Table of Contents

Registration No. 333- _______

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACTOF 1933

UNUSUAL MACHINES,INC.

(Exact name of registrant as specified in its charter)

151 Calle De San Francisco
Ste. 200 PMB 2106
San Juan, Puerto Rico 00901-1607

+1 855-921-4600

(Address, including zip code, and telephone number,including area code of registrant’s principal executive offices)

Brandon Torres Declet

151 Calle De San Francisco
Ste. 200 PMB 2106
San Juan, Puerto Rico 00901-1607

+1 855-921-4600

(Name, address, including zip code, and telephone number,including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed saleto the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on thisForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.☐

If this Form is filed to register additional securitiesfor an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registrationstatement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuantto Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliereffective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuantto Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earliereffective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. Seethe definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and“emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check markif the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act. ☐

The registrant hereby amends this RegistrationStatement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment whichspecifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the SecuritiesAct of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, actingpursuant to Section 8(a), may determine.

The informationcontained in this preliminary Prospectus is not complete and may be changed. These securities may not be sold until the registrationstatement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securitiesand it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

______________ Shares

of CommonStock

Unusual Machines, Inc.

This is the initial public offering, or the “Offering,”of ________ shares of common stock, par value $0.01 per share of Unusual Machines, Inc., a Puerto Rico corporation (“UMAC”or the “Company”), on a firm commitment basis. A significant amount of the proceeds of the Offering will be used by the Companyto pay $5.0 million of the $18 million purchase price (the “Purchase Price”) to acquire Fat Shark Holdings, Ltd. (“FatShark”) and Rotor Riot LLC (“Rotor Riot”) each of which are wholly-owned subsidiaries of Red Cat Holdings, Inc. (“RedCat”), which acquisition is referred to elsewhere in this Prospectus as the “Business Combination”.The Company will issue Red Cat a senior secured convertible note in the principal amount of $2.5 million (the “Senior Note”). See “Use of Proceeds”. The conversion price of the Senior Note is the lower of $4.00 and the per-share offering price inthis Offering, and for purposes of the descriptions and amounts contained in this Prospectus we are assuming the conversion price of$4.00 per share. The 625,000 shares of common stock issuable to Red Cat upon conversion of the Senior Note are referred to in this Prospectusas the “Conversion Shares.”

Upon consummation of the Offering, assumingthe issuance of ____ shares of our common stock at $___ per share (the anticipated midpoint of the range) Mr. Jeffrey Thompson, our largeststockholder, will beneficially own ___% of our common stock (excluding the exercise of the over-allotment option by the underwritersand the issuance of the warrants to the underwriters, the issuance of the Conversion Shares and the issuance of our Series A ConvertiblePreferred Stock (referred to in this Prospectus as the “Series A”) as part of the Purchase Price, which Mr. Thompson willnot be deemed to beneficially own. See “The Business Combination” and “PrincipalStockholders” for more information.

Prior to this Offering, there has been no publicmarket for our common stock. We expect that the initial public offering price will be between $____ and $____ per share. We intend tolist the shares of our common stock on The Nasdaq Capital Market under the symbol “UMAC.” However, there is no assurancethat the Offering will be closed and our common stock will begin trading on The Nasdaq Capital Market (“Nasdaq”). TheOffering is contingent upon final approval of our listing on Nasdaq,

We are an “emerging growth company” underapplicable U.S. federal securities laws and are eligible for reduced public company reporting requirements.

Upon the completion of this Offering, we will have______ shares of common stock issued and outstanding, or ___________ sharesof common stock if the underwriters exercise their over-allotment option in full. Each share of our common stock is entitled toone vote.

Investing in our common stock involves a highdegree of risk. See “Risk Factors” beginning on page 8. Neither the Securities and Exchange Commission nor any state securitiescommission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representationto the contrary is a criminal offense.

______________

The underwriters are selling ________ shares of common stock (or _____shares of common stock if the underwriters exercise their over-allotment option in full) in this Offering on a firm commitment basis.We have granted the underwriters an option, exercisable for 45 days following the effective date of this Prospectus, to purchase up toan additional ___ % of the shares of common stock offered in this Offeringon the same terms solely to cover over-allotments. The Registration Statement of which this Prospectus is a part also covers the sharesof common stock issuable upon the exercise of the underwriter’s over-allotment option. For additional information regarding ourarrangement with the underwriters, please see “Underwriting” beginning on page 76.

