Unusual Machines, Inc.

Previous wording

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 wording

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. In addition to Upgrade Energy’s California facility, we expect to open a battery manufacturing facility in Orlando, Florida in either December or January.

Previous wording

During the three months ended June 30, 2026 we generated revenues totaling $16,722,467 compared to $2,123,970 during the three months ended June 30, 2026, representing an increase of $14,598,497 or 687%. The increase in revenue primarily relates to the increase and establishment of our enterprise business and revenue related to our National Defense Authorization Act (“NDAA”) and Blue UAS products. Our enterprise revenue was $14,220,865 for the three months ended June 30, 2026 compared to $192,090 for the three months ended June 30, 2025. We started manufacturing production on certain products including drone motors, headsets, cameras and other drone related products during the first half of 2026. As we continue to expand our manufacturing capabilities and the larger drone market develops, we continue to see significant increased interest and demand in our manufactured products as we head into the second half of 2026. We expect our revenue to continue to grow as we continue to build out our capacity including our manufacturing facilities and products and significantly increasing our manufacturing staff to handle additional demand from the market.

Current wording

During the three months ended September 30, 2026 we generated revenues totaling $13,903,032 compared to $2,134,588 during the three months ended September 30, 2025, representing an increase of $11,768,444 or 551%. The increase in revenue primarily relates to the increase and establishment of our enterprise business and revenue related to our National Defense Authorization Act (“NDAA”) and Blue UAS products. Our enterprise revenue was $12,556,925 for the three months ended September 30, 2026 compared to $976,138 for the three months ended September 30, 2025. We started manufacturing production on certain products including drone motors, headsets, cameras and other drone related products during 2026. As we continue to expand our manufacturing capabilities and the larger drone market develops, we continue to see significant increased interest and demand in our manufactured products in the fourth quarter. We expect our revenue to continue to grow as we continue to build out our capacity including our manufacturing facilities and products and significantly increasing our manufacturing staff to handle additional demand from the market. With the acquisition of Upgrade Energy and the opening of our new Orlando battery manufacturing facility, we see battery manufacturing being a key part of the total mix of sales.

Previous wording

During the three months ended June 30, 2026, our cost of goods sold was $10,920,334 compared to $1,329,291 during the three months ended June 30, 2025, resulting in an increase of $9,591,043 or 722%. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct and indirect product costs. The increase in cost of goods sold is driven entirely by the increase in our revenue.

Current wording

During the three months ended September 30, 2026, our cost of goods sold was $8,986,728 compared to $1,294,200 during the three months ended September 30, 2025, resulting in an increase of $7,692,528 or 594%. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct and indirect product costs. The increase in cost of goods sold is driven entirely by the increase in our revenue.

Previous wording

During the three months ended June 30, 2026, our gross profit was $5,802,134 compared to $794,679 during the three months ended June 30, 2025, resulting in an increase of $5,007,455 or 630%. Our gross margin, as a percentage of sales, totaled 34.7% during the three months ended June 30, 2026, compared to gross margin of approximately 37.4% during the three months ended June 30, 2025. Our gross profit is entirely driven based on our growth in top line revenue, while the decrease in margins is driven primarily by our continued and rapid expansion of manufacturing, however, we believe our margins are still within normal operating limits and will continue to increase as our manufacturing process continues to mature.

Current wording

During the three months ended September 30, 2026, our gross profit was $4,916,304 compared to $840,388 during the three months ended September 30, 2025, resulting in an increase of $4,075,916 or 485%. Our gross margin, as a percentage of sales, totaled 35.47% during the three months ended September 30, 2026, compared to gross margin of approximately 39.4% during the three months ended September 30, 2025. Our gross profit is entirely driven based on our growth in top line revenue, while the decrease in margins is driven primarily by our continued and rapid expansion of manufacturing, however, we believe our margins are still within normal operating limits and will continue to increase as our manufacturing process continues to mature.

Previous wording

During the three months ended June 30, 2026, operations expenses totaled $1,540,919 compared to $404,277 during the three months ended June 30, 2025, resulting in an increase of $1,136,642 or 281%. 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 our motor factory operations that we are putting in place along with additional shipping costs from the increase in revenue.

