Letter to Shareholders

Letter to Shareholders

By Drone USA, Posted in June 20, 2017

Dear Shareholders,
On May 8th we filed our Form 10. The process took a lot longer than we had anticipated. I would like to say special thanks to Dennis Antonelos, our CFO, Scott Salberg, our auditor, Ernie Stern, our SEC attorney, and Lily Hui and Michael Joy, our accountants. Without their incredible efforts our Form 10 never would have been filed. Together they make a formidable team. We are responding to comments from the SEC which we expect to complete in a few days and hope to have the Form 10 become effective in early July 2017. Now, I would like to discuss what we are working on.

Police Drone Sales

Last month we presented our Police Drones, Shadow and Cyclops, to dozens of Connecticut Police Departments at the CPCA (Connecticut Police Chiefs Association). The following week, we demonstrated our Shadow quadcopter to several Police Departments in Trumbul. On May 26th we received our first purchase order from a Connecticut Police Department. At the request of that Police Department, we will be demonstrating our fixed wing Cyclops on a beach in Connecticut. We will be inviting several surrounding Police Departments to join us that day along with some politicians from Hartford. Our Cyclops is ideal for water search and rescue missions. The Police can inexpensively look for boaters in distress or swimmers who ventured too far from the shoreline. It can also be used to locate great whites in Cape Cod. We intend to offer Cyclops to every coastal town in the US.

Howco (Our Subsidiary)

Approximately two months ago we hired Matthew Wiles as Howco’s new General Manager. Matthew has been hired to replace the previous owners Kathy and Chuck Joy. Kathy and Chuck will continue to train Matt until they think he is ready to lead Howco on his own. Matthew was one of five candidates that we interviewed. He was aggressive and requested to be interviewed first. Kathy, Chuck and I decided to bring Matthew and the other strong candidate in for a test. Each would work beside Chuck for a full day. We were looking for someone who was very detailed. Howco is a government supplier and must comply with complicated strict rules set forth in the long, detailed written contracts. Matthew impressed us from the start. During his interview he pulled out a Government contract that he had worked on. He proceeded to walk us through specific details of the contract. When he came in for his test, he proved to be the one. Since his hiring, we have been very pleased with his performance. As we grow, I believe Matthew will grow with us.

Our strategic intent with Howco is twofold: first, we intend to use Howco on the supply-side to our drone business and second as a conduit for drone sales to the US government. Howco is good at negotiating low-cost long-term supplier contracts. Howco will become our procurement arm for our US factory. In addition to procurement, Howco will search the US Government bid boards for drone sales and drone replacement part sales.

Rodrigo Kuntz and BRVant

Rodrigo Kuntz serves on our Board and is our CTO. He is also the owner of BRVant. In May of 2016 we signed an agreement with BRVant that gave us export rights and exclusive rights to Rodrigo’s technology. Rodrigo has earned PhDs in both computer and electrical science. In my view, Rodrigo is an extremely valuable asset to us. Last month, Rodrigo demonstrated our Shadow drones to several Police Departments in Trumbul. As result, we secured our first drone sale. In about four weeks we will be demonstrating our fixed-winged Cyclops to law enforcement on a beach in Connecticut. We want to show law enforcement personnel that Cyclops is an inexpensive alternative for search and rescue missions. Cyclops can easily locate boaters in distress and swimmers who have ventured too far from shore. This summer we will be demonstrating our drone products to more police departments in Connecticut, Massachusetts, New York and New Jersey.

Our Difference that Matters

Our difference that matters rests on three pillars: superior service, high quality products and most important lifelong customer friendships. I spent decades in the environmental remediation, insulation service and manufacturing businesses. I built those businesses on the three pillars: superior service, high quality products and building life-long customer friendships. I intend to do the same at Drone USA. As stories of our superior service and high quality products spread, so will our business. Every activity we pursue and every expense we incur will go to reinforce our three pillar strategy to create value for our targeted customers: law enforcement, fire fighters and commercial businesses such as precision agriculture, mining and utility inspection.

Manufacturing in the Northeast

We are considering manufacturing our police Shadow and Cyclops drones in Connecticut. We have met with employees from the Connecticut Department of Economic & Community Development and are reviewing Connecticut’s manufacturing incentive programs and application process. We are pleased with what Connecticut is offering. In addition, we are looking to the individual towns to see what potential tax incentives they provide. Concurrently, we are also looking to explore other potential locations in the Northeast, such as Massachusetts, New York, Rhode Island and New Jersey. All five states house top engineering universities and large aerospace manufacturers ensuring us access to a talented labor pool. We have also had discussions with a representative from the state of Rhode Island. Although different from Connecticut, Rhode Island’s incentives are very competitive. Within the year, we are looking to lease or buy 12,000 square feet of office/manufacturing space and hire somewhere between 25 and 30 new employees.

Respectfully Submitted,
Michael Bannon