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Equity Method Investment
 3 Months Ended
Mar. 31, 2025
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investment

Note 7 – Equity Method Investment

 

On July 22, 2024, the Company sold all of its securities in UMAC to two unaffiliated third-party purchasers (the “Purchasers”). As part of the transaction, on July 22, 2024, the Company entered into an Exchange Agreement with UMAC pursuant to which the Company exchanged 4,250,000 shares of UMAC’s common stock, par value $0.001 per share, for 4,250 shares of UMAC’s newly designated Series A Convertible Preferred Stock (the “Series A”). The Company sold the Series A ownership interest ($4,408,357 at time of sale) and the Note Receivable of $4,000,000 to the Purchasers for $4.4 million in cash pursuant to a Purchase Agreement in a transaction that closed on July 22, 2024.

 

As of March 31, 2024, the Company had owned approximately a 46% interest in Unusual Machines. The primary business operations included selling first-person-view video goggles for drone pilots, drones, parts and related equipment to the consumer marketplace. UMAC’s financial statements are prepared in accordance with GAAP. See Note 4 for additional information.

 

Financial information for UMAC prior to the sale of the Company’s equity interest was derived from UMAC’s Form 10-Q for the six months ended June 30, 2024 and was as follows:

 

      
Current assets  $5,116,963 
Long-term assets   20,083,390 
Current liabilities   931,200 
Long-term liabilities   4,297,332 
Revenues   2,030,039 
Gross profit   592,607 
Net loss  $(2,718,240)

 

The Company’s investments in UMAC have been impacted by the following:

 

      
Initial investment, February 16, 2024  $17,000,000 
Equity method loss   (503,625)
Impairment   (9,058,875)
Investment balance, March 31, 2024  $7,437,500 
Impairment   

(2,295,000

)
Equity method loss   (734,143)
Sale of ownership interest   (4,408,357)
Investment balance, July 22, 2024  $— 

 

The computation of both the initial investment as of February 16, 2024 and investment balance as of March 31, 2024, was based on the fair market value of UMAC’s common stock.