Current wording

During the three months ended September 30, 2026, operations expenses totaled $2,012,744 compared to $636,705 during the three months ended September 30, 2025, resulting in an increase of $1,376,039 or 216%. 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 our motor factory operations that we are putting in place along with additional shipping costs from the increase in revenue.

Previous wording

During the three months ended June 30, 2026, research and development expenses totaled $430,759 compared to $62,731 for the three months ended June 30, 2025, resulting in an increase of $368,028 or 587%. 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 and include both internal and external resources and costs associated with new product development.

Current wording

During the three months ended September 30, 2026, research and development expenses totaled $350,548 compared to $39,369 for the three months ended September 30, 2025, resulting in an increase of $311,179 or 790%. 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 and include both internal and external resources and costs associated with new product development.

Previous wording

During the three months ended June 30, 2026, sales and marketing expenses totaled $790,012 compared to $302,358 for the three months ended June 30, 2025, resulting in an increase of $487,654 or 161%. The increase primarily relates to the buildout of our sales and marketing teams as our business shifts from retail to enterprise. In addition, we incurred additional expenses during the second quarter related to marketing events and increase in ad spend during the period.

Current wording

During the three months ended September 30, 2026, sales and marketing expenses totaled $613,614 compared to $373,539 for the three months ended September 30, 2025, resulting in an increase of $240,075 or 64%. The increase primarily relates to the buildout of our sales and marketing teams as our business shifts from retail to enterprise. In addition, we incurred additional expenses during the second quarter related to marketing events and increase in ad spend during the period.

Previous wording

During the three months ended June 30, 2026, general and administrative expenses totaling $10,799,261 compared to $7,195,193 for the three months ended June 30, 2025, resulting in an increase of $3,604,068 or 50%. General and administrative expenses incurred include expenses related to operations for a public company including legal and other professional fees, public company insurance expense, investor relations 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. 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 items 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 wording

During the three months ended September 30, 2026, general and administrative expenses totaled $10,238,161 compared to $4,730,063 for the three months ended September 30, 2025, an increase of $5,508,098 or 116%. General and administrative expenses include expenses related to operating as a public company, including legal, auditing and other professional fees, public company insurance expense, investor relations and other costs associated with being public. We have also increased our headcount to support our growth, including expanding our accounting, HR, and facilities staff. We expect our general and administrative expenses to increase as we continue to increase our infrastructure with additional hires, systems and processes, and as we become subject to additional compliance related activities. We also anticipate 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 our general and administrative expenses to increase at the same rate as our revenue as we start to gain operational efficiencies at scale.

Previous wording

During the three months ended June 30, 2026, other income and expense totaled $50,590 compared to $225,734 during the three months ended June 30, 2025, resulting in a decrease of $175,144. This decrease relates primarily to our unrealized loss from short-term investments of $3,883,535 offset by realized gain from short-term investments of $2,267,931 and an interest income increase of $1,594,428.

Current wording

During the three months ended September 30, 2026, other income and expense totaled other expense of $16,681,327 compared to other income of $6,565,202 during the three months ended September 30, 2025, resulting in a decrease of $23,246,529. This decrease relates primarily to our unrealized loss from short-term investments of $24,231,394 offset by an increase in interest income increase of $985,489.

Previous wording

Our net loss for the three months ended June 30, 2026, totaled $7,783,553 compared to $6,964,739 for the three months ended June 30, 2025, resulting in an increase in net loss of $818,814 or 12%. This increase in net loss relates to the increase in realized gain of trading securities of $2.2 million plus an increase in interest income of $1.6 million, which was offset by a decrease in operating profit of $643,669 and unrealized loss in trading securities of $3.9 million.

Current wording

Our net loss for the three months ended September 30, 2026, totaled $25,044,948 compared to a net income of $1,603,465 for the three months ended September 30, 2025, resulting in an increase in net loss of $26,648,413 or 1,661%. This increase in net loss primarily relates to the increase in unrealized loss from trading securities of $24,231,394.

