Unusual Machines plans investments to pursue U.S. drone treasury strategy

Unusual Machines (UMAC) CEO Allan Evans has issued a letter to shareholders, which read in part, “While we will maintain cash reserves to maintain smooth operations, we plan on making several strategic investments as we pursue a U.S. drone treasury strategy. For background, we are a domestic manufacturer of drone components. We strive to supply as many different drone companies as we can. This provides broad reach and has allowed investors in Unusual Machines to invest in our stock as a way to effectively invest in the U.S. drone industry as a whole. While we can invest up to 40% of our assets, exclusive of cash and government securities, our goal is to limit our investments well below that legal limit. As a management team, we thought it would be most appropriate if we extended that individual Unusual Machines investment thesis to our corporate investments. This will align our strategy to that of our shareholders and broaden exposure to an even greater portion of the industry. We have to be discerning in how we approach these investments. We have three criteria we look at on a case-by-case basis to determine if any opportunity fits in our potential portfolio. Does it make for a good financial investment? Does it accelerate the emergence of an American drone ecosystem? Are there synergies with current Unusual Machines operations? We are only interested in an investment if the answer is yes to all three of our criteria. We believe that we have a responsibility to our shareholders to work toward better financial returns from this drone treasury strategy than we could by investing in treasuries or bonds. Using these investments to accelerate the American drone ecosystem allows us to help build a bigger future market faster and has the secondary benefit of accelerating the expansion of our TAM. Finally, we view synergies with our current operations as another factor that allows us to amplify the gains we see from our investments. On August 22nd, we closed the first of our drone treasury investments. We participated in an $8M PIPE along with another strategic investor in Safe Pro Group. This investment can be used as an example to understand how we approach our three criteria. We feel confident in our diligence and expect this investment to generate a positive financial outcome. We believe the company is at an inflection point where their technology is mature and about to be effectively productized. We feel like our investment was at a good valuation and reduced concerns about their capitalization to allow them to go execute effectively while removing the risk of dilution in the short term. We believe that this investment will accelerate the development of their AI software and their edge computing capabilities. Their technology to detect landmines is crucial for the Department of Defense and will be vital after the current conflict in Ukraine ends, as major agricultural zones are currently unusable until they are demined. Given the work Safe Pro has done in Ukraine, this creates opportunities for Unusual Machines to get wider exposure to customers and also ensure that the cameras we provide are part of the algorithms that can be used by other drones as part of the demining process. The process for this first investment has given us the confidence to proceed with rolling out this strategy and exploring other opportunities on an ongoing basis. We believe we are at the start of a multi-year drone supercycle that will be driven by legislation and expanding defense budgets that could make this drone treasury strategy very successful.”