What changed in this filing

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Item 1. Business

2026-03-12 compared with 2025-03-27 · 254 added, 222 removed, 140 unchanged (77% of the section changed)

2 unchanged sentences

(“Unusual Machines”

or the “Company”) is a Nevada corporation engaged in the commercial drone industry with our principal place of business in

Orlando, Florida.

The Company reincorporated from Puerto Rico to Nevada on April 22, 2024.

Initial Public Offering

On February 16, 2024, the Company closed its Initial

Public Offering (the “IPO”) of 1,250,000 shares of common stock at a public offering price of $4.00 per share.

are traded on the New York Stock Exchange American (“NYSE American”).

Simultaneous with the closing of the IPO, the Company

acquired Fat Shark Ltd.

(“Fat Shark”) and Rotor Riot, LLC (“Rotor Riot”) from Red Cat Holdings, Inc.

The Business Combination & Business Overview

On November 21, 2022, the Company entered into

a Share Purchase Agreement (the “Purchase Agreement”) with Red Cat and Jeffrey Thompson, the founder and Chief Executive Officer

of Red Cat, pursuant to which we agreed to purchase Red Cat’s consumer business consisting of Fat Shark and Rotor Riot (the “Business

Combination”).

Under the terms of the Purchase Agreement, as amended, the Company purchased Rotor Riot and Fat Shark subsidiaries

for $22.1 million (the “Purchase Price”) comprised of (i) $1.1 million in cash, (ii) a $4.0 million promissory note (the “Note”)

issued by the Company to Red Cat, and (iii) $17.0 million of the Company’s Common Stock or 4,250,000 shares of Common Stock at the

$4.00 per share IPO price.

Unusual Machines specializes in the production

and sale of small drones and essential components through B2B sales and a curated retail channel.

There is strong brand recognition of

the Rotor Riot and Fat Shark brands particularly in the FPV sub-segment of the drone market.

Unusual Machines intends to build its business

both organically and through strategic acquisitions while onshoring production of critical drone components.

With the transition to onshoring

production of drone components, the Company is expanding into B2B channels for customers that require a non-Chinese supply chain.

A major factor in Unusual Machines’ component

production is the validation of the new supply chains.

The Defense Innovation Unit (DIU) audits new drone components for supply chain

and cyber security risks.

Components that pass the audit can then be put on the actively maintained Blue Framework list.

of 2024, Unusual Machines has developed three components (and variants) that have been approved and placed on the Blue Framework.

includes a flight controller, a motor controller, and a camera.

The company intends to continue to develop and certify new components

through this process to ease the acquisition requirements on domestic drone manufacturers that are ultimately significant customers.

or the “Company”) is a Nevada corporation organized in 2024 which is a successor to a Puerto Rican corporation organized in

The Company is engaged in the commercial drone industry, with its principal place of business in Orlando, Florida.

of 2025, the Company acquired Rotor Lab Pty.

Ltd., an Australian company (“Rotor Lab”).

Unusual Machines manufactures and sells drone

components and drones across a diversified brand portfolio through business-to-business (“B2B”) sales and a curated retail

There is strong brand recognition of the Unusual Machines, Rotor Riot, and Fat Shark brands, particularly in the first person

view (“FPV”) and small military sub-segments of the drone market.

Unusual Machines is rapidly growing its business by onshoring

the manufacturing of critical drone components in the United States.

With the transition to onshoring drone component production, the

Company is expanding B2B sales to customers that require a National Defense Authorization Act (“NDAA”)-compliant domestic

supply chain.

A key factor in Unusual Machines’ component

production is the validation of newly supply chains to meet defense and federal procurement requirements.

The Defense Contract Management

Agency audits new drone components for supply chain and cybersecurity risks.

Components that pass the audit can then be put on the actively

maintained Blue Framework list.

Since August 2024, Unusual Machines has developed six components (and variants) that have been approved

and added to the Blue Framework.

The Company intends to continue developing and certifying new components through this process to ease

acquisition requirements for domestic drone manufacturers, which are ultimately significant customers.

The Drone Industry

The drone industry continues to expand to become

a powerful business tool and recreational activity, with growth occurring broadly and across our targeted industries.

According to Drone

Industry Insights, the global drone market is expected to grow to $57.8 billion by 2030, with the commercial market growing at a 7.9%

compound annual growth rate (“CAGR”).

