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What changed in Unusual Machines, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Unusual Machines, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+315 added−413 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-22)

Top changes in Unusual Machines, Inc.'s 2024 10-K

315 paragraphs added · 413 removed · 191 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

30 edited+21 added−8 removed12 unchanged
Biggest changeCountry Status Patent No Application Date Grant Date Title United States Issued 29/610,543 7/13/2017 UNMANNED AERIAL VEHICLE Canada Issued 179088 1/11/2018 UNMANNED AERIAL VEHICLE China Issued 201830008387.4 1/11/2018 UNMANNED AERIAL VEHICLE EU Issued 4665040 1/12/2018 UNMANNED AERIAL VEHICLE Korea Issued 30-2018-1689 1/11/2018 UNMANNED AERIAL VEHICLE United States Issued 15/684,814 8/23/2017 UNMANNED AERIAL VEHICLE Canada Abandoned 3009413 6/26/2018 UNMANNED AERIAL VEHICLE China Pending 201810895541.3 8/8/2018 UNMANNED AERIAL VEHICLE EU Pending EP18179512.1 6/25/2018 UNMANNED AERIAL VEHICLE United States Issued 29/610,554 7/13/2017 PRINTED CIRCUIT BOARD Canada Issued 179089 1/11/2018 PRINTED CIRCUIT BOARD China Issued 201830008494.7 1/11/2018 PRINTED CIRCUIT BOARD EU Issued 4665032 1/12/2018 PRINTED CIRCUIT BOARD Korea Issued 30-2018-1690 1/11/2018 PRINTED CIRCUIT BOARD China Pending 201810324925.X 4/12/2018 SINGLE-PANEL HEAD-MOUNTED DISPLAY EU Pending 19159958.8 3/4/2019 SINGLE-PANEL HEAD-MOUNTED DISPLAY United States Issued 16/002,200 6/7/2018 SINGLE-PANEL HEAD-MOUNTED DISPLAY China Pending 202010150301.8 3/6/2020 APPARATUS FOR ATTACHING ACCESSORIES TO A FIRST-PERSON VIEW HEADSET United States Published 17/187,838 2/28/2021 APPARATUS FOR ATTACHING ACCESSORIES TO A FIRST-PERSON VIEW HEADSET United States Pending 29/783,966 5/17/2021 HEADSET China Pending 202130741102.X 11/11/2021 VR GLASSES Canada, European Union Countries, Japan, United Kingdom Pending Not yet assigned 11/12/2021 HEADSET 4 Trademark Portfolio The following table summarizes current registered trademarks (indicated by “Registered”) including the registration dates.
Biggest changeCountry Status Patent No Application Date Grant Date Title United States Issued D825,381 7/13/2017 8/14/2018 UNMANNED AERIAL VEHICLE (Design Canada Issued 179088 1/10/2018 5/30/2019 UNMANNED AERIAL VEHICLE (Design) China Issued CN304757327S 1/9/2018 8/3/2019 UNMANNED AERIAL VEHICLE (Design) EU Issued 004665040 1/12/2018 1/12/2018 UNMANNED AERIAL VEHICLE (Design) GB Issued 90046650400001 1/12/2018 1/12/2018 UNMANNED AERIAL VEHICLE (Design) Korea Issued 30-963991 1/11/2018 7/3/2018 UNMANNED AERIAL VEHICLE (Design) United States Issued 10,179,647 8/23/2017 1/15/2019 UNMANNED AERIAL VEHICLE (Utility) Canada Abandoned 3009413 6/26/2018 UNMANNED AERIAL VEHICLE (Utility) China Issued 201810895541.3 8/8/2018 3/12/2024 UNMANNED AERIAL VEHICLE (Utility) France Issued 3446974 6/25/2018 11/6/2024 UNMANNED AERIAL VEHICLE (Utility) Germany Issued 602018076194.2 6/25/2018 11/6/2024 UNMANNED AERIAL VEHICLE (Utility) Switzerland Issued 3446974 6/25/2018 11/6/2024 UNMANNED AERIAL VEHICLE (Utility) United Kingdom Issued 3446974 6/25/2018 11/6/2024 UNMANNED AERIAL VEHICLE (Utility) United States Issued D848,383 7/13/2017 5/14/2019 PRINTED CIRCUIT BOARD (Design) Canada Issued 179089 1/10/2018 5/30/2019 PRINTED CIRCUIT BOARD (Design) China Issued 304758049S 1/9/2018 8/3/2018 PRINTED CIRCUIT BOARD (Design) EU Issued 004665032 1/12/2018 1/12/2018 PRINTED CIRCUIT BOARD (Design) United Kingdom Issued 90046650320001 1/12/2018 1/12/2018 PRINTED CIRCUIT BOARD (Design) Korea Issued 30-965570 1/11/2018 7/13/2018 PRINTED CIRCUIT BOARD (Design) China Issued 201810324925.X 4/12/2018 11/19/2021 SINGLE-PANEL HEAD-MOUNTED DISPLAY (Utility) EU Pending 19159958.8 2/28/2019 SINGLE-PANEL HEAD-MOUNTED DISPLAY (Utility) United States Issued 10,819,973 6/7/2018 10/27/2020 SINGLE-PANEL HEAD-MOUNTED DISPLAY (Utility) China Pending 202010150301.8 3/6/2020 APPARATUS FOR ATTACHING ACCESSORIES TO A FIRST-PERSON VIEW HEADSET (Utility) United States Allowed 17/187,838 2/28/2021 APPARATUS FOR ATTACHING ACCESSORIES TO A FIRST-PERSON VIEW HEADSET (Utility) United States Issued D991,255 5/17/2021 7/4/2023 HEADSET (Design) China Issued CN308594144S 11/11/2021 4/19/2024 VR GLASSES (Design) Canada Issued DM/218 069 11/9/2021 11/9/2021 HEADSET (Design) EU Issued DM/218 069 11/9/2021 11/9/2021 HEADSET (Design) Japan Issued DM/218 069 11/9/2021 11/9/2021 HEADSET (Design) GB Issued DM/218 069 11/9/2021 11/9/2021 HEADSET (Design) 5 Trademark Portfolio The following table summarizes current registered trademarks (indicated by “Registered”) including the registration dates.
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.
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. 7
Under the terms of the Purchase Agreement, as amended, the Company purchased Rotor Riot and Fat Shark subsidiaries for $20.0 million (the “Purchase Price”) comprised of (i) $1.0 million in cash, (ii) a $2.0 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.
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.
Rotor Riot competes against these competitors by leveraging its visibility on the internet through its Facebook page which has more than 38,000 followers and its Rotor Riot YouTube channel which has more than 272,000 subscribers.
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 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 $54.6 billion by 2030, with the commercial market growing at a 7.7% compound annual growth rate (“CAGR”).
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”).
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.
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. 3 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 States.
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 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.
As the chart indicates, these trademarks are registered in the U.S. and abroad. Country Status Trademark Reg. No. Reg. Date. App. No. App. Date.
As the chart indicates, these trademarks are registered in the United States and abroad. Country Status Trademark Reg. No. Reg. Date. App. No. App. Date.
None of the patents are currently licensed and IP is generated in the general course of doing engineering design. The following table summarizes currently issued patents (indicated by “Issued”) including the grant dates thereof, and patent applications (indicated by “Pending or Published”).
The IP portfolio primarily includes design and utility patents related to FPV headsets. None of the patents are currently licensed and IP is generated in the general course of doing engineering design. The following table summarizes currently issued patents (indicated by “Issued”) including the grant dates thereof, and patent applications (indicated by “Pending or Published”).
The Company believes that very promising, private companies (such as those the company will likely target) 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.
The Company 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.
This experience is accomplished by live streaming footage from a camera mounted on the nose of the drone directly into specially designed goggles worn by the pilot. The image is transmitted via radio (traditionally analog but increasingly digital) to the pilot. The drone remote control unit, the drone, and the FPV goggles are all interconnected via radio.
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. The drone remote control unit, the drone, and the pilot display are all interconnected via radio.
To that extent, except for users who use solar and other non-electrical 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. 3 Employees and Human Capital Resources As of December 31, 2023, the Company had three full-time employees.
To that extent, except for users who use solar and other non-electrical 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.
Unusual Machines specializes in the production and sale of small drones and essential components and with the acquisitions of Fat Shark and Rotor Riot, it brings brand recognition and a strong curated retail channel in the FPV drone market segment.
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.
According to Allied Market Research, the drone component industry is likewise expanding. The drone flight controller market, valued at $15.53 billion in 2021 is expected to reach $28.86 billion by 2031.
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.
Unusual Machines intends to build its business both organically and through strategic acquisitions that leverage our retail business to onshore production of critical drone components. With the transition to onshoring production of drone components, the Company intends to expand into B2B channels for customers that require a domestic supply chain.
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.
We 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 Fat Shark and Rotor Riot principally operate in the FPV segment of the drone industry. This segment focuses on drones piloted with wearable display devices.
We believe that unlocking this potential will be key to industry consolidation and breaking the dominance of China in the drone industry. 1 First Person View (FPV) Market Segment Unusual Machines principally operates in the FPV segment of the drone industry.
In December 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.
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.
Item 1. Business Background of Unusual Machines Unusual Machines, Inc. (“Unusual Machines” or the “Company”) is a Puerto Rico corporation, originally incorporated July 11, 2019, with our principal place of business in Orlando, Florida.
Item 1. Business Background of Unusual Machines Unusual Machines, Inc. (“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.
Unusual Machine’s business strategy includes (i) increasing its overall customer base with its products and rapid adoption; (ii) investing in new products and IP, starting with the Fat Shark and Rotor Riot acquisitions that were completed with our IPO, (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, (iv) enhancing the company’s products to improve the integration of third-party solutions, and (v) seeking strategic partnerships and sponsorships with companies that want access to the FPV community.
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.
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. Other competitors include GetFPV and Lumenier. Race Day Quads is a larger, direct competitor in the FPV sector.
Competition 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.
Research and Development Research and development activities are part of Unusual Machine’s business, and the Company will follow a disciplined approach to investing our resources to create new drone technologies and solutions. In the years ending December 31, 2023 and 2022, Fat Shark’s research and development costs were approximately 13.0% and 9.8%, respectively, of its revenues.
Research and Development Research and development activities are part of Unusual Machine’s business, and the Company will follow a disciplined approach to investing capital and resources to create new drone technologies and solutions.
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 U.S. 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.
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.
Class Next Deadline US Registered ROTOR RIOT 5,175,159 4/4/2017 87/074,341 6/16/2016 16, 25, 35, 41 AOU due 4/4/2023 Australia Registered ROTOR RIOT 1814854 4/18/2017 1814854 12/9/2016 16, 25, 35, 41 Renewal due 12/9/2026 Canada Registered ROTOR RIOT TMA1013525 1/22/2019 1813182 12/8/2016 16, 25, 35, 41 Renewal due 1/22/2034 EU Registered ROTOR RIOT 016152688 5/14/2017 016152688 12/12/2016 16, 25, 35, 41 Renewal due 12/12/2026 UK Registered ROTOR RIOT UK00916152688 5/14/2017 UK00916152688 12/12/2016 16, 25, 35, 41 Renewal due 12/12/2026 US Registered Rotor Riot Logo 5,175,160 4/4/2017 87/074,378 6/16/2016 16, 25, 35, 41 AOU due 4/4/2023 Australia Registered Rotor Riot Logo 1814855 4/18/2017 1814855 12/9/2016 16, 25, 35, 41 Renewal due 12/9/2026 Canada Registered Rotor Riot Logo TMA1013624 1/22/2019 1813183 12/8/2016 16, 25, 35, 41 Renewal due 1/22/2034 EU Registered Rotor Riot Logo 016152837 5/14/2017 016152837 12/12/2016 16, 25, 35, 41 Renewal due 12/12/2026 UK Registered Rotor Riot Logo UK00916152837 5/14/2017 UK00916152837 12/12/2016 16, 25, 35, 41 Renewal due 12/12/2026 Unusual Machines has recently filed for a trademark on our logo.
