Unusual Machines, Inc.

Background of Unusual Machines

Unusual Machines, Inc. (“Unusual Machines” or the “Company”) is a Nevada corporation organized in 2024 which is a successor to a Puerto Rican corporation organized in 2019. The Company is engaged in the commercial drone industry, with its principal place of business in Orlando, Florida. In September of 2025, the Company acquired Rotor Lab Pty. Ltd., an Australian company (“Rotor Lab”).

Unusual Machines manufactures and sells drone components and drones across a diversified brand portfolio through business-to-business (“B2B”) sales and a curated retail channel. There is strong brand recognition of the Unusual Machines, Rotor Riot, and Fat Shark brands, particularly in the first person view (“FPV”) and small military sub-segments of the drone market. Unusual Machines is rapidly growing its business by onshoring the manufacturing of critical drone components in the United States. With the transition to onshoring drone component production, the Company is expanding B2B sales to customers that require a National Defense Authorization Act (“NDAA”)-compliant domestic supply chain.

A key factor in Unusual Machines’ component production is the validation of newly supply chains to meet defense and federal procurement requirements. The Defense Contract Management Agency audits new drone components for supply chain and cybersecurity risks. Components that pass the audit can then be put on the actively maintained Blue Framework list. Since August 2024, Unusual Machines has developed six components (and variants) that have been approved and added to the Blue Framework. The Company intends to continue developing and certifying new components through this process to ease acquisition requirements for domestic drone manufacturers, which are ultimately significant customers.

The Drone Industry

The drone industry continues to expand as a powerful business, defense, and public safety tool, as well as a popular recreational activity, with growth occurring broadly across our targeted industries. According to Drone Industry Insights’ Global Drone Market Report 2025–2030, the global drone market is projected to reach approximately U.S. $57.8 billion by 2030. A Fact.MR report indicates the drone accessories market was valued at approximately $25.2 billion in 2024 and is projected to reach ~$156 billion by 2034 at a ~20% CAGR. Furthermore, the global drone flight controller system market was approximately $7.14 billion in 2024 and is expected to reach around $13.05 billion by 2029 (CAGR ~12.8%) according to the Business Research Company. Similarly, Global Market Insights reports that the drone motor market was valued at ~$4.7 billion in 2024 and is forecast to grow to ~$9.2 billion by 2030, and ~$15.9 billion by 2034 at a ~13.1% CAGR. Fortune Business Insights likewise forecasts the motor market at $6.7 billion in 2025, with expansion toward $16.3 billion by 2034 as commercial and industrial drone deployment increases.

Unusual Machines intends to pursue strategic acquisition targets that are cash flow positive and manufacture and sell drone components or enable us to domestically produce them. The Company believes that very promising companies (both public and private) are, in many instances, underfunded and unable to scale their innovative products and solutions. We believe that unlocking this potential will be key to industry consolidation. The Company’s acquisition strategy is intended to support broader industry shifts toward U.S.-manufactured and NDAA-compliant drone systems, while maintaining a deliberate approach to capital allocation and integration risk.

Low Cost and Attritable Drone Market Segment

Unusual Machines principally operates and manufactures components in the Group 1 Unmanned Aerial Systems (“UAS”) which is often referred to as the small drone segment of the drone industry. These drones are known for being light weight, high speed, and low-cost attritable drones where responsiveness and situational awareness are essential. In the defense sector, these drones are primarily used for tactical missions with real time intelligence, surveillance, and reconnaissance. In the commercial and consumer sector, these drones are used for freestyle, racing, cinematic production, mapping and commercial use.

This also includes FPV drones where pilots use wearable display devices or screens that provide real-time, first-person video feed from a camera mounted on the drone, creating an immersive operating experience in which the pilot interacts with the aircraft through visual immersion. This experience is enabled by live-streamed video transmitted with ultra-low latency from the drone to the pilot via radio links, enabling precise pilot control. FPV systems integrate onboard cameras, video transmission modules, flight controllers, motors, and pilot display devices that operate as an integrated system over radio communications. While FPV video transmission has historically relied on analog signals, digital transmission systems are increasingly adopted as reliability, range, and image quality improve. These systems require sophisticated electronics capable of maintaining low-latency, reliable performance during flight.