According to Allied Market Research, the drone component industry is likewise expanding.

The drone flight controller market, valued at $6.6 billion in 2022 is expected to reach $13.8 billion by 2032.

The drone motor market,

valued at $2.6 billion in 2021 is projected to reach $9.9 billion by 2031.

The drone industry continues to expand as a powerful

business, defense, and public safety tool, as well as a popular recreational activity, with growth occurring broadly across our targeted

According to Drone Industry Insights’ Global Drone Market Report 2025–2030, the global drone market is projected

to reach approximately U.S.

$57.8 billion by 2030.

A Fact.MR report indicates the drone accessories market was valued at approximately

$25.2 billion in 2024 and is projected to reach ~$156 billion by 2034 at a ~20% CAGR.

Furthermore, the global drone flight controller

system market was approximately $7.14 billion in 2024 and is expected to reach around $13.05 billion by 2029 (CAGR ~12.8%) according to

the Business Research Company.

Similarly, Global Market Insights reports that the drone motor market was valued at ~$4.7 billion in 2024

and is forecast to grow to ~$9.2 billion by 2030, and ~$15.9 billion by 2034 at a ~13.1% CAGR.

Fortune Business Insights likewise forecasts

the motor market at $6.7 billion in 2025, with expansion toward $16.3 billion by 2034 as commercial and industrial drone deployment increases.

Unusual Machines intends to pursue strategic acquisition

targets that are cash flow positive and either sell drone parts or allow us to integrate drone parts and software services.

believes that very promising, private companies (such as Aloft Technologies, Inc.

as discussed below) are in many instances underfunded

and missing out on the ability to go public and bring their innovative products and solutions to a larger set of customers globally.

believe that unlocking this potential will be key to industry consolidation and breaking the dominance of China in the drone industry.

First Person View (FPV) Market Segment

Unusual Machines principally operates in the FPV

segment of the drone industry.

This segment focuses on drones piloted with wearable display devices or screens that show a first-person

view of the camera mounted on the drone.

This is a unique experience where the pilot is interacting with an aircraft through visual immersion.

This experience is accomplished by live streaming footage from a camera mounted on the nose of the drone directly to the pilot with as

little latency as possible.

The image is transmitted via radio (traditionally analog but increasingly digital) to the pilot.

remote control unit, the drone, and the pilot display are all interconnected via radio.

This effect requires sophisticated electronics

that transmit visual information with sufficient speed and reliability to allow pilot control over the drone in real-time.

Pilots routinely

achieve speeds of over 90 mph in racing and other mission critical applications.

There are four common categories of FPV flight

– freestyle flight, racing, cinema photography, and defense.

In freestyle, the pilot navigates around obstacles focused on acrobatics

and exploring the environment around the aircraft through the HMD.

FPV racing describes a spectator sport where pilots fly their drones

in competitions through a series of obstacles, flags, and gates in a racetrack.

Cinema photography is the process of viewing and recording

a subject matter from the air from the viewpoint of the pilot.

Defense is a market segment characterized by the use cases demonstrated

in the Ukrainian conflict and is the largest segment of the market with over 5 million FPV drones expected to be built in 2025.

Potential Aloft Acquisition

On February 1, 2025, the Company entered

into a Merger Agreement to acquire a drone software company, Aloft Technologies, Inc.

We believe that Aloft

is a leader in the drone fleet and airspace management sector, powering more than 70% of all FAA-approved Low Altitude Authorization

and Notification Capability (“LAANC”) airspace authorizations in the United States, according to Aloft.

According to Aloft, Aloft has provided more than 1.6 million authorizations in total with 400,000 authorizations provided in 2024.

The acquisition is for $14.5 million payable, almost entirely in the Company’s Common Stock with the issuance of 1,204,319

shares of Common Stock and approximately $100,000 in cash.

In addition, customary closing conditions by the parties must be

completed before closing the merger.

There can be no assurances that the Aloft merger will close.

“ Risk Factors .”

targets that are cash flow positive and manufacture and sell drone components or enable us to domestically produce them.

The Company believes

that very promising companies (both public and private) are, in many instances, underfunded and unable to scale their innovative products

and solutions.

We believe that unlocking this potential will be key to industry consolidation.

The Company’s acquisition strategy

is intended to support broader industry shifts toward U.S.-manufactured and NDAA-compliant drone systems, while maintaining a deliberate

approach to capital allocation and integration risk.