The underwriters expect to deliver the shares to purchaserson or about ________ __, 2023.

Sole Book Running Manager

____________

Co-Manager

_____________________

The date of this Prospectus is ________, 2023.

TABLE OF CONTENTS

You should rely only on information contained inthis Prospectus. We have not, and the underwriter has not, authorized anyone to provide you with additional information or informationdifferent from that contained in this Prospectus. Neither the delivery of this Prospectus nor the sale of our securities means that theinformation contained in this Prospectus is correct after the date of this Prospectus. This Prospectus is not an offer to sell or thesolicitation of an offer to buy our securities in any circumstances under which the offer or solicitation is unlawful or in any stateor other jurisdiction where the offer is not permitted.

For investors outsidethe United States: Neither we nor the underwriter has taken any action that would permit this Offering or possession or distribution ofthis Prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the UnitedStates who come into possession of this Prospectus must inform themselves about, and observe any restrictions relating to, the offeringof the securities covered hereby and the distribution of this Prospectus outside of the United States. 

The information in thisProspectus is accurate only as of the date on the front cover of this Prospectus. Our business, financial condition, results of operationsand prospects may have changed since those dates.

No person is authorizedin connection with this Prospectus to give any information or to make any representations about us, the securities offered hereby or anymatter discussed in this Prospectus, other than the information and representations contained in this Prospectus. If any other informationor representation is given or made, such information or representation may not be relied upon as having been authorized by us.

Neither we nor the underwritershave done anything that would permit this Offering or possession or distribution of this Prospectus in any jurisdiction where action forthat purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relatingto, this Offering and the distribution of this Prospectus.

CAUTIONARY STATEMENT REGARDINGFORWARD-LOOKING STATEMENTS

This Prospectus contains, in addition to historicalinformation, certain forward-looking statements that includesinformation relating to future events, future financial performance, strategies, business opportunities, expectations including our goalsand projections with respect to the planned Business Combination, our anticipated operations and business strategy with respect to FatShark and Rotor Riot and the design, manufacture and sale of drone and drone-related products through those entities, projections andestimates for demand, growth and other metrics regarding drone products and the drone industry, future plans for and anticipated transactionsand relationships with respect to our products and intellectual property portfolio and operations, our working capital needs, the planneduse and sufficiency of the proceeds from this Offering, our further development and implementation of our business plan and our abilityto locate sources of capital necessary to meet our business needs and objectives. Such forward-looking statements include those that expressplans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact.These forward-looking statements are based on our current expectations and projections about future events and they are subject to risksand uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or impliedin such statements.

In some cases, you can identify forward-looking statementsby terminology, such as “may,” “should,” “would,” “expect,” “intend,” “anticipate,”“believe,” “estimate,” “continue,” “plan,” “potential” and similar expressions.Accordingly, these statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially fromthose expressed in them. Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughoutthis Prospectus or incorporated herein by reference.

You should read this Prospectus and the documentswe have filed as exhibits to the Registration Statement, of which this Prospectus is part, completely and with the understanding thatour actual future results may be materially different from what we expect. You should not assume that the information contained in thisProspectus or any prospectus supplement is accurate as of any date other than the date on the front cover of those documents.

Risks, uncertainties and other factors that may causeour actual results, performance or achievements to be different from those expressed or implied in our written or oral forward-lookingstatements may be found in this Prospectus under the heading “Risk Factors.”

Forward-looking statements speak only as of the datethey are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-lookingstatements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, exceptto the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawnthat we will make additional updates with respect to those or other forward-looking statements. New factors emerge from time to time,and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our businessor the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in anyforward-looking statements. We qualify all of the information presented in this Prospectus particularly our forward-looking statements,by these cautionary statements.

