NYSE: UMAC

The Drone Industry

The drone industry continues to expand as a powerful
business, defense, and public safety tool, as well as a popular recreational activity, with growth occurring broadly across our targeted
industries. According to Drone Industry Insights’ Global Drone Market Report 2025–2030, the global drone market is projected
to reach approximately U.S. $57.8 billion by 2030. A Fact.MR report indicates the drone accessories market was valued at approximately
$25.2 billion in 2024 and is projected to reach ~$156 billion by 2034 at a ~20% CAGR. Furthermore, the global drone flight controller
system market was approximately $7.14 billion in 2024 and is expected to reach around $13.05 billion by 2029 (CAGR ~12.8%) according to
the Business Research Company. Similarly, Global Market Insights reports that the drone motor market was valued at ~$4.7 billion in 2024
and is forecast to grow to ~$9.2 billion by 2030, and ~$15.9 billion by 2034 at a ~13.1% CAGR. Fortune Business Insights likewise forecasts
the motor market at $6.7 billion in 2025, with expansion toward $16.3 billion by 2034 as commercial and industrial drone deployment increases.

Unusual Machines intends to pursue strategic acquisition
targets that are cash flow positive and manufacture and sell drone components or enable us to domestically produce them. The Company believes
that very promising companies (both public and private) are, in many instances, underfunded and unable to scale their innovative products
and solutions. We believe that unlocking this potential will be key to industry consolidation. The Company’s acquisition strategy
is intended to support broader industry shifts toward U.S.-manufactured and NDAA-compliant drone systems, while maintaining a deliberate
approach to capital allocation and integration risk.

Low Cost and Attritable Drone Market Segment

Unusual Machines principally operates and manufactures
components in the Group 1 Unmanned Aerial Systems (“UAS”) which is often referred to as the small drone segment of the drone
industry. These drones are known for being light weight, high speed, and low-cost attritable drones where responsiveness and situational
awareness are essential. In the defense sector, these drones are primarily used for tactical missions with real time intelligence, surveillance,
and reconnaissance. In the commercial and consumer sector, these drones are used for freestyle, racing, cinematic production, mapping
and commercial use.

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This also includes FPV drones where pilots use
wearable display devices or screens that provide real-time, first-person video feed from a camera mounted on the drone, creating an immersive
operating experience in which the pilot interacts with the aircraft through visual immersion. This experience is enabled by live-streamed
video transmitted with ultra-low latency from the drone to the pilot via radio links, enabling precise pilot control. FPV systems integrate
onboard cameras, video transmission modules, flight controllers, motors, and pilot display devices that operate as an integrated system
over radio communications. While FPV video transmission has historically relied on analog signals, digital transmission systems are increasingly
adopted as reliability, range, and image quality improve. These systems require sophisticated electronics capable of maintaining low-latency,
reliable performance during flight.

Plans for Growth, Development, and Expansion

Unusual Machine’s intends to strengthen
its market position through continued organic revenue growth while expanding its role as a U.S. supplier of critical drone components.
The Company’s growth strategy emphasizes disciplined execution, increased operational scale, and expansion of its B2B component
sales to commercial and defense-oriented customers.

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

Customers

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

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

Competition

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

In the global drone market, SZ DJI Technology
Co., Ltd. (“DJI”) is the dominant manufacturer, with industry research firms estimating that DJI accounts for a majority of
global consumer and prosumer drone sales. DJI’s scale and vertical integration create competitive pressure across the industry,
while evolving regulatory requirements and customer demand for U.S.-based, compliant supply chains have created opportunities for alternative
suppliers. See “Government Regulation and Federal Policy” below for recent information relating to DJI.

Within the drone components market, Unusual Machines
competes with domestic and international manufacturers, including T-Motor, Orqa, ModalAI, and ARK Electronics. Competition is based on
price, performance, reliability, availability, and compliance.

Unusual Machines differentiates itself by offering
price-competitive, domestically manufactured and assembled drone components designed to meet NDAA requirements and align with Department
of Defense procurement frameworks, including the Blue UAS ecosystem, while focusing on supply chain control and execution reliability.

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The Company’s Drone Component Manufacturing

The Company operates multiple manufacturing facilities located near
its headquarters in Orlando, Florida. As of March 2026, Unusual Machines operates five facilities in the Orlando area to support domestic
drone component production and assembly, one of which is our corporate office. These facilities manufacture a variety of drone components,
including motors, headsets, and other critical components. The components support consumer, defense, and enterprise customers. The Company
expects to continue to expand its production footprint in the Orlando area in a planful and deliberate manner, including the potential
addition of new product categories, such as batteries and cameras, as operational capacity and customer demand support such expansion. See “