Low Cost and Attritable Drone Market Segment

Unusual Machines principally operates and manufactures

components in the Group 1 Unmanned Aerial Systems (“UAS”) which is often referred to as the small drone segment of the drone

These drones are known for being light weight, high speed, and low-cost attritable drones where responsiveness and situational

awareness are essential.

In the defense sector, these drones are primarily used for tactical missions with real time intelligence, surveillance,

and reconnaissance.

In the commercial and consumer sector, these drones are used for freestyle, racing, cinematic production, mapping

and commercial use.

This also includes FPV drones where pilots use

wearable display devices or screens that provide real-time, first-person video feed from a camera mounted on the drone, creating an immersive

operating experience in which the pilot interacts with the aircraft through visual immersion.

This experience is enabled by live-streamed

video transmitted with ultra-low latency from the drone to the pilot via radio links, enabling precise pilot control.

FPV systems integrate

onboard cameras, video transmission modules, flight controllers, motors, and pilot display devices that operate as an integrated system

over radio communications.

While FPV video transmission has historically relied on analog signals, digital transmission systems are increasingly

adopted as reliability, range, and image quality improve.

These systems require sophisticated electronics capable of maintaining low-latency,

reliable performance during flight.

Plans for Growth, Development, and Expansion

Unusual Machine’s plans to strengthen its

market position through continued organic revenue growth.

In parallel, the Company intends to aggressively invest in the extension of

their B2B sales of drone components.

Unusual Machine’s business strategy includes (i) increasing its overall customer base with

its products and rapid adoption;

(ii) investing in new hardware products, (iii) expanding and growing Unusual Machine’s customer

base and revenue streams from its existing customer base using a “land-and-expand” model that establishes initial relationships

and grows those relationships through the provision of high quality products and services, and (iv) expanding into new segments like SaaS

through acquisitions like Aloft.

Historically, revenues for Unusual Machines has

primarily generated online through its e-commerce site, www.rotorriot.com and the Company continues to see continued growth through its

retail store.

As Unusual Machines continues to expand its B2B component business and with potential acquisitions, the Company expects

to rapidly grow an enterprise customer base primarily of drone manufacturers.

Unusual Machines competes with a number of significantly

larger, better capitalized companies.

SZ DJI Technology Co., Ltd., commonly known as DJI, is the dominant market leader with a global

market share estimated at more than 70%, according to industry research firms.

The primary retail competitor is GetFPV.

Unusual Machines

competes against these competitors by leveraging its visibility on the internet through its Rotor Riot Facebook page which has more than

38,000 followers and its Rotor Riot YouTube channel which has more than 272,000 subscribers.

The Company believes that the Rotor Riot

brand has been at the center of the racing and freestyle culture of drones since registering its domain name in 2015.

With the Company’s expansion into the drone

component market, additional competitors include T-Motor, Orqa, Modal AI, ARK Electronics.

Unusual Machines differentiates from these

competitors by being price competitive and having their products approved by the Defense Innovation Unity Blue Framework for their enterprise

components, which allows them to be sold within Federal guidelines.

Unusual Machines maintains price competitiveness and is an emerging

leader in the value segment of the non-Chinese components market.

The Company’s Drone Manufacturing

The Company hired a vice president of manufacturing

in January 2025 whose role is to head up the Company’s proposed drone motor manufacturing business.

The Company plans to lease

an additional facility near its headquarters office in Orlando, Florida, at which it will manufacture NDAA compliant drone motors.

Company expects that it will be in a position to commence manufacturing during the second quarter of 2025.

We believe that by bringing

manufacturing in house, it can reduce our costs of motor inventory.

Unusual Machine’s intends to strengthen

its market position through continued organic revenue growth while expanding its role as a U.S.

supplier of critical drone components.

The Company’s growth strategy emphasizes disciplined execution, increased operational scale, and expansion of its B2B component

sales to commercial and defense-oriented customers.

The Company’s business strategy includes

(i) increasing its overall customer base through broader adoption of its products across consumer, commercial, and mission-oriented applications;

(ii) investing in the development and expansion of hardware products that support increased performance, reliability, and manufacturability;

(iii) growing revenue from its existing customer base using a “land-and-expand” approach that establishes initial relationships

and deepens engagement over time through consistent product delivery and service;

(iv) selectively pursuing acquisitions and partnerships

that enhance domestic manufacturing capabilities, supply chain control, or component offerings;

and (v) making strategic investments in

emerging leaders in the U.S.

drone ecosystem that would help us broaden our pipeline and relationships with our suppliers and customers

and thereby support the American drone ecosystem.