Industry and Market Data

This Prospectus contains estimates made, and otherstatistical data published, by independent parties and by us relating to market size and growth and other data about our industry. Weobtained the industry and market data in this Prospectus from our own research as well as from industry and general publications, surveysand studies conducted by third parties. This data involves a number of assumptions and limitations and contains projections and estimatesof the future performance of the industries in which we operate that are inherently subject to a high degree of uncertainty and actualevents or circumstances may differ materially from events and circumstances reflected in this information. We caution you not to giveundue weight to such projections, assumptions and estimates. While we believe that these publications, studies and surveys are reliable,we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internalresearch are reliable, such results and estimates have not been verified by any independent source.

PROSPECTUS SUMMARY

This summary highlights certain information containedelsewhere in this Prospectus. This summary is not intended to be complete and does not contain all of the information that you shouldconsider in making your investment decision. You should carefully read this entire Prospectus, including our consolidated financial statementsand the related notes and the information set forth under the headings “Risk Factors” and “Management’s Discussionand Analysis of Financial Condition and Results of Operations” contained in this Prospectus before making an investment decision.

Unless the context otherwise requires, referencesto “we,” “our,” “us,” “Unusual” “Unusual Machines” or the “Company”in this Prospectus means Unusual Machines, Inc., a Puerto Rico corporation.

Company Background

We are a Puerto Rico corporation, originallyincorporated July 11, 2019, with our principal place of business in San Juan, Puerto Rico. Our principal corporate office is locatedat 151 Calle De San Francisco, Ste 200 PMB 2106 San Juan, Puerto Rico 00901-1607 and our telephone number is +1 855-921-4600.Our corporate website is unusualmachines.com. Information on our website is not incorporated into this Prospectus.

The Company was incorporated in Puerto Rico underthe 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 Business Combination

On November 21, 2022, weentered into a Share Purchase Agreement (the “Purchase Agreement”) with Red Cat Holdings, Inc. (“Red Cat”) andJeffrey Thompson, the founder and Chief Executive Officer of Red Cat, pursuant to which we agreed to purchase Red Cat’s consumerbusiness consisting of Fat Shark and Rotor Riot. Fat Shark and Rotor Riot are in the business of designing and marketing consumer dronesand first-person-view (“FPV”) goggles. Rotor Riot is also a licensed authorized reseller of consumer drones manufactured bythird-parties. Under the terms of the Purchase Agreement, upon satisfaction of closing conditions including the affirmative vote of theshareholders of Red Cat and the closing of the Offering, Unusual will purchase from Red Cat its Rotor Riot and Fat Shark subsidiariesfor $18 million in a combination of cash, a convertible note (referred to in this Prospectus as the “Senior Note”) and issuanceof our Series A Convertible Preferred Stock (referred to in this Prospectus as the “Series A”). See “The Business Combination”for more information.

Business Overview

Simultaneous with the closing of this Offering,we will acquire Fat Shark Ltd., referred into in this Prospectus as “Fat Shark,” and Rotor Riot, LLC, referred into in thisProspectus as “Rotor Riot,” which are first-person view (“FPV”) drone technology market leaders. Because UnusualMachines is still in its development stage and has limited operations on a pre-transaction basis, the business-related and certain financialinformation in this Prospectus focuses on the business, products and operations of Fat Shark and Rotor Riot, which will entail the Company’sbusiness focus following the acquisition. While each entity exists independently, their operations have been structured and developedto complement each other and operate largely in tandem, as the discussions contained elsewhere in this Prospectus describe in greaterdetail.

Fat Shark is a leader in FPV, designing andmanufacturing ultra-low latency FPV video goggles for drone pilots, which it markets towards retail distributors including Rotor Riot.Rotor Riot is a rapidly growing e-commerce marketplace, backed by the largest community of FPV drone pilots in the world, and marketsdrones and drone-related products including Fat Shark goggles and competitor offerings, to end users of the drones and drone productsincluding drone enthusiasts, hobbyists and competitive racers. Over the next two years, we expect that these businesses will continueto excel in the consumer FPV market, while expanding into new enterprise verticals like public safety and drone delivery. This is partof our vision to enable people to be part of the robotics revolution.

Headquartered in Puerto Rico, we intend to buildboth organically and through strategic acquisitions, by targeting companies within the highly fragmented drone industry that have valuableintellectual property, revenue generating customers, and exceptional teams.

The Drone Industry

The drone industry has expanded beyond its militaryorigin to become a powerful tool for businesses and popular recreational activity. We expect both of these markets to continue to grow.According to a study by Insider Intelligence, total global drone shipments are estimated to reach 2.4 million in 2023 – increasingat a 66.8% compound annual growth rate (CAGR). Drone growth is expected to occur across all industries: direct to consumer (DTC), publicsafety, and drone delivery. For example, Reporter Link compiled a report in 2021 that projected the drone services market is expectedto surpass $60 billion by 2025, from approximately $4.4 billion in 2018. International Data Corporation Markets has projected that thesmall drone market will increase from 3.8 billion in 2022 to 6.2 billion by 2027, and a CAGR of 10.1% from to 2022 to 2027. The FederalAviation Administration (the “FAA”) has forecasted a 300% increase in commercial drones from 2019 to 2023 as per businessinsider.com.

Accordingly, we will pursue strategic acquisition targets in the FPVdrone technology space that have the potential to improve our own hardware and software solutions, rapidly grow our revenues, open newindustry verticals, and integrate best in class intellectual property and teams. We believe that very promising, private companies (suchas those we will likely target) are in many instances grossly underfunded and missing out on the ability to go public and bring theirinnovative products and solutions to a larger set of customers globally. Unlocking this potential will be key to industry consolidationand breaking the dominance of China in the drone industry. We stand at the forefront of this important trend.

Exclusively FPV

Fat Shark and Rotor Riot principally operate in thedrone FPV segment of the industry. This segment focuses on drones piloted with wearable display devices. These are head mounted displays(“HMDs”) or goggles for drone pilots. These goggles give pilots FPV perspective to control their drone in flight. This isa unique experience where the pilot is interacting with an aircraft through visual immersion. In this augmented reality (AR), the pilotsees only what the drone sees, as if sitting in the pilot seat. This experience is accomplished by live streaming footage from a cameramounted on the nose of the drone directly into specially designed goggles worn by the pilot. The image is transmitted via radio (traditionallyanalog but increasingly digital) to the pilot. The drone remote control unit, the drone, and the FPV goggles are all interconnected viaradio. This effect requires sophisticated electronics that transmit visual information with sufficient speed and reliability to allowpilot control over the drone in real-time. Pilots routinely achieve speeds of over 90 mph in racing and other mission critical applications.

There are three common categories of FPV flight – freestyle flight,racing, and aerial photography. In freestyle, the pilot navigates around obstacles focused on acrobatics and exploring the environmentaround the aircraft through the HMD. This type of flight can be used for public safety as well as package delivery. FPV racing describesa growing spectator sport where pilots fly their drones in competitions through a series of obstacles, flags, and gates in a racetrack.Aerial photography is the process of viewing and recording a subject matter from the air from the viewpoint of the pilot.

Plans for Growth, Development, and Expansion

We plan to strengthen our market position through continued revenuegrowth. In parallel, we are aggressively investing in the development or acquisition of FPV products and services that serve a broad setof industries including consumer, public safety, and drone delivery. Our business strategy includes (i) increasing our overall customerbase with a superior product and rapid adoption; (ii) investing in new products and IP, beginning with the Fat Shark and Rotor Riot acquisitions,(iii) exploring and pursuing acquisitions of additional products, teams and technologies that complement and expand the functionalityof the FPV goggles offered by Fat Shark and the inventory and marketing capabilities of Rotor Riot; (iv) expanding and growing our customerbase and revenue streams from our existing customer base using a “land-and-expand” model that establishes initial relationshipsand grows those relationships through the provision of high quality products and services, (v) enhancing our products to improve the integrationof third-party solutions; (vi) targeting underserved drone pilots as customers and as potential marketing partners, and (viii) seekingstrategic partnerships and sponsorships with companies that want access to the FPV community.

Risk Factors Summary

Our business and an investment in our commonstock are subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediatelyfollowing this prospectus summary. Some of these risks include:

Summary of the Offering

Summary Combined Pro FormaFinancial Data

The following summary combined pro forma statementsof operations for the years ended December 31, 2022 and 2021 and summary combined pro forma balance sheet data as of December 31,2022 and 2021 have been derived from our, Fat Shark and Rotor Riot unaudited combined pro forma financial statements included elsewherein this Prospectus. You should read this “Summary Combined Pro Forma Financial Data” section together with our financialstatements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”included elsewhere in this Prospectus. Our financial statements are prepared and presented in accordance with accounting principles generallyaccepted in the United States, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods.

RISK FACTORS

Any investment in our securities involves a high degreeof risk. Investors should carefully consider the risks described below and all of the information contained in this Prospectus beforedeciding whether to purchase our securities. Our business, financial condition and results of operations could be materially adverselyaffected by these risks if any of them actually occur. This Prospectus also contains forward-looking statements that involve risks anduncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certainfactors, including the risks we face as described below and elsewhere in this Prospectus.

Risks Related to our Business and FinancialCondition

Because Fat Shark and Rotor Riot’s auditors have qualifiedtheir reports on a going concern basis and with our history of losses, we may not be able to continue operating as a going concern.

We have experienced losses from operations sinceinception and have never generated positive cash flow. The success of our business plan during the next 12 months and beyond will be contingentupon generating sufficient revenue to cover our operating costs and obtaining financing from this Offering. The reports from Fat Sharkand Rotor Riot’s independent registered public accounting firm for the fiscal year ended April 30, 2022 and prior years includean explanatory paragraph stating Fat Shark and Rotor Riot have each recurring net losses from operations, negative operating cash flows,and will need additional working capital for ongoing operations. These factors, among others, raise substantial doubt about each of FatShark and Rotor Riot’s ability to continue as a going concern. If we are unable to close this Offering, our business, prospects,financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern.

Because the Company willhave no operating history prior to its acquisition of Fat Shark and Rotor Riot, any investment in us is highly speculative.

We plan to acquire Fat Sharkand Rotor Riot simultaneously with the closing of this Offering. Both companies have been operated by Red Cat since their acquisitionby Red Cat in 2020. While we expect the management of each target to remain, no Red Cat officer is joining us. Our management team willbe headed by our executive officers together with individuals from Fat Shark and Rotor Riot, and our operations going forward are thereforesubject to ordinary integration risks where two companies and two cultures are combined. Further, we may not accurately forecast customerbehavior and recognize or respond to emerging trends, changing preferences or competitive factors facing us, and, therefore, we may failto make accurate financial forecasts. Our current and future expense levels are based largely on our budgeted plans and estimates of futurerevenue. Similarly, if we are able to raise sufficient capital in this Offering or in future financingtransactions, we may use a portion of the proceeds to acquire other operating businesses in our industry or in related industries to facilitatestrategic growth and build our market presence and revenue potential. If we do acquire one or more businesses in the future, we may beunable to adjust our spending in a timely manner to compensate for any unexpected revenue shortfall, which could then force us to curtailour business operations or plan of operations or acquisitions.

Additionally, our currentrevenue projections are based largely on customer and partner relationships and contracts that are still the subject of negotiation, theresults of which remain uncertain. Additionally, Fat Shark and Rotor Riot currently operate as subsidiaries of Red Cat, a holding companyof drone-related businesses, which also holds two drone businesses that market products for government, industrial and military applicationsin addition to its consumer-focused product offerings which we will acquire through Fat Shark and Rotor Riot. Therefore, in addition tohaving no experience as a public company, our new operations will be subject to the risk of a lack of diversification, as today we arelimited to drone products designed for consumer or recreational use rather than military or industrial applications. In the future, wemay diversify our products beyond the consumer and recreational use but the timeline and success of those efforts are uncertain. Our newsubsidiaries will lack the support they previously had in terms of their product development and production efforts, as they can no longeraccess the more vertically integrated resources that were available to them at Red Cat. The risk of this occurring will intensify if arecession occurs in the U.S. or global economy, as our future business is aimed at consumers whose spending patterns will likely declineas a result of inflation and the prospect of an economic downturn.

Our prospects must be consideredin light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations,integration and growth process. Due to these contingencies, we may be unable to achieve or maintain profitability in some or all of ourbusiness segments in a timely manner or at all, in which case you could lose all or some of your investment.

Fat Shark and Rotor Riot have incurred net lossessince their acquisition by Red Cat and may fail to achieve or maintain profitability.