Classes Next Deadline US Registered ROTOR RIOT 5,175,159 4/4/2017 87/074,341 6/16/16 16, 25, 35, 41 Renewal due 4/4/2027 Australia Registered ROTOR RIOT 1814854 4/18/2017 1814854 12/9/16 16, 25, 35, 41 Renewal due 12/9/2026 Canada Registered ROTOR RIOT TMA1013525 1/22/2019 1813182 12/8/16 16, 25, 35, 41 Renewal due 1/22/2034 EU Registered ROTOR RIOT 016152688 5/14/2017 016152688 12/12/16 16, 25, 35, 41 Renewal due 12/12/2026 UK Registered ROTOR RIOT UK00916152688 5/14/2017 UK00916152688 12/12/16 16, 25, 35, 41 Renewal due 12/12/2026 US Registered Rotor Riot Logo 5,175,160 4/4/2017 87/074,378 6/16/16 16, 25, 35, 41 Renewal due 4/4/2027 Australia Registered Rotor Riot Logo 1814855 4/18/2017 1814855 12/9/16 16, 25, 35, 41 Renewal due 12/9/2026 Canada Registered Rotor Riot Logo TMA1013624 1/22/2019 1813183 12/8/16 16, 25, 35, 41 Renewal due 1/22/2034 EU Registered Rotor Riot Logo 016152837 5/14/2017 016152837 12/12/16 16, 25, 35, 41 Renewal due 12/12/2026 UK Registered Rotor Riot Logo UK00916152837 5/14/2017 UK00916152837 12/12/16 16, 25, 35, 41 Renewal due 12/12/2026 US Registered BYTE FROST 6,318,131 4/13/2021 88/574,951 8/12/19 9 AOU due 4/13/2027 US Registered DOMINATOR 5,446,501 4/17/2018 87/513,286 6/30/17 9 Renewal due 4/17/2028 US Registered FAT SHARK 6,037,513 4/21/2020 87/513,291 6/30/17 9, 12 AOU due 4/21/2026 Australia Registered FAT SHARK 1892862 7/18/2018 1892862 7/12/17 9, 12 Renewal due 7/12/2027 UK Registered FAT SHARK UK00917653122 6/12/2018 UK00917653122 12/27/17 9, 12 Renewal due 12/28/2027 EU Registered FAT SHARK 17653122 6/12/2018 17653122 12/28/17 9, 12 Renewal due 12/28/2027 (continued) 6 Country Status Trademark Reg.
The drone motor market, valued at $2.6 billion in 2021 is projected to reach $9.9 billion by 2031. 1 Unusual Machines intends to pursue strategic acquisition targets that are cash flow positive and either sell drone parts or allow us to vertically integrate the production of drone parts.
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.
Cinema photography is the process of viewing and recording a subject matter from the air from the viewpoint of the pilot. Defense is a newer market segment characterized by the use cases emerging in the Ukrainian conflict. Plans for Growth, Development, and Expansion Unusual Machine’s plans to strengthen its market position through continued organic revenue growth.
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.
The two most critical components are electronics and frames. Approximately 95% of Rotor Riot’s inventory is purchased directly from Chinese vendors, all of which could be subject to varying tariffs. The United States has continuously increased tariffs since 2019, which Rotor Riot is currently subject to and range from 2% to 25%.
See “Item 1A. Risk Factors .” Suppliers 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%.
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.
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. In December 2015, the FAA announced that all drones weighing more than 250 grams, or 0.55 pounds, must be registered with the FAA.
We believe 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. Fat Shark also competes with DJI along with other FPV headset companies including Skyzone FPV, Orqa, and HD Zero.
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.
In parallel, the Company intends to aggressively invest in the extension of their business from just B2C sales to B2B sales of drone components.
“ Risk Factors .” 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.
These are head mounted displays (“HMDs”) or goggles for drone pilots. These goggles give pilots FPV perspective to control their drone in flight. This is a unique experience where the pilot is interacting with an aircraft through visual immersion.
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.
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The Company was incorporated in Puerto Rico under the name “Red Cat Motor Corporation” on July 11, 2019, before changing its name to “AerocarveUS Corporation” on October 20, 2020 and then to “Unusual Machines, Inc.” on July 5, 2022. The Company is in the process of reincorporating as a Nevada corporation.
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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. Since August of 2024, Unusual Machines has developed three components (and variants) that have been approved and placed on the Blue Framework.
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Fat Shark is a leader in designing and manufacturing ultra-low latency first-person-view (“FPV”) video goggles for drone pilots, which it markets towards retail distributors including Rotor Riot.
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This 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.
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Rotor Riot is a rapidly growing e-commerce marketplace, backed by the largest community of FPV drone pilots in the world and retails FPV drones and goggles, parts, tools, drone components, and accessories manufactured by third-parties.
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Potential Aloft Acquisition On February 1, 2025, the Company entered into a Merger Agreement to acquire a drone software company, Aloft Technologies, Inc. (“Aloft”).
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Customers Revenues for Fat Shark are principally generated through distributors and for Rotor Riot online through its e-commerce site, www.rotorriot.com. Both Fat Shark and Rotor Riot market their products and services to recreational and professional drone pilots and hobbyists. Competition Rotor Riot competes with a number of significantly larger, better capitalized companies.
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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.
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The Fat Shark brand has been synonymous with FPV headsets since the emergence of the market in 2008. Fat Shark continues to compete through partnerships with other FPV companies and a focus on manufacturing and product quality. 2 Suppliers Rotor Riot purchases inventory from approximately 50 suppliers although 57% of this inventory is purchased from four vendors.
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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. See Item 1A.
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These tariffs increase the cost of goods which reduces the company’s profit margins. Fat Shark has sources over 90% of its components and inventory from a single Chinese supplier, Shenzhen Fatshark Co. Ltd. See Item 13 – Certain Relationships and Related Party Transactions and Director Independence for additional information.
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Customers 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.
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The Company believes that the oversight of the FAA is beneficial to the drone industry generally, and the Company specifically. Approximately 10 % of the drones sold by Rotor Riot are below the weight threshold required to register. The remaining 90% have more functionality, are more likely to be used for commercial purposes, and therefore, should be registered.
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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.
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However, with the completion of and acquisitions of Fat Shark and Rotor Riot, the Company had 14 full-time employees as of March 21, 2024. Intellectual Property The Company has consolidated its IP into a subsidiary, UMAC IP Holdings Corp. The IP portfolio primarily includes design and utility patents related to FPV headsets.
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Unusual Machines maintains price competitiveness and is an emerging leader in the value segment of the non-Chinese components market. 2 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.
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The Company plans to lease an additional facility near its headquarters office in Orlando, Florida, at which it will manufacture NDAA compliant drone motors. The 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.
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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.
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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 U.S. 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.
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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. This has created preference for components from companies, like Unusual Machines, that are actively onshoring.
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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.
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Section 1709 is commonly referred to as the Countering Chinese Communist Party (CCCP) Drone Act.
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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.
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The Company believes that this is functionally a ban on all new DJI and Autel products (similar to a previous ban of Huawei). This ban will impact consumers as well as enterprises and the Company believes this will open the entire U.S. drone market up to domestic competition.
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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. Property The Company’s headquarters are in Orlando, Florida under a lease which expires in October 2028.
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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. 4 Intellectual Property The Company has consolidated its IP into a subsidiary, UMAC IP Holdings Corp.
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No. Reg. Date. App. No. App. Date. Classes Next Deadline China Registered FAT SHARK 28347095 3/7/2019 28347095 12/27/17 9 Renewal due 3/6/2029 China Registered FAT SHARK 28347096 12/7/2018 28347096 12/27/17 12 Renewal due 12/6/2028 S.
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Korea Registered FAT SHARK 40-1429232 12/20/2018 40-20170165133 12/22/17 9, 12 Renewal due 12/20/2028 Japan Registered FAT SHARK 6128494 3/8/2019 2017162207 12/11/17 9, 12, 28 Renewal due 3/8/2029 US Registered Shark Head Logo 5,921,613 11/26/2019 87/792,917 2/10/18 9, 25 AOU due 11/26/2025 UK Registered Shark Head Logo UK00917938426 12/26/2018 UK00917938426 7/31/18 9, 12, 25 Renewal due 7/31/2028 EU Registered Shark Head Logo 17938426 12/26/2018 17938426 7/31/18 9, 12, 25 Renewal due 7/31/2028 China Registered Shark Head Logo 32458836 4/7/2019 3248836 7/25/18 9 Renewal due 4/6/2029 China Registered Shark Head Logo 32458835 4/7/2019 32458835 7/25/18 12 Renewal due 4/6/2029 China Registered Shark Head Logo 32458837 4/7/2019 32458837 7/25/18 25 Renewal due 4/6/2029 US Registered SHARK BYTE 6,631,683 2/1/2022 90/337,500 11/23/20 9 AOU due 2/1/2028 UK Registered SHARK BYTE UK00003597165 9/3/2021 UK00003597165 2/18/21 9 Renewal due 2/18/2031 EU Registered SHARK BYTE 018402699 11/5/2021 018402699 2/19/21 9 Renewal due 2/19/2031 China Registered SHARK BYTE 53741813 10/14/2022 53741813 2/20/21 9 Renewal due 10/27/2031 Unusual Machines has recently filed for a trademark on our logo.
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Research and development costs were approximately $90,584 and 0, for the years ended December 31, 2024 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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

136 edited+39 added−108 removed172 unchanged
Biggest changeSome of these risks include: Risks Related to our Business and Financial Condition · Because Fat Shark and Rotor Riot’s auditors have qualified their reports on a going concern basis and with our history of losses, we may not be able to continue operating as a going concern. · Because the Company had a very limited operating history prior to its acquisition of Fat Shark and Rotor Riot, any investment in us is highly speculative. · The Company may be unable to repay indebtedness. · Fat Shark and Rotor Riot have incurred net losses since their acquisition by Red Cat and may fail to achieve or maintain profitability. · If the proceeds of the recent initial public offering (the “IPO”) are insufficient to meet our working capital needs, and if we are then not able to obtain sufficient capital, we may be forced to limit the scope of our operations. · If we lose key personnel, it may adversely affect our business. · Conflicts of interest involving our Board and other parties could materially harm our business. · If we are unable to attract new customers or maintain and grow Fat Shark and Rotor Riot existing customer relationships in a manner that is cost-effective, our revenue growth could be slower than we expect and our business may be harmed. · Future operating results and key metrics may fluctuate significantly from period-to-period due to a wide range of factors, which makes our future results difficult to predict. · Any failures of or damage to, attack on or unauthorized access to our information technology systems or facilities or disruptions to our continuous operations, including the systems, facilities or operations of third parties with which we do business, such as resulting from cyber-attacks, could result in significant costs, reputational damage and limits on our ability to conduct our business activities. · Our failure to effectively manage our growth could harm our business. · If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely affected.
Biggest changeSome of these risks include: Risks Related to our Business and Financial Condition · Because the Company had a very limited operating history prior to its acquisition of Fat Shark and Rotor Riot, any investment in us is highly speculative. · Fat Shark and Rotor Riot incurred net losses since their acquisition by Red Cat and may fail to achieve or maintain profitability. · Rising threats of international tariffs, including tariffs applied to goods between the United States and China may materially and adversely affect our business. · If the proceeds of the prior IPO and subsequent capital raises are insufficient to meet our working capital needs, and if we are then not able to obtain sufficient capital, we may be forced to limit the scope of our operations. · If we lose key personnel, it may adversely affect our business. · Conflicts of interest involving our board of directors (“Board”) and other parties could materially harm our business. · If we are unable to attract new customers or maintain and grow our existing customer relationships in a manner that is cost-effective, our revenue growth could be slower than we expect and our business may be harmed. · Future operating results and key metrics may fluctuate significantly from period-to-period due to a wide range of factors, which makes our future results difficult to predict. · Any failures of or damage to, attack on or unauthorized access to our information technology systems or facilities or disruptions to our continuous operations, including the systems, facilities or operations of third parties with which we do business, such as resulting from cyber-attacks, could result in significant costs, reputational damage and limits on our ability to conduct our business activities. · Our failure to effectively manage our growth could harm our business. · If we are unable to attract, integrate and retain additional qualified personnel, including top technical talent, our business could be adversely affected. · If we are successful in consummating the Merger, the integration of our business and the Aloft business may disrupt or have a negative impact on our business. 8 Risks Related to Our Sale of Drone-Related Products and Operations in the Drone Industry · We operate in an emerging and rapidly evolving industry which makes it difficult to evaluate our business and future prospects. · We face competition from larger companies that have substantially greater resources which challenges our ability to establish market share, grow the business, and reach profitability. · Several steps of our production processes are dependent upon certain critical machines and tools which could result in delivery interruptions and foregone revenues. · We may not be able to procure necessary key components for our products or may produce or purchase too much inventory. · We may not be able to keep pace with technological advances; and we depend on advances in technology by other companies. · Lack of long-term purchase orders and commitments from customers may lead to a rapid decline in sales. · Our products require ongoing research and development and may experience technical problems or delays, which could lead the business to fail. · If we are involved in litigation, it could harm our business or otherwise distract management. · Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation, including due to our high reliance on online and social media platforms, would likely adversely affect our business and operating results. · Future growth and ability to generate and grow revenue and achieve or maintain profitability may be adversely affected if our marketing initiatives are not effective in generating sufficient levels of brand awareness. · Future acquisitions could disrupt our business and adversely affect our operating results, financial condition and cash flows. · If we incur any future impairment in the carrying value of our goodwill asset or write-off of our general intangibles, it could depress our stock price. · Product quality issues and a higher-than-expected number of warranty claims or returns could harm our business and operating results.
