What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-14 · 266 added, 150 removed, 96 unchanged (81% of the section changed)

24 unchanged sentences

Beginning in the second half of 2024,

we launched our business-to-business 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.

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.

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.

Recent Developments, Challenges and Uncertainties

At the Market Agreement

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.

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.

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.

On July 14, 2025, we entered into a securities

7 unchanged sentences

With the funds received from our recent offerings,

we are focusing on growing both our retail and enterprise revenue channels and investing in drone component manufacturing in the United

we are focusing on growing both our enterprise and retail revenue channels and investing in drone component manufacturing in the United

During the first quarter of 2025, we added both the Rotor Riot Brave 55A ESC (electronic speed controller), and the Fat Shark

3 unchanged sentences

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 plan to open

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.

6 unchanged sentences

the tariff uncertainties, we cannot predict the impact tariff policies in the United Staes and other countries will have on our business.

But our B2C business relies heavily on China so retaliatory tariffs can adversely affect us especially our B2C business.

1A – Risk Factors” for more information on the risks associated with the uncertainty of the imposition of tariffs on our business.

But our consumer business (“B2C”) relies heavily on China so retaliatory tariffs can adversely affect us especially our B2C

See “Item 1A – Risk Factors” for more information on the risks associated with the uncertainty of the imposition

of tariffs on our business.

Rotor Lab Acquisition

On June 12, 2025, we entered into a Share Purchase

5 unchanged sentences

to forfeiture in the event of a breach of representations and warranties and indemnification.

The terms of the SPA are subject to standard

closing conditions, in addition to receiving required regulatory approvals from the Australian Foreign Investment Review Board.

The acquisition of Rotor Lab was finalized

on September 3, 2025 with the issuance of 656,642 shares of our common stock.

Recent Customer Purchase

On October 15, 2025, we secured an order from

Army’s 101 st Airborne Division for 3,500 NDAA-compliance motors produced at our new U.S.

based manufacturing

The motors will support the Division’s deployment of the new Attritable Battlefield Enabler V1.01 drones.

also indicated plans to expand procurement, targeting an additional order of 20,000 components including motors from us in 2026.

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.

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

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.

Recent Investments

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.

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.

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.

On October 1, 2025, Unusual Machines appointed

Al Ducharme as Vice President of Engineering.

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.

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.

On September 4, 2025, Unusual Machines appointed

Craig McIntyre as Vice President of Enterprises Sales.

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.

On August 11, 2025, Unusual Machines appointed

Tom Mercier as Vice President of Headsets.

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.

On July 7, 2025, Unusual Machines promoted Stacey

Wright to executive Vice President of Revenue.

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

At the time she joined, Rotor Riot's annual revenue stood at $1.7 million.

Results of operations

Three Months Ended June 30, 2025 and 2024

During the three months ended June 30, 2025 we generated revenues totaling $2,123,970 compared to $1,411,124 during the

three months ended June 30, 2024, representing an increase of $712,846 or 51%.

The growth in revenue is driven from growth in our existing

retail channel and expanding our enterprise channel as we are manufacturing additional Blue UAS products.

Three Months Ended September 30, 2025 compared

to the Three Months Ended September 30, 2024

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.

Cost of Goods Sold & Gross Profit

During the three months ended June 30, 2025, our

cost of goods sold was 1,329,291 compared to $1,022,684 during the three months ended June 30, 2024, resulting in an increase of $306,607

Our gross margin, as a percentage of sales, totaled 37.4% during the three months ended June 30, 2025, compared to gross margin

of 27.5% during the three months ended June 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.

Our gross margin is also subject to additional fluctuations

based on the increased tariffs being imposed on certain products.

We have started passing these additional costs to customers and will

have an impact on our overall gross profit percentage.

We expect that in the three months ended September 30, 2025, our cost of goods

sold will experience an increase from the tariffs and increase in inventory costs as we source inventory from countries outside of China

including the United States and Taiwan.

See “Item 1A – Risk Factors” for more information on the risks associated with

the uncertainty of the imposition of tariffs on our business.

During the three months ended June 30, 2025, our gross profit was

$794,679 compared to $388,440 during the three months ended June 30, 2024, resulting in an increase of $406,239 or 105%.

Our gross margin,

as a percentage of sales, totaled 37.4% during the three months ended June 30, 2025, compared to gross margin of approximately 27.5%

during the three months ended June 30, 2024.

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.