Historically, Unusual Machines generated a significant

portion of its revenue through direct-to-consumer sales via its Rotor Riot e-commerce platform.

As Unusual Machines continues to expand

its B2B component offerings, enterprise sales have grown to represent a larger portion of total revenue.

In 2025, enterprise customers

became the Company’s primary revenue driver.

The Company’s enterprise customer base consists

primarily of U.S.-based drone manufacturers and system integrators that purchase components for use in consumer, commercial, and mission-oriented

drone platforms.

Unusual Machines expects continued growth in this customer base as demand for domestically sourced, reliable, and compliant

drone components increases, supported by expanding manufacturing capacity and broader component availability.

Unusual Machines operates in a highly competitive

drone and drone components market characterized by rapid technological change, pricing pressure, and the presence of large, well-capitalized

international manufacturers.

Competition varies by product category and end market, particularly between consumer-facing products and

enterprise-focused component sales.

In the global drone market, SZ DJI Technology

(“DJI”) is the dominant manufacturer, with industry research firms estimating that DJI accounts for a majority of

global consumer and prosumer drone sales.

DJI’s scale and vertical integration create competitive pressure across the industry,

while evolving regulatory requirements and customer demand for U.S.-based, compliant supply chains have created opportunities for alternative

See “Government Regulation and Federal Policy” below for recent information relating to DJI.

Within the drone components market, Unusual Machines

competes with domestic and international manufacturers, including T-Motor, Orqa, ModalAI, and ARK Electronics.

Competition is based on

price, performance, reliability, availability, and compliance.

Unusual Machines differentiates itself by offering

price-competitive, domestically manufactured and assembled drone components designed to meet NDAA requirements and align with Department

of Defense procurement frameworks, including the Blue UAS ecosystem, while focusing on supply chain control and execution reliability.

The Company’s Drone Component Manufacturing

The Company operates multiple manufacturing facilities located near

its headquarters in Orlando, Florida.

As of March 2026, Unusual Machines operates five facilities in the Orlando area to support domestic

drone component production and assembly, one of which is our corporate office.

These facilities manufacture a variety of drone components,

including motors, headsets, and other critical components.

The components support consumer, defense, and enterprise customers.

expects to continue to expand its production footprint in the Orlando area in a planful and deliberate manner, including the potential

addition of new product categories, such as batteries and cameras, as operational capacity and customer demand support such expansion.

See “ Item 1A.

Risk Factors .”

Unusual Machines purchases inventory from approximately

50 suppliers, much of which could be subject to varying tariffs.

The United States has continuously increased tariffs since 2019, which

Unusual Machines is currently subject to and range from 2% to 25%.

In addition, in Q1 2025, additional tariffs have been instituted on

Chinese products and could see potential changes to tariffs in the future.

These tariffs increase the cost of goods which reduces the

company’s profit margins or increases the total price to our customers.

For more information, See Risk Factors – Risks Related

to our Business and Financial Condition “Rising threats of international tariffs, including tariffs applied to goods between the

and China, may materially and adversely affect our business.”

Unusual Machines retail competitors are subject

to the same tariffs and have supply chains that include a greater mix of products sourced from China.

The Company can use its domestically

manufactured parts to improve both relative margin and price relative to the other domestic retailers.

In this way, tariffs may be a driver

for revenue and margin growth.

Additionally, tariffs have caused domestic drone manufacturers to prioritize domestic producers.

created preference for components from companies, like Unusual Machines, that are actively onshoring.

Government Regulation

and Federal Policy

National Defense Authorization

Act and American Security Drone Act

In December 2023, Congress passed the National

Defense Authorization Act (“NDAA”), which includes the American Security Drones Act (“ASDA”).

The bill prohibits,

starting in January 2026, federal agencies and federally funded programs from purchasing or using drones manufactured in countries that

are viewed as threats to U.S.

national security, such as China.

The basis for the legislation is that purchases from these countries (i)

pose a significant threat to national security, (ii) represent efforts to infiltrate and influence American society, and (iii) risk the

theft of personal and business data.