Previous wording

Results of Operations – Six Months Ended June 30, 2026 compared to the Six Months Ended June 30, 2025

Current wording

Results of Operations – Nine Months Ended September 30, 2026 compared to the Nine Months Ended September 30, 2025

Previous wording

During the six months ended June 30, 2026 we generated revenues totaling $24,818,304 compared to $4,166,270 during the six months ended June 30, 2025, representing an increase of $20,652,034 or 496%. The growth in revenue is driven from growth in our existing retail channel and expanding our enterprise channel as we are manufacturing additional NDAA and Blue UAS products. Our enterprise revenue was $21,510,234 for the six months ended June 30, 2026 compared to $312,246 for the six months ended June 30, 2025. We started manufacturing production on certain products including drone motors, headsets, cameras and other drone related products during the first half of 2026. As we continue to expand our manufacturing capabilities and the larger drone market develops, we continue to see significant increased interest and demand in our manufactured products as we head into the second half of 2026. We expect our revenue to continue to grow in 2026 as we continue to build out our capacity including our manufacturing facilities and products and significantly increasing our manufacturing staff to handle additional demand from the market.

Current wording

During the nine months ended September 30, 2026 we generated revenues totaling $38,721,336 compared to $6,300,857 during the nine months ended September 30, 2025, representing an increase of $32,420,479 or 515%. The growth in revenue is driven from growth in our existing retail channel and expanding our enterprise channel as we are manufacturing additional NDAA and Blue UAS products. Our enterprise revenue was $34,200,305 for the nine months ended September 30, 2026 compared to $1,288,384 for the nine months ended September 30, 2025. We started manufacturing production on certain products including drone motors, headsets, cameras and other drone related products during the first half of 2026. As we continue to expand our manufacturing capabilities and the larger drone market develops, we continue to see significant increased interest and demand in our manufactured products as we head into 2027. We expect our revenue to continue to grow as we continue to build out our capacity including our manufacturing facilities and products and significantly increasing our manufacturing staff to handle additional demand from the market.

Previous wording

During the six months ended June 30, 2026, we incurred cost of goods sold of $16,362,063 compared to $2,874,784 during the six months ended June 30, 2025, resulting in an increase of $13,487,279 or 469%. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct and indirect product costs. The increase in cost of goods sold is driven entirely by the increase in our revenue.

Current wording

During the nine months ended September 30, 2026, we incurred cost of goods sold of $25,348,791 compared to $4,168,984 during the nine months ended September 30, 2025, resulting in an increase of $21,179,807 or 508%. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct and indirect product costs. The increase in cost of goods sold is driven entirely by the increase in our revenue.

Previous wording

During the six months ended June 30, 2026, our gross profit was $8,456,241 compared to $1,291,486 during the six months ended June 30, 2025, resulting in an increase of $7,164,755 or 555%. Our gross margin, as a percentage of sales, totaled 34.1% during the six months ended June 30, 2026, compared to 31% during the six months ended June 30, 2025. We anticipate our gross margin 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 during the period. The margins we generated during the first half of the year are in line with our expectations and our normal operating margins.

Current wording

During the nine months ended September 30, 2026, our gross profit was $13,372,545 compared to $2,131,873 during the nine months ended September 30, 2025, resulting in an increase of $11,240,672 or 527%. Our gross margin, as a percentage of sales, totaled 34.5% during the nine months ended September 30, 2026, compared to 33.8% during the nine months ended September 30, 2025. We anticipate our gross margin 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 during the period. The margins we generated during the first half of the year are in line with our expectations and our normal operating margins.

Previous wording

During the six months ended June 30, 2026, operations expenses totaled $3,367,620 compared to $706,879 during the six months ended June 30, 2025, resulting in an increase of $2,660,741 or 376%. Operations expenses primarily relate to our direct operations including our warehouse personnel and warehouse expenses. In addition, we have started incurring additional operations related expenses as we start incurring non-product costs related to our motor production and headset facilities. We expect our operations expense to increase as we continue to hire additional staff to support our operations including engineering staff to help improve process and gain efficiencies. We anticipate additional operating expenses in the second half of 2026 as we set up additional battery facilities with the completion of the Upgrade Energy acquisition and look to continue to expand additional operations.