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

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.

Operating Expenses

During the three months ended June 30, 2025,

operations expenses totaled $404,277 compared to $213,772 during the three months ended June 30, 2024, resulting in an increase of $190,505

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.

During the three months ended June 30, 2025, research

and development expenses totaled $62,731 compared to $10,282 for the three months ended June 30, 2024, resulting in a increase of $52,449

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.

During the three months ended June 30, 2025, sales

and marketing expenses totaled $302,358 compared to $386,332 for the three months ended June 30, 2024, resulting in a decrease of $83,974

The decrease primarily relates to additional costs incurred during the second quarter of 2024 related to our Rampage marketing

event that is expected to occur during the fourth quarter of this year.

Other sales and marketing expenses increased slightly based on

the increase in revenue and ad spend during the period.

During the three months ended June 30, 2025, general

and administrative expenses totaling $7,195,193 compared to $1,349,587 for the three months ended June 30, 2024, resulting in an increase

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.

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%.

The increase primarily relates to the increase in non-cash stock compensation expense of approximately $5.5 million

and increase in professional fees and operating as a public company.

Our net loss for the three months ended June 30,

2025, totaled $6,964,739 compared to $1,612,238 for the three months ended June 30, 2024, resulting in an increase in net loss of $5,352,501

This increase in net loss relates to the increase in general and administrative expenses which was primarily driven by the increase

in non-cash stock compensation expense, which was $5,513,328 for the second quarter of 2025.

Results of Operations – Six Months

Ended June 30, 2025 compared to the Six Months Ended June 30, 2024

During the six months ended June 30, 2025 we generated

revenues totaling $4,166,270 compared to $2,030,039 during the six months ended June 30, 2024, representing an increase of $2,136,231

The growth in revenue is driven from growth in our existing retail channel and expanding our enterprise channel as we are manufacturing

additional Blue UAS products.

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.

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.

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.

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.

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.

Results of Operations – Nine Months

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

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.

Cost of Goods Sold

During the six months ended June 30, 2025, we

incurred cost of goods sold of $2,874,784 compared to $1,437,432 during the six months ended June 30, 2024, resulting in an increase of

$1,437,352 or 100%.

Similar to revenues, we did not incur any cost of goods sold until the closing of the acquisitions on February 16,

Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct product

During the nine months ended September 30, 2025,

we incurred cost of goods sold of $4,168,984 compared to $2,569,209 during the nine months ended September 30, 2024, resulting in an increase

of $1,599,775 or 62%.

Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other

direct product costs.

The increase in cost of goods sold is driven entirely by the increase in our revenue.

During the six months ended June 30, 2025, our

gross margin was $1,291,486 compared to $592,607 during the six months ended June 30, 2024, resulting in an increase of $698,879 or 118%.

Our gross margin, as a percentage of sales, totaled 31% during the six months ended June 30, 2025, compared to 29% during the six months

ended June 30, 2024.

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 quarter are in

line with our expectations and normal operating margins.

During the nine months ended September 30, 2025,

our gross margin was $2,131,873 compared to $992,094 during the nine months ended September 30, 2024, resulting in an increase of $1,139,779

Our gross margin, as a percentage of sales, totaled 33.8% during the nine months ended September 30, 2025, compared to 27.9%

during the nine months ended September 30, 2024.

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 quarter are in line with our expectations and normal operating margins.

Operating Expenses

During the six months ended June 30, 2025, operations

expenses totaled $706,879 compared to $326,094 during the six months ended June 30, 2024, resulting in an increase of $380,785 or 117%.

Prior to the closing of the acquisitions in February 2024, we did not have any operations.

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 costs related to our motor production facility during the second quarter of 2025.

During the six months ended June 30, 2025, research

and development expenses totaled $70,633 compared to $27,078 for the six months ended June 30, 2024, resulting in an increase of $43,555

Research and development expense primarily relates to new product development as we continue to partner with manufacturers to

bring drone component manufacturing to the United States.

During the six months ended June 30, 2025, sales

and marketing expenses totaled $509,975 compared to $543,390 for the six months ended June 30, 2024, resulting in a decrease of $33,415

During the nine months ended September 30, 2025,

operations expenses totaled $1,343,584 compared to $544,220 during the nine months ended September 30, 2024, resulting in an increase

of $799,364 or 147%.