Interruptions in our manufacturing could be caused by us or our partners including but not limited to equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair and maintenance of manufacturing equipment can be extensive.
Interruptions could be caused by us or our partners including but not limited to equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new equipment. Lead-time for delivery, installation, testing, repair and maintenance of equipment can be extensive.
NYSE American requires that the average closing price of its listed common stock remain above $1.00 over a 30 consecutive day period, in order to remain listed.
The NYSE American requires that the average closing price of its listed common stock remain above $1.00 over a 30 consecutive day period, in order to remain listed.
Acquisitions involve many risks, including the following: · an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; · We may incur substantial costs and deploy a significant amount of time and other resources towards a prospective transaction that does not close, either of which could materially harm our financial condition; · we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, contracts, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; · an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; · an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company; · we may encounter difficulties in, or may be unable to, successfully sell any acquired products; 22 · an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; · the potential strain on our financial and managerial controls and reporting systems and procedures; · potential known and unknown liabilities associated with an acquired company, including due to a non-disclosure or failure to identify such liabilities during the due diligence process prior to closing an acquisition; · if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; · the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; · to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and · managing the varying intellectual property protection strategies and other activities of an acquired company.
Acquisitions involve many risks, including the following: · an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; · We may incur substantial costs and deploy a significant amount of time and other resources towards a prospective transaction that does not close, either of which could materially harm our financial condition; · we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, contracts, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; · an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; · an acquisition may result in a delay or reduction of customer purchases for both us and the company we acquired due to customer uncertainty about continuity and effectiveness of service from either company; 26 · we may encounter difficulties in, or may be unable to, successfully sell any acquired products; · an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; · the potential strain on our financial and managerial controls and reporting systems and procedures; · potential known and unknown liabilities associated with an acquired company, including due to a non-disclosure or failure to identify such liabilities during the due diligence process prior to closing an acquisition; · if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; · the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; · to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and · managing the varying intellectual property protection strategies and other activities of an acquired company.
In addition, the increasing global focus on climate change, including greenhouse gas (“GHG”) emissions, has resulted in legislative and regulatory efforts to address the causes and impacts of climate change, and any new and more strict laws and regulations to reduce GHG emissions and address other aspects of climate change, including carbon taxes, cap and trade programs, GHG reduction requirements, requirements for the use of green energy, and changes in procurement requirements, may result in increased operational and compliance obligations, which could adversely affect our financial condition and results of operations.
In addition, the global focus on climate change, including greenhouse gas (“GHG”) emissions, has resulted in legislative and regulatory efforts to address the causes and impacts of climate change, and any new and more strict laws and regulations to reduce GHG emissions and address other aspects of climate change, including carbon taxes, cap and trade programs, GHG reduction requirements, requirements for the use of green energy, and changes in procurement requirements, may result in increased operational and compliance obligations, which could adversely affect our financial condition and results of operations.
Increases in costs incurred or diversion of management’s attention as a result of becoming a publicly traded company may adversely affect our business, prospects, financial condition, results of operations, and cash flows. 32 Our failure to maintain effective disclosure controls and internal controls over financial reporting could have an adverse impact on us .
Increases in costs incurred or diversion of management’s attention as a result of becoming a publicly traded company may adversely affect our business, prospects, financial condition, results of operations, and cash flows. Our failure to maintain effective disclosure controls and internal controls over financial reporting could have an adverse impact on us .
If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
If a claim of patent infringement against us succeeds, we may have to pay substantial damages, possibly including treble damages and attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses from third parties, which may be impossible or require substantial time and monetary expenditure.
Our operating results could be materially adversely impacted if our suppliers do not provide the critical components used to assemble our products on a timely basis, at a reasonable price, and in sufficient quantities. Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products.
Our operating results could be materially adversely impacted if our suppliers do not provide the critical components used to assemble our products on a timely basis, at a reasonable price, and in sufficient quantities. 17 Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. 5 Risk Factors Summary Our business and an investment in our common stock are subject to numerous risks and uncertainties, including those highlighted in this “ Risk Factors ” section below.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Risk Factors Summary Our business and an investment in our Common Stock are subject to numerous risks and uncertainties, including those highlighted in this “ Risk Factors ” section below.
Our intention is to purchase certain components from suppliers based in the United States, which may lead us to pay higher prices, or select parts from a more limited number of suppliers relative to our competitors, which would adversely impact our gross margin and operating results.
Our intention is to purchase certain components or sub-components from suppliers based in the United States, which may lead us to pay higher prices, or select parts from a more limited number of suppliers relative to our competitors, which would adversely impact our gross margin and operating results.
If we raise capital in the future, it may dilute our existing stockholders’ ownership and/or have other adverse effects on us, our securities or our operations. If we are required to raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership may decrease, and these stockholders may experience substantial dilution.
If we raise capital in the future, it may dilute our existing stockholders’ ownership and/or have other adverse effects on us, our securities or our operations. If we are required to raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will decrease, and these stockholders may experience substantial dilution.
Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. In addition, as we move into new geographies, we will need to attract and recruit skilled personnel in those areas.
Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. In addition, if we move into new geographies, we will need to attract and recruit skilled personnel in those areas.
If we or third parties such as drone pilots who Rotor Riot uses to market our products online fail to adhere to these requirements, we could be limited, restricted or banned from some or all uses, which would materially adversely affect our business. 21 Future growth and ability to generate and grow revenue and achieve or maintain profitability may be adversely affected if our marketing initiatives are not effective in generating sufficient levels of brand awareness.
If we or third parties such as drone pilots who Rotor Riot uses to market our products online fail to adhere to these requirements, we could be limited, restricted or banned from some or all uses, which would materially adversely affect our business. 24 Future growth and ability to generate and grow revenue and achieve or maintain profitability may be adversely affected if our marketing initiatives are not effective in generating sufficient levels of brand awareness.
This discussion should be read in conjunction with the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations .” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and securities trading prices.
This discussion should be read in conjunction with the other information in this Annual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and securities trading prices.
A successful product liability claim or series of claims brought against us could cause our stock price to decline and, would adversely affect our results of operations and business. 20 Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation, including due to our high reliance on online and social media platforms, would likely adversely affect our business and operating results.
A successful product liability claim or series of claims brought against us could cause our stock price to decline and, would adversely affect our results of operations and business. 23 Our business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition or reputation, including due to our high reliance on online and social media platforms, would likely adversely affect our business and operating results.
Customers issue purchase orders or use our e-commerce site solely at their own discretion, often shortly before the requested date of shipment.
Our B2C customers issue purchase orders or use our e-commerce site solely at their own discretion, often shortly before the requested date of shipment.
In either case, such a license may not be available on commercially reasonable terms or at all. 24 Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more of our products.
In either case, such a license may not be available on commercially reasonable terms or at all. 27 Parties making intellectual property claims against us may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more of our products.
Both our distributor relationships through Fat Shark and our online sales through Rotor Riot entail short-term contracts under which customers are generally able to cancel orders (without penalty) or delay the delivery of products on relatively short notice, regardless of whether or not we are in default under our agreements.
Both our distributor relationships and our online sales through Rotor Riot entail short-term contracts under which customers are generally able to cancel orders (without penalty) or delay the delivery of products on relatively short notice, regardless of whether or not we are in default under our agreements.
To the extent that any such action asserts a claim under the Exchange Act, that provision must be brought in federal court.
To the extent that any such action asserts a claim under the Exchange Act, that claim must be brought in federal court.
Therefore, an investor seeking to bring a claim against or on behalf of the Company or its affiliates under Puerto Rico law or the federal securities laws may be forced to litigate their case in a court which poses geographic or other hardships, and could face uncertainty as to which jurisdiction and venue the case will ultimately be heard in, which may delay, prevent or impose additional obstacles on the investor in such litigation.
Therefore, an investor seeking to bring a claim against or on behalf of the Company or its affiliates under Nevada law or the federal securities laws may be forced to litigate their case in a court which poses geographic or other hardships, and could face uncertainty as to which jurisdiction and venue the case will ultimately be heard in, which may delay, prevent or impose additional obstacles on the investor in such litigation.
Any such development could materially harm our business. 19 If we are involved in litigation, it could harm our business or otherwise distract management. If we become a party to a substantial, complex or extended litigation, it could cause us to incur large expenditures and could distract management.
Any such development could materially harm our business. 22 If we are involved in litigation, it could harm our business or otherwise distract management. If we become a party to a substantial, complex or extended litigation, it could cause us to incur large expenditures and could distract management.
Our executive officers, senior management and key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason and without notice.
Our executive officers, senior management and key personnel are all employed on an at-will basis, which means that they could terminate their services with us at any time, for any reason and without notice.
These tariffs or any further costs or restrictions imposed on products that we import, could require us to raise our prices, which may result in the loss of customers and harm our business, particularly since we rely on consumer spending and our products are typically considered non-essential, and purchases are therefore highly price sensitive.
Future tariffs or any further costs or restrictions imposed on products that we import, could require us to raise our prices on our B2C products, which may result in the loss of customers and harm our business, particularly since we rely on consumer spending and our products are typically considered non-essential, and purchases are therefore highly price sensitive.
Further, Section 7 also provides for the United States District Court for the District of Puerto Rico as the exclusive venue for any cause of action under either the Securities Act or the Exchange Act, meaning such federal court is the only court in which such a case may be brought and heard.
Further, Section 7 also provides for the United States District Court for the District of Nevada as the exclusive venue for any cause of action under either the Securities Act or the Exchange Act, meaning such federal court is the only court in which such a case may be brought and heard.
Additionally, because Fat Shark’s products are used as ancillary or supplemental components of a drone’s functions, we may become involved in disputes arising from a third party’s actions or products that utilize its technology, even if we were not the direct cause of the issue.
Additionally, because our products are used as ancillary or supplemental components of a drone’s functions, we may become involved in disputes arising from a third party’s actions or products that utilize its technology, even if we were not the direct cause of the issue.
Our Board of Directors has the power to authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further shareholder approval which could adversely affect the rights of the holders of our common stock.
Our Board has the power to authorize and issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and special rights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further stockholder approval which could adversely affect the rights of the holders of our Common Stock.
For example, if a recession occurs in the U.S. or global economy, we expect that consumer spending, particularly for non-essential goods such as our drone products which are largely focused on recreational uses, may decline, limiting our ability to attract or maintain a sufficient customer base to achieve or maintain the revenue we seek in the development and sale of our products.
For example, if a recession occurs in the United States or global economy, we expect that consumer spending, particularly for non-essential goods such as our drone products which are largely focused on recreational uses, may decline, limiting our ability to attract or maintain a sufficient customer base to achieve or maintain the revenue we seek in the development and sale of our products.
In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this “ Risk Factors ” section, the market price of and trading volume for our common stock (including any stock-run ups or price declines) may change for a variety of other reasons, not necessarily related to our actual operating performance.
In addition to changes to market prices based on our results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our Common Stock (including any stock-run ups or price declines) may change for a variety of other reasons, not necessarily related to our actual operating performance.
Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products, including our firmware updates, could be provided to those targets or provided by our customers despite such precautions. Further, the manufacture and sale of our products in certain states and countries may subject us to environmental and other regulations.
Even though we take precautions to prevent our products from being provided to targets of United Staets sanctions, our products, including our firmware updates, could be provided to those targets or provided by our customers despite such precautions. Further, the manufacture and sale of our products in certain states and countries may subject us to environmental and other regulations.
If we are able to successfully develop, produce and market our products, we will likely need to incur additional expenditures and expand our personnel with additional employees and consultants who are capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully.
If we are able to successfully develop, produce and market our products and initiate our planned manufacturing business, we will likely need to incur additional expenditures and expand our personnel with additional employees and consultants who are capable of providing the necessary support. We cannot assure you that our management will be able to manage our growth effectively or successfully.
(“UAV”) a wholly-owned subsidiary of Red Cat, in each case with a non-exclusive, non-sublicensable royalty free perpetual license back to UAV for Red Cat and its present and future subsidiaries to make, use and sell products subject to such assigned patents and applications solely with respect to military and defense drone applications.
(“UAV”) a wholly-owned subsidiary of Red Cat, in each case with a non-exclusive, non-sublicensable royalty free perpetual license back to UAV for Red Cat to make, use and sell products subject to such assigned patents and applications solely with respect to military and defense drone applications.
If we experience any significant disruption in manufacturing, a serious failure of a critical piece of equipment, or an inability to hire personnel, we may be unable to supply products to our customers in a timely manner.
If we experience any significant disruption in assembling, a failure of a critical piece of equipment, or an inability to hire personnel, we may be unable to supply products to our customers in a timely manner.
