Good day, and welcome to Q2 Investor Summit Virtual. We appreciate your participation in today's virtual event. Up next, we are pleased to introduce Unusual Machines Incorporated. If you would like to ask a question during the webcast, you may click the Q&A icon button on the right side of your screen. Please type your question into the box and click send to submit it. At this time, it is my pleasure to hand over the session to Allan Evans, CEO at Unusual Machines Incorporated, who will lead the presentation. Sir, the floor is yours.
Thank you. Good morning, everyone. I'm Allan. My background's a little unusual. I'm on the West Coast today visiting a bunch of customers, so sorry for any sort of hiccups here. I'll jump into a background on the company, just go through the deck in probably 10 minutes to 15 minutes. I am really interested in questions because I find that investors have a lot of great ones, and they tend to be top of mind. Unusual Machines, we're in the drone industry, particularly in the small backpack-sized drone industry up to table-sized drone industry. Our focus is actually on drone parts and on making NDA compliant drone parts outside of China. This will have a whole lot of forward-looking statements. Feel free to read this.
If you look at the highlights, if you just take this away, we have a retail sales channel where we sell a lot of parts, and then we're making enterprise drone components that we sell to as many different companies as we can across the industry, particularly in the U.S. Every quarter so far has been the best revenue quarter of all time. Our Q1 was the first full quarter of operations. We were up 59% year- over- year. We only in September really launched our B2B business. We have three products on the Blue framework, which is the Defense Innovation Unit's audit for the military. Our B2B revenue is up about 3.5 times from half one to half two last year when we introduced it. We have $40 million of cash on hand. We don't have any debt.
We don't really have any warrants or any other overhang. The entire drone market in the U.S. is really being driven by legislation and geopolitical elements, and that's creating both short and long-term opportunities. The legislation recently has sort of kicked out all the Chinese drones. The conflict in Ukraine and I think the recent events where they blew up a lot of airplanes is driving sort of this transition for everyone to go, "Hey, these aren't toys. These are tools, and our supply chain for this matters." The recent executive orders are pushing the FAA to do rulemaking for beyond visual line of sight, which should open up delivery and dramatically improve the TAM, the domestic market. Where we're at is we had a little bit of a head start.
We said, "Hey, we think these parts are going to matter." We just signed the lease and got the keys for what'll be a 17,000 sq ft drone motor facility. There's a lot of interest in what we're doing for Made in the U.S.A. with our price value points and our relationship with the DIU and our ability to get through the audits. That's the highlights of the company. Basically, U.S.-approved drone parts for the U.S. marketplace. We have a really strong B2C foundation. We have Rotor Riot, which is an e-commerce site where we sell a whole bunch of parts through. That gets us over the chicken and the egg problem to get the volumes and gives us really strong brand equity.
It also has given us really good insights into what people want because our consumers are awesome, and they keep buying or wanting to try the new stuff from everywhere. We sort of get a sneak peek at R&D a lot of places because of how far ahead our customers are. We plan on continuing to grow. The market is ripe for it, and I think the next two to three years is the time to go big or go home. We see continued growth in our retail business. That is organic. The team there is doing a great job. We are going to continue to accelerate on-shoring of more and more parts. We keep working with the DIU to put parts on the Blue list and do NDA compliant parts in other places where they do not matter.
We use our retail positioning to market for both B2C and B2B, and ultimately even B2G because those brands are very familiar. It's much easier for us to start to drive sales. We are going to scale motor production as quickly as we can. It's a huge gap in the marketplace. We think the market right now is either acquire or be acquired. We think it'll consolidate over the next two to three years. We are always also open to smart acquisitions and think there could be good opportunity there. Quick look at our retail business. This is rotorriot.com. We sell FPV parts, and we do final assembly of drones. We keep driving revenue here. The team there is doing great. It also is a big chunk of our media outreach arm.
We have almost 300,000 subscribers to our YouTube channel, which publishes videos on a weekly basis to show the fun side of flying drones, almost 100,000 social media followers. We have 160,000 unique registered customers. A lot of them come back and buy stuff. That creates this really solid base for us to drive volumes. In terms of hardware, this is really our B2B kickoff as us starting to do our own components. In the last three months, three of these critical components, a flight controller, a speed controller, and a camera joined the DIU Blue framework. We have more of them in development. We're constantly working on it. We've seen a lot of interest in these. We just started our B2B outreach, but we're seeing it to be three and a half times what it was before launch.