Plans for Growth, Development, and Expansion

Unusual Machine’s intends to strengthen its market position through continued organic revenue growth while expanding its role as a U.S. supplier of critical drone components. The Company’s growth strategy emphasizes disciplined execution, increased operational scale, and expansion of its B2B component sales to commercial and defense-oriented customers.

The Company’s business strategy includes (i) increasing its overall customer base through broader adoption of its products across consumer, commercial, and mission-oriented applications; (ii) investing in the development and expansion of hardware products that support increased performance, reliability, and manufacturability; (iii) growing revenue from its existing customer base using a “land-and-expand” approach that establishes initial relationships and deepens engagement over time through consistent product delivery and service; (iv) selectively pursuing acquisitions and partnerships that enhance domestic manufacturing capabilities, supply chain control, or component offerings; and (v) making strategic investments in emerging leaders in the U.S. drone ecosystem that would help us broaden our pipeline and relationships with our suppliers and customers and thereby support the American drone ecosystem.

Customers

Historically, Unusual Machines generated a significant portion of its revenue through direct-to-consumer sales via its Rotor Riot e-commerce platform. As Unusual Machines continues to expand its B2B component offerings, enterprise sales have grown to represent a larger portion of total revenue. In 2025, enterprise customers became the Company’s primary revenue driver.

The Company’s enterprise customer base consists primarily of U.S.-based drone manufacturers and system integrators that purchase components for use in consumer, commercial, and mission-oriented drone platforms. Unusual Machines expects continued growth in this customer base as demand for domestically sourced, reliable, and compliant drone components increases, supported by expanding manufacturing capacity and broader component availability.

Competition

Unusual Machines operates in a highly competitive drone and drone components market characterized by rapid technological change, pricing pressure, and the presence of large, well-capitalized international manufacturers. Competition varies by product category and end market, particularly between consumer-facing products and enterprise-focused component sales.

In the global drone market, SZ DJI Technology Co., Ltd. (“DJI”) is the dominant manufacturer, with industry research firms estimating that DJI accounts for a majority of global consumer and prosumer drone sales. DJI’s scale and vertical integration create competitive pressure across the industry, while evolving regulatory requirements and customer demand for U.S.-based, compliant supply chains have created opportunities for alternative suppliers. See “Government Regulation and Federal Policy” below for recent information relating to DJI.

Within the drone components market, Unusual Machines competes with domestic and international manufacturers, including T-Motor, Orqa, ModalAI, and ARK Electronics. Competition is based on price, performance, reliability, availability, and compliance.

Unusual Machines differentiates itself by offering price-competitive, domestically manufactured and assembled drone components designed to meet NDAA requirements and align with Department of Defense procurement frameworks, including the Blue UAS ecosystem, while focusing on supply chain control and execution reliability.

The Company’s Drone Component Manufacturing

The Company operates multiple manufacturing facilities located near its headquarters in Orlando, Florida. As of March 2026, Unusual Machines operates five facilities in the Orlando area to support domestic drone component production and assembly, one of which is our corporate office. These facilities manufacture a variety of drone components, including motors, headsets, and other critical components. The components support consumer, defense, and enterprise customers. The Company expects to continue to expand its production footprint in the Orlando area in a planful and deliberate manner, including the potential addition of new product categories, such as batteries and cameras, as operational capacity and customer demand support such expansion. See “Item 1A. Risk Factors.”

Suppliers

Unusual Machines sources inventory from approximately 70 suppliers, some of which are subject to varying tariffs. Since 2019, the United States has implemented and continuously increased tariffs on certain imported goods, which Unusual Machines is currently subject to, ranging from 2% to 30%. These tariffs can increase the cost of goods, reducing the Company’s profit margins or increasing the total price for our customers.