The risks, uncertainties and challenges encountered by companies operating in emerging and rapidly growing industries include: · generating sufficient revenue to cover operating costs and sustain operations; · acquiring and maintaining market share; · attracting and retaining qualified personnel; · successfully developing and commercially marketing new products; · complying with development regulatory requirements; · the possibility that favorable estimates or projections prove to be incorrect; · responding effectively to changing technology, evolving industry standards, and changing customer needs or requirements; and · accessing the capital markets to raise additional capital, on reasonable terms, if and when required to sustain operations or to grow the business.
The risks, uncertainties and challenges encountered by companies operating in emerging and rapidly growing industries include: · generating sufficient revenue to cover operating costs and sustain operations; · acquiring and maintaining market share; · attracting and retaining qualified personnel; · successfully developing and commercially marketing new products; · complying with challenging supply chain issues which may arise; · complying with developing regulatory requirements; · the possibility that favorable estimates or projections prove to be incorrect; · responding effectively to changing technology, evolving industry standards, and changing customer needs or requirements; and · accessing the capital markets to raise additional capital, on reasonable terms, if and when required to sustain operations or to grow the business.
These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time consuming, including due to increased training of our current employees, additional hiring of new employees, and increased assistance from consultants. The SEC’s new cybersecurity rules will increase our compliance costs.
These rules and regulations have increased our accounting, legal and financial compliance costs and make some activities more time consuming, including due to increased training of our current employees, additional hiring of new employees, and increased assistance from consultants. The SEC’s cybersecurity rules will increase our compliance costs.
Our products are subject to U.S. export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our products must be made in compliance with these laws.
Our products are subject to United States export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our products must be made in compliance with these laws.
Data privacy and protection regulations are frequently broad in terms of scope of the information protected, activities affected, and geographic reach. In particular, there are numerous U.S. federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data.
Data privacy and protection regulations are frequently broad in terms of scope of the information protected, activities affected, and geographic reach. In particular, there are numerous United States federal, state, and local laws and regulations and foreign laws and regulations regarding privacy and the collection, sharing, use, processing, disclosure, and protection of personal data.
Our success in this area will depend on a wide range of factors, some of which are beyond our control, including the following: · the efficacy of our marketing efforts; · our ability to obtain new customers and retain and/or expand sales or upsell to existing customers; · our ability to maintain high customer satisfaction; · the quality and perceived value of our products; · our ability to obtain, maintain and enforce patents and trademarks and other indicia of origin, including those we expect to obtain through the acquisition of Fat Shark and Rotor Riot, will be critical to our business plan; · our ability to successfully differentiate from competitors’ products; · actions of competitors and other third parties; · our ability to provide customer support and professional services; · positive or negative publicity; · litigation or regulatory related developments.
Our success in this area will depend on a wide range of factors, some of which are beyond our control, including the following: · the efficacy of our marketing efforts; · our ability to obtain new customers and retain and/or expand sales or upsell to existing customers; · our ability to maintain high customer satisfaction; · the quality and perceived value of our products; · our ability to obtain, maintain and enforce patents and trademarks and other indicia of origin, will be critical to our business plan; · our ability to successfully differentiate from competitors’ products; · actions of competitors and other third parties; · our ability to provide customer support and professional services; · positive or negative publicity; · litigation or regulatory related developments.
In addition, changes in political conditions in China and changes in the state of China-U.S. relations, including any tensions relating to potential military conflict between China and Taiwan, are difficult to predict and could adversely affect the operations or financial condition of the Company.
In addition, changes in political conditions in China and changes in the state of China-United States relations, including any tensions relating to potential military conflict between China and Taiwan, are difficult to predict and could adversely affect the operations or financial condition of the Company.
Factors that could cause the market price of our common stock to fluctuate significantly include: · the results of operating and financial performance and prospects of other companies in our industry; · strategic actions by us or our competitors, such as acquisitions or restructurings; · announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by our competitors; · the public’s reaction to our press releases, other public announcements, and filings with the SEC; · lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in the drone industry; · changes in government policies in the United States and, as our international business increases, in other foreign countries; · changes in earnings estimates or recommendations by securities or research analysts who track our common stock or failure of our actual results of operations to meet those expectations; · market and industry perception of our success, or lack thereof, in pursuing our growth strategy; · changes in accounting standards, policies, guidance, interpretations or principles; · any lawsuit involving us or our products; · arrival and departure of key personnel; · sales of common stock by us, our investors or members of our management team; and · changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters. 31 Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our common stock (including stock run ups or price declines) and could seriously harm the market price of our common stock, regardless of our operating performance.
Factors that could cause the market price of our Common Stock to fluctuate significantly include: · the results of operating and financial performance and prospects of other companies in our industry; · strategic actions by us or our competitors, such as acquisitions or restructurings; · announcements of innovations, increased service capabilities, new or terminated customers or new, amended or terminated contracts by our competitors; · the public’s reaction to our press releases, other public announcements, and filings with the SEC; · lack of securities analyst coverage or speculation in the press or investment community about us or market opportunities in the drone industry; · changes in government policies in the United States and, as our international business increases, in other foreign countries; · changes in earnings estimates or recommendations by securities or research analysts who track our Common Stock or failure of our actual results of operations to meet those expectations; · market and industry perception of our success, or lack thereof, in pursuing our growth strategy; · changes in accounting standards, policies, guidance, interpretations or principles; · any lawsuit involving us or our products; · arrival and departure of key personnel; · sales of Common Stock by us, our investors or members of our management team; and · changes in general market, economic and political conditions in the United States and global economies or financial markets, including those resulting from natural or man-made disasters.
In addition, because of our involvement in the Chinese market, any deterioration in political or trade relations might cause a public perception in the U.S. or elsewhere that might cause our business to become less attractive. Such an impact could adversely affect our revenues and cash flows.
In addition, because of our B2C involvement in the Chinese market, any deterioration in political or trade relations might cause a public perception in the United States or elsewhere that might cause that business to become less attractive. Such an impact could adversely affect our revenues and cash flows.
For example, many of Fat Shark and Rotor Riot’s products rely on electricity generated by lithium-ion batteries, which implicate a variety of environmental and other regulations designed to control the production, use, and transportation of hazardous materials such as lithium and other components and minerals deployed in these batteries.
For example, many of our products rely on electricity generated by lithium-ion batteries, which implicate a variety of environmental and other regulations designed to control the production, use, and transportation of hazardous materials such as lithium and other components and minerals deployed in these batteries.
Further, these provisions may give rise to a potential ambiguity as to which courts – commonwealth or federal – should preside over certain cases such as cases with overlapping claims under both Puerto Rican corporate law and the Securities Act and the rules and regulations thereunder.
Further, these provisions may give rise to a potential ambiguity as to which courts – state or federal – should preside over certain cases such as cases with overlapping claims under both Nevada corporate law and the Securities Act and the rules and regulations thereunder.
Delisting would have a negative effect on the price of our common stock and would impair your ability to sell our common stock when you wish to do so. 33 Our Board of Directors may authorize and issue shares of new classes of stock that could be superior to or adversely affect current holders of our common stock.
Delisting would have a negative effect on the price of our Common Stock and would impair your ability to sell our Common Stock when you wish to do so. 35 Our Board may authorize and issue shares of new series of preferred stock that could be superior to or adversely affect current holders of our Common Stock.
Further, if adequate financing is not available or is unavailable on acceptable terms, we may find we are unable to fund our planned expansion, continue offering the Fat Shark and Rotor Riot products, take advantage of acquisition opportunities, develop or enhance or products, or to respond to competitive pressures in the industry which may jeopardize our ability to continue operations. 10 If we lose key personnel, it may adversely affect our business.
Further, if adequate financing is not available or is unavailable on acceptable terms, we may find we are unable to fund our planned expansion, take advantage of acquisition opportunities, develop or enhance our products, or respond to competitive pressures in the industry which may jeopardize our ability to continue operations. 13 If we lose key personnel, it may adversely affect our business.
Because the Company had a very limited operating history prior to its acquisition of Fat Shark and Rotor Riot, any investment in us is highly speculative. We completed our acquisitions of Fat Shark and Rotor Riot simultaneously with the closing of our IPO in February 2024.
Risks Related to our Business and Financial Condition Because the Company had a limited operating history prior to its acquisition of Fat Shark and Rotor Riot, any investment in us is highly speculative. We completed our acquisitions of Fat Shark and Rotor Riot simultaneously with the closing of our IPO in February 2024.
There can be no assurance we will be able to detect and remedy all defects in the hardware we sell, which could result in product recalls, product redesign efforts, loss of revenue, reputational damage and significant warranty and other remediation expenses.
The products that we sell could contain defects in design or manufacture. There can be no assurance we will be able to detect and remedy all defects in the hardware we sell, which could result in product recalls, product redesign efforts, loss of revenue, reputational damage and significant warranty and other remediation expenses.
Companies in the consumer electronics, wireless communications, semiconductor, AI, IT, and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual property rights.
Companies in the consumer electronics, wireless communications, semiconductor, artificial intelligence, information technology, and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual property rights.
Failing to prevent or properly respond to a cyber-attack could expose us to regulatory fees or civil liability, cause us to lose customers or suppliers, prevent us from offering our products including due to resulting regulatory action, impair our ability to maintain continuous operations, and inhibit our ability to meet regulatory requirements. 13 Our failure to effectively manage our growth could harm our business.
Failing to prevent or properly respond to a cyber-attack could expose us to regulatory fees or civil liability, cause us to lose customers or suppliers, prevent us from offering our products including due to resulting regulatory action, impair our ability to maintain continuous operations, and inhibit our ability to meet regulatory requirements.
There can be no assurances that we will be able to do so or to reach profitability. 9 We expect to continue to incur losses for the foreseeable future and we expect costs to increase in future periods as we expend substantial financial and other resources on, among other things: · researching, developing, producing and distributing new products; · sales and marketing, which will require time before these investments generate sales results; · general and administrative expenditures, including significantly increasing expenses in accounting and legal fees related to the increase in the sophistication and resources required for public company compliance and other needs arising from the growth and maturity of the Company; · competing with other companies that are currently in, or may in the future enter, the markets in which we compete; · maintaining high customer satisfaction and ensuring product and service quality; · developing our indirect sales channels and strategic partner network; · maintaining the quality of our technology infrastructure; · establishing and increasing market awareness of our Company and enhancing our brand; · maintaining compliance with applicable governmental regulations and other legal obligations, including those related to intellectual property and drones; and · attracting and retaining top talent in a competitive labor market.
We expect to continue to incur losses for the foreseeable future and we expect costs to increase in future periods as we expend substantial financial and other resources on, among other things: · expanding into the B2B channel; · opening a manufacturing facility; · researching, developing, producing and distributing new products; · sales and marketing, which will require time before these investments generate sales results; · general and administrative expenditures, including significantly increasing expenses in accounting and legal fees related to the increase in the sophistication and resources required for public company compliance and other needs arising from the growth and maturity of the Company; · competing with other companies that are currently in, or may in the future enter, the markets in which we compete; · maintaining high customer satisfaction and ensuring product and service quality; · developing our indirect sales channels and strategic partner network; · maintaining the quality of our technology infrastructure; · establishing and increasing market awareness of our Company and enhancing our brand; · consummating and integrating acquisitions; · maintaining compliance with applicable governmental regulations and other legal obligations, including those related to intellectual property and drones; and · attracting and retaining top talent in a competitive labor market.
Finally we must describe our board of directors’ oversight of risks from cybersecurity threats and management’s role in assessing and managing these risks. We expect to incur material additional compliance and reporting costs, including monitoring, collecting, and analyzing data concerning cyber-security incidents and evaluating and preparing the required disclosure. We may also be required to incur third party compliance costs.
Finally we must describe our Board’s oversight of risks from cybersecurity threats and management’s role in assessing and managing these risks. We expect to incur material additional compliance and reporting costs, including monitoring, collecting, and analyzing data concerning cyber-security incidents and evaluating and preparing the required disclosure.
While the Supreme Court of Delaware has upheld a charter provision designating federal courts as the exclusive forum for actions brought under the Securities Act, it is unclear how a court in another jurisdiction, including Puerto Rico, might rule.
While the Supreme Court of Delaware has upheld a charter provision designating federal courts as the exclusive forum for actions brought under the Securities Act, it is unclear how a court in Nevada, might rule.
Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and services to countries, governments, and persons targeted by U.S. sanctions.
Furthermore, United States export control laws and economic sanctions prohibit the provision of products and services to countries, governments, and persons targeted by United States sanctions.
We can provide no assurances that we will not lose potential sales or be able to meet production orders due to future production interruptions in our manufacturing lines. We may not be able to procure necessary key components for our products or may produce or purchase too much inventory.
We can provide no assurances that we will not lose potential sales or be able to meet production orders due to future production interruptions in our manufacturing lines. When we commence manufacturing drones, the same risks will apply. 21 We may not be able to procure necessary key components for our products or may produce or purchase too much inventory.
