Unusual Machines, Inc.

Current report

Recent Developments

Current report

Confidentially Marketed Public Offering

Current report

On March 23, 2026, we completed a confidentially marketed public offering in which we sold 8,823,529 shares of common stock at $17.00 per share resulting in gross proceeds of approximately $150.0 million, prior to payment of placement agent fees of $10.5 million, and 0.7 million in other offering expenses resulting in net proceeds of approximately $138.8 million. We intend to use the net proceeds from the offering to acquire additional inventory, working capital needs and general corporate purposes.

Current report

Inventory Purchase

Current report

During the month of May, we are initiating purchase orders of inventory estimated to be approximately $75.0 million to secure materials and inventory across our drone component product lines. We are continuing to see significant demand increase across the industry and these purchase orders help position the Company and its inventory availability to meet customer demand through supply chain planning. These purchases are expected to be made over the next several months.

Current report

Definitive Agreement to acquire Upgrade Energy

Current report

On May 7, 2026, we signed a definitive agreement to acquire DroneNX, LLC which operates as Upgrade Energy (“Upgrade Energy”), a manufacturer of battery and power systems solutions for unmanned aerial systems. The transaction purchase price is estimated at $52.0 million, which includes (i) a fixed quantity of 1,792,012 shares of the Company’s common stock at $13.9508 per share which was based on the preceding 5 day volume weighted average share price of the Company’s common stock prior to signing the definitive agreement, which is estimated to be approximately $25.0 million, which could be subject to change based on the Company’s common stock price at the time of closing, (ii) $1.0 million in cash upon closing of the transaction, and (iii) an additional $26.0 million in cash based on the Company recognizing $10.0 million in revenue related to internally manufactured batteries during the first two years after the acquisition closing date. The acquisition is subject to customary closing conditions, including Upgrade Energy completing their financial audit.

Current report

The acquisition adds battery expertise to our domestic manufacturing and engineering capabilities, adds additional drone components to our product mix, and strengthens our overall domestic supply chain and manufacturing capabilities.

Current report

Three Months Ended March 31, 2026 and 2025

Current report

During the three months ended March 31, 2026 we generated revenues totaling $8,095,836 compared to $2,042,300 during the three months ended March 31, 2025, representing an increase of $6,053,536 or 296%. The increase in revenue over the last 12 months primarily relates to the increase and establishment of our B2B business and revenue related to our NDAA and Blue UAS products. Our B2B revenue was $7,318,256 for the three months ended March 31, 2026 compared to $34,030 for the three months ended March 31, 2025.. See Note 2 to our Consolidated Financial Statements We recently started manufacturing production on certain products including drone motors and we continue to see significant increased interest and demand in our manufactured products in the first quarter and the remaining of 2026. We expect our revenue to continue to grow quarter over quarter in 2026 as we continue to build out our capacity including our manufacturing facilities and products as well increasing our staffing to handle additional demand from the market.

Current report

Gross Profit

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During the three months ended March 31, 2026, our gross profit was $2,654,107 compared to $496,807 during the three months ended March 31, 2025, resulting in an increase of $2,157,300 or 434%. Our gross margin, as a percentage of sales, totaled 32.8% during the three months ended March 31, 2026, compared to 24.3% during the three months ended March 31, 2025. While the margins we generated during the year are in line with our expectations and normal operating margins, we do anticipate continued fluctuations in our manufactured products into 2026 as we continue to improve our manufacturing process and become more efficient. We anticipate our gross margins to have fluctuations in 2026 as we start scaling our manufacturing process. We anticipate our gross margins will have a decline in the first two quarters of 2026 as we bring on and train our staff, work to scale production, increase to multiple shifts, and build out efficiencies. We anticipate our margins will improve in the second half of 2026 as we have more trained staff and efficient processes and as we bring on our highly-automated production line for motors.

Current report

During the three months ended March 31, 2026, selling and marketing expenses totaled $580,039 compared to $207,616 for the three months ended March 31, 2025, resulting in an increase of $372,423 or 179%. Sales and marketing expenses primarily relate to advertising spend related to Rotor Riot, marketing events and payroll expenses for our sales and marketing team. The increase relates mainly to adding additional staffing to our sales and marketing team. We anticipate our sales and marketing costs to increase in 2026 related to building out our enterprise sales team, however, we expect these increases to be at a lower rate than our revenue and other expenses as our enterprise sales are more dedicated efforts, while our retail revenue is driven off of advertising sales.