Certain competitors in the drone retail and components markets are subject to the same tariffs and rely on supply chains that include a greater mix of foreign-sourced products, including components manufactured in China. Unusual Machines’ increasing use of domestically manufactured components may reduce relative exposure to tariffs on imported goods and improve supply chain resilience. In addition, evolving trade policies have led some U.S. drone manufacturers to place greater emphasis on domestic sourcing, which the Company believes has supported increased customer interest in U.S.-based component suppliers, including Unusual Machines, that are actively onshoring, although such impacts remain subject to market conditions and policy developments.

For a discussion of risks related to tariffs and international trade policy, see “Item 1A. Risk Factors—Risks Related to Our Business and Financial Condition.”

Government Regulation and Federal Policy

National Defense Authorization Act and American Security Drone Act

In December 2023, Congress passed the NDAA, which includes provisions commonly referred to as the American Security Drones Act (“ASDA”). These provisions are intended to restrict the procurement and use of certain unmanned aircraft systems (“UAS”) manufactured or assembled by foreign entities identified as national security threats, including certain Chinese manufacturers. The ASDA has been enacted and is being implemented through federal regulations and agency guidance. Specifically, the American Security Drone Act:

On November 21, 2025, the White House Office of Management and Budget issued Memorandum M-26-02 implementing Section 1829 of ASDA and related provisions. The memorandum requires federal civilian agencies, within 180 days of issuance, to integrate specified information security and risk assessment procedures into UAS procurements and into grants and cooperative agreements that fund UAS acquisitions. In addition, consistent with ASDA and the Federal Acquisition Regulation, federal agencies are prohibited from procuring or operating certain “FASC-prohibited” unmanned aircraft systems manufactured or assembled by designated foreign entities, subject to statutory exemptions and case-by-case waivers. Beginning December 22, 2025, federal funds awarded through grants, cooperative agreements, or other federal awards may not be used to procure or operate such systems except where an applicable exemption or approved waiver applies. We anticipate that this will stimulate additional demand for domestically made drones and drone components.

Implementation of these provisions is occurring through federal rulemaking, including amendments to the Federal Acquisition Regulation (“FAR”), and is subject to agency-specific guidance, exemptions, and transition periods.

FCC Equipment Authorization and Countering CCP Drones Act

In December 2024, Section 1709 of the National Defense Authorization Act was enacted. This provision expands the authority of the Federal Communications Commission (“FCC”), in coordination with national security agencies, to conduct security reviews of certain foreign-manufactured drone systems.

The legislation directs the Nation Security Agencies to conduct a national security determination of the two largest Chinese drone companies (DJI and Autel), within a one year period. If these manufacturers are deemed an unacceptable national security threat, or if a determination is not completed within one year, the FCC may place the entities on its Covered List, which proscribes granting any future FCC licenses, which are necessary for the importation and marketing of UAS in the United States.

In October 2025, the FCC voted unanimously (3-0) to adopt a rule allowing the agency to retroactively ban equipment, including previously authorized wireless devices, if the manufacturer is deemed a national security threat.

On December 23, 2025, the FCC issued guidance of implementation of Section 1709. Going forward UAS seeking FCC approvals must have at least 65% of components, based on value, and must be domestically sourced (under the March 2022 changes to Federal Acquisition Regulation: Amendments to the FAR Buy American Act Requirements). This pertains to drones made in any country other than the United States. The FCC specifically includes motors and batteries. Without meeting this standard, a company must seek a waiver from the FCC in order to receive a license. The FCC updated its Covered List to include drones and drone components produced abroad. The Covered List identifies communications equipment and services that are deemed to pose an unacceptable risk to the national security of the U.S. or the safety and security of U.S. persons. Equipment on the Covered List is prohibited from receiving FCC authorization. The FCC’s updated restrictions apply to new device models but do not prohibit the import, sale or use of any existing models previously authorized by the FCC.

On January 7, 2026, the FCC partially reversed the restriction to exempt drones and drones components on the Pentagon’s Blue List of cleared UAS aircraft, such as components produced by foreign manufacturers including Sony, Nvidia and Panasonic. However, DJI, the world’s drone manufacturer, is based in China and was not included on the Blue UAS List.

As a result of the December restrictions, DJI filed a petition in the U.S. Court of Appeals for the Ninth Circuit challenging the FCC’s decision to add foreign drones and components to the Covered List. DJI alleges that the FCC’s actions violate the Fifth Amendment and exceed the FCC’s statutory authority and that it will sustain severe harm as the FCC has used the ruling to justify restrictions on its ability to import its existing products, as well as new products outside the scope of the ruling, into the U.S. We cannot predict the outcome of this litigation.

While the scope, timing, and outcome of these reviews remain subject to FCC implementation and agency discretion, any resulting restrictions on new equipment authorizations could limit the introduction of new drone models from affected manufacturers into the U.S. market. Such restrictions will apply across consumer, commercial, and enterprise use cases and could increase demand for compliant drone systems and components from U.S.-based suppliers, including Unusual Machines, subject to regulatory interpretation and future policy developments.

Department of Defense Policy and the Drone Dominance Initiative

In parallel with legislative and regulatory actions, in December 2025, the Department of War (“DoW”) announced Drone Dominance, an iterative $1.0 billion plan to purchase small, lethal drones over the next two years. This program is designed to accelerate the development, procurement, and deployment of secure, scalable, and cost-effective unmanned systems sourced from domestic and allied suppliers. This and other initiatives emphasize rapid manufacturing, resilient supply chains, and the availability of compliant components suitable for defense and allied applications.

Collectively, these developments reflect a broader federal effort to reduce reliance on foreign-manufactured drone systems and to strengthen the U.S. drone industrial base. While the timing and scope of implementation may vary, the Company believes these actions are contributing to increased demand for U.S.-manufactured and compliant drone components, subject to regulatory interpretation and future policy developments.

Environmental Considerations

Compliance with applicable environmental laws since inception has not had a material effect upon the Company’s capital expenditures, earnings or competitive position. However, drones are battery operated which use electricity for charging. To that extent, except for users who use solar and other non-electrical power to charge drones, users of drones the company sells burn carbon which negatively affects the environment.

Employees and Human Capital Resources

As of March 6, 2026, the Company had 141 full-time employees and 3 full-time contractors, including our Chief Executive Officer, whose services are performed under a consulting agreement.

Property

The Company’s headquarters are in Orlando, Florida. As of March 2026, we lease five facilities in Orlando, Florida which are utilized for manufacturing, warehousing and a corporate office. We also lease a facility in Canberra, Australia which is utilized for motor manufacturing. Our leases total 62,500 square foot in the aggregate.

Intellectual Property

The Company has consolidated its IP into a subsidiary, UMAC IP Holdings Corp. The IP portfolio primarily includes design and utility patents related to FPV headsets. None of the patents are currently licensed and IP is generated in the general course of doing engineering design.

The following table summarizes currently issued patents (indicated by “Issued”) including the grant dates thereof, and patent applications (indicated by “Pending or Published”). As the chart indicates, some of these patents are in the U.S., where when issued the patent protection generally applies for 20 years from the date the patent application was made (subject to potential extension, if applied for and granted). In general, patent protection provides the patent holder with a monopoly on the invention within its scope for the duration of the patent.

Trademark Portfolio

The following table summarizes current registered trademarks (indicated by “Registered”) including the registration dates. As the chart indicates, these trademarks are registered in the United States and abroad.

Research and Development

Research and development activities are part of Unusual Machine’s business, and the Company will follow a disciplined approach to investing capital and resources to create new drone technologies and solutions. Research and development costs were approximately $202,585 and $90,584, for the years ended December 31, 2025 and 2024, respectively and primarily related to developing NDAA compliant products including our Brave F7 flight controller, Brave 55A ESC and the Fat Shark Aura FPV Camera. A fundamental part of this approach is a well-defined screening process that helps us identify commercial opportunities that support desired technological capabilities in the markets we serve.