Current wording

During the nine months ended September 30, 2026, operations expenses totaled $5,380,364 compared to $1,343,584 during the nine months ended September 30, 2025, resulting in an increase of $4,036,780 or 300%. Operations expenses primarily relate to our direct operations including our warehouse personnel and warehouse expenses. In addition, we have started incurring additional operations related expenses as we start incurring non-product costs related to our motor production and headset facilities. We expect our operations expense to increase as we continue to hire additional staff to support our operations including engineering staff to help improve process and gain efficiencies. We anticipate additional operating expenses in the fourth quarter as we set up additional battery facilities with the completion of the Upgrade Energy acquisition and look to continue to expand additional operations including anew Orlando, Florida battery manufacturing facility in December or January.

Previous wording

During the six months ended June 30, 2026, research and development expenses totaled $644,101 compared to $70,633 for the six months ended June 30, 2025, resulting in an increase of $573,468 or 812%. Research and development expense primarily relates to new product development and include both internal and external resources and costs associated with new products.

Current wording

During the nine months ended September 30, 2026, research and development expenses totaled $994,649 compared to $110,002 for the nine months ended September 30, 2025, resulting in an increase of $884,647 or 804%. Research and development expense primarily relates to new product development from both internal and external resources and costs associated with these new products.

Previous wording

During the six months ended June 30, 2026, sales and marketing expenses totaled $1,370,051 compared to $509,975 for the six months ended June 30, 2025, resulting in an increase of $806,076 or 169%. 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 wording

During the nine months ended September 30, 2026, sales and marketing expenses totaled $1,983,665 compared to $883,513 for the nine months ended September 30, 2025, resulting in an increase of $1,100,152 or 125%. 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 expanding 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.

Previous wording

During the six months ended June 30, 2026, general and administrative expenses totaling $18,027,462 compared to $10,421,097 for the six months ended June 30, 2025, resulting in an increase of $7,606,365 or 73%. 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. 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 wording

During the nine months ended September 30, 2026, general and administrative expenses totaled $28,265,622 compared to $15,151,160 for the nine months ended September 30, 2025, an increase of $13,114,462 or 87%. General and administrative expenses include expenses related to operating as a public company, including legal, auditing and other professional fees, public company insurance expense, and other costs associated with being public. We have also increased our headcount to support our growth, including increasing our accounting, HR, and facilities staff. We expect our general and administrative expenses to increase as we continue to build out our infrastructure with additional hires and systems. We also anticipate 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 the fourth quarter of 2026. We do not anticipate our general and administrative expenses to increase at the same rate as our revenue as we start to gain operational efficiencies at scale.

Previous wording

During the six months ended June 30, 2026, other income and expense totaled $17,592,571 compared to $227,266 during the six months ended June 30, 2025, resulting in an increase of $17,365,304. This increase relates primarily to our unrealized gain from short-term investments of $5,608,541, realized gain from short-term investments of $9,532,673, and an interest income increase of $2,384,974.

Current wording

During the nine months ended September 30, 2026, other income and expense totaled $911,244 compared to $6,792,468 during the nine months ended September 30, 2025, resulting in a decrease of $5,881,224. The decrease primarily relates to unrealized losses from trading securities of $18,622,853, offset by a realized gain from investments of $9,532,673 and an increase in interest income of $3,370,462.

Previous wording

Our net income for the six months ended June 30, 2026, totaled $2,499,441 compared to a net loss of $10,231,018 for the six months ended June 30, 2025, resulting in an increase in net income of $12,730,459 or 124%. The increase primarily relates to unrealized gains from investments of $5.6 million, realized gains from investments of $9.5 million, and an increase in interest income of $2.3 million.

Current wording

Our net loss for the nine months ended September 30, 2026, totaled $22,545,507 compared to a net loss of $8,627,553 for the nine months ended September 30, 2025, resulting in an increase in net loss of $13,917,954 or 161%. The increase primarily relates to unrealized losses from investments of $18,622,853, offset by a realized gain from investments of $9,532,673 and an increase in interest income of $3,370,462.

Previous wording

Net cash used in operating activities was $38,891,945 during the six months ended June 30, 2026, compared to net cash used in operating activities of $3,862,349 during the six months ended June 30, 2025, representing an increase of $35,029,596 or 907%. The increase was primarily attributable to changes in working capital, including increase in inventory of $16,324,070, prepaid and deposits for inventory of $10,385,385, accounts receivable of $8,713,013, and offset by an increase in accounts payable and accrued expenses of $1,416,814, an increase in operating lease liabilities of $558,619 and an increase in contingent consideration of $153,000. The Company recorded unrealized gains on short term investments of $5,608,541 and realized gains of $9,532,673.

