Industry Overview - The global agriculture drones market is projected to grow from $2.01 billion in 2024 to $8.03 billion by 2029, indicating significant growth potential driven by the adoption of aerial data collection tools in agriculture [1] - The cereals and grains segment is experiencing substantial growth, with drones playing a crucial role in optimizing yields through aerial surveys, crop health monitoring, and soil condition assessments [2] - The overall agriculture drone market is expected to grow from $6.10 billion in 2024 to $23.78 billion by 2032, at a CAGR of 18.5%, fueled by demand for precision agriculture and advancements in drone technology [4] Company Developments - ZenaTech, Inc. has received FAA Part 137 approval for its ZenaDrone 1000, allowing it to conduct commercial agricultural operations, including crop spraying and precision agriculture [2][3] - ZenaTech plans to utilize a Drone as a Service (DaaS) model to sell its solutions, targeting larger commercial farms and agribusinesses [2] - Unusual Machines, Inc. reported a fourth-quarter revenue of over $2.0 million, marking a 31% increase quarter-over-quarter, with total revenue for FY2024 reaching $5.65 million, exceeding its target by 13% [11] Technological Advancements - The ZenaDrone 1000 features advanced technology, including AI, sensors, and purpose-built attachments for crop spraying, designed for stable flight and heavy lift capabilities [5][6] - Sidus Space has unveiled a near real-time vessel detection and classification capability through its LizzieSat® satellite platform, enhancing space-based maritime intelligence [12][13] - AgriFORCE Growing Systems Ltd. has made progress in its Radical Clean Solutions division, receiving a U.S. patent for a chemical-free solution to reduce mold and extend the shelf life of produce [14][15][16]

Industry Overview - The global unmanned aerial system (UAS) military drones market is experiencing steady growth, driven by rising global defense budgets and geopolitical tensions [1] - Nations are investing in advanced UAS to enhance defense and security capabilities, particularly in regions like Asia-Pacific, the Middle East, and Eastern Europe [1] - Military drones are becoming integral to modern defense strategies, supporting surveillance, intelligence, and tactical operations [1] North America Market Leadership - North America, led by the United States, dominates the military drone market due to significant investments in advanced military technologies and a strong defense budget [2] - The U.S. military is the largest operator of drones, focusing on developing state-of-the-art systems for various missions, including surveillance and combat [2] - Key industry players in the U.S. include General Atomics and Northrop Grumman, which contribute to the technological edge of U.S. military drones [2] Draganfly Inc. Developments - Draganfly Inc. has entered a multi-year agreement with SafeLane Global to provide landmine mapping drones and aerial survey services [2][4] - The partnership aims to enhance the speed, accuracy, and safety of explosive threat detection and removal operations in high-risk environments [4][7] - Draganfly's technology will support humanitarian and defense efforts, particularly in mine-affected regions like Ukraine [5][6] Unusual Machines, Inc. Performance - Unusual Machines reported over $2.0 million in revenue for Q4 2024, marking a 31% quarter-over-quarter increase and the best revenue quarter to date [9] - The total revenue for FY2024 reached $5.65 million, exceeding the target of $5 million by 13% [9] - The company achieved this growth without customer concentration, with no single customer representing more than 5% of total revenue [9] Kratos Defense & Security Solutions Initiatives - Kratos announced the groundbreaking of its Hypersonic System Indiana Payload Integration Facility, a 68,000-square-foot complex to support hypersonic vehicle activities [10] - This facility aims to enhance the U.S. hypersonic infrastructure and accelerate testing capabilities for advanced hypersonic technologies [11] General Dynamics Information Technology Collaboration - General Dynamics Information Technology has expanded its partnership with Amazon Web Services to drive digital modernization and advance government missions [13][14] - The collaboration will focus on developing cybersecurity, artificial intelligence, and cloud migration solutions for defense and intelligence agencies [14]

Financial Data and Key Metrics Changes - The company reported a net loss of $32 million for 2024, but emphasized that it is in the best financial position ever, with more cash in the bank than before and a focus on controlling cash burn [19][20][21] - Cash position improved from $1.7 million at the start of the quarter to $3.8 million at the end, with additional proceeds of about $2.4 million from warrant exercises [11][12][24] - Total revenue for the year reached $5.65 million, exceeding the target of $5 million, with a gross margin of 28% for the fourth quarter [13][23] Business Line Data and Key Metrics Changes - The components business has been initiated and already represents about 15% of total revenue, with significant growth expected [11][35] - Enterprise sales accounted for approximately 15% of fourth quarter B2B sales, indicating a positive trend in this segment [14][35] Market Data and Key Metrics Changes - The U.S. market is seen as favorable for growth in 2025, particularly due to sanctions against T-Motor, which has created a market vacuum for alternative suppliers [40][41] - The company is experiencing accelerated domestic orders, although European market orders have not materialized as expected [36][37] Company Strategy and Development Direction - The company is focusing on aggressive growth, particularly in the components business, and plans to scale production in Orlando [17][41] - The management is optimistic about leveraging tariffs to improve margins and market share against competitors with a larger mix of Chinese products [41][42] Management's Comments on Operating Environment and Future Outlook - The management acknowledges the impact of the political landscape on business growth, with a favorable U.S. market expected in 2025 [33][43] - There is a focus on maintaining cash flow and operational efficiency while pursuing growth opportunities [11][17] Other Important Information - The company has eliminated $4 million in debt and increased its fully diluted share count from 11.2 million to 17 million since the IPO [20][21] - The management is implementing stock sales plans to manage tax obligations related to equity grants [15] Q&A Session Summary Question: Impact of tariffs on 2025 - The CEO indicated that tariffs could lead to a margin expansion of 10% to 15% while allowing for competitive pricing on in-house products [47][48] Question: Key financial metrics to focus on - The CEO emphasized the importance of cash flow, revenue growth, and operational cash burn as critical metrics [49][50] Question: B2B sales pipeline and revenue expectations - The company aims for B2B sales to represent 50% of revenue over the next four to six quarters [53][54] Question: Production capabilities and sourcing - The company is currently working with contract suppliers for motor production while planning to scale in-house capabilities [56][57] Question: Financial targets for 2025 - The management plans to provide more concrete financial targets after assessing Q1 results and the impact of tariffs [59] Question: Cash position for 2025 expansion plans - The company believes it has sufficient cash on hand to fund its expansion plans for 2025 [80]

Financial Data and Key Metrics Changes - The company reported a net loss of $32 million for 2024, but emphasized that it is in the best financial position ever, with more cash in the bank than before and a focus on controlling cash burn [19][20][21] - Cash position improved from $1.7 million at the start of the quarter to $3.8 million at the end, with an additional $2.4 million received from warrant exercises [11][12][24] - Total revenue for the year reached $5.65 million, exceeding the target of $5 million, with a gross margin of 28% for the fourth quarter [13][23] Business Line Data and Key Metrics Changes - The components business started contributing to revenue, representing about 15% of total sales in the fourth quarter [14][35] - Enterprise sales accounted for 15% of the fourth quarter's B2B sales, with expectations to increase this to 50% over the next few quarters [14][54] Market Data and Key Metrics Changes - The U.S. market is seen as favorable for growth in 2025, particularly due to sanctions against T-Motor, which has created a market vacuum for alternative suppliers [40][41] - The company is experiencing accelerated domestic orders, although European market orders have not materialized as expected [36][37] Company Strategy and Development Direction - The company is focusing on aggressive growth, particularly in the components business, and plans to scale production in Orlando [17][41] - Management is optimistic about leveraging tariffs to improve margins and market share against competitors with a larger mix of Chinese products [41][42] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the company's financial health and growth potential, despite uncertainties in the political landscape affecting defense spending [33][43] - The company is positioned to take advantage of favorable market conditions and is actively working to fill the void left by sanctioned suppliers [40][72] Other Important Information - The company has eliminated $4 million in debt and increased its fully diluted share count from 11.2 million to 17 million since the IPO [21][30] - Management is implementing stock sales plans to manage tax obligations related to equity grants [15] Q&A Session Summary Question: Impact of tariffs on 2025 - Management indicated that tariffs could lead to a 10% to 15% margin expansion while allowing for competitive pricing on in-house products [48] Question: Key financial metrics to focus on - Management emphasized the importance of cash flow, revenue growth, and gross margin as key metrics [49][50] Question: Enterprise sales pipeline and revenue expectations - The internal target is for B2B sales to represent 50% of revenue within four to six quarters [54] Question: Production capabilities and sourcing - The company is initially using contract suppliers for motor production but plans to build in-house capabilities to increase volumes and margins [57] Question: Financial targets for 2025 - Management plans to provide more detailed financial targets after Q1 2025, depending on tariff implementations and market conditions [59] Question: Aloft acquisition timeline - The acquisition is progressing but not prioritized over immediate production needs due to market demands [62] Question: Future growth opportunities from sanctions - Management sees significant opportunities arising from sanctions against Chinese firms, particularly in the motor segment [84] Question: Current sourcing from China - The company has reduced its reliance on Chinese sourcing significantly since the IPO, with a focus on U.S.-made components [91]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Exact name of registrant as specified in its charter) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT For the transition period from ________ to _________ Commission File Number: 001-41961 Unusual Machines, Inc. (State or other jurisdiction of i ...

Company Analysis - Unusual Machines Inc (NYSE: UMAC) is rated as a hold due to uncertainty from the latest US National Defense Act which calls for the formation of an appropriate agency [1] Analyst Background - First Principles Partners specializes in equity research focusing on technology innovation and sustainability investment [2] - The analyst uses a "First Principles" approach to break down complex problems into basic financial and technological elements to uncover overlooked investment opportunities [2] - The analyst has a strong background in investment private equity and venture capital with a proven track record of delivering strong returns [2] - Articles focus on emerging technologies sustainable investing and the intersection of innovation and finance [2]

Core Viewpoint - Unusual Machines, Inc. (UMAC) has gained significant attention from investors following the appointment of Donald Trump Jr. to its advisory board, leading to a substantial increase in stock price and speculation about its potential as a meme stock [1][4][5] Company Overview - UMAC specializes in manufacturing drone components, focusing on reducing reliance on foreign supply chains. The company has made strategic acquisitions, including FPV market leader Fat Shark and e-commerce platform Rotor Riot, positioning itself to serve growing industries such as public safety and defense [2][3] - The company reported Q3 2024 sales of $1.53 million, reflecting a 9% sequential increase, with gross margins at 26%. UMAC aims to achieve $5 million in sales this year, indicating steady growth [6] Strategic Moves - The appointment of Donald Trump Jr. is seen as a strategic move to enhance UMAC's presence in the U.S. drone market. His involvement aligns with the company's mission to bring drone manufacturing jobs back to America [4][5] - CEO Allan Evans emphasized Trump Jr.'s expertise and influence, suggesting that his guidance could be pivotal for the company's growth during this critical period [5] Market Performance - UMAC's stock has surged nearly 700% in the past month, highlighting its speculative nature driven by low float and increased trading volume. The stock is currently trading at 35 times sales, with a market cap of $125 million and a float of under 5 million shares [6][7] - Despite the stock's rapid rise, analysts have issued a 12-month price forecast of $4.00, indicating a potential downside of 69.23% from current levels [6] Speculative Nature and Future Outlook - The stock's speculative nature is underscored by its micro-float and reliance on retail investor interest, with online buzz contributing to its rally. Long-term potential will depend on UMAC's ability to scale operations and capture market share in the U.S. drone sector [8][9] - Limited analyst coverage exists, with a single Buy rating from ThinkEquity suggesting some institutional confidence, but potential investors are advised to weigh recent gains against the stock's speculative characteristics [9]

Company News - Unusual Machines shares soared for a second straight session after Donald Trump Jr joined the drone parts maker's advisory board [1] - The company's CEO Allan Evans stated that Trump Jr's appointment was not aimed at leveraging his connections to secure government contracts [1] - Trump Jr owns more than 331,000 shares of Unusual Machines [2] - Unusual Machines began publicly trading in February and the Trump Jr news sent shares to all-time highs in the past two sessions [2] Stock Performance - Unusual Machines shares were up 32% to $13 03 in recent trading after soaring 85% on Wednesday [2] - The stock price reached $14 10, a 42 57% increase, on November 29, 2024 [4] Industry Perspective - Trump Jr emphasized the need for the US to stop buying Chinese-made drones and drone parts, highlighting the importance of domestic drone manufacturing [2] - He expressed enthusiasm for Unusual Machines' efforts to bring drone manufacturing jobs back to the USA [2]

Revenue and Sales Performance - Q3 2024 revenue was $1.53 million, a 9% quarter-over-quarter increase, with a gross margin of 26%[3] - Total sales through Q3 2024 reached $3.56 million, on track to meet or exceed the 2024 target of $5 million[3] - Revenue for the three months ended September 30, 2024 was $1,531,264, compared to no revenue in the same period in 2023[17] - Gross profit for the three months ended September 30, 2024 was $399,487, compared to no gross profit in the same period in 2023[17] Product and Market Growth - Received orders for nearly 7,000 units of the NDAA-compliant Brave 7 flight controller in the first week of availability, currently shipping over 1,000 units per month[4] - The global drone accessories market is valued at $17.5 billion and is projected to exceed $115 billion by 2032[13] - Enterprise component sales are expected to drive growth in Q4 2024 and throughout 2025[4] - The company anticipates more products to receive Blue UAS Framework certification in Q4 2024, boosting enterprise sales[8] Financial Position and Cash Flow - Cash position at the end of Q3 2024 was $1.69 million, down from $2.2 million at the start of the quarter[6] - Cash and cash equivalents increased to $1.69 million as of September 30, 2024, up from $0.9 million as of December 31, 2023[12] - Net cash used in operating activities for the nine months ended September 30, 2024, was $2,718,513, compared to $1,382,538 in the same period in 2023[21] - Net cash used in investing activities for the nine months ended September 30, 2024, was $852,801, compared to $3,164 in the same period in 2023[21] - Net cash provided by financing activities for the nine months ended September 30, 2024, was $4,362,313, compared to $376,702 used in the same period in 2023[21] - Cash, end of period for September 30, 2024, was $1,685,772, compared to $1,337,018 in the same period in 2023[21] Net Loss and Expenses - Net loss for Q3 2024 was $2.1 million, or $0.30 per share, compared to a net loss of $0.4 million, or $0.11 per share, in Q3 2023[11] - Net loss for the three months ended September 30, 2024 was $(2,144,250), compared to $(353,674) in the same period in 2023[17] - Total operating expenses for the three months ended September 30, 2024 were $1,860,539, compared to $353,674 in the same period in 2023[17] - Net loss per share for the three months ended September 30, 2024 was $(0.30), compared to $(0.11) in the same period in 2023[17] - Net loss for the nine months ended September 30, 2024, was $4,862,490, compared to $1,966,876 in the same period in 2023[21] Equity and Capital Structure - Total stockholders' equity as of September 30, 2024 was $19,226,002, compared to $1,831,505 as of September 30, 2023[20] - Common shares outstanding as of September 30, 2024 were 6,184,983, compared to 3,217,255 as of September 30, 2023[20] - Additional paid-in capital as of September 30, 2024 was $27,959,642, compared to $5,315,790 as of September 30, 2023[20] - Accumulated deficit as of September 30, 2024 was $(8,795,536), compared to $(3,516,460) as of September 30, 2023[20] - Issuance of common shares for initial public offering, net of offering costs, was 1,250,000 shares for $3,849,555 in the nine months ended September 30, 2024[20] - Proceeds from issuance of common shares were $5,000,000 for the nine months ended September 30, 2024[21] - Common share issuance offering costs were $637,687 for the nine months ended September 30, 2024[21] Financing and Capital Raising - Finalized a private placement in October 2024 for $1.955 million, with net proceeds of $1.733 million[5] - Non-cash consideration paid for assets acquired and liabilities assumed was $19,000,000 for the nine months ended September 30, 2024[21] - Deferred acquisition costs were $100,000 for the nine months ended September 30, 2024[21] - Deferred offering costs recorded as reduction of proceeds were $512,758 for the nine months ended September 30, 2024[21]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 Or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission File No. 333-270519 Unusual Machines, Inc. (Exact Name of Registrant as Specified in Its Charter) | --- | ...