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 costs related to our motor production

During the nine months ended September 30, 2025,

research and development expenses totaled $110,002 compared to $42,078 for the nine months ended September 30, 2024, resulting in an increase

of $67,924 or 161%.

Research and development expense primarily relates to new product development as we continue to partner with manufacturers

to bring drone component manufacturing to the United States.

During the nine months ended September 30, 2025,

sales and marketing expenses totaled $883,513 compared to $795,643 for the nine months ended September 30, 2024, resulting in an increase

of $87,870 or 11%.

Sales and marketing expenses primarily relate to advertising spend related to Rotor Riot and payroll expenses.

The decrease relates

to additional costs incurred during the second quarter of 2024 related to our Rampage marketing event, which was then offset by additional

ad spend and other sales related expenses from our increase in revenue and sales.

During the six months ended June 30, 2025, general

and administrative expenses totaling $10,421,097 compared to $2,353,761 for the six months ended June 30, 2024, resulting in an increase

increase relates mainly to adding additional staffing in our sales team.

During the nine months ended September 30, 2025,

general and administrative expenses totaling $15,151,160 compared to $3,728,749 for the nine months ended September 30, 2024, resulting

in an increase of $11,422,411 or 306%.

The increase relates primarily to increased non-cash expenses totaling $9,522,260 related to stock

based compensation expense compared to the expense in 2024 of $759,673 and the additional increase is from increase in professional fees

and other public company related expenses.

During the nine months ended September 30, 2025,

depreciation and amortization expenses totaled $63,635 compared to $513 for the nine months ended September 30, 2024, resulting in an

increase of $63,122.

The increase relates to depreciation during the third quarter from the acquisition of Rotor Lab assets and amortization

related to intangible assets.

Our net loss for the nine months ended September

30, 2025, totaled $8,627,553 compared to $4,862,490 for the nine months ended September 30, 2024, resulting in an increase in net loss

of $3,765,063 or 77%.

The increase relates primarily to increased non-cash expenses totaling $7,419,701 related to stock based compensation

expense and the additional increase is from increase in professional fees and other public company related expenses.

Our net loss for the six months ended June 30,

2025, totaled $10,231,018 compared to $2,718,240 for the six months ended June 30, 2024, resulting in an increase in net loss of $7,419,701

The increase primarily relates to increased non-cash expenses related to stock based compensation expense discussed in the above

The increase primarily relates to an increase of approximately $8.7 million increase over year 2024 in non-cash

stock based compensation expense offset by unrealized gains from short term investments of approximately $5.8 million.

Cash Flow Analysis

Prior to the closing

of our IPO and the acquisitions of Fat Shark and Rotor Riot, we did not have any cash inflows from operations and all cash outflows related

to our activities related to our IPO.

Our future cash flows from operating activities will be significantly impacted by revenues received,

our investment in sales and marketing to drive growth, and general and administrative expenses related to operating a public company.

Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations.

Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity

needs and achieve our business objectives.

Our future cash flows

from operating activities will be significantly impacted by revenues received, our investment in sales and marketing to drive growth,

and general and administrative expenses related to operating a public company.

Our ability to meet future liquidity needs will be driven

by our operating performance and the extent of continued investment in our operations.

Failure to generate sufficient revenues and related

cash flows could have a material adverse effect on our ability to achieve our business objectives.

Operating Activities

Net cash used in operating activities was $11,394,294

during the six months ended June 30, 2025, compared to net cash used in operating activities of $2,181,840 during the six months ended

June 30, 2024, representing an increase of $1,680,509 or 77%.

This increase in net cash used primarily resulted from our increase in accounts

receivable of $125,757, inventory of $426,180, prepaid expenses of $156,440, accounts payable and accrued expenses of $444,594 and changes

in other operating assets and liabilities of $61,864.

This was offset by the change in non-cash stock based compensation of $6,994,114

and changes in other non-cash related expenses of $52,990.

during the nine months ended September 30, 2025, compared to net cash used in operating activities of $2,718,513 during the nine months

ended September 30, 2024, representing an increase of $8,675,781 or 319%.

This increase in net cash used in operating activities primarily

resulted from our increase in net loss of $3,765,063, increase in inventory of $2,083,662, prepaid inventory of $5,697,419, other assets

of $1,037,670, and unrealized gain on trading securities of $5,849,713, offset by the change in share based compensation expense of $8,762,588

and customer deposits of $951,877.