Unusual Machines sources inventory from approximately

70 suppliers, some of which are subject to varying tariffs.

Since 2019, the United States has implemented and continuously increased tariffs

on certain imported goods, which Unusual Machines is currently subject to, ranging from 2% to 30%.

These tariffs can increase the cost

of goods, reducing the Company’s profit margins or increasing the total price for our customers.

Certain competitors in the drone retail and components

markets are subject to the same tariffs and rely on supply chains that include a greater mix of foreign-sourced products, including components

manufactured in China.

Unusual Machines’ increasing use of domestically manufactured components may reduce relative exposure to

tariffs on imported goods and improve supply chain resilience.

In addition, evolving trade policies have led some U.S.

drone manufacturers

to place greater emphasis on domestic sourcing, which the Company believes has supported increased customer interest in U.S.-based component

suppliers, including Unusual Machines, that are actively onshoring, although such impacts remain subject to market conditions and policy

developments.

For a discussion of risks related to tariffs and

international trade policy, see “ Item 1A.

Risk Factors —Risks Related to Our Business and Financial Condition.”

Government Regulation and Federal Policy

National Defense Authorization Act and American

Security Drone Act

In December 2023, Congress passed the NDAA, which

includes provisions commonly referred to as the American Security Drones Act (“ASDA”).

These provisions are intended to restrict

the procurement and use of certain unmanned aircraft systems (“UAS”) manufactured or assembled by foreign entities identified

as national security threats, including certain Chinese manufacturers.

The ASDA has been enacted and is being implemented through federal

regulations and agency guidance.

Specifically, the American Security Drone Act:

Prohibits federal departments and agencies from procuring and operating certain foreign commercial off-the-shelf drone or covered unmanned aircraft system manufactured or assembled in countries identified as national security threats, and provides a timeline to end current use of these drones.

Prohibits the use of federal funds awarded through certain contracts, grants, or cooperative agreements to state or local governments from being used (1) to procure a covered unmanned aircraft system that is manufactured or assembled by a covered foreign entity or (2) in connection with the operation of such a drone or unmanned aircraft system.

Requires the Comptroller General of the United States to submit a report to Congress no later than 275 days after the enactment of the NDAA detailing the amount of foreign commercial off-the-shelf drones and covered unmanned aircraft systems procured by federal departments and agencies from countries identified as national security threats.

Federal Aviation Administration

The Federal Aviation Administration (“FAA”)

of the United States Department of Transportation is responsible for the regulation and oversight of civil aviation within the United

Its primary mission is to ensure the safety of civil aviation.

The FAA has adopted the name “unmanned aircraft” (“UA”)

to describe aircraft systems without a flight crew on board.

More common names include drone, Unmanned Aerial Vehicle (“UAV”)

and remotely operated aircraft.

The FAA began issuing regulations governing drones

in 2005 with their scope and frequency expanding in recent years with the significant increase in the number of drones sold.

2015, the FAA announced that all drones weighing more than 250 grams, or 0.55 pounds, must be registered with the FAA.

As of December

2023, the FAA reported the registration of almost 791,000 drones, of which approximately 370,000 were commercial and approximately 416,000

were recreational.

In addition, more than 370,000 remote pilots were certified.

In January 2021, the FAA finalized rules requiring

that drones be identifiable remotely.

These rules are effective for drone manufacturers beginning in September 2022 and for drone pilots

in September 2023.

The FAA believes that remote ID technologies will enhance safety and security by allowing the FAA, law enforcement,

and federal security agencies to identify drones flying in their jurisdiction.

These efforts lay the foundation for more complex operations,

such as those beyond visual line of sight at low altitudes, as the FAA and the drone industry move toward a traffic management ecosystem

for Unmanned Aircraft System flights separate from, but complimentary to, the air traffic management system.

The Company believes that the oversight of the

FAA is beneficial to the drone industry generally, and the Company specifically.

Approximately 70% of all FAA LAANC authorization are

already done using the Aloft product.

Countering Chinese

Communist Party Drone Act

In December 2025, Section 1709 was passed into

law as part of the National Defense Authorization Act.

Section 1709 is commonly referred to as the Countering Chinese Communist Party

(CCCP) Drone Act.