Our reliance on third-party manufacturers and service providers will entail risks to which we may not be subject if our future operations were more vertically integrated, including: · the ongoing supply chain shortages, and any future supply chain and logistics challenges that we or our vendors may face in the future, including due to the reliance on lithium-ion batteries and other materials for our products; · the inability to meet any product specifications and quality requirements consistently; · a delay or inability to procure or expand sufficient manufacturing capacity; · discontinuation or recall of products or component parts; · manufacturing and product quality issues related to scale-up of manufacturing; · costs and validation of new equipment and facilities required for scale-up; · a failure to comply with applicable regulatory and safety standards in the U.S. and foreign markets in which we or our collaborators operate; · the inability to negotiate manufacturing and service agreements with third parties under commercially reasonable terms; · the possibility of breach or termination or nonrenewal of agreements with third parties in a manner that is costly or damaging to us; · we do not always execute definitive written agreements with our vendors, particularly those located in China, which exposes us to possible disputes concerning the existence or terms of our agreements and our intellectual property rights; · the reliance on a few sources, and sometimes, single sources for raw materials and components, such that if we cannot secure a sufficient supply of these product components, we cannot manufacture and sell products in a timely fashion, in sufficient quantities or under acceptable terms; · the lack of qualified backup suppliers for any raw materials currently purchased from a small number of source suppliers; · operations of our third-party manufacturers, suppliers or service providers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the party; · carrier disruptions or increased costs beyond our control; · possible misappropriation of our proprietary technology; and · failing to deliver products under specified storage conditions and in a timely manner. 17 Given our early stages, our product technology and manufacturing processes are evolving, which can result in production challenges and difficulties.
Our reliance on third-party manufacturers and service providers will entail risks to which we may not be subject if our future operations were more vertically integrated, including: · the ongoing supply chain shortages, and any future supply chain and logistics challenges that we or our vendors may face in the future, including due to the reliance on lithium-ion batteries and other materials for our products; · the inability to meet any product specifications and quality requirements consistently; · the impact of tariffs, the availability of United States supply sources and the impact of higher prices; · discontinuation or recall of products or component parts; · manufacturing and product quality issues related to scale-up of manufacturing; 20 · costs and validation of new equipment and facilities required for scale-up; · a failure to comply with applicable regulatory and safety standards in the United States and foreign markets in which we or our collaborators operate; · the inability to negotiate manufacturing and service agreements with third parties under commercially reasonable terms; · the possibility of breach or termination or nonrenewal of agreements with third parties in a manner that is costly or damaging to us; · we do not always execute definitive written agreements with our vendors, particularly those located in China, which exposes us to possible disputes concerning the existence or terms of our agreements and our intellectual property rights; · the reliance on a few sources, and sometimes, single sources for raw materials and components, such that if we cannot secure a sufficient supply of these product components, we cannot manufacture and sell products in a timely fashion, in sufficient quantities or under acceptable terms; · operations of our third-party manufacturers, suppliers or service providers could be disrupted by conditions unrelated to our business or operations, including the bankruptcy of the party; · carrier disruptions or increased costs beyond our control; · possible misappropriation of our proprietary technology; and · failing to deliver products under specified storage conditions and in a timely manner.
These arrangements could cause him to be unable or decline to devote sufficient time and attention to our Company at the expense of these other ventures, and/or to face a conflict of interest, financial or otherwise, adverse to us and in favor of these other ventures.
These arrangements could cause him to be unable or decline to devote sufficient time and attention to our Company and favor Red Cat, and/or to face a conflict of interest, financial or otherwise, adverse to us and in favor of Red Cat.
We may be unable to produce our products in sufficient quantity and quality to maintain existing customers and attract new customers. In addition, we may experience manufacturing problems which could result in delays in delivery of orders or product introductions.
Our product technology and manufacturing processes are evolving, which can result in production challenges and difficulties. We may be unable to produce our products in sufficient quantity and quality to maintain existing customers and attract new customers. In addition, we may experience manufacturing problems which could result in delays in delivery of orders or product introductions.
Rotor Riot is limited by the number of personnel it has on staff to assemble custom drones.
Rotor Riot is limited by the number of personnel it has on staff to assemble drones and drone parts.
Our Certificate of Incorporation contains certain provisions which may result in difficulty in bringing stockholder actions against or on behalf of the Company or its affiliates. Section 7 of our Certificate of Incorporation provides that the internal affairs of the Company, including stockholder derivative actions, shall be brought exclusively in commonwealth courts located in Puerto Rico.
Our Articles of Incorporation contains certain provisions which may result in difficulty in bringing actions against or on behalf of the Company or its affiliates. Section 7 of our Articles of Incorporation provides that the internal affairs of the Company, including derivative actions, shall be brought exclusively in the courts located in Clark County, Nevada.
All of the components that go into the manufacturing are sourced from third-party suppliers. 14 Some of the key components used to manufacture our products come from a limited or single source of supply, or by a supplier that could potentially become a competitor. Our contract manufacturers generally purchase these components on our behalf from approved suppliers.
Some of the key components used to manufacture our products come from a limited or single source of supply, or by a supplier that could potentially become a competitor. Our contract manufacturers generally purchase these components on our behalf from approved suppliers.
Because our common stock is listed on NYSE American, we are subject to additional regulations and continued requirements. With the completion of our IPO in February 2024, we are required to meet the continued listing standards for NYSE American. If we fail to meet NYSE American’s listing standards, our common stock may be delisted.
Because our Common Stock is listed on NYSE American, we are subject to additional regulations and continued requirements. Because our Common Stock trades on the NYSE American, we are required to meet the continued listing standards for NYSE American. If we fail to meet NYSE American’s listing standards, our Common Stock may be delisted.
With the completion of our IPO, we expect to incur increased costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, and the Exchange Act, as well as the rules of NYSE American.
We are incurring increased costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Customer Protection Act of 2010, and the Securities Exchange Act of 1934 (the “Exchange Act”), as well as the rules of the NYSE American.
Moreover, we cannot be certain whether: · we were the first to conceive, reduce to practice, invent, or file the inventions covered by each of our issued patents and pending patent applications; · others will independently develop similar or alternative products, technologies, services or designs or duplicate any of our products, technologies, services or designs; · any patents issued to us will provide us with any competitive advantages, or will be challenged by third parties; · we will develop additional proprietary products, services, technologies or designs that are patentable; or · the patents of others will have an adverse effect on our business. 25 The patents we own or license and those that may be issued to us in the future may be challenged, invalidated, rendered unenforceable or circumvented, and the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages.
Moreover, we cannot be certain whether: · we were the first to conceive, reduce to practice, invent, or file the inventions covered by each of our issued patents and pending patent applications; · others will independently develop similar or alternative products, technologies, services or designs or duplicate any of our products, technologies, services or designs; · any patents issued to us will provide us with any competitive advantages, or will be challenged by third parties; · we will develop additional proprietary products, services, technologies or designs that are patentable; or · the patents of others will have an adverse effect on our business.
As introduced this proposed legislation would establish requirements for how companies handle personal data by, among other things, limiting the collection, processing, and transfer of personal data to that which is reasonably necessary to provide a requested product or service, prohibiting companies from transferring individuals’ personal data without their affirmative express consent, establishing a right to access, correct, and delete personal data, requiring companies to provide individuals with a means to “opt out” of advertising, requiring companies to implement security practices aimed at protecting personal data, and imposing enforcement actions and the possibility of civil proceedings for violations.
As introduced, this proposed legislation would establish requirements for how companies handle personal data by, among other things, limiting the collection, processing, and transfer of personal data, prohibiting companies from transferring individuals’ personal data without their affirmative express consent, establishing a right to access, correct, and delete personal data, requiring companies to provide individuals with a means to “opt out” of the transfer of non-sensitive covered data and the right to opt out of the user of their personal information for targeted advertising, requiring companies to implement security practices aimed at protecting personal data, and imposing enforcement actions and the possibility of civil proceedings for violations.
The failure to maintain an adequate technology infrastructure and applications with effective cyber-security controls could impact operations, adversely affect our financial results, result in loss of business, damage our reputation or impact our ability to comply with regulatory obligations, leading to regulatory fines and sanctions.
We may also be required to incur third party compliance costs. 16 The failure to maintain an adequate technology infrastructure and applications with effective cyber-security controls could impact operations, adversely affect our financial results, result in loss of business, damage our reputation or impact our ability to comply with regulatory obligations, leading to regulatory fines and sanctions.
If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected.
If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected. 18 Our new manufacturing business has inherent risks that may adversely impact us.
If quarterly revenues or results of operations fall below expectations of investors or public market analysts, the price of our common stock could fall substantially. Our products require ongoing research and development and may experience technical problems or delays, which could lead the business to fail.
Further, our B2C business is seasonal with retail sales peaking in the fourth quarter. If quarterly revenues or results of operations fall below expectations of investors or public market analysts, the price of our Common Stock could fall substantially. Our products require ongoing research and development and may experience technical problems or delays, which could lead the business to fail.
Proposed federal legislation, like the American Data Privacy and Protection Act, will likely continue to be debated and, at some point, may be enacted in some form. We intend to strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, and data protection.
Proposed federal legislation, will likely continue to be debated and, at some point, may be enacted in some form. We intend to strive to comply with all applicable laws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, and data protection. Our limited resources may adversely affect our compliance effort.
Our operating results and key metrics could vary significantly from quarter-to-quarter as a result of various factors, some of which are outside of our control, including: · the expansion or contraction of our customer base and the amount of product ordered; · the size, duration and terms of our contracts with both existing and new customers, including distributors we contract with particularly as to Fat Shark’s sale of FPV goggles; · seasonality of sales at Rotor Riot which generally has experienced higher sales volumes in October – December than in other three-month periods as a result of holiday purchases and its e-commerce focus; · sales cycles which fluctuate and often include delays between the end of one product or solution’s cycle and the launch of a new product or solution to replace or supplement the prior offering, which for example significantly impacts Fat Shark’s sales as it improves upon and launches new products and shifts focus away from older products; · the introduction of products and product enhancements by competitors, and changes in pricing for products offered by us or our competitors; · customers delaying purchasing decisions in anticipation of new products or product enhancements by us or our competitors or otherwise; · changes in customers’ budgets; · the amount and timing of payment for expenses, including infrastructure, research and development, sales and marketing expenses, employee benefit and stock-based compensation expenses; · costs related to the hiring, training and maintenance of our employees; · any future impact from COVID-19, including any long-term or pervasive effects of the virus; · any future impact from the ongoing geopolitical military conflict (including the war in Israel, the Russian war in Ukraine, tensions between China and Taiwan, and other unrest in the Middle East); · supply chain issues particularly with the current COVID-19 resurgence in China and Fat Shark’s reliance on one related party Chinese supplier; · political unrest affecting our relationship with China and future tariffs; · our lack of a long-term agreement with our suppliers which can affect the availability of parts and future costs ; · changes in laws and regulations or other regulatory developments that impact our business; · the timing and extent of the growth of our business; and · general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate.
Our operating results and key metrics could vary significantly from quarter-to-quarter as a result of various factors, some of which are outside of our control, including: · delays in the receipt of orders from customers that are dependent on government orders; · the effect that tariffs, a trade war and a potential recession may have on our business; · delays in getting Blue List approval for additional drone components that we develop; · the expansion or contraction of our customer base and the amount of products ordered; · the size, duration and terms of our contracts with both existing and new customers, including distributors we contract with; · seasonality of sales at Rotor Riot which generally has experienced higher sales volumes in October – December than in other three-month periods as a result of holiday purchases and its e-commerce focus; · sales cycles which fluctuate and often include delays between the end of one product or solution’s cycle and the launch of a new product or solution to replace or supplement the prior offering; · the introduction of products and product enhancements by competitors, and changes in pricing for products offered by us or our competitors; · customers delaying purchasing decisions in anticipation of new products or product enhancements by us or our competitors or otherwise; · changes in customers’ budgets; · the amount and timing of payment for expenses, including infrastructure, research and development, sales and marketing expenses, employee benefit and stock-based compensation expenses; · costs related to the hiring, training and maintenance of our employees; · any future impact from the ongoing geopolitical military conflicts (including the war in Israel, the war in Ukraine, and tensions between China and Taiwan; · supply chain issues; · political unrest affecting our relationship with China and future tariffs; 15 · our lack of a long-term agreement with our suppliers which can affect the availability of parts and future costs ; · changes in laws and regulations or other regulatory developments that impact our business; · the timing and extent of the growth of our business; and · general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate.
Since the CCPA was enacted, the U.S. currently has at least 15 states – California, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, New Hampshire, New Jersey, Oregon, Tennessee, Texas, Utah and Virginia, that have comprehensive data privacy laws in place, or enacted comprehensive data privacy laws set to soon take effect.
Since the CCPA was enacted, the United States currently has at least 20 states – California, Colorado, Connecticut, Delaware, Indiana, Iowa, Kentucky, Maryland, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee, Texas, Utah and Virginia, that have comprehensive data privacy laws in place, or enacted comprehensive data privacy laws set to soon take effect.