Current report

During the three months ended March 31, 2026, general and administrative expenses totaling $7,228,201 compared to $3,225,904 for the three months ended March 31, 2025, resulting in an increase of $4,002,297 or 124%. General and administrative expenses incurred include expenses related to operations for a public company including legal and other professional fees, public company insurance expense, and other costs associated with being public. We’ve also increased our headcount to support our growth which includes building out our accounting, HR, and facilities staff. The above amount includes $3,939,979 in non-cash stock compensation expense during the first three months of 2026 as compared to $1,906,373 during 2025. We expect our general and administrative expenses to increase during 2026 as we continue to build out our infrastructure with additional hires and systems. We also anticipate things like professional fees and other expenses related to being a public company to increase. In addition, we anticipate our non-cash stock compensation expense to be higher in 2026. We do not anticipate the increase in our general and administrative expenses to increase at the same rate as our revenue as we start to gain operational efficiencies at scale.

Current report

Other Income (Loss)

Current report

During the three months ended March 31, 2026, other income totaled $17,541,980 compared to $1,532 during the three months ended March 31, 2025, resulting in an increase of $17,540,448. This increase relates primarily to our unrealized gain from short term investments of $9,492,076, realized gain from short term investments of $7,264,743, and increase in interest income of $790,546.

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Operating Income (Loss)

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Our operating loss for the three months ended March 31, 2026 was $7,258,987, compared to an operating loss for the three months ended March 31, 2025 of $3,267,811. This increase followed our rapid expansion as we began to apply the cash we had raise to the expansion of our drone components business.

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Cash Flows

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Net cash used in operating activities was $17,412,987 during the three months ended March 31, 2026, compared to net cash used in operating activities of $1,193,628 during the three months ended March 31, 2025, representing an increase of $16,219,359. The increase was primarily attributable to changes in working capital, including increase in inventory of $8,510,541, prepaid and deposits for inventory of $3,817,595, accounts receivable of $1,817,598, and a decrease in accounts payable and accrued expenses of $435,307 . The Company recorded unrealized gains on short term investments of $9,492,076 and realized gains of $7,264,743, which were partially offset by share-based compensation expense of $3,939,979.

Current report

Net cash used in investing activities was $5,383,494 during the three months ended March 31, 2026 compared to net cash used in operating activities of $0 during the three months ended March 31, 2025. This increase consisted of $17,500,000 used in our strategic short term investments, $698,237 in purchases of property and equipment, partially offset by proceeds from sales of short term investments of $12,814,743

Current report

Net cash provided by financing activities totaled $142,455,327 during the three months ended March 31, 2026, compared to $2,436,966 during the three months ended March 31, 2025, resulting in an increase in net cash provided by financing activities of $140,018,362 or 5,745%. Our first quarter 2026 proceeds are from a public offering of common shares of $149,999,993 offset by offering costs of $11,200,000 and proceeds from warrant exercises of $3,395,000

Current report

On January 9, 2026, we received $3,395,000 in proceeds related to the 350,000 warrants that were exercised from the July 2025 Registered Direct Offering.

Current report

On March 23, 2026, we completed a public offering for the sale of 8,823,529 shares of Common Stock at a price of $17.00 per share for aggregate gross proceeds of approximately $150.0 million before deducting fees to the placement agent and other expenses payable by us in connection with the offering. We retained approximately $138.8 million in net proceeds after offering expenses.

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Company Overview

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We are a Nevada corporation with our principal place of business in Orlando, Florida. We sell and manufacture drones and drone components across a diversified brand portfolio, which includes Fat Shark, the leader in FPV (first-person view) ultra-low latency video goggles for drone pilots. We also retail small, acrobatic FPV drones and equipment directly to consumers through the curated Rotor Riot e-commerce store. Beginning in the second half of 2024, we launched our business-to-business (“B2B”) channel selling drone parts to commercial customers. With a changing regulatory environment, we seek to be a dominant Tier-1 parts supplier to the fast-growing multi-billion-dollar U.S. drone industry. The Company recently opened a drone motor manufacturing facility in Orlando, Florida, is expecting to open a fulfillment facility in Orlando, Florida in December 2025, and expects to open a drone manufacturing facility in the coming months in Orlando, Florida.