Going forward, we expect the next three to six months this to become just a dominant part of our business. We are building out that drone motor facility, which we expect the first deliveries from that to go to customers in late December. We do expect to build motors in-house before that. We just expect them to need QC and for us to go fly them on our own stuff. The drone market opportunity is gigantic. If you look and you narrow it all the way down to just backpack-sized drones in the United States, just DJI, the Chinese company being kicked out, was more than a $10 billion market opportunity as a TAM. If you look, the U.S. government is really expected to move to place orders for a Tridable system, so the low-cost one-way drones, this fall.
That's expected to be several hundred million dollars in orders. Given our value segment and our Made in the U.S.A., we really hope to be a partial blend of a lot of the submissions there. We expect that to be a real driver of orders for us in the fall. That should really baseline our revenue next year as we fulfill those opportunities. In drone landscape, you do not have too many DIU component suppliers. I have listed most of them that I can think about here. We are different from the rest in that we are at the value segment. Like ModalAI is great. Doodle Labs is great. Mobilicom is great. They all do much higher cost, higher technology add, value add components. For instance, ModalAI's flight controller is around $1,000. Ours is $50.
When you look, they're really well-suited to certain applications. We're well-suited to limited use, low cost. There are a lot of manufacturers. We know most of them. Those go into all the different service providers, which for the DoD, you'd see things like TAC in there, et cetera. This is what it looks like. We're on the component supply side. This market really wouldn't exist without sort of the legislation and the geopolitical activity going on. The U.S. government has said that drones, very much like microchips with the CHIPS Act, are a critical technology and that we need to have supply chains that are within at least the Allied Nations. This has been strongly bipartisan support. In 2023, you had the American Security Drone Act passed, which said the government cannot buy or fly Chinese drones. That goes into effect this December.
You saw the National Defense Authorization Act, which has an FCC ban on DJI and Autel, the two big Chinese drone companies. That goes into effect this December. You're seeing tariffs, which are actually giving us margin and a price competitive advantage, which are still being adjusted and super interesting. Excuse me. You're seeing the Countering Chinese Communist Party Drones Act, which is actually Section 1709 of the current NDAA, which also is really pushing out the Chinese elements. What's not listed here is the executive orders, which are accelerating the FAA's adoption of beyond visual line of sight and some of the regulatory aspects to allow beyond visual line of sight, but also one to many. Like those drone light shows will get easier to do.
We expect drone light shows where they have a lot of cost sensitivity to be a pretty significant customer of ours as that expands. Our strategic roadmap is to continue to expand our hardware offering, really get on top of drone motor production, and then start to build out a sales and field application engineering team so that we're faster to integrate with our partners and really help them realize the amazing drone products they want. Longer term, keep doing blue framework and then listen to our customers and do custom engineering based on their requirements as they win in the market. Really start to launch integrated solutions like remote ID chips that match the new rules for BVLOS so that our customers can share the airspace. For our financial strength, revenue has grown every quarter. Our margins, we try to target around 30%.
Our gross margin's been closer to 28%. We have $40 million in the bank roughly after a public offering in May. We don't have any debt. Our current operational cash burn, and most of this is just the cost of being a public company, is about $850,000 a quarter. We do expect some additional cash burn as we build out the motor factory. Cap table, we have about 25 million shares outstanding if you're doing some math. We do have a few warrants. The pipe warrants are owned by myself and two other board members. We have the public offering warrants owned by the bank. That's really the only stuff outstanding there. Leadership team, this hasn't changed. Myself, I'm the CEO.
We have a great CFO in Brian Hoff, a great COO in Andrew Camden, and a very sophisticated board of directors that is wonderful to work with. Again, investment highlights, we are absolutely in the backpack-sized drone segment of the drone industry. We expect B2B to B2G to be the real driver of our growth in the next year. We have a very healthy corporate profile with a lot of cash on hand, increasing revenues, a B2B model that's starting to turn on, and no debt or other overhang. This is completely being driven by legislation and geopolitical events. That push just keeps getting stronger. We expect now that the market has been created by the government, that the capital will be injected by the Defense Department, especially given the interest in drones from this administration and this manifestation of the DoD.
We have a head start on a lot of these parts. Our U.S. development and NDA compliance gives us that first mover advantage where we're now adding a whole nother subsegment with drone motors. We're really excited about where we're going. We think we're really well positioned. There are no barriers to us executing where I think the market vacuum is so strong, we could grow very quickly. That's what I have for a presentation. I try to go through quick because I find the questions are more informative for everybody. I'm hoping that gives you a pretty good background on the company. Let's see if we can get into the questions here. Give me a second. A little technical ninjutsu. All right. Please fire away with questions.
I don't see any there, or I can dive into anything more specific anybody is interested in. All right. No one has any questions for me. All right. You guys, I'm shocked. Let me start by giving you an overview of what I see as near and long-term catalysts. If you look right now, and I've said this several times, my expectation is that you're going to see the government be the first and the next driver in the whole drone market segment. What I expect to see is the big beautiful bill or whatever the instantiation of the government budget is will pass. That gets the allocation down to the rest of the government, in particular to the DoD, where then they will go and start to place orders for what they want.
Now, there's a jam up in years like this where there's a continuing resolution in how that money is spent because they can't really go allocate the money until the bill is passed. What you typically see, and what I expect to see this year, is the bill to get passed and then very quickly before the end of the government fiscal year, so before the end of September, a whole bunch of contracts to get initiated. Those contracts will come from this bill. In the new fiscal year in October, you'll see another wave of potential contracts. If you're really looking to see how this drone market's going to play out and pick your winners, if you will, you'd start by paying attention to anybody that gets contracts before the bill is passed.
That means they had to go find much more challenging buckets of money. And so some customer is extremely interested in their product offering. Then after the bill is passed, you're going to get a lot of the standard orders. What you often see is 70%-80% of orders for this category all get placed in that window after the budget is passed. My gut still says August. August and September is when we're going to see a whole lot of that. It's going to come all at once. It won't impact revenues right away because a lot of times there'll be early delivery and then the expected deliveries, I think, will be around January. We've said before that we break even and our next financial target is to get to break even at about a $20 million annual runway.
We've also said that we expect that to occur in four to six quarters out. The reason why we've said that is if the government places orders in September and if deliveries start to ramp in January, because we're GAAP basis, we expect by next summer to be at full run rates. That's when we expect to see us cross the threshold of those revenues. It'll be pretty easy to predict once we see those orders come in. That's the other reason we really haven't given guidance and don't feel comfortable giving guidance is the combination of tariffs and then this uncertainty around this government timing slides when the expected deliveries would be from maybe a November time period to a January time period. It will have a really dramatic impact as a single variable on what our finances look like.
If you're paying attention to drones, yep, the money's coming from defense. Yes, there's huge amounts of interest given what was called the Pearl Harbor event in Ukraine, the executive orders, and the obvious need to sort of modernize the U.S. military to incorporate these aspects of robotics. The action, the mechanics of doing it aren't just them saying, "Let's do it." The bill passing and then it trickling down and seeing the orders and the different purchase orders come out. Again, I've always expected it to be in August and September. Still do. What you get in the meantime is you get a lot of people setting up these orders. You might call it chatter. We're getting a lot of chatter. As a company, we expect to start hiring here soon.
We're going to put out job recs so that we can bring in people to start to build more drones and really get in front of the motor factory. We see the next maybe two months as our only opportunity to get in front of what we expect to be a very rapid increase in our need to manufacture based on the feedback we're getting from our different customers and then from their end customers. We're about to enter a phase of sort of positioning for that corner, which is really, really exciting. I mean, it's super busy, which is great. Again, as you pay attention as investors, that's sort of what you want to pay attention to. The next thing, motors. People wonder what we've said publicly is that we've already ordered the equipment.
We've already been able to use some of our capital to set up the supply chain. We expect motors to still be in August, September for when they start going out. We're building our facility to do about 50,000 motors a month. Estimates out there would say at 50,000 motors a month, it's probably $30 million run rate. That feels reasonably accurate to me depending on where we land. That's what we see is that and the ability to expand sort of where we're at. There's not really very good supply chains or other motor sources in our size and price category outside of China where the Chinese companies like T-MOTOR, which has now been added to the sanctions list, they just do a really good job.
Even more than the rare earth issues, the T-MOTOR sanction issue is what puts us in a position to capture a large chunk of that market if we continue to move quickly and deliver good products for our customers. Another common question I get is, "What are we doing with the money?" If we have $40 million in the bank and we burn under $1 million a quarter, that seems like a lot of cash. It is. We're using it primarily to leverage the supply chain and be a really good partner. If you're a DoD Prime and you're set up to go do a three-year contract and you place an order, you want to be sure we can deliver. Now that we have the cash, we pass that credit check.
Even more importantly, for some of our smaller partners, we have reached credit term agreements that we're finalizing where when they go and take a government order, they don't get paid till net 15 after delivery. The government has this thing called the prompt payment clause where if they don't pay on time, they have to pay an interest penalty on the payment. It's about 5.5%. What happens a lot of times is the government's late on the payments because there's a rule for it. It becomes this very challenging working capital function for some of our smaller defense primes. We're in a position now to say, "Hey, look, you show us the order, we can match your payment terms, and then we can continue to smooth that out.
If the government doesn't pay on time, we just get the payment penalty. In that way, we can use some of our cash as working capital and collect the 5.5% on it as we facilitate being able to take orders in a lot of different ways for some of our customers and not require them to go find very specific contract vehicles where they get paid upfront. We see that as really opening up the door to more orders faster for us. On the supply chain side, it really lets us even participate. If you're aware, one of the big sticking points in the current Chinese trade negotiations are these rare earths. I try to think an analogy. The rare earths supply chain issue, it reminds me of oil production.
The mining of rare earth is done in a lot of places, just like the extraction of oil is done in oil wells in many, many places. What China really does a very good job of is they have all the refineries. They do the processing of these into the finished products, particularly the high-quality finished products that are used in electric motors for aerospace or automotive. Right now, they have a restriction on exporting that for anything that could have any military use, which makes sense. What our cash position lets us do is go to some of the few suppliers that are non-Chinese and go in and say, "Hey, look, we're going to order this." Then they look at us and realize we'll pay the bill and we can place the right size orders.
The other side of raising the money has let us go out and work with supply chain for our subcomponents for the specifics like rare earths in jurisdictions outside of China where we wouldn't have been able to do that before. We're now really in a great position to sort of make all of this work where it would have been very challenging before that given current geopolitical climate. Those are a couple of questions I regularly get asked, and it still doesn't look like anybody has any questions. Shoot, guys, nobody. Questions are my favorite part of the whole thing.
In terms of acquisition strategy, what we've said all the way along is we think that given the turbulence in the markets that occurred earlier in this year and that we still see with tariff variability, a lot of times what you get then is the private markets get jammed up. We expect the public markets to come back first. I think what you're seeing this week is even a revitalization of the drone perspective where we see a lot of benefit. We are really looking and think the opportunity to incorporate companies. We have two windows. One window is really right now before the fall where we can onboard and go through the process of getting set up.
The next one will be after sort of what we see as the government sales cycle where we're going to have to be fully consumed supporting them. You are really looking at November through February. We think there could be some really good opportunities to start to consolidate in that window. If there are not, it is okay. There really are not too many other parts vendors that would make a lot of sense to put together. We are happy to work with anybody as we try to really bring manufacturing and this critical supply chain back to the U.S. If we cannot bring it back to the U.S., at least to friendly nations where we are trying to do a lot of the work. Oh, all right. I am going to have a sip of coffee. Come on. No questions, guys. Nobody wants to know anything.
I'll tell you. There's something in the chat. What do we got? Oh, yep. Still no questions. All right. Hopefully, you're listening at least. What else do people generally want to know? Team's great. Like I said, we're growing. If you're interested in work, send a note. I publish pretty regularly on LinkedIn. If we're not sending out press releases, you can find us there. I always encourage everybody to buy one share. That way you can follow along and it shows up on your ticker and you can decide if you like it or not. If you walk around the shows, like if you walked around the defense shows in the last few months, you would see our parts on a lot of different drones. We haven't publicly disclosed too many of our partners. I mean, we have said we're doing motors with Red Cat.