An additional seven states have enacted narrower privacy laws – Maine, Michigan, Minnesota, Nevada, New York, Vermont, and Washington. So far during the 2023-24 legislative cycle, at least 15 states have introduced privacy bills that address a range of issues, including protecting biometric identifiers and health data, or governing the activities of specific entiteis.
An additional seven states have enacted narrower privacy laws – Florida, Maine, Michigan, Nevada, New York, Vermont, Washington and Wisconsin. During the 2024 legislative cycle, at least six states have introduced comprehensive privacy bills that address a range of issues, including protecting biometric identifiers and health data, or governing the activities of specific entities.
Fat Shark and Rotor Riot must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations, integration and growth process.
Unusual Machines must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations, and growth process.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock. Our Auditor and Red Cat’s auditor recently was subjected to certain significant enforcement actions in Canada.
Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.
Our Board on which we heavily depend are or may become involved in other endeavors giving rise to conflicts of interests that are adverse to the Company. See “ Part III, Item 10. Directors, Executive Officers, and Corporate Governance. ” Mr.
Our Board on which we heavily depend are or may become involved in other endeavors giving rise to conflicts of interests that are adverse to the Company. See “Management” and “Corporate Governance.” Mr.
To increase our revenue following the acquisition of Fat Shark and Rotor Riot, we must add new customers, upsell to our existing customers, enhance our products with features that set us apart from our competitors, and effectively develop and market new products that enable us to maintain and expand our brand and market share.
To increase our revenue, we must add new customers, upsell to our existing customers, enhance our products with features that set us apart from our competitors, and effectively develop and market new products including our B2B products that enable us to maintain and expand our brand and market share.
Risks Related to Government Regulation of Our Operations and Industry Failure to obtain necessary regulatory approvals from the FAA or other governmental agencies by us, our customers, or others who use our products, or limitations put on the use of unmanned aircraft systems, or “UAS,” in response to public privacy or safety concerns, may prevent us from expanding the sales of our drone solutions in the United States.
If we fail to obtain necessary regulatory approvals from the FAA or other governmental agencies by us, our customers, or others who use our products, or limitations put on the use of unmanned aircraft systems, or UAS in response to public privacy or safety concerns, may prevent us from expanding the sales of our drone solutions in the United States.
Both companies, prior to the completion of the acquisitions, were operated by Red Cat since their acquisition by Red Cat in 2020. While the management of each company is expected to remain, no Red Cat officer, other than Dr. Allan Evans who became our Chief Executive Officer in December 2023, is joining us.
Both companies, prior to the completion of the acquisitions, were operated by Red Cat since their acquisition by Red Cat in 2020. While the management of each company remained as employees, no Red Cat officer, other than Dr. Allan Evans who became our Chief Executive Officer in December 2023, and our Chief Operating Officer in March 2024, respectively, joined us.
If we are not successful in proving that we have prior rights in our marks and arguing that there is a likelihood of confusion between our marks and the marks of these third parties, our inability to prevent these third parties from using our marks may negatively impact the strength, value and effectiveness of our brand names and our ability to market our products and prevent consumer confusion. 26 If we lose our rights under our third-party technology licenses, our operations could be adversely affected.
If we are not successful in proving that we have prior rights in our marks and arguing that there is a likelihood of confusion between our marks and the marks of these third parties, our inability to prevent these third parties from using our marks may negatively impact the strength, value and effectiveness of our brand names and our ability to market our products and prevent consumer confusion. 29 Significant inflation could adversely affect our business and financial results.
Any failure or perceived failure by us, customers, or third-party vendors or end-users involved with our products to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition.
Any failure or perceived failure by us, customers, or third-party vendors or end-users involved with our products to comply with our privacy or security policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personal data, may result in governmental enforcement actions, litigation, or negative publicity, and could have an adverse effect on our operating results and financial condition. 32 Governments are continuing to focus on privacy and data security, and it is possible that new privacy or data security laws will be passed or existing laws will be amended in a way that is material to our business.
Since their acquisition by Red Cat in 2020, Fat Shark and Rotor Riot incurred net losses for each reported quarter with the exception of Fat Shark which reported a small net income in the quarter ended July 31, 2022. Further, Unusual Machines was formed in July 2019 and has not conducted any active business.
Since their acquisition by Red Cat in 2020, Fat Shark and Rotor Riot incurred net losses for each reported quarter with the exception of Fat Shark which reported a small net income in the quarter ended July 31, 2022.
The drone industry, and the electronics industry as a whole, can be subject to business cycles. During periods of growth and high demand for products, we may not have adequate supplies of inventory on hand to satisfy customers’ needs.
The drone industry, and the electronics industry as a whole, can be subject to business cycles. During periods of growth and high demand for products, we may not have adequate supplies of inventory on hand to satisfy customers’ needs. The imposition of tariffs and a trade war may also impact our supply chain for component parts from China.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we will take a comprehensive approach to cybersecurity risk management. Our management actively oversees our risk management program, including the management of cybersecurity risks.
Biggest changeItem 1C. Cybersecurity Risk Management and Strategy Like all companies that utilize technology, we are subject to threats of breaches of our technology systems. To mitigate the threat to our business, we will take a comprehensive approach to cybersecurity risk management. Our management actively oversees our risk management program, including the management of cybersecurity risks.
We can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations, or financial condition.
We can provide no assurance that there will not be incidents in the future or that past or future attacks will not materially affect us, including our business strategy, results of operations , or financial condition. 38
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Risk Management and Strategy At a high level, the key objectives for the Company’s cybersecurity program are to implement and sustain effective security controls to stop intrusion attempts and to maintain and continuously improve its ability to respond to attacks and incidents.
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Success in achieving these objectives relies upon using quality technology solutions, cultivating and maintaining a team of skilled professionals, and improving processes continuously.
Removed
Our cybersecurity program in particular will focus on the following key areas: Risk Assessment : At least annually, we will conduct a cybersecurity risk assessment that takes into account information from internal stakeholders, known information security vulnerabilities, and information from external sources, including reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and consultants.
Removed
The results of the assessment will be used to develop initiatives to enhance our security controls, make recommendations to improve processes, and inform a broader Company-wide risk assessment that are then reported to our members of management. Technical Safeguards : We will regularly assess and deploy technical safeguards designed to protect our information systems from cybersecurity threats.
Removed
Such safeguards are regularly evaluated and improved based on vulnerability assessments, cybersecurity threat intelligence and incident response experience. Incident Response and Recovery Planning : We will establish a comprehensive incident response and recovery plans that guide our response in the event of a cybersecurity incident. We will continuously test and evaluate the effectiveness of those plans.
Removed
Vendor Risk Management : We will implement a vendor risk management program for domestic vendors, which will be designed to identify and mitigate cybersecurity threats associated with our use of domestic third-party service providers. Such providers are subject to security risk assessments at the time of on-boarding, contract renewal, and upon detection of an increase in risk profile.
Removed
We will use a variety of inputs in such risk assessments, including information supplied by providers in response to detailed questionnaires and meetings as well as information from third parties.
Removed
In addition, we will require our domestic providers to meet appropriate security requirements, controls and responsibilities and investigate security incidents that have impacted our third-party providers, as appropriate. 36 Education and Awareness : Our policies will require each of our employees to contribute to our data security efforts.
Removed
We will regularly remind employees of the importance of handling and protecting data, including through annual privacy and security training to enhance employee awareness of how to detect and respond to cybersecurity threats. As part of that educational process, we will periodically simulate cybersecurity threats to the Company and review/assess employee responses.
Removed
In this regard, the Company will implement policies and procedures for all employees including: (i) information security/cybersecurity policies, which are internally available for all employees, (ii) information security/cybersecurity awareness training; (iii) a clear escalation process which employees can follow in the event an employee notices something suspicious; and (iv) ensuring that information security/cybersecurity is part of the employee performance evaluation and/or disciplinary process.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe currently anticipate that the current leased space will be sufficient to support our current and future needs. In addition, we have an executive office located at 15 Ave. Muñoz Rivera, Suite2200, San Juan, Puerto Rico 00901 which we sublet from Red Cat on month-to-month basis.
Biggest changeMuñoz Rivera, Suite2200, San Juan, Puerto Rico 00901 which we sublet from Red Cat on month-to-month basis.
Item 2. Properties. We own no properties. With the closing of our IPO, our principal place of business is located in Orlando, Florida at the Rotor Riot facility. In October 2023, Rotor Riot signed a five-year lease for a 6,900 sq. foot facility in Orlando, FL.
Item 2. Properties. Our principal place of business is located in Orlando, Florida at the Rotor Riot facility. In October 2023, Rotor Riot signed a five-year lease for a 6,900 sq. foot facility in Orlando, FL.
Added
We currently anticipate that the current leased space will be sufficient to support our current and future needs, except to support our new drone component manufacturing business. We expect we can lease a suitable facility near our executive offices with comparable costs per square foot. In addition, we have an executive office located at 15 Ave.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Removed
Item 3. Legal Proceedings. From time to time, we are involved in various disputes, claims, suits, investigations, and legal proceedings arising in the ordinary course of business. We believe that the resolution of current pending legal matters will not have a material adverse effect on our business, financial condition, results of operations or cash flows.
Added
Item 3. Legal Proceedings. From time to time, we may be involved in various disputes, claims, suits, investigations, and legal proceedings arising in the ordinary course of business. For additional information, see “Note 15. Commitments and Contingencies” to our financial statements included in this Form 10-K. Item 4. Mine Safety Disclosures None. 39 PART II
Removed
Nonetheless, we cannot predict the outcome of these proceedings, as legal matters are subject to inherent uncertainties, and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on our business, financial condition, results of operations or cash flows. For additional information, see “Note 12.
Removed
Commitments and Contingencies” to our financial statements included in this Form 10-K.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plan The following table provides information regarding our equity compensation plans as of December 31, 2023: Equity Compensation Plan Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants, and vesting of restricted stock Weighted-average exercise price of outstanding options and warrants Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders – $ – 1,461,876 Equity compensation plans not approved by security holders – $ – – The Company’s 2022 Equity Incentive Plan has 1,461,876 shares of common stock available for issuance.
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plan The following table provides information regarding our equity compensation plans as of December 31, 2024: Equity Compensation Plan Information Plan category Number of securities to be issued upon exercise of outstanding options, warrants, and vesting of restricted stock Weighted-average exercise price of outstanding options and warrants Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 480,000 $ 0.85 617,341 Equity compensation plans not approved by security holders – $ – – The Company’s 2022 Equity Incentive Plan (the “Plan”) currently has 693,227 shares of Common Stock available for issuance as of the date of this Annual Report on Form 10-K which includes the increase in total authorized shares for the 5% evergreen provision as of January 1, 2025 and the reduction of total authorized shares related to additional issuances since December 31, 2024.
There has been no material change in the planned use of proceeds from our IPO from that described in the prospectus dated February 16, 2024, filed with the SEC pursuant to Rule 424(b)(1) under the Securities Act.
There was no material change in the planned use of proceeds from our IPO from that described in the prospectus dated February 16, 2024, filed with the SEC pursuant to Rule 424(b)(1) under the Securities Act.
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has been traded on the NYSE American under the symbol “UMAC” since our IPO on February 14, 2024. The last reported sales price of our common stock on March 21, 2024 was $1.79.
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Common Stock has been traded on the NYSE American under the symbol “UMAC” since our IPO on February 14, 2024. The last reported sales price of our Common Stock on March 25, 2025 was $7.23.
Holders As of March 1, 2024, there were approximately 357 holders of record of our common stock. These numbers are based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees.
Holders As of February 25, 2025, there were approximately 1,523 holders of record of our Common Stock. These numbers are based on the actual number of holders registered at such date and does not include holders whose shares are held in “street name” by brokers and other nominees.
The 2022 Equity Incentive Plan contains an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance pursuant to awards under such plan shall be increased on the first day of each year beginning in 2025 and ending in 2032 equal to the lesser of (a) five percent (5%) of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such smaller number of shares of stock as determined by our board of directors. 38 Recent Sales of Unregistered Securities The following is a summary of all securities that we have sold during the last three years without registration under the Securities Act of 1933, as amended (the “Securities Act”).
The Plan contains an “evergreen” provision, pursuant to which the number of shares of Common Stock reserved for issuance pursuant to awards under such plan shall be increased on the first day of each year beginning in 2025 and ending in 2032 equal to the lesser of (a) 5% of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such smaller number of shares of stock as determined by our Board. 40 Use of Proceeds On February 13, 2024, the SEC declared effective our registration statement on Form S-1 (File No. 333-270519), as amended, filed in connection with our IPO.
On February 16, 2024, we closed our IPO in which we sold 1,250,000 shares of our common stock, par value $0.01 per share (the “Shares”) and up to an additional 187,500 Shares issuable upon the exercise of the underwriter’s over-allotment option at a public offering price of $4.00 per share, resulting in net proceeds of $3,725,000 after deducting offering costs, underwriting discounts, and other commissions.
On February 16, 2024, we closed our IPO in which we sold 1,250,000 shares of our Common Stock, resulting in net proceeds of $3,849,555 after deducting offering costs, underwriting discounts, and other commissions.
Removed
On September 10, 2021, we closed a private offering. Our founders purchased 3,000,000 shares of common stock at a price of $0.01 per share for total proceeds of $30,000. The shares were issued pursuant to the exemption provided under Section 4(a)(2) of the Securities Act of 1933, as amended and Rule 506(b) promulgated thereunder.
Removed
Subscriber Name Shares Issued Subscription price Jeffrey Thompson 2,400,000 $24,000 Brains Riding In Tanks, LLC 150,000 $1,500 John J. Laxague 150,000 $1,500 Matthew Newman 150,000 $1,500 James T.
Removed
Connell 150,000 $1,500 Total 3,000,000 $30,000 On September 14, 2021, we closed a private offering and sold 4,552,000 shares of common stock at a price of $0.50 per share for total proceeds of $2,276,000, including 52,000 shares of common stock issued to Jeffrey Thompson for a total of $26,000.
Removed
The shares were issued pursuant to the exemption provided under Rule 506(b) of Regulation D of the Securities Act of 1933. On January 12, 2022, we closed a private offering and sold 482,500 shares of common stock at a price of $4.00 per share for total proceeds of $1,930,000.
Removed
The shares were issued pursuant to the exemption provided under Rule 506(b) of Regulation D of the Securities Act of 1933. On July 27, 2022, we closed a private offering and sold 150,000 shares of common stock at a price of $4.00 per share for total proceeds of $600,000.
Removed
The shares were issued pursuant to the exemption provided under Rule 506(b) of Regulation D of the Securities Act of 1933. On December 13, 2022, the Company issued 140 Series B preferred shares to three accredited investors in connection with the cancellation of 1,400,000 shares of common stock.
Removed
The Series B preferred stock is convertible into common stock at a ratio of 10,000 shares of common stock for each share of Series B stock held, subject to certain limitations. Series B preferred shares are not entitled to vote on any matters submitted to shareholders of the Company.
Removed
Shares outstanding at December 31, 2022 totaled 140 which are convertible into 1,400,000 shares of common stock. These issuances were exempt from registration under Section3(a)(9) of the Securities Act. On March 7, 2023, we issued 150,000 shares of our common stock to the investors in the July 27, 2022 private placement.
Removed
The shares were issued at the request of Revere Securities as partial consideration for its agreement to modify its engagement letter with the Company. The shares were exempt from registration under Rule 506(b) under the Securities Act.
Removed
On June 1, 2023, the Company issued 50 Series B preferred shares to an accredited investor in connection with the cancellation of 500,000 shares of common stock. The Series B preferred stock is convertible into common stock at a ratio of 10,000 shares of common stock for each share of Series B stock held, subject to certain limitations.
Removed
Series B preferred shares are not entitled to vote on any matters submitted to shareholders of the Company. Preferred shares outstanding at June 5, 2023, totaled 190 which are convertible into 1,900,000 shares of common stock. The issuance was exempt from registration under Section3(a)(9) of the Securities Act.
Removed
On January 2, 2024, the Company issued 16,086 shares of our common stock to Brandon Torres Declet as part of severance the Company and Mr. Declet agreed to pursuant to Mr. Declet’s Termination Agreement.
Removed
The shares were issued pursuant to the exemption provided under Rule 506(b) of Regulation D of the Securities Act of 1933 On January 2, 2024, the Company issued 16,086 shares of our common stock to Brandon Torres Declet as part of severance the Company and Mr. Declet agreed to pursuant to Mr. Declet’s Termination Agreement.
Removed
On February 28, 2024, the Company issued 175,000 shares of our common stock to an accredited investor in connection with a conversion of 35 shares of our Series B Convertible Preferred Stock. The issuance was exempt from registration under Section 3(a)(9) of the Securities Act.
Removed
On March 12, 2024, the Company issued 175,000 shares of our common stock to an accredited investor in connection with a conversion of 35 shares of our Series B Convertible Preferred Stock. The issuance was exempt from registration under Section 3(a)(9) of the Securities Act. 39 Use of Proceeds On February 13, 2024, the U.S.
Removed
Securities and Exchange Commission declared effective our registration statement on Form S-1 (File No. 333-270519), as amended, filed in connection with our IPO.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe decrease related to higher revenues during the 2024 period. Gross Margin During the nine months ended January 31, 2024, Rotor Riot’s gross margin was $936,634 compared to $364,363 during the nine months ended January 31, 2023, resulting in an increase of $572,271 or 157.1%.
Biggest changeGross Margin During the year ended December 31, 2024, our gross margin was $1,546,251 compared to $0 during the year ended December 31, 2023, resulting in an increase of $1,546,251 or 100%. Our gross margin, as a percentage of sales, totaled 28% during the year ended December 31, 2024, compared to 0% during the year ended December 31, 2023.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited and unaudited financial statements (prepared in accordance with accounting principles generally accepted in the United States (“U.S.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the audited financial statements (prepared in accordance with accounting principles generally accepted in the United States (“U.S.
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “ Risk Factors .” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Unusual Machines, Inc. and its subsidiaries.
Actual results could differ materially from those discussed in or implied by forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Form 10-K, particularly in the section entitled “Risk Factors.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our” and the “Company” refer to Unusual Machines, Inc. and its subsidiaries.
GAAP”)) and related notes included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”). The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “ Special Note Regarding Forward-Looking Statements ” for a discussion of the uncertainties, risks, and assumptions associated with those statements.
GAAP”)) and related notes included elsewhere in this Annual Report on Form 10-K (this “Form 10-K”). The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and assumptions associated with those statements.
In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management. Property and equipment are stated at cost.
In general, management’s estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.
Adjustments in a purchase price allocation may require a change in the amounts allocated to goodwill during the periods in which the adjustments are determined. 48 Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements. Recently Issued Accounting Pronouncements The Company has implemented all new accounting pronouncements that are in effect.
Unusual Machines Cash Flows Years Ended December 31, 2023 and 2022 Operating Activities Net cash used in operating activities was $2,201,485 during the year ended December 31, 2023 compared to net cash used in operating activities of $1,231,794 during the year ended December 31, 2022, representing an increase of $969,691 or 78.7%.
Operating Activities Net cash used in operating activities was $3,996,367 during the year ended December 31, 2024, compared to net cash used in operating activities of $1,776,552 during the year ended December 31, 2023, representing an increase of $2,219,815 or 125%.
On July 25, 2022, we closed an additional private offering of 150,000 shares of common stock at a price of $4.00 per share for total proceeds of $600,000. We believe that the net proceeds from our February 2024 IPO and existing cash balances will be sufficient to fund our current operating plans through at least the next 12 months.
We believe that the net proceeds from our 2024 financings, warrant exercises, revenues, and existing cash balances will be sufficient to fund our current operating plans through at least the next 12 months.
These factors, among others, raise substantial doubt about each company's ability to continue as a going concern. With the closing of our IPO in February 2024, we expect each will no longer operate as a going concern. Critical Accounting Policies and Estimates Our financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis.
Critical Accounting Policies and Estimates Our financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis.
Fat Shark Cash Flows Nine Months Ended January 31, 2024 and 2023 Operating Activities Fat Shark net cash provided by operating activities was $420,974 during the nine months ended January 31, 2024, compared to net cash used in operating activities of $3,515,745 during the nine months ended January 31, 2023, representing an increase of $3,936,539 or 112.0% in net cash provided by operating activities.
Investing Activities Net cash used in investing activities was $852,801 during the year ended December 31, 2024 compared to net cash used in investing activities of $3,164 during the year ended December 31, 2023, representing an increase of $849,637.
Net Loss Net loss for the year ended December 31, 2023, totaled $1,794,455 compared to $1,242,584 for the year ended December 31, 2022, resulting in an increase of $551,871 or 44.4%.
Other Expenses During the year ended December 31, 2024, other expenses totaled $15,002,061 compared to $0 during the year ended December 31, 2023, resulting in an increase of $15,002,061 or 100%.
On February 16, 2024, we completed our IPO for the sale of 1,250,000 shares of common stock at a public offering price of $4.00 per share for gross proceeds of $5.0 million. After paying certain underwriting discounts and commissions, business combination expenses and other expenses related to the IPO, we received approximately $3.5 million in net proceeds.
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.
During the nine months ended January 31, 2024, Fat Shark incurred general and administrative expenses totaling $14,816 compared to $66,193 for the nine months ended January 31, 2023, resulting in a decrease of $51,377 or 77.6%. The decrease primarily relates to lower office and insurance costs compared to the 2023 period.
During the year ended December 31, 2024, general and administrative expenses totaling $6,250,939 compared to $2,377,862 for the year ended December 31, 2023, resulting in an increase of $3,873,077 or 163%.
This decrease in net cash used related to timing of purchasing additional computer equipment. Financing Activities Net cash provided by financing activities totaled $0 during the year ended December 31, 2023 compared to $549,900 during the year ended December 31, 2023, resulting in a decrease in net cash provided by financing activities of $549,900 or 100%.
This change in net cash used in investing activities related to the $1,000,000 we paid to purchase Fat Shark and Rotor Riot, offset by $147,199 in cash acquired as compared to $3,164 used for purchase of computer equipment during 2023. 43 Financing Activities Net cash provided by financing activities totaled $7,711,718 during the year ended December 31, 2024, compared to net cash used in financing activities of $424,933 during the year ended December 31, 2023, resulting in an increase in net cash provided by financing activities of $8,136,651.
During the year ended April 30, 2023, Rotor Riot incurred research and development expenses totaling $65,487 compared to $58,719 for the year ended April 30, 2022, resulting in an increase of $6,768 or 11.5%. The increase primarily relates to increased payroll costs.
Operations expenses primarily relate to our direct operations including our warehouse personnel and warehouse expenses. During the year ended December 31, 2024, research and development expenses totaled $90,584 compared to $0 for the year ended December 31, 2023, resulting in an increase of $90,584 or 100%.
Removed
All amounts presented in tables, other than per share amounts, are in thousands unless otherwise noted. Recent Developments Initial Public Offering On February 16, 2024, the Company closed the IPO for the sale of 1,250,000 shares of common stock, at a public offering price of $4.00 per share.
Added
All amounts presented in tables, other than per share amounts, are in thousands unless otherwise noted.
Removed
The IPO generated gross proceeds of $5.0 million and net proceeds of approximately $3.5 million.
Added
Recent Developments Private Placement On October 29, 2024 (the “Closing Date”), we entered into Securities Purchase Agreements (the "SPA”) with accredited investors (each, an "Investor” and together the "Investors”) for a private placement offering ("Private Placement”), 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.
Removed
Acquisition of Fat Shark and Rotor Riot On November 21, 2022, the Company entered into 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.
Added
We intend to use the net proceeds of the Offering for working capital and general corporate purposes. As part of the Private Placement, we issued an aggregate of 1,286,184 units at a per unit purchase price of $1.52 per unit.
Removed
Fat Shark and Rotor Riot are in the business of designing and marketing consumer drones and FPV goggles. Rotor Riot is also a licensed authorized reseller of consumer drones manufactured by third-parties.
Added
Each unit consisted of one share of Common Stock and one warrant to purchase one share of the Company’s Common Stock (each an "Investor Warrant”) and collectively, the Investor Warrants”).
Removed
Under the terms of the Purchase Agreement, as amended, the Company purchased from Red Cat its Rotor Riot and Fat Shark subsidiaries for $20.0 million comprised of (i) $1.0 million in cash, (ii) a $2.0 million promissory 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. 40 Unusual Machines Results of Operations Years Ended December 31, 2023 and 2022 Revenue During the years ended December 31, 2023 and 2022, we did not generate any revenues and as such did not incur any cost of goods sold.
Added
The Investor Warrants have a term of five and a half years from the Closing Date and may not be exercised for 180 days after the Closing Date and are exercisable at $1.99 per share, subject to certain limitations and adjustments set forth in the Investor Warrants. On February 25, 2025, the 2025 Special Meeting of the Company was held.
Removed
Operating Expenses During the year ended December 31, 2023, we incurred general and administrative expenses totaling $1,794,455 compared to $1,242,732 for the year ended December 31, 2022, resulting in an increase of $551,723 or 44.4%. The increase primarily relates to increased legal expenses and professional fees related to the business combination and for preparation of becoming a public company.
Added
At the 2025 Special Meeting, the Company’s stockholders voted and approved on a waiver of the provision that certain warrants are only exercisable 180 days after issuance. On February 26, 2025, the Company issued 1,224,606 shares of Common Stock to various warrant holders who exercised their warrants at an exercise price of $1.99.
Removed
The increase in net loss is almost entirely related to the increase in general and administrative expenses as we start to build out our operations for the business combination and becoming a public company.
Added
The Company received gross proceeds in the aggregate amount of $2,436,966 as a result of the warrant exercises. The shares of common stock issued are fully registered under the Registration Statement on Form S-1 (SEC Registration Number 333-283494).
Removed
Fat Shark Results of Operations Nine Months Ended January 31, 2024 and 2023 Revenue During the nine months ended January 31, 2024 (or the “2024 period”), Fat Shark generated revenues totaling $1,379,391 compared to $2,060,594 during the nine months ended January 31, 2023 (or the “2023 period”), representing a decrease of $681,203 or 33.1%.
Added
All of the Investor Warrants were exercised other than Investor Warrants held by Allan Evans, our Chief Executive Officer, Sanford Rich and Robert Lowry, who are each members of our Board. 41 Potential Aloft Acquisition On February 1, 2025, we entered into a Merger Agreement to acquire drone software company, Aloft.
Removed
Revenues can fluctuate from period to period and are generally reflective of normal changes as the life cycles of the company’s products mature.
Added
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 airspace authorizations in the United States. Aloft has provided more than 1.6 million authorizations in total with 400,000 authorizations provided in 2024.
Removed
Lower revenues for the 2024 period related to its newest product, the Dominator, which was launched at the beginning of the 2023 period, and while it generated strong initial sales in the first quarter, sales declined significantly since the 2023 period.
Added
The acquisition is for $14.5 million, almost entirely in the Company’s Common Stock. Customary closing conditions by the parties must be met before closing the merger. For more information, see Risk Factors – Risks Related to our Business and Financial Condition” we may not be successful in consummating the merger if certain closing conditions are not met.
Removed
Cost of Goods Sold During the nine months ended January 31, 2024, Fat Shark incurred cost of goods sold of $2,557,379 compared to $1,753,695 during the nine months ended January 31, 2023; resulting in an increase of $803,684 or 45.8%.
Added
Results of Operations We acquired Fat Shark and Rotor Riot on February 16, 2024 and generated no revenue from 2023 through the date of acquisition. For pro forma information unaudited result of operations reflecting our performance if we had owned these subsidiaries as of January 1, 2023, See Note 3 to our Consolidated Financial Statements.
Removed
The increase primarily related to an inventory impairment charge of $1,244,920 related to the Dominator goggles during the 2024 period. 41 Gross Margin During the nine months ended January 31, 2024, Fat Shark’s gross margin was ($1,177,988) compared to $306,899 during the nine months ended January 31, 2023, resulting in a decrease of $1,484,887 or 483.8%.
Added
Years Ended December 31, 2024 and 2023 Revenue During the year ended December 31, 2024 we generated revenues totaling $5,565,319 compared to $0 during the year ended December 31, 2023, representing an increase of $5,565,319 or 100%. We did not generate any revenues until the closing of the acquisitions of Fat Shark and Rotor Riot on February 16, 2024.
Removed
Fat Shark’s gross margin, as a percentage of sales, totaled (85.4%) during the nine months ended January 31, 2024, compared to 14.9% during the nine months ended January 31, 2023. The reported gross margin was adversely impacted by an impairment charge of $1,244,920 related to the write-down of Dominator inventory based on sales volumes and product discounts.
Added
Accordingly, our revenues for the year ended December 31, 2024 are affected by not having any revenues for half of the first quarter. Prior to our acquisition, Fat Shark and Rotor Riot had pro forma revenues for the year ended December 31, 2023 of approximately $4.68 million.
Removed
Operating Expenses During the nine months ended January 31, 2024, Fat Shark’s operations expenses totaled $111,204 compared to $180,805 during the nine months ended January 31, 2023, resulting in a decrease of $69,601 or 38.5%. The decrease during the 2024 period reflects lower professional services fees compared to the 2023 period.
Added
Revenues almost entirely relate to completed and fulfilled product sales during the year through our Rotor Riot retail channel and from B2B enterprise sales of our Fat Shark and Blue UAS products.
Removed
During the nine months ended January 31, 2024, Fat Shark incurred research and development expenses totaling $35,669 compared to $208,107 for the nine months ended January 31, 2023, resulting in a decrease of $172,438 or 82.9%. The decrease during the 2024 period reflects lower payroll costs compared to the 2023 period.
Added
Cost of Goods Sold During the year ended December 31, 2024, we incurred cost of goods sold of $4,019,068 compared to $0 during the year ended December 31, 2023, resulting in an increase of $4,019,068 or 100%. Similar to revenues, we did not incur any cost of goods sold until the closing of the acquisitions on February 16, 2024.
Removed
During the nine months ended January 31, 2024, Fat Shark’s sales and marketing expenses totaled $159 compared to $13,837 for the nine months ended January 31, 2023, resulting in a decrease of $13,678 or 98.9%. Sales and marketing expenses were higher during the 2023 period as the Company was preparing for the launch of the Dominator.
Added
Prior to our acquisition, Fat Shark and Rotor Riot had pro-forma cost of goods sold for the year ended December 31, 2023 of approximately $4.13 million. Cost of goods sold primarily relate to product costs from our sales but also include certain shipping and tariff costs.
Removed
Net Loss Fat Shark’s net loss for the nine months ended January 31, 2024, totaled $1,401,934 compared to $221,530 for the nine months ended January 31, 2023, resulting in an increase in net loss of $1,180,404 or 532.8%.
Added
We anticipate our gross margin to fluctuate period to period depending on certain promotions and products that are sold during the period and the margins we generated during the quarter are in line with our expectations and normal operating margins.
Removed
This increase in net loss relates to the impairment charge related to the Dominator inventory resulting in lower gross margins during the 2024 period. This was partially offset by lower operating expenses compared to the 2023 period.
Added
Operating Expenses During the year ended December 31, 2024, operations expenses totaled $959,740 compared to $0 during the year ended December 31, 2023, resulting in an increase of $959,740 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any operations expenses.
Removed
The release of Fat Shark’s new generation product, the Dominator, took place during the 2023 period which resulted in higher revenues and gross margins in the 2023 period.
Added
Prior to the closing of the acquisitions in February 2024, we did not have any research and development expenses during 2023.
Removed
Fat Shark Results of Operations Years Ended April 30, 2023 and 2022 Revenue During the year ended April 30, 2023 (or the “2023 period”), Fat Shark generated revenues totaling $2,317,444 compared to $2,627,792 during the year ended April 30, 2022 (or the “2022 period”), representing a decrease of $310,348 or 11.8%.
Added
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 and include expenses incurred related to our Blue UAS products. 42 During the year ended December 31, 2024, sales and marketing expenses totaled $1,091,268 compared to $0 for the year ended December 31, 2023, resulting in an increase of $1,091,268 or 100%.
Removed
Revenues can fluctuate from period to period and are generally reflective of normal changes as the life cycles the company’s products mature.
Added
Prior to the closing of the acquisitions in February 2024, we did not have any sales and marketing expenses. Sales and marketing expenses primarily relate to advertising spend related to Rotor Riot, costs related to our Rotor Riot show production and payroll expenses for our marketing personnel.
Removed
Lower revenues for the 2023 period related to its newest product, the Dominator, which was launched at the beginning of the 2022 period, and while it generated strong initial sales in the first quarter, sales declined significantly over the remaining quarters in Fiscal 2023. 42 Cost of Goods Sold During the year ended April 30, 2023, Fat Shark’s incurred cost of goods sold of $2,159,159 compared to $2,569,307 during the year ended April 30, 2022; resulting in a decrease of $410,148 or 16.0%.
Added
General and administrative expenses incurred during 2024 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. In addition, we also incurred $2,320,206 in non-cash stock compensation expense.
Removed
The decrease related to lower revenues during the 2023 period. Gross Margin During the year ended April 30, 2023, Fat Shark gross margin was $158,285 compared to $58,485 during the year ended April 30, 2022, resulting in an increase of $99,800 or 170.6%.
Added
General and administrative expenses incurred during 2023 primarily related to expenses incurred as we operated as a management company to acquire Fat Shark and Rotor Riot and take the Company public. We incurred $600,000 of non-cash stock compensation expenses in 2023.
Removed
Fat Shark’s gross margin, as a percentage of sales, totaled 6.8% during the year ended April 30, 2023 compared to 2.2% during the year ended April 30, 2022. The lower gross margin in the 2022 period related to price reductions of the prior digital goggle as Fat Shark prepared for the launch of the Dominator early in the 2023 period.
Added
The increase relates to increased expenses related to closing the IPO including legal and accounting fees, additional transition and integration related expenses, higher stock compensation expense, and costs related to operating Fat Shark and Rotor Riot.
Removed
Separately, Fat Shark recorded a charge of $182,845 related to the write-off of excess quantities of Dominator inventory based on sales volumes during the second half of the year ended April 30, 2023.
Added
During the year ended December 31, 2024, we recognized a loss on impairment of goodwill of $10,073,326 compared to $0 for the year ended December 31, 2023, resulting in an increase of $10,073,326 or 100%.
Removed
Operating Expenses During the year ended April 30, 2023, Fat Shark’s operations expenses totaled $240,945 compared to $252,545 during the year ended April 30, 2022, resulting in a decrease of $11,600 or 4.6%. The decrease during the 2023 period reflects lower professional services fees compared to the 2022 period.
Added
The loss on goodwill impairment relates to the difference in the fair value calculation of goodwill from the acquisitions of Rotor Riot and Fat Shark as compared to the carrying value as of the measurement date. We did not have any goodwill in the prior year as the acquisitions had not yet been completed.
Removed
During the year ended April 30, 2023, Fat Shark incurred research and development expenses totaling $280,515 compared to $407,881 for the year ended April 30, 2022, resulting in a decrease of $127,366 or 31.2%. The decrease during the 2023 period reflects lower payroll and material costs compared to the 2022 period.
Added
Other expenses mostly consists of non-cash related charges including $16,146,205 for the change in fair value from our derivatives including the conversional option feature on the note payable and the warrant liability. It is offset by a non-cash gain on debt extinguishment of $1,259,979.
Removed
During the 2022 period, Fat Shark incurred higher payroll and material costs related to its next generation product release. During the year ended April 30, 2023, Fat Shark’s sales and marketing expenses totaled $16,858 compared to $60,616 for the year ended April 30, 2022, resulting in a decrease of $43,758 or 72.2%.
Added
Finally, other expenses included $116,981 for interest expense that the Company paid in relation to its Note Payable during the year and interest income of $1,146. We did incur these same costs in 2023 as we did not have operational activities until after our IPO and the completion of the acquisitions.
Removed
Sales and marketing expenses were higher during the 2022 period as the Company was preparing for the launch of the Dominator. During the year ended April 30, 2023, Fat Shark incurred general and administrative expenses totaling $88,277 compared to $169,096 for the year ended April 30, 2022, resulting in a decrease of $80,819 or 47.8%.
Added
Net Loss Our net loss for the year ended December 31, 2024, totaled $31,980,468 including non-cash charges of approximately $26.7 million. This compared to $2,383,462 for the year ended December 31, 2023, resulting in an increase in net loss of $29,597,006.
Removed
The decrease primarily relates to lower payroll, facilities, and business travel costs compared to the 2022 period. Net Loss Fat Shark’s net loss for the year ended April 30, 2023 totaled $546,121 compared to $910,723 for the year ended April 30, 2022, resulting in a decrease of $364,602.
Added
The increase in net loss primarily relates to a change in fair value of derivatives and warrant liabilities of $16,146,205, a loss on impairment of goodwill of $10,073,326, the increase in general and administrative expenses related to closing the IPO and stock compensation expense with additional increase in expenses for operations, sales and marketing expenses we incurred since the acquisition from Fat Shark and Rotor Riot, and interest expense of $116,981.
Removed
This decrease relates to improved gross margins and lower operating expenses during the 2023 period. During the 2022 period, Fat Shark’s gross margin was lower related to pricing discounts on end-of-life cycle products and higher research and development expenses related to the release of the new generation product, the Dominator.
Added
Interest expense is from our debt incurred from our IPO that was converted to equity in August and December 2024. This was partially offset by generating gross margin related to the revenue and cost of goods sold from sales for Fat Shark and Rotor Riot, a gain on debt extinguishment of $1,259,979, and income tax benefit of $13,360.
Removed
Rotor Riot Results of Operations Nine Months Ended January 31, 2024 and 2023 Revenue During the nine months ended January 31, 2024 (or the “2024 period”), Rotor Riot generated revenues totaling $3,122,673 compared to $2,534,514 during the nine months ended January 31, 2023 (or the “2023 period”), representing an increase of $588,159 or 23.2%.
Added
Cash Flows 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.
Removed
Revenues can fluctuate from period to period and are generally reflective of normal changes through the life cycles of the products that the company sells.

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