It has been a while since I took a critical look at the DRONES Index summary of U.S. drone companies, and it has been an interesting year for technology, politics, and war. There have also been some changing winds in the macroeconomic outlook for this country’s financial institutions. So, let’s do an end-of-year update; I’ll be sure to make it a big one.

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I would like to start by briefly revisiting the companies I previously featured in Company Spotlight articles.

Company Spotlight Updates

AeroVironment Inc. (AVAV)

I covered AeroVironment in summer 2022. This Defense contractor was coming off a lull in DOD spending on UAS programs. Russia had recently invaded Ukraine and the Ukraine aid funding had not yet hit AeroVironment’s quarterly reports. I lamented the lack of commercial sales, and stated that major wars (foreign or domestic) have a way of energizing the defense industrial base.

Since that time, the company’s Switchblade loitering munition has had some success in combat, and established AeroVironment as an industry leader in this niche market. Several rounds of funding later, AeroVironment had amassed a small fortune for itself. Its stock is up about 100% since writing that article. The company still appears to have little in the way of non-defense sales, so I suspect revenue will continue to ebb and flow with the tides of war.

Kratos Defense & Security Solutions, Inc. (KTOS)

I covered KTOS in summer 2024 as the stock market was receiving its first glimmers of hope of falling interest rates. I noted that it was in a healthy financial position and had several bullish indicators working in its favor.

Since that article, Kratos was awarded another contract for its XQ-58A UAV which participated in a major exercise. There appears to be growing interest from the U.S. Marine Corps, particularly after Kratos initiated a partnership with Shield AI for the XQ-58A autopilot. Kratos’ quarterly report beat estimates and 12 out of 12 analysts rate it somewhere between Hold and Strong Buy. It has been a good performer for the second half of 2024. I continue to speculate about the possibility of Kratos spinning off or selling its Kratos UAV (KUAV) division.

AgEagle Aerial Systems Inc. (UAVS)

I covered UAVS in summer 2023 amid significant quantitative tightening and rising interest rates. At the time, UAVS was in a dismal financial position; however, I noted its potential for gaining traction with foreign militaries and domestic agricultural stakeholders.

Since writing the article, the company’s poor financial position finally caught up and forced some drastic action. UAVS underwent some stock dilution, conducted a 50:1 reverse split, and continued further dilution. The stock is down nearly 99% since that article. There have been a few bright spots—a large purchase order, supplying cameras to a competitor, continued listing as a Blue UAS—but the sales are simply not keeping pace with cash burn. AgEagle appeared to do a complete overhaul of its Board of Directors in late 2024, and CEO Bill Irby has hinted at a rebranding to reflect the company’s transition from precision agriculture to security and defense markets. If there is a big move for AgEagle afoot, I would expect to see it in 2025. Big moves tend to cost money, so I would not be surprised to see the company raise capital through additional stock offering to public and private investors.

Workhorse Group Inc. (WKHS)

I covered WKHS in summer 2023 in a challenging fiscal environment. At the time, the company was in a dismal financial position, and I noted that it was in good company with several other EV companies on the brink of extinction.

Since writing the article, Workhorse conducted a 20:1 reverse split and significant stock dilution. It also sold off assets—including its Workhorse Aero division. The stock is down about 95% since the writing of that article.

With reseller partnerships in several states and a Government-friendly contract vehicle, Workhorse has all the makings for a comeback. There is one missing ingredient: sales. Lots of sales. An entire fleet worth of sales. With a lack of sales and liquid assets, the only way for the company to pay its recurring bills is continued stock dilution.

Without its Workhorse Aero division, Workhorse Inc. is just a boring EV company with no drones, so I will be removing it from the DRONES Index. (I am joking about it being boring, but serious about removing it from the DRONES Index.)

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Let’s also revisit another topic germane to the U.S. Drone Industry as it unfolds in real-time.

Chinese Drone Ban Update

While not quite “official” yet (whatever that means), I believe that the proposed commercial ban of imported Chinese drones (as well as domestic drones with imported Chinese components) is all but inevitable. If not an outright ban, then heavily tariffed. I believe that the 2024 election results across the Federal government solidify this.

Let’s take a look an updated chart of the companies I identified as beneficiaries of the legislation. (Now that UMAC is on my radar, I will add it to the list.)

The sudden leap at the end of this timeline is due to sudden jumps in RCAT and UMAC in late November. Other than those outliers, this list is showing a steady growth over the last calendar year.

DRONES Index Updates

Here are some updates to the companies on the list.

Removals

First, I have removed a few companies from the Index since I first published it.

Workhorse Group Inc. (WKHS)

As previously stated, Workhorse is no longer a drone-related company, as it had to trim some fat to pay the rent.

Kaman Corporation (KAMN)

I covered Kaman shortly after it announced that it was being taken private. Since then, the transition has been completed, and any investors who held the stock in the last several years saw an approximate 100% capital gain. I continue to follow this company as a drone professional, but no longer as an investor.

Velodyne Lidar (VLDR)

Velodyne merged into Ouster (OUST) in February 2023 and is being replaced in the DRONES Index.

II-VI Corp. (IIVI)

II-VI rebranded as Coherent Corp. (COHR) in fall 2022.

Additions

There are a few new entrants to the DRONES Index. One company recently went public, one company dipped its toes into the U.S. drone industry, two companies are added as the result of an M&A or rebranding of an incumbent company, and two companies are upgraded from OTC to the main exchange.

Unusual Machines, Inc. (UMAC)

Unusual Machines went public in March 2024. It is a drone components manufacturer based in Orlando, FL. Until recently, it primarily served the drone hobbyist market. The company web site is unusually sparse, but indicates that it is capitalizing on the Chinese Drone Ban by developing its own drone hardware suitable for military equipment (the venerable Blue UAS certification). It first caught my attention in November 2024 when one Donald Trump Jr. joined the company as an advisor. UMAC is categorized as a Shell Company in the Financial Services sector; I am interpreting this as a sign that UMAC will be a holding company that acquires several smaller drone companies from the U.S., Canada, and possibly Europe. I will be listing it in the Speculation Portfolio.

Palladyne AI Corp. (PDYN)

Palladyne is a software development company specializing in artificial intelligence (AI). It is based in Salt Lake City, UT. The company announced partnership with Teal Drones in November 2024, marking its official status as a drone-related software supplier. I will be listing it in the Speculation Portfolio.

Ouster, Inc. (OUST)

Ouster is a sensor manufacturer based in San Francisco, CA. It merged with Velodyne Lidar (VLDR) in February 2023 and now supplies lidar sensors to drone manufacturers. I will be listing it in the Growth Portfolio.

Coherent Corp. (COHR)

Coherent is a component manufacturer based in Saxonburg, PA, and is formerly known as II-VI Corp.

Red Cat Holdings, Inc. (RCAT)

Red Cat is a technology holding company based in Puerto Rico. I have been following it since DRONES’ inception, but hesitated to include it for two reasons: (1) it was listed on the OTC index, and (2) it is officially based outside the sovereign United States. However, recent events have earned it an upgrade to the official DRONES Index.

As a holding company, Red Cat made two strategic acquisitions: Teal Drones (Salt Lake City, UT) and FlightWave Aerospace (Santa Monica, CA). Its systems have been certified on the Blue UAS list for several years and gaining traction with the U.S. and foreign militaries. However, it enjoyed a tremendous change of fortune in November 2024 as the Teal “Black Widow” was selected as the U.S. Army’s Short-Range Reconnaissance (SRR) program of record. (This news came on the heels of a major FlightWave Edge 130 sale to the Royal Australian Navy—talk about stealing thunder!)

I briefly covered Red Cat in a recent article discussing the Chinese Drone Ban. The company’s product line is oriented toward defense and security customers, so I do not foresee a boon in commercial sales in the near future.

Although Red Cat is headquartered offshore, it is comprised of two domestic drone manufacturers, and the RCAT stock is now well within the range to be listed on the standard index. So the intent of the index is met, and it is now upgraded to the DRONES Index, Growth Portfolio.

Ondas Holdings Inc. (ONDS)

Ondas is a technology holding company based in Marlborough, MA. Its subsidiary companies include several U.S.-based manufacturers of drones, drone components, and counter-drone systems. I briefly covered Ondas in a recent article discussing the Chinese Drone Ban. I predicted that, of the companies I covered in that article, it has the greatest overall growth potential as dual-use technology serving enterprise and defense customers alike.

ONDS stock is teetering on the edge of transitioning to the main exchange, so I am taking a leap of faith by upgrading it to the official DRONES Index, Speculation Portfolio.

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DRONES Index Overview

In addition to modifying the list of U.S. drone companies, I also adjusted the relative weights based on the proportion of company operations that relate to drones. I also adjusted how the index is normalized, so that high-price stocks such as LMT do not completely dwarf low-price stocks such as RCAT. Here is an updated look at the U.S. Drone Industry over the last 3 calendar years.

Writ large, we see slow and steady growth over the last 12 months as macroeconomic conditions became more favorable to technology- and industrial-based companies. The late-year surge is largely attributed to a confluence of three events: (1) the Chinese drone ban, (2) a major Department of Defense contract award, and (3) the results of the Presidential election, and business associations of the President-elect’s friends and family.

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That concludes up today’s update. As we approach the end of 2024, be sure to make time for your loved ones, be kind and generous to all people, and be sure to conduct your own research prior to any investment decisions.

Be advised that I hold positions in several stocks mentioned in this article. I suggest obtaining the services of a financial advisor.