The law mandates that within one year, a security review of the two largest Chinese drone companies (DJI and Autel)

must be conducted and if it is not (or they fail to pass), the FCC will no longer grant licenses to operate within the United States.

The Company believes that this is functionally a ban on all new DJI and Autel products (similar to a previous ban of Huawei).

will impact consumers as well as enterprises and the Company believes this will open the entire U.S.

drone market up to domestic competition.

Prohibits federal departments and agencies from procuring and operating certain foreign commercial off-the-shelf drones or covered unmanned aircraft systems manufactured or assembled in countries identified as national security threats, and establishes a phased timeline to discontinue the use of such systems currently in operation, subject to applicable waivers and implementation guidance.

Restricts the use of federal funds awarded through certain contracts, grants, or cooperative agreements to state or local governments for (i) the procurement of a covered unmanned aircraft system that is manufactured or assembled by a covered foreign entity or (ii) the operation of such system.

Requires the Comptroller General of the United

States to submit a report to Congress detailing the extent to which federal departments and agencies have procured or operated foreign-manufactured

commercial off-the-shelf drones or covered UAS sourced from countries identified as national security threats.

On November 21, 2025, the White House Office of

Management and Budget issued Memorandum M-26-02 implementing Section 1829 of ASDA and related provisions.

The memorandum requires federal

civilian agencies, within 180 days of issuance, to integrate specified information security and risk assessment procedures into UAS procurements

and into grants and cooperative agreements that fund UAS acquisitions.

In addition, consistent with ASDA and the Federal Acquisition Regulation,

federal agencies are prohibited from procuring or operating certain “FASC-prohibited” unmanned aircraft systems manufactured

or assembled by designated foreign entities, subject to statutory exemptions and case-by-case waivers.

Beginning December 22, 2025, federal

funds awarded through grants, cooperative agreements, or other federal awards may not be used to procure or operate such systems except

where an applicable exemption or approved waiver applies.

We anticipate that this will stimulate additional demand for domestically made

drones and drone components.

Implementation of these provisions is occurring

through federal rulemaking, including amendments to the Federal Acquisition Regulation (“FAR”), and is subject to agency-specific

guidance, exemptions, and transition periods.

FCC Equipment Authorization and Countering

CCP Drones Act

In December 2024, Section 1709 of the National

Defense Authorization Act was enacted.

This provision expands the authority of the Federal Communications Commission (“FCC”),

in coordination with national security agencies, to conduct security reviews of certain foreign-manufactured drone systems.

The legislation directs the Nation Security Agencies

to conduct a national security determination of the two largest Chinese drone companies (DJI and Autel), within a one year period.

these manufacturers are deemed an unacceptable national security threat, or if a determination is not completed within one year, the

FCC may place the entities on its Covered List, which proscribes granting any future FCC licenses, which are necessary for the importation

and marketing of UAS in the United States.

In October 2025, the FCC voted unanimously (3-0)

to adopt a rule allowing the agency to retroactively ban equipment, including previously authorized wireless devices, if the manufacturer

is deemed a national security threat.

On December 23, 2025, the FCC issued guidance

of implementation of Section 1709.

Going forward UAS seeking FCC approvals must have at least 65% of components, based on value, and must

be domestically sourced (under the March 2022 changes to Federal Acquisition Regulation:

Amendments to the FAR Buy American Act Requirements).

This pertains to drones made in any country other than the United States.

The FCC specifically includes motors and batteries.

meeting this standard, a company must seek a waiver from the FCC in order to receive a license.

The FCC updated its Covered List to include

drones and drone components produced abroad.

The Covered List identifies communications equipment and services that are deemed to pose

an unacceptable risk to the national security of the U.S.

or the safety and security of U.S.

Equipment on the Covered List is

prohibited from receiving FCC authorization.

The FCC’s updated restrictions apply to new device models but do not prohibit the import,

sale or use of any existing models previously authorized by the FCC.

On January 7, 2026, the FCC partially reversed

the restriction to exempt drones and drones components on the Pentagon’s Blue List of cleared UAS aircraft, such as components produced

by foreign manufacturers including Sony, Nvidia and Panasonic.

However, DJI, the world’s drone manufacturer, is based in China and

was not included on the Blue UAS List.

As a result of the December restrictions, DJI

filed a petition in the U.S.

Court of Appeals for the Ninth Circuit challenging the FCC’s decision to add foreign drones and components

to the Covered List.