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Recent Developments, Challenges and Uncertainties

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At the Market Agreement

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On August 28, 2025, we entered into a Capital on Demand Sales Agreement (the "Sales Agreement”) with Jones Trading Institutional Services LLC ("Jones”), pursuant to which we may issue and sell over time and from time to time up to $300,000,000 worth of shares of our common stock (the "Shares”). Sales of the Shares, if any, may be made by any method permitted by law deemed to be an "at the market” offering as defined in Rule 415 of the Securities Act of 1933 (the "Securities Act”), including without limitation sales made directly on or through the NYSE American, the trading market for the Company’s common stock, or any other existing trading market in the United States for the Company’s common stock, sales made to or through a dealer other than on an exchange or otherwise, sales made directly to Jones as principal in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or in any other method permitted by law. Jones will use commercially reasonable efforts to sell on behalf of us all the Shares requested to be sold by us, consistent with its normal trading and sales practices, subject to the terms of the Sales Agreement.

Previous report

Under the Agreement, Jones will be entitled to compensation of 3.0% of the gross proceeds from the sales of the Shares sold under the Sales Agreement. In addition, we have agreed to reimburse Jones for the fees and disbursements of its counsel, in an amount not to exceed $55,000. In addition, we shall reimburse Jones for legal fees of its counsel up to $3,750 for each quarterly due diligence update. The Shares are being offered and sold pursuant to a prospectus supplement filed with the SEC.

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During the month of October 2025, we sold 4,666,600 shares of common stock at an average price of $15.46 per share under the Agreement for total gross proceeds of approximately $72.1 million. We paid Jones approximately $2.2 million related to the sales of common stock under the Sales Agreement.

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On July 14, 2025, we entered into a securities purchase agreement with certain investors for the purchase and sale of 5,000,000 shares of common stock in a registered direct offering at a public offering price of $9.70 per share. On July 15, 2025, the offering closed and we received aggregate gross proceeds of $48.5 million before deducting placement agent fees and other related expenses. The Company intends to use the proceeds of this offering for the purchase of our drone motor manufacturing equipment which we estimate to be approximately $4.0 million, general corporate purposes and working capital.

Previous report

With the funds received from our recent offerings, we are focusing on growing both our enterprise and retail revenue channels and investing in drone component manufacturing in the United States. During the first quarter of 2025, we added both the Rotor Riot Brave 55A ESC (electronic speed controller), and the Fat Shark Aura FPV (first-person view) Camera to the U.S. Department of Defense Innovation Units Blue UAS Framework (“DIU Blue Framework”). In addition, in July 2025, we added the Fat Shark Aura Video Transmitter (VTX) to the DIU Blue Framework. In furtherance of our B2B business, we have entered into a new lease of a 17,000 square foot facility in Orlando, Florida effectively August 1, 2025, where we recently opened a drone motor manufacturing plant. See Note 7 to Consolidated Financial Statements. While we continued to see top line revenue growth during the first half of 2025, our continued future plans for retail revenue growth and margins are subject to uncertainties outside of our control, including changes to trade policy with respect to tariffs and other impacts to our global supply chain cost structure. We are continually evaluating the tariff landscape and working to find reliable and high quality suppliers in multiple countries including the United States and Taiwan that we anticipate will have the least amount of impact to our retail costs and overall margin. Because of the tariff uncertainties, we cannot predict the impact tariff policies in the United Staes and other countries will have on our business. But our consumer business (“B2C”) relies heavily on China so retaliatory tariffs can adversely affect us especially our B2C business. See “Item 1A – Risk Factors” for more information on the risks associated with the uncertainty of the imposition of tariffs on our business.

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Rotor Lab Acquisition

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On June 12, 2025, we entered into a Share Purchase Agreement (“SPA”) to acquire 100% of the capital stock of Rotor Lab Pty Ltd., an Australian company (“Rotor Lab”) from its existing shareholders. We agreed to issue the sellers a total of $4,000,000 of shares of our common stock, plus additional earnout consideration of up to $3,000,000 worth of shares of our common stock. $800,000 of the initial consideration will be restricted and subject to forfeiture in the event of a breach of representations and warranties and indemnification. The acquisition of Rotor Lab was finalized on September 3, 2025 with the issuance of 656,642 shares of our common stock.

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Recent Customer Purchase Orders

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On October 15, 2025, we secured an order from the U.S. Army’s 101 st Airborne Division for 3,500 NDAA-compliance motors produced at our new U.S. based manufacturing facility. The motors will support the Division’s deployment of the new Attritable Battlefield Enabler V1.01 drones. The Army has also indicated plans to expand procurement, targeting an additional order of 20,000 components including motors from us in 2026.

