What changed in Unusual Machines, Inc.'s 10-K — 2024 vs 2025

In September of 2025, the Company acquired Rotor Lab Pty. Ltd., an Australian company (“Rotor Lab”). Unusual Machines manufactures and sells drone components and drones across a diversified brand portfolio through business-to-business (“B2B”) sales and a curated retail channel.

According to Drone Industry Insights’ Global Drone Market Report 2025–2030, the global drone market is projected to reach approximately U.S. $57.8 billion by 2030. A Fact.MR report indicates the drone accessories market was valued at approximately $25.2 billion in 2024 and is projected to reach ~$156 billion by 2034 at a ~20% CAGR.

Furthermore, the global drone flight controller system market was approximately $7.14 billion in 2024 and is expected to reach around $13.05 billion by 2029 (CAGR ~12.8%) according to the Business Research Company.

Similarly, Global Market Insights reports that the drone motor market was valued at ~$4.7 billion in 2024 and is forecast to grow to ~$9.2 billion by 2030, and ~$15.9 billion by 2034 at a ~13.1% CAGR.

Fortune Business Insights likewise forecasts the motor market at $6.7 billion in 2025, with expansion toward $16.3 billion by 2034 as commercial and industrial drone deployment increases. Unusual Machines intends to pursue strategic acquisition targets that are cash flow positive and manufacture and sell drone components or enable us to domestically produce them.

The Company’s acquisition strategy is intended to support broader industry shifts toward U.S.-manufactured and NDAA-compliant drone systems, while maintaining a deliberate approach to capital allocation and integration risk.

Low Cost and Attritable Drone Market Segment Unusual Machines principally operates and manufactures components in the Group 1 Unmanned Aerial Systems (“UAS”) which is often referred to as the small drone segment of the drone industry. These drones are known for being light weight, high speed, and low-cost attritable drones where responsiveness and situational awareness are essential.

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

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.

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

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

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

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

(“DJI”) is the dominant manufacturer, with industry research firms estimating that DJI accounts for a majority of global consumer and prosumer drone sales. DJI’s scale and vertical integration create competitive pressure across the industry, while evolving regulatory requirements and customer demand for U.S.-based, compliant supply chains have created opportunities for alternative suppliers.

See “Government Regulation and Federal Policy” below for recent information relating to DJI. Within the drone components market, Unusual Machines competes with domestic and international manufacturers, including T-Motor, Orqa, ModalAI, and ARK Electronics. Competition is based on price, performance, reliability, availability, and compliance.

Unusual Machines differentiates itself by offering price-competitive, domestically manufactured and assembled drone components designed to meet NDAA requirements and align with Department of Defense procurement frameworks, including the Blue UAS ecosystem, while focusing on supply chain control and execution reliability. 2 The Company’s Drone Component Manufacturing The Company operates multiple manufacturing facilities located near its headquarters in Orlando, Florida.

As of March 2026, Unusual Machines operates five facilities in the Orlando area to support domestic drone component production and assembly, one of which is our corporate office. These facilities manufacture a variety of drone components, including motors, headsets, and other critical components. The components support consumer, defense, and enterprise customers.

The Company expects to continue to expand its production footprint in the Orlando area in a planful and deliberate manner, including the potential addition of new product categories, such as batteries and cameras, as operational capacity and customer demand support such expansion. See “ Item 1A.

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.

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.

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. 3 FCC Equipment Authorization and Countering CCP Drones Act In December 2024, Section 1709 of the National Defense Authorization Act was enacted.

This provision expands the authority of the Federal Communications Commission (“FCC”), in coordination with national security agencies, to conduct security reviews of certain foreign-manufactured drone systems. The legislation directs the Nation Security Agencies to conduct a national security determination of the two largest Chinese drone companies (DJI and Autel), within a one year period.

If these manufacturers are deemed an unacceptable national security threat, or if a determination is not completed within one year, the FCC may place the entities on its Covered List, which proscribes granting any future FCC licenses, which are necessary for the importation and marketing of UAS in the United States.

In October 2025, the FCC voted unanimously (3-0) to adopt a rule allowing the agency to retroactively ban equipment, including previously authorized wireless devices, if the manufacturer is deemed a national security threat. On December 23, 2025, the FCC issued guidance of implementation of Section 1709.

Going forward UAS seeking FCC approvals must have at least 65% of components, based on value, and must be domestically sourced (under the March 2022 changes to Federal Acquisition Regulation: Amendments to the FAR Buy American Act Requirements). This pertains to drones made in any country other than the United States. The FCC specifically includes motors and batteries.