Since their acquisition by Red Cat in 2020, Fat Sharkand Rotor Riot incurred net losses for each reported quarter with the exception of Fat Shark which reported a small net income in thequarter ended July 31, 2022. Further, Unusual Machines was formed in July 2019 and have not conducted any active business. Following ouracquisition of Fat Shark and Rotor Riot, their operations will constitute our business. Further, each of Fat Shark and Rotor Riot hadlower revenues and higher net losses in fiscal year 2022 compared to fiscal year 2021, and generally experience fluctuating revenue asa result of recurring seasonal sales cycles. We will need to generate higher revenues and control operating costs in order to attain profitability.There can be no assurances that we will be able to do so or to reach profitability.

We expect to continue to incur losses for the foreseeable future and weexpect costs to increase in future periods as we expend substantial financial and other resources on, among other things:

These expenditures may not result in additional revenueor the growth of our business in the manner or to the extent anticipated or intended or at all. If following the acquisition of Fat Sharkand Rotor Riot, we fail to grow revenue or to achieve or sustain profitability, our business, financial condition, results of operations,and prospects could be materially adversely affected and the market price of our common stock could be adversely affected.

If the proceeds of this Offering are insufficientto 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 ouroperations.

We expect that the net proceeds of this Offering afterpayment to Red Cat will be sufficient to meet our working capital needs. However, our future business is aimed at consumers who face inflationand the prospect of a recession. Accordingly, we may require substantial additional working capital. The expected use of net proceedsof this Offering represents our current intentions based upon our present plan and business conditions. As of the date of this Prospectus,we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this Offering.We will have broad discretion in the application of the net proceeds in the category of working capital and general corporate purposes,including acquisitions, and to fund ongoing operations and expansion of our business, and investors will be relying on our judgment regardingthe application of the net proceeds of this Offering other than payments to Red Cat. Depending on the outcome of our business activitiesand other unforeseen events, our plans and priorities may change and we may apply the net proceeds of this Offering in different proportionsthan we currently anticipate.

There can be no assurance that our businesses willreach profitability. If adequate additional debt and/or equity financing is not available on reasonable terms or at all, then we may notbe able to continue to develop our business activities, and we will have to modify our business plan. These factors could have a materialadverse effect on our future operating results and our financial condition.

Our ability to raise financing through sales of equitylinked securities depends on general market conditions and the demand for our common stock. We may be unable to raise adequate capitalthrough sales of equity linked securities, and if our stock price is lower than the Offering price at the time of such sales, our existingstockholders could experience substantial dilution. Debt transactions often include restrictive covenants that could limit our abilityto engage in strategic transactions, acquire complimentary businesses, or adjust to changing market environments as quickly or efficientlyas we otherwise would or at all. Further, if adequate financing is not available or is unavailable on acceptable terms, we may find weare 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.

Because of the price protection containedin the Series A and the Senior Note, if we raise money in the future at priced below $4.00, investors will experience dilutionwhich may be significant.

Both the Series A and the Senior Note areconvertible at $4.00 per share and each contain standard full ratchet price protection that if we raise money at lower prices, the conversionprices of the Series A and Senior Note are adjusted to the same price as used in any future financing, subject to customary exceptions.As a result investors may sustain substantial dilution if we raise money in the future at lower prices. For example, at $4.00 per share,the Series A and Senior Note converts into 2,675,000 shares and 625,000 shares, respectively. At $3.00 per share, the Series A and SeniorNote converts into 3,500,000 shares and 833,333 shares, respectively. At $1.00 per share, the Series A and Senior Note converts into10,500,000 shares and 2,500,000 shares, respectively. Accordingly, if we raise money at increasingly lower prices, the dilution impactwill be more significant.

If we lose key personnel, it may adversely affectour business.

Our future success depends in large part on the continuedcontributions of our executive officers, members of senior management and other key personnel, particularly Brandon Torres Declet, ourChief Executive Officer and Chairman of the Board. As more fully described elsewhere in this Prospectus, Mr. Declet’s leadership,knowledge and experience in the drone industry is expected to be crucial to our business plan and any future successes and progress weexperience. The loss of Mr. Declet’s services would therefore materially adversely affect our business and prospects. We have “keyperson” insurance in place for Mr. Declet but not for any other officers or employees. Our executive officers, senior managementand key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, forany reason and without notice. The loss of any of our key management personnel could significantly delay or prevent the achievement ofour development and strategic objectives and adversely affect our business.

Conflicts of interestinvolving our management team and other parties could materially harm our business.

Our management team on whichwe heavily depend are or may become involved in other endeavors giving rise to conflicts of interests that are adverse to the Company.For example, Brandon Torres Declet, our Chief Executive Officer has business interests in ventures that operate in the drone industryoutside our Company. See “Management and Board of Directors.” These arrangements could cause Mr. Declet to be unable or declineto 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. Accordingly, from time-to-time our management may not devotetheir full time and attention to our affairs, which could have a material adverse effect on our operating results, and there can be noassurance that other conflicts of interest will not arise from their other business ventures, any of which could materially and adverselyimpact our business. Other members of our management team and Mr. Jeffrey Thompson and Thomas Walker, members of our Board of Directorsalso have significant roles and interests in other drone companies, which pose similar threats to us as those described as to Mr. Declet.

In addition, the primary contract manufacturer forFat Shark headsets is Shenzhen Fat Shark Co Ltd. (the “Supplier”), a company located in China which is majority-owned by MollyMo, who is the wife of Greg French, founder and former owner of Fat Shark prior to its acquisition by Red Cat. These relationships couldresult in Mr. French diverting his time, resources and corporate opportunities to this other entity rather than the Company. The Companyexpects to procure Mr. French’s services as a consultant of Fat Shark in connection with the Business Combination.

Finally, Rotor Riot offers a variety of drone productsthrough its website, which includes a number of product offerings from competitors in the drone industry. While these relationships haveenabled us to generate revenue, by virtue of their involvement in the sale of drones and drone-related products these customers also haveinterests that are adverse to ours, and may determine to reduce their expenditures on our products in the future and/or to verticallyintegrate their operations to reduce or eliminate their reliance on our products.

Any of the foregoing developments could result inmaterially adverse consequences to our Company, results of operations and financial condition.

If we are unable to attract new customers or maintainand grow Fat Shark and Rotor Riot existing customer relationships in a manner that is cost-effective, our revenue growth could be slowerthan we expect and our business may be harmed.

To increase our revenue following the acquisitionof Fat Shark and Rotor Riot, we must add new customers, upsell to our existing customers, enhance our products with features that setus apart from our competitors, and effectively develop and market new products that enable us to maintain and expand our brand and marketshare. Demand for our products is affected by a number of factors, many of which are beyond our control. Additionally, the projectionsand estimates about the future success and growth of the drone industry and demand for drone-related products such as ours, includingthose referenced elsewhere in this Prospectus, could prove to be incorrect, in which case our results of operations and prospects willdecline. For example, if a recession, we expect that consumer spending, particularly for non-essential goods such as our drone productswhich are largely focused on recreational uses, may decline, limiting our ability to attract or maintain a sufficient customer base toachieve or maintain the revenue we seek in the development and sale of our products. Even if we do attract customers, the cost of newcustomer acquisition may prove so high as to prevent us from achieving or sustaining profitability.

Our future success also depends on our ability toincrease the use of our products and solutions within and across our existing customers and future customers. While we believe there isa significant opportunity to further expand within Fat Shark and Rotor Riot’s existing customer base, including due to our plannedemployment of a “land-and-expand” business model in which we plan to establish relationships with new customers and grow thoserelationships over time by providing high quality products and services, our growth prospects depend on our ability to persuade customersto buy more product, and if we fail to do so, our business goals and prospects may not be achieved to the extent sought or anticipatedor at all.

Future operating results and key metrics may fluctuatesignificantly from period-to-period due to a wide range of factors, which makes our future results difficult to predict.

Our operating results and key metrics could vary significantlyfrom quarter-to-quarter as a result of various factors, some of which are outside of our control, including:

Any one of these or other factors discussed elsewherein this Prospectus may result in fluctuations in our operating results, meaning that quarter-to-quarter comparisons may not necessarilybe indicative of our future performance.

Our failure to effectively manage our growth couldharm our business.

Other than our Agreement with Red Cat to acquire FatShark and Rotor Riot, we have no operating business. Businesses, including development stage companies such as ours which often grow rapidly,may have difficulty managing their growth. These challenges are exