Okay. Good afternoon, everyone, and welcome to Unusual Machines’ Fourth Quarter and Full Year ended December 31, 2024 Earnings Conference Call and Webcast. With us today are Unusual Machines’ CEO, Allan Evans; and CFO, Brian Hoff. Following today’s remarks, we will have a Q&A session. During this call, management will make forward-looking statements, including statements that address Unusual Machines’ expectations for future performance and operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Usual Machines’ most recently filed Form 10-K. Except as required by law, Unusual Machines disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. As a reminder, this call is being recorded, and a replay will be available on Unusual Machines’ website at www.unusualmachines.com. Now let me hand the call over to Allan Evans, CEO. Please go ahead, Allan.

Thank you, Christine. Thank you, everyone, for being here. Before I begin, our lawyers have asked me to read the safe harbor statement and it probably is a summary of the rest of the call. Please note that the company’s remarks made during this call, including answers to questions, include forward-looking statements, which are subject to various risks and uncertainties. These statements include our expectation that we will not incur similar GAAP losses as we incurred in quarter four 2024 in the future, our ability to continue to limit our cash burn and improve our margins, cash flow and revenues. Our expectation is that tariffs will not have a significant negative 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 global prices, our ability to take advantage of tariffs to improve our margins, our ability to get more products listed on the Blue UAS framework of the U.S. Department of Defense, our ability to achieve aggressive growth, our ability to take advantage of a favorable legislative environment, 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 in the legislative environment to drive substantial growth through 2025. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. A discussion of risks and uncertainties related to Unusual Machines Inc.’s business is contained in its filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K filed with the SEC on March 27, 2025. Additionally, we are dependent upon third…

Thank you, Allan, and thank you to everyone for joining us this afternoon. As Allan said, the fourth quarter was our best quarter-to-date with revenue over $2 million. Total revenue for the year was $5.65 million since the date of acquisitions in February. The fourth quarter was our first quarter with selling our Blue UAS products. And our fourth quarter was margins remained in line with expectations at 28%. This was also a very transformational quarter for us in regards to our balance sheet. Throughout the quarter, we converted the remaining $3 million, $4 million in total debt to common shares we completed a $1.8 million private investment and had $1.5 million in cash exercises on warrants. This had a net impact of increasing our cash balance by $2 million and eliminating the debt of $3 million during the quarter. Finally, as we noted in an 8-K recently, and in February 2025, we also had additional warrants of exercises of cash for approximately $2.4 million, and our total cash balance is approximately $5 million today. Moving our attention to SG&A expenses, which is kind of our normal operations. Our operational SG&A expenses remain very consistent and in line with expectations. The big fluctuations we saw this quarter were a little bit more in ad spend and shipping expense, but that’s expected given the holiday increase in sales. There are two non-cash-related items in our SG&A expenses. That’s related to $1.5 million worth of stock compensation expense and a $10 million impairment on goodwill. Stock compensation expense was higher in the fourth quarter based on timing of equity grants and the increase in our stock price. In addition, and then as we mentioned, the $10.1 million [ph] in loss on goodwill. Now shifting to the other expenses in the statement of…

Thanks, Brian. You’re the best. It is no secret that the growth of our business is impacted by the domestic and global political landscape. We have favorable market conditions right now and we are accelerating inventory orders as well as building out our domestic production as quickly as we can. Tariffs and regulations have galvanized our growth plans while political changes have introduced uncertainty around the European market. Before I dive into it further, I do want to note that my comments from here forward are pretty much forward-looking and are no way assured. We are continuing to work very hard to accelerate our made in the U.S. components business. We have three products that have now been approved for the DIU Blue Framework, and we’re going to get more components improved. I’m very proud of how our team has embraced this new business segment as the components business already represents about 15% of our revenue. While we have not seen the European market orders materialize in the way we might have expected based on those first Brave F7 sales, we are seeing domestic borders accelerate. To be candid, fully upfront, two possible upside scenarios that we were hoping for last year did not materialize. The first one was the U.S. defense spending at the end of the fiscal year for the FPV category. It was below our expectations for 2024. And then the recent relationship changes with Europe at a state level lead us to believe that we will not be a preferred vendor for drone parts in Ukraine. These same changes, the same dynamic environment in the political landscape is creating a very favorable U.S. market for us in 2025. For instance, in January, Jiangxi Xintuo Enterprise Co., Ltd, and I’m sure I butchered that, was added to…

First question is from John Roy, John from Water Tower Research. Hi, John.

Hey. I really had a question about the tariffs. I know it’s the topic of the day. But can you give us any more color on how big of an impact this could have in 2025?

Thank you very much. The question from John Roy is what is the impact of tariffs on 2025? I would say to start, a little uncertain because the tariffs are uncertain, but they’re doing two things. First, it is while allowing us with a lot of our drones to the retail store, to be even more competitively priced and move more volume over to our in-house products. And I think if you look, the tariffs on China are supposed to expand by about 25%. So we think there’s maybe 10% to 15% of margin expansion there while offering our customers really competitive pricing. The other thing is with the T-motor band, it’s causing a lot of U.S. entities to not look at other Chinese companies, which would be the preferred alternatives, and they’re saying, Oh man, with tariffs, et cetera, we want to go work with a domestic company." And so even the idea of tariffs is causing us to get more inbound for sales.

Great. And as a follow-up, I wanted to ask about GAAP. Obviously, GAAP, excluding the numbers pretty much here. I wanted to really get what your thinking is the numbers that we should be really focusing on. I mean, revenue, revenue growth, gross margin, is there anything besides those three items that’s really high in your mind?

I mean we put it out there. We look at cash in, cash out and growth. And so if you look, we were all in cash at about $4.6 million. We report every quarter what we see as operational cash burn. We try really hard to keep that in the $750 million range. I think we’re in the $890 million range last quarter because we had pipe expenses. The – as long as we’re growing, we only die if we run out of cash. We only have to go do debt financing or anything negative if it’s cash. And so we felt like it’s important to be transparent to do those things, but our company is healthier than it’s ever been in GAAP, I think is misleading in this case. So we try to communicate that.

Great, thanks so much.

No problem. While you bring in the next person, Christine, Barrett Boone has asked, given the enterprise sales represent 15% of quarter four revenue with the Blue Framework launch, can we elaborate on our pipeline and what percentage of revenue we expect this to be in 2025 and beyond? Barrett, I appreciate the question. We will know a lot more after quarter one. We’re seeing interest pick up. Our internal objective is to have B2B sales represent 50% more and more of our revenue to say, "Hey, this is now a business unit that’s fully working." And we’re targeting somewhere between four and six quarters to realize that. So it’s a little bit of a race. Can revenue from retail grow and make that a harder challenge for the B2B folks or not, but that’s our internal target dynamic marketplace. So a little variance on when we think we’d hit it. Christine, you got another – anybody else with questions? All right. So we have another one here. Can we share more information about the scale and monetary value of Red Cat’s initial motor orders and what kind of production volumes you’re targeting? Are you using contract suppliers or building the motors completely in-house? Good question. We don’t talk about customers that we have an NDA with. What I can tell you is we’re moving to motor production our supply chain. And so we’re working with other vendors initially, and we’re owning the spec in the design and then we’re rolling it in internally so that we’re able to fulfill right now rather than have to wait. And we expect then building out our own production to increase volumes, enable the customers that need their final production to be made in the USA and enable us to have margin expansion.…

No more call-in questions, Allan. We’re good.

Well, all right. Then I’d like to say thank you to everyone. We really appreciate your time. As always, please reach out with any additional feedback. We really appreciate all of you. And I think we’re all doing this together, shareholders, executives, everybody in the industry. And so thank you. I’d say, if you walk away with one thing, you should walk away with us thinking 2024 was great. We got, I think, all the things we didn’t like cleaned up. The company is super healthy even though – and maybe it looks weird in the public markets and now going into 2025, we’re going after it. And so if you want to see aggressive pay attention for the next 12 months. Thank you, everybody.