Investing Activities

Net cash used in investing activities was $12,457,633

during the six months ended June 30, 2025 compared to net cash used in investing activities of $852,201 during the six months ended June

30, 2024, representing a decrease of $590,050 or 69%.

The cash used in investing activities during the six months ended June 30, 2025

related to the purchasing of equipment related to our motor factory while the cash used in investing activities during the six months

ended June 30, 2024 related to our acquisitions of Rotor Riot and Fat Shark.

during the nine months ended September 30, 2025 compared to net cash used in investing activities of $852,801 during the nine months ended

September 30, 2024, representing an increase of $11,604,832 or 1,361%.

The cash used in investing activities during the nine months ended

September 30, 2025 related to the purchasing of equipment related to our motor factory and our investment in short-term equity securities

of $11.0 million.

Financing Activities

Net cash provided by financing activities totaled

$39,300,836 during the six months ended June 30, 2025, compared to net cash provided by financing activities of $4,362,313 during the

six months ended June 30, 2024, resulting in an increase in net cash provided by financing activities of $34,938,523.

The increase primarily

relates to proceeds received from our public offering of $36,496,000 in May 2025, proceeds from warrant exercises of $2,436,966, and employee

stock option exercises of $367,780 during the period.

and capital resources

As of June 30, 2025, we had current assets totaling

$42,222,934 primarily consisting of cash balances of $38,933,059, inventory of $1,609,117 and other current assets of $192,778 and deposits

for inventory of $1,314,592.

Our current liabilities as of June 30, 2025 totaled $821,698, primarily consisting of accounts payable and

accrued expenses of $608,694 and deferred revenue of $139,435 and current operating lease liability of $73,569.

Our net working capital

as of June 30, 2025 was $41,399,236.

$84,378,076 during the nine months ended September 30, 2025, compared to net cash provided by financing activities of $4,362,313 during

the nine months ended September 30, 2024, resulting in an increase in net cash provided by financing activities of $80,015,763.

primarily relates to net proceeds received from our common stock offerings totaling $81,397,000 after deducting offering expenses.

Liquidity and capital

As of September 30, 2025, we had current assets

totaling $91,704,048 primarily consisting of cash balances of $64,285,750, short-term investments of $16,849,713, accounts receivable

of $309,544, inventory of $3,118,491, other current assets of $218,871 and deposits for inventory of $6,921,679.

Our current liabilities

as of September 30, 2025 totaled $5,933,935, primarily consisting of accounts payable and accrued expenses of $1,167,242, deferred revenue

of $1,518,736,current operating lease liability of $247,957, and contingent consideration related to the Rotor Lab acquisition of $3,000,000.

Our net working capital as of September 30, 2025 was $85,770,113.

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 our At The Market Agreement and after deducting fees and other expenses,

we received approximately $69.9 million in net cash proceeds.

On July 15, 2025, we completed a registered direct

7 unchanged sentences

received cash proceeds of $2,436,966.

In December 2024, two investors and note holders

exercised their option to convert $3,000,000 of the then outstanding Convertible Note into 1,507,538 shares of Common Stock at a price

of $1.99 per share.

After the conversion and as of December 31, 2024, we no longer have any debt outstanding.

In December 2024, we also had several investors

exercise 684,000 warrants with cash and we issued 684,000 shares of our Common Stock for total cash proceeds of $1,523,700.

On October 29, 2024, we completed a private placement

offering for the sale of 1,286,184 shares of Common Stock at a price of $1.52 per share for aggregate gross proceeds of $1.95 million

before deducting fees to the placement agent and other expenses payable by us in connection with the private placement.

We retained approximately

$1.8 million in net proceeds.

14, 2025, we have approximately $81 million in cash .

We believe that the net proceeds from our financings, warrant exercises, revenues,

and existing cash balances will be sufficient to fund our current operating plans through more than the next 12 months.

With the approximately

$45 million of net proceeds we received on July 15, 2025 and our existing cash balances, we have substantial liquidity to support our

As of November 6, 2025, we have approximately

$133.0 million in cash.

We believe that the net proceeds from our financings, warrant exercises, revenues, and existing cash balances

will be sufficient to fund our current operating plans through more than the next 12 months.

With the approximately $69.9 million of net

proceeds we received in October 2025 from our ATM, the $3.2 million we received iu November 2025 in relation to certain warrant exercises,

and our existing cash balances, we have substantial liquidity to support our business.

For more information about our ATM, see “Item

II – Other Information – Item 5”.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis