Challenging Defence Markets

Since $UMAC is basically my whole personality now, let me articulate how it fits oh so neatly into Maj's framework here: "1. Spending heavily on capacity expansion. (One of my favorites)." -> Square footage of manufacturing space has expanded from 53,000 sqft at the start of the year, to a current 105,000 sqft, with another 100,000 sqft to be acquired by years end. So ~50k -> 200k in one year. Headcount has gone from 81 to 330 in that time. Likely 400 by the end of the year. "2. Inventory is increasing ahead of anticipated demand or new customer programs." -> Inventory has been building, over the past 3 Qs: --> Q3'25: Raw materials: $717,907 Finished goods: $2,400,584 Prepaid deposits: $6,921,679 --> Q4'25: Raw materials: $4,232,774 Finished goods: $1,083,874 Prepaid deposits: $9,748,483 --> Q1'26: $13,827,189 Raw materials: $12,193,535 Finished goods: $1,633,654 Prepaid deposits: $13,566,078 --> Q2'26: Raw materials: $17,469,622 Finished goods: $4,444,710 Prepaid deposits: $20,543,732 Notably, raw materials and deposits are scaling way ahead of finished goods. Is that because they're just stockpiling materials? No. During that time, revenue has moved from: --> Q3'25: $2,134,588 --> Q4'25: $4,898,359 --> Q1'26: $8,095,836 --> Q2'26: $16,722,467 This while maintaining gross margins in the mid 30's. Based on "not guidance", I expect revenue to be flat to slightly down for Q3, finished inventory to be flatish, and raw materials to jump in anticipation of a flood of demand in the Q4/Q1 timeframe. "3. Investing in a new product or entering a new market that could create a meaningful recurring revenue stream. (One of my favorites)." -> UMAC just closed the acquisition of Upgrade Energy, putting them squarely in the drone battery supply chain. Known customers of Upgrade Energy include $AVAV, Anduril, Neros, and other Drone Gauntlet participants. Notably, batteries have a known replacement cycle, creating that recurring revenue component not seen in other drone hardware components. "4. Accounts receivable are growing because sales are accelerating. (Cash flow may lag reported earnings as customers take time to pay)." --> Accounts receivable have been growing in line with revenues and materials: --> Q3'25: $309,544 --> Q4'25: $1,564,739 --> Q1'26: $3,128,885 --> Q2'26: $9,333,235 "5. Spending heavily on automation or equipment that could improve margins and reduce operating costs for years to come. (Could have put this in the capacity expansion bucket, but it’s a little more specific)." -> UMAC is currently commissioning an automated motor line, which will increase their motor output by about 100,000 per month. This is an increase from their current capacity of 30,000/month, for a total capacity of 130,000/month once online. After gathering production and quality control data, management expects to order 8 to 10 more automated lines. Of course, all this growth has not occurred without it's costs. In the time frame represented, share count has taken the following trajectory: --> Q3'25: 30,002,179 --> Q4'25: 37,759,911 --> Q1'26: 46,708,842 --> Q2'26: 48,611,102 But operational inflection is near. Operational profits are expected in the Q1/Q2 timeframe, and I expect dilution to simmer down, relating primarily to compensation rather than funding operations. DYODD not FA I'm obviously bullish.