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On October 3, 2025, we secured an $800,000 purchase order for high-performance drone components from Red Cat. The order includes several of our Blue UAS products and motors that will be integrated into Red Cat’s FANG™ drones, supporting ongoing demand for U.S. made, NDAA compliant systems in defense, public safety, and other government agency applications.

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On September 30, 2025, we secured a $12.8 million defense purchase order supplying Strategic Logix’s RRSL Drone Systems. We are the primary supplier of NDAA compliant components including our Blue UAS listed Aura Analog Camera, Aura VTX, Brave Flight Controller, and Brace ESCs for the RRSL line. The RRSL developed by Strategic Logix is an interoperable UAV platform with configurations starting at $800, including manual, autonomous, and fiber enabled options. The order covers more than 160,000 of our manufactured components, including ground control systems, highlighting both the demand scale and our central role in enabling production.

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Recent Investments

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On September 29, 2025, we entered into a Securities Purchase Agreement with Kopin Corporation (“Kopin”) pursuant to which we purchased 2,380,952 shares of Kopin’s common stock at a purchase price of $2.10 per share, for an aggregate purchase price of $5.0 million In addition, on September 29, 2025, Kopin and Unusual Machines entered into a Registration Rights Agreement, pursuant to which Kopin agreed to file a registration statement with the SEC on or prior to the 40th calendar day following the date of the Securities Purchase Agreement.

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On September 16, 2025, we entered into a Securities Purchase Agreement with Lightpath Technologies, Inc. (“Lightpath”) pursuant to which we purchased 800,000 of Lightpath’s common stock at a purchase price of $5.00 per share for an aggregate purchase price of $4.0 million. On October 1, 2025, Lightpath filed a registration statement on Form S-3 to register the issuance of such shares of common stock.

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On August 19, 2025, we entered into a Securities Purchase Agreement with Safe Pro Group Inc. (“Safe Pro”) pursuant to which we purchased for an aggregate purchase price of $2.0 million an aggregate of: (i) 500,000 shares of Safe Pro’s common stock, and (ii) three-year warrants to purchase up to 500,000 shares of Safe Pro’s common stock (the “Warrants”). The Warrants were issued on August 21, 2025, have an initial exercise price equal to $6.00 per share, are immediately exercisable, and will expire three years from the date of issuance. The combined purchase price of one share of common stock and one accompanying Warrant was $4.00. The issuance of the shares of common stock and the shares of common stock underlying the warrants are registered pursuant an effective registration statement (No. 333-290107) and are freely tradeable.

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Recent Hires

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On October 1, 2025, Unusual Machines appointed Mr. Al Ducharme as Vice President of Engineering. Mr. Ducharme has more than 25 years of experience in photonics, optics, embedded systems, and unmanned aerial vehicle (UAV) technologies. At Hoverfly, he grew the company from startup to global supplier, launching more than 20 products, including one of the world's first drone flight controllers. He holds 30 U.S. and international patents and a proven record in product development, IP strategy, and scaling engineering teams. In his new role, Ducharme wil report to COO Andrew Camden and partner with Unusual Machines' production team to align design and engineering, focusing on speed, quality, and anticipating customer needs.

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On September 19, 2025, Unusual Machines appointed Mr. Nathaniel Kennedy as Vice President of Marketing. With over 25 years of experience in e-commerce, consumer, enterprise, and licensing, Mr. Kennedy has led digital transformation, forged high-profile partnerships-including a NASCAR collaboration-and scaled businesses into national leaders. At Unusual Machines, he will oversee marketing for Rotor Riot, Fat Shark, and the broader portfolio, in addition to supporting enterprise and defense growth.

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On September 4, 2025, Unusual Machines appointed Mr. Craig McIntyre as Vice President of Enterprises Sales. Mr. McIntyre brings more than 20 years of leadership in sales and business development, including senior roles building drone solutions ecosystems and navigating government procurement. Most recently, he served as Head of Commercial Market Development for Drone Solutions at BT Group, where he oversaw counter UAS and infrastructure contracts, introduced the world's first 4G drone SIM, and launched national drone survey services. He has also founded and scaled multiple start-ups focused on UAV, counter-UAS, and emerging technology markets.