Current wording

Net cash used in operating activities was $73,554,146 during the nine months ended September 30, 2026, compared to net cash used in operating activities of $11,394,294 during the nine months ended September 30, 2025, representing an increase of $62,159,852 or 545%. The increase was primarily attributable to changes in working capital, including increase in inventory of $35,559,329, prepaid and deposits for inventory of $7,493,589, accounts receivable of $16,801,237, and offset by an increase in accounts payable and accrued expenses of $4,142,716, and an increase in operating lease liabilities of $1,164,495. The Company recorded unrealized loss on short term investments of $12,773,139 and realized gains of $9,532,673.

Previous wording

Net cash used in investing activities was $35,786,762 during the six months ended June 30, 2026 compared to net cash used in investing activities of $262,751 during the six months ended June 30, 2025, representing an increase of $35,524,012. This increase consisted of $52,500,000 used in our strategic short-term investments, $508,336 in purchases of property and equipment and $2,861,101 in deposits for future purchases of property and equipment in 2026 as compared to $262,751, partially offset by proceeds from sales of short term investments of $20,082,674.

Current wording

Net cash used in investing activities was $68,906,754 during the nine months ended September 30, 2026 compared to net cash used in investing activities of $12,457,633 during the nine months ended September 30, 2025, representing an increase of $56,449,121. This increase consisted of $82,499,998 used in our strategic short-term investments, $6,295,729 in purchases of property and equipment, partially offset by proceeds from sales of short term investments of $20,082,674.

Previous wording

Net cash provided by financing activities totaled $200,981,341 during the six months ended June 30, 2026, compared to net cash provided by financing activities of $39,300,836 during the six months ended June 30, 2025, resulting in an increase in net cash provided by financing activities of $161,680,505. Our first half 2026 proceeds are from a public offering of common shares of $149,999,993 and at the market shares of $60,000,000 offset by offering costs of $13,001,236. Our first half 2025 proceeds included a public offering of common shares of $40,000,000 offset by offering costs of $3,504,000. In addition we had proceeds from warrant exercises of $3,395,000, and option exercises of $587,584 during 2026 as compared to $2,436,966 and $367,870, respectively during 2025.

Current wording

Net cash provided by financing activities totaled $201,144,130 during the nine months ended September 30, 2026, compared to net cash provided by financing activities of $84,378,076 during the nine months ended September 30, 2025, resulting in an increase in net cash provided by financing activities of $116,766,054. Our 2026 proceeds are from a public offering of common shares of $149,999,993 and our at-the-market offering of $60,000,000 offset by offering costs of $13,001,236. Our 2025 proceeds included a public offering of common stock of $40,000,000 offset by offering costs of $3,504,000. In addition we had proceeds from warrant exercises of $3,395,000, and option exercises of $750,373 during 2026 as compared to $2,479,466 and $501,610, respectively during 2025.

Previous wording

As of June 30, 2026, we had current assets totaling $370,575,945 primarily consisting of cash balances of $229,598,776, investments of $86,773,449, inventory of $21,914,332 and deposits for inventory of $20,543,732. Our current liabilities as of June 30, 2026 totaled $6,885,146, primarily consisting of accounts payable and accrued expenses of $2,863,569, contingent consideration of $3,000,000, deferred revenue of $286,056, and current operating lease liability of $735,521. Our net working capital as of June 30, 2026 was $363,690,799.

Current wording

As of September 30, 2026, we had current assets totaling $351,312,208 primarily consisting of cash balances of $161,965,505, short-term investments of $98,391,766, accounts receivable of $18,703,356, inventory of $42,622,077, other current assets of $1,370,481 and deposits for inventory of $23,259,023. As of September 30, 2026, our current liabilities totaled $10,142,634 and consisted primarily of accounts payable and accrued expenses of $6,055,909, deferred revenue of $114,491, the current portion of operating lease liabilities of $972,234, and contingent consideration of $3,000,000 related to the Rotor Lab acquisition. Our net working capital as of September 30, 2026 was $336,169,577.