DJI alleges that the FCC’s actions violate the Fifth Amendment and exceed the FCC’s statutory authority

and that it will sustain severe harm as the FCC has used the ruling to justify restrictions on its ability to import its existing products,

as well as new products outside the scope of the ruling, into the U.S.

We cannot predict the outcome of this litigation.

While the scope, timing, and outcome of these

reviews remain subject to FCC implementation and agency discretion, any resulting restrictions on new equipment authorizations could

limit the introduction of new drone models from affected manufacturers into the U.S.

Such restrictions will apply across consumer,

commercial, and enterprise use cases and could increase demand for compliant drone systems and components from U.S.-based suppliers,

including Unusual Machines, subject to regulatory interpretation and future policy developments.

Department of Defense Policy and the Drone

Dominance Initiative

In parallel with legislative and regulatory actions,

in December 2025, the Department of War (“DoW”) announced Drone Dominance, an iterative $1.0 billion plan to purchase small,

lethal drones over the next two years.

This program is designed to accelerate the development, procurement, and deployment of secure,

scalable, and cost-effective unmanned systems sourced from domestic and allied suppliers.

This and other initiatives emphasize rapid

manufacturing, resilient supply chains, and the availability of compliant components suitable for defense and allied applications.

Collectively, these developments reflect a broader

federal effort to reduce reliance on foreign-manufactured drone systems and to strengthen the U.S.

drone industrial base.

While the timing

and scope of implementation may vary, the Company believes these actions are contributing to increased demand for U.S.-manufactured and

compliant drone components, subject to regulatory interpretation and future policy developments.

Environmental Considerations

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power to charge drones, users of drones the company sells burn carbon which negatively affects the environment.

Further, the SEC’s

climate change rules, when passed, will likely increase our compliance costs.

Employees and Human Capital Resources

As of March 25, 2025, the Company had sixteen

full-time employees and two full-time contractors, including our Chief Executive Officer, whose services are performed on behalf of a

consulting agreement.

As of March 6, 2026, the Company had 141 full-time

employees and 3 full-time contractors, including our Chief Executive Officer, whose services are performed under a consulting agreement.

The Company’s headquarters

are in Orlando, Florida under a lease which expires in October 2028.

At this facility, the Company maintains its executive offices and

a warehouse from which it holds inventory and ships inventory to customers.

As stated above, the Company plans to initiate a manufacturing

facility and believes that there are available locations near its current facility.

are in Orlando, Florida.

As of March 2026, we lease five facilities in Orlando, Florida which are utilized for manufacturing, warehousing

and a corporate office.

We also lease a facility in Canberra, Australia which is utilized for motor manufacturing.

Our leases total 62,500

square foot in the aggregate.

Intellectual Property

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UNMANNED AERIAL VEHICLE (Utility)

201810895541.3

UNMANNED AERIAL VEHICLE (Utility)

602018076194.2

11 unchanged sentences

PRINTED CIRCUIT BOARD (Design)

201810324925.X

SINGLE-PANEL HEAD-MOUNTED DISPLAY (Utility)

2 unchanged sentences

SINGLE-PANEL HEAD-MOUNTED DISPLAY (Utility)

202010150301.8

APPARATUS FOR ATTACHING ACCESSORIES TO A FIRST-PERSON VIEW HEADSET (Utility)

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Renewal due 12/28/2027

Next Deadline

Renewal due 3/6/2029

23 unchanged sentences

Renewal due 10/27/2031

Unusual Machines has

recently filed for a trademark on our logo.

United States

Unusual Machines Logo

United States

Unusual Machines Logo

United States

Unusual Machines Logo

Research and Development

3 unchanged sentences

Research and development costs were approximately $202,585 and $90,584, for the years ended December

and 2023, respectively and primarily related to developing NDAA compliant products including our Brave F7 flight controller, Brave 55A

ESC and the Fat Shark Aura FPV Camera.

A fundamental part of this approach is a well-defined screening process that helps us identify

commercial opportunities that support desired technological capabilities in the markets we serve.

31, 2025 and 2024, respectively and primarily related to developing NDAA compliant products including our Brave F7 flight controller,

Brave 55A ESC and the Fat Shark Aura FPV Camera.

A fundamental part of this approach is a well-defined screening process that helps us

identify commercial opportunities that support desired technological capabilities in the markets we serve.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business