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On August 11, 2025, Unusual Machines appointed Mr. Tom Mercier as Vice President of Headsets. Mr. Mercier brings deep technical and operational experience in developing and scaling specialty optical systems-from early prototypes through high-yield manufacturing. His leadership at Magic Leap, Google, and Broadcom demonstrates his ability to bring sophisticated hardware to market efficiently, with an emphasis on yield, quality, and operational discipline.

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On July 7, 2025, Unusual Machines promoted Stacey Wright to executive Vice President of Revenue. Ms. Wright joined Rotor Riot in 2020 as Vice President and was promoted to President in 2024 following its acquisition by Unusual Machines. She has been instrumental in scaling operations and laying the foundation for sustained growth. At the time she joined, Rotor Riot's annual revenue stood at $1.7 million.

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Three Months Ended September 30, 2025 compared to the Three Months Ended September 30, 2024

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During the three months ended September 30, 2025 we generated revenues totaling $2,134,588 compared to $1,531,264 during the three months ended September 30, 2024, representing an increase of $603,324 or 39%. The growth in revenue is primarily driven from growth in our enterprise channel as we are manufacturing Blue UAS products along with growth in our retail channel.

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Cost of Goods Sold & Gross Profit

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During the three months ended September 30, 2025, our cost of goods sold was $1,294,200 compared to $1,131,777 during the three months ended September 30, 2024, resulting in an increase of $162,423 or 14%. The increase is cost of goods sold relates to our increase in sales during the period.

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During the three months ended September 30, 2025, our gross profit was $840,388 compared to $399,487 during the three months ended September 30, 2024, resulting in an increase of $440,901 or 110%. Our gross margin, as a percentage of sales, totaled 39.4% during the three months ended September 30, 2025, compared to gross margin of 26.1% during the three months ended September 30, 2024. We try and maintain margins in the 20% - 30% range on majority of our products and anticipate our gross profit to fluctuate period to period depending on certain promotions and products that are sold during the period and the mix of retail and enterprise sales that are sold during the period. We continue to see higher gross margins on our enterprise sales. Our gross margin is also subject to additional fluctuations based on the increased tariffs being imposed on certain products, which have been passed on to customers and will have an overall impact on our gross margin.

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During the three months ended September 30, 2025, operations expenses totaled $636,705 compared to $218,126 during the three months ended September 30, 2024, resulting in an increase of $418,579 or 192%. Operations expense relate to expenses incurred for fulfilling orders and warehouse related expenditures including our warehouse personnel, supplies, and shipping expenses. The increase primarily relates to additional costs incurred related to the opening of our motor factory and its pre-opening operations along with additional shipping costs from the increase in revenue.

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During the three months ended September 30, 2025, research and development expenses totaled $39,369 compared to $15,000 for the three months ended September 30, 2024, resulting in a increase of $24,369 or 162%. Research and development expense primarily relates to new product development and is subject to fluctuations based on specific research and development projects ongoing during the period.

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During the three months ended September 30, 2025, sales and marketing expenses totaled $373,539 compared to $252,253 for the three months ended September 30, 2024, resulting in an increase of $121,286 or 48%. The increase primarily relates to additional costs related to marketing of our retail operations and additional staff that we’ve hired during the quarter.

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During the three months ended September 30, 2025, general and administrative expenses totaling $4,730,063 compared to $1,374,989 for the three months ended September 30, 2024, resulting in an increase of $3,355,074 or 244%. The increase primarily relates to the increase in non-cash stock compensation expense which was approximately $2.1 million for the quarter and an increase in professional fees and other public company expenses.

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During the three months ended September 30, 2025, non-cash depreciation and amortization expenses totaled $22,449 compared to $171 for the three months ended September 30, 2024, resulting in an increase of $22,278. The increase relates to an increase in depreciation expense for equipment acquired from the Rotor Lab acquisition and amortization related to intangibles.

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Net Income

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Our net income for the three months ended September 30, 2025, totaled $1,603,465 compared to a net loss of $2,144,250 for the three months ended September 30, 2024, resulting in an increase in net income of $3,747,715 or 174%. The increase in net income relates to the unrealized gain from our short term investments for approximately $5.8 million offset by an increase in SG&A expenses. With our minority investments in public companies, we are required to mark to market our portfolio and report the corresponding gain or loss.

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Results of Operations – Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024

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Revenue

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During the nine months ended September 30, 2025 we generated revenues totaling $6,300,857 compared to $3,561,303 during the nine months ended September 30, 2024, representing an increase of $2,739,554 or 77%. The growth in revenue is driven from growth in our existing retail channel and the expansion of our enterprise sales.