Unusual Machines acquires Upgrade Energy for $52M to build domestic drone battery capacity

Unusual Machines has signed a definitive merger agreement to acquire DroneNX LLC, which operates as Upgrade Energy, a manufacturer of battery and power systems for unmanned aerial systems, for approximately $52 million. The consideration consists of 1,792,012 shares of Unusual Machines common stock valued at $13.9508 per share, $1 million in cash at closing, and a performance-based earnout of up to $26 million contingent on Upgrade Energy achieving $10 million in annual revenue during a two-year calculation period following the agreement date.

Why batteries now

Under the National Defense Authorization Act for fiscal year 2026, the US Department of Defense will be prohibited from purchasing batteries for weapons and support systems made with materials sourced from foreign entities of concern, including China and Russia, starting January 1, 2028. That deadline has turned domestic drone battery production from a niche manufacturing question into a defence procurement constraint. A June 2025 executive order directed the acceleration of domestic drone production and supply chain development, and the FY2026 defence budget included $53.6 billion for the Defense Autonomous Warfare Group.

Batteries are where the supply chain dependency is most acute. Chinese cell chemistry and cell manufacturing underpin most of the drone battery market globally, including in nominally American-made systems. The 2028 NDAA deadline forces drone companies serving defence customers to locate or build compliant domestic supply before they lose access to procurement. For Unusual Machines, adding a battery manufacturer is not a diversification move; it is the gap in an otherwise domestic component stack.

Unusual Machines

Unusual Machines is an Orlando, Florida-based NYSE-listed manufacturer of NDAA-compliant drone components. Its portfolio includes Fat Shark, the market-leading brand in FPV video goggles, and Rotor Riot, a curated FPV drone e-commerce platform. The company has scaled motor production from 20,000 to a projected 120,000 units per month on the back of enterprise and government demand, and plans to install a high-volume automated motor production line in the latter half of 2026. Enterprise revenue is projected to rise from $27 million in 2026 to $46 million in 2027, with gross margins expanding from 35% in 2025 to 48% in 2027. The company also initiated $75 million in strategic materials purchase orders in May 2026 to secure inventory across its drone component product lines.

Upgrade Energy

Upgrade Energy operates out of an 18,500-square-foot facility in Torrance, California with approximately 30 engineering and production employees. Matthew Barnard, CEO of Upgrade Energy, said the company was built specifically to solve flight time and reliability challenges for drone operators through high-performance batteries manufactured in the United States. Following the close of the transaction, Unusual Machines plans to expand battery pack operations by adding a second production facility in Orlando, Florida. The earnout structure, up to $26 million contingent on $10 million in annual revenue, reflects the difference between a battery manufacturer with domestic capability and one with demonstrated revenue at scale. Unusual Machines is paying for the former and structuring the additional consideration around evidence of the latter.

The broader race

The Unusual Machines acquisition is one of several simultaneous moves to build domestic drone battery supply chains. SES AI has converted its South Korean facility to produce NDAA-compliant drone battery cells. Battery materials company 6K Energy and drone manufacturer CRG Defense signed a seven-year supply agreement for domestic NMC811 cathode material sourced from North Andover, Massachusetts, with additional capacity planned for a Jackson, Tennessee facility in 2028. Skydio pledged $3.5 billion to expand US drone manufacturing. The pattern across all four moves is the same: the 2028 compliance deadline has made domestic supply chain position a competitive and regulatory necessity rather than a preference.

Maturity

The transaction remains subject to customary closing conditions, including receipt of a 2025 audit for Upgrade Energy, and is expected to close within 120 days of the agreement date. No revenue figures for Upgrade Energy have been publicly disclosed. The earnout is contingent on revenue performance that has not yet been demonstrated at the required scale.

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