US Co.'s Drone Approved for 'Blue UAS' DoD Program

Drone and drone component maker Unusual Machines Inc. (UMAC:NYSEAMERICAN) announced that its Rotor Riot Brave F7 Flight Controller has been approved for the Blue UAS (unmanned aerial systems) Framework list for U.S. Defense Department purchases.

The development is a significant milestone for the company, which saw its stock rise nearly 18% this week.

"Gaining Blue certification is a short-term potential catalyst" for the company, Sergio Heiber wrote for Seeking Alpha last month. "The company could reach profitability with just one or two military contracts, which would result in a rerating of the share price."

Allan Evans, chief executive officer of Unusual Machines, said, "This certification reinforces our mission to support the American drone industry with high-quality, domestically manufactured components. We know procurement can be a challenge and see the DIU (Defense Innovation Unit) and the Blue process as the best way to facilitate the Department of Defense (DoD) in using FPV drones."

Framework Sets Rigorous Standards

The Blue UAS Framework initiative by the DIU sets rigorous standards for cybersecurity, supply chain integrity, and operational requirements. This is done to ensure that certified UAS are trusted and secure, Unusual Machines noted. In order to be added to the Blue UAS Framework, a Department of Defense (DoD) sponsor needs to advocate for the product, and it has to represent a new capability.

"Gaining Blue certification is a short-term potential catalyst" for the company, Sergio Heiber wrote for Seeking Alpha last month. "The company could reach profitability with just one or two military contracts, which would result in a rerating of the share price."

"The audit and approval of the Brave F7 Flight Controller is a testament to the foresight of the Marine Core Warfighter Lab and enables several simplified acquisition pathways for all government customers," Unusual Machines said in a release.

"A low-cost FPV UAS technology added to the DIU Blue list offers a significant advancement in our capability to deploy secure, reliable, and domestically manufactured unmanned systems," said Major Steven Atkinson of the Marine Corps Warfighting Laboratory. "It provides a scalable solution that ensures we can keep pace with our adversaries while enhancing operational effectiveness and security for our warfighters."

The Rotor Riot Brave F7 Flight Controller is manufactured in compliance with the National Defense Authorization Act (NDAA), which emphasizes reducing reliance on foreign technologies and enhancing domestic manufacturing capabilities. UMAC said is the first U.S.-made flight controller on the Blue UAS Framework list specifically designed for high- performance FPV flight.

"This flight controller represents a significant step forward in the company's ongoing efforts to expand its presence as a domestic drone parts manufacturer," the company said.

The Catalyst:  Defense Demand Is Large

Unusual Machines has a foothold in the commercial drone business; however, it is pivoting some of its focus toward B2B initiatives with customers in the defense industry. Demand for drones and drone parts in the defense sector is large. 

"[Unusual Machines] generates US$5M revenue a year with 20–30% year-on-year growth that is expected to continue," Technical Analyst Clive Maund wrote on June 20, concluding that the stock was a Strong Buy.

Flight controllers use sensor data to coordinate the speeds of rotor motors. Unusual Machines said some key features of the Brave F7 Flight Controller include its pricing, a STMF722RET6 processor, a Bosch accelerometer and barometer, and 16 megabytes of built-in black box memory.

"The Brave F7 Flight Controller is designed by our Rotor Riot team with the FPV pilot in mind," said Stacy Wright, president of Rotor Riot. "We are committed to serving our FPV hobby and are proud to offer high-quality, reliable American-made drone components at a very competitive price."

"[Unusual Machines] generates US$5M revenue a year with 20–30% year-on-year growth that is expected to continue," Technical Analyst Clive Maund wrote on June 20, concluding that the stock was a Strong Buy.*

"There are plenty of potential catalysts over the next several months with the seasonal round of government contracts being announced," Maund wrote.

In a June 17 research note, Dr.  Ashok Kumar also shared optimism for Unusual Machines, giving the company a Buy rating and a target price of US$4.

Pivoting From Chinese Products

The drone market is anticipated to grow in both the commercial and defense sectors. According to a report by Drone Industry Insights, the global drone market size is forecasted to reach US$54.6 billion by 2030, with the commercial market growing at a 7.7% compound annual growth rate (CAGR).

Fortune Business Insights noted that "The global military drone market is projected to grow from US$14.14 billion in 2023 to US$35.60 billion by 2030, at a CAGR of 14.10% during the forecast period."

As noted by Bloomberg, "Chinese drones command about 90% of the US consumer market and 70% of the industrial one."

The U.S. is attempting to pivot away from China as a supplier. However, legislation to ban such drones that passed in the House of Representatives has so far been left out of a Senate version of the National Defense Authorization Act.

Security is also an issue. Global Market Insights said the drone cybersecurity market was worth US$2.2 billion in 2023 and estimates it will register a CAGR of 19% between 2024 and 2032.

"With the growing adoption of drones in sectors such as agriculture, defense, and logistics, the demand for robust cybersecurity measures is intensifying," analysts wrote. "Innovations in drone technology, such as improved automation and AI capabilities, have expanded the application of drones, necessitating advanced cybersecurity solutions to protect these sophisticated systems from potential cyber-attacks."

Ownership and Share Structure

About 21.6% of the company is owned by management and insiders, UMAC said. The rest, 78.4%, is retail.

The company's market cap is US$19.13 million, according to Market Watch, with 9.33 million shares outstanding. It trades in a 52-week range of US$5.54 and US$0.98.

Important Disclosures:

1. Unusual Machines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Unusual Machines Inc. 
3. Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
4. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company. 

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* Disclosure for the quote from the Clive Maund article published on June 20, 2024

1. For the quoted article (published on June 20, 2024), the Company has paid Street Smart, an affiliate of Streetwise Reports, US$1,500 in addition to the monthly consulting fee. 
2. Author Certification and Compensation: [Clive Maund of clivemaund.com] is being compensated as an independent contractor by Street Smart, an affiliate of Streetwise Reports, for writing the article quoted. Maund received his UK Technical Analysts’ Diploma in 1989.  The recommendations and opinions expressed in the article accurately reflect the personal, independent, and objective views of the author regarding any and all of the designated securities discussed. No part of the compensation received by the author was, is, or will be directly or indirectly related to the specific recommendations or views expressed

Clivemaund.com Disclosures

The quoted article represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks cannot be only be construed as a recommendation or solicitation to buy and sell securities.