They were our first motor customer. We are working with a lot of partners. Last quarter, we did not have a single customer that was more than 5%. We do not have strong customer concentration. In that way, I think as an investment vehicle, we look a little more like an ETF. It is more of a bet on the industry rather than a bet on an individual product or product category. We find that to be pretty exciting. We just get to celebrate our customers when they win. In terms of the challenge of onshoring, one of our personal ethos is that we need to be able to make products that compete at the quality of the Chinese products and at the price. We always said that we cannot be more than 20% of the price. Oh, we have a question.
Chris has asked, "How many motors can we see eventually producing? Can we supply all of our needs here in the U.S.?" Thanks, Chris. Right now, we're scaling our production facility to do about 50,000 motors a month. That's a pretty good number. It is estimated that DJI sells a million Mavics a year, which would be 4 million motors a year for something that's being sold right now. I think we could eventually meet all our needs here in the U.S. Anytime you move a supply chain like this, it's five-10 years till you can get there. I think doing all of the motors for all the drones in the U.S. might just be a different type of problem. You want redundant supply chain.
If something happened to our facility in Orlando, you might want to make it in Japan, or you might want to make it in China. I think we can absolutely be in a position to have enough motors to not be at risk in a conflict from geopolitical events. Chris said, "On the motors, it feels like they're pretty much a commodity. It's more in the controls and software." Do you agree with that? I look at motors as mid-tech. In the U.S., we have this idea that technology is what matters. Technology is great. What the Chinese companies have done an amazing job of that we sort of lost is manufacturing excellence. Motors are these mid-tech. You have to get the motor alignment right. You have to get the coils right. You have to be sure you're in quality range.
You have to produce them at high cost and low volume. You need to create these really robust, challenging manufacturing processes to do that. That is really where Unusual Machines sits, is we're trying to be this manufacturing excellence company to do these parts for our customers that are the technology company. It is much more important that a motor works like you expect and does not fail arbitrarily or the drone falls out of the sky than we put in all the neatest technology. I think that is the difference on where we sit versus a lot of the awesome U.S. drone companies that are doing technologies. Tom asked, "Can I talk about Aloft, please?" Tom, still working with them. Cannot talk about it, but we will absolutely have updates next week on Aloft. I am still very close with Jon and Josh. Talk to them every day.
They're great. Hopefully we can get that resolved one way or another, and we'll let you know. Do we have other questions out there? Chris, you're welcome. Appreciate the thank you. Goodness. Sorry, I'm excited. I'm out here. Like I said, yesterday, I was meeting with a bunch of different customers. There's starting to form these centers of drone companies in the U.S., which is pretty cool. There's a center in the San Diego area where there's a lot of these great companies. There's starting to be sort of a fixed-wing center in the Pacific Northwest. You see a few others. You see in Orlando, it's sort of that category. You're actually seeing a drone segment develop in Huntsville, Alabama, and another one in Salt Lake City.
It's kind of nice that these companies are sort of, the gravity is starting to develop in the industry. I expect that to actually show up and create some dynamics too. It's nice that there are fewer places to travel now even than there were a few years ago to sort of see and meet everyone and start to get work done. That part's exciting. Does anybody else have other questions? I got about two minutes left. Hopefully, this has been informative. I mean, Unusual Machines, we're a drone parts company trying to onshore. I think we really believe that not only for defense, but for critical technologies domestically, it's important that we have a supply chain that can sustain those technologies regardless of global events, whether it's geopolitical, conflict, or just natural disaster.
I think if we look, one of the most obvious challenges was during COVID, there were all these cars sitting on lots because they could not get a couple of chips. We do not want to see the same thing happen with drones. We are really excited about being a company that is part of the solution. We are really glad we are public because we do expect that we are the beneficiary of laws and U.S. tax dollars in terms of our company. In this way, if people believe in it, they can invest and participate in the outcomes that they pay taxes for. Again, thank you, everybody, for joining. Please reach out anytime to investors at Unusual Machines if you have other questions or want to connect. Otherwise, I hope you guys enjoy the rest of the conference.
Thanks, Allan.
That concludes Unusual Machines Incorporated's presentation. You may now disconnect.
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