activities   2,436,966    4,362,313 
           
Net increase in cash   1,243,338    2,313,833 
           
Cash and cash equivalents, beginning of period   3,757,323    894,773 
           
Cash and cash equivalents, end of period  $5,000,661   $3,208,606 
           
Supplemental disclosures of cash flow information:          
Non-cash consideration paid for assets acquired and liabilities assumed  $–   $19,000,000 
Deferred acquisition costs  $–   $100,000 
Deferred offering costs recorded as reduction of proceeds  $–   $512,758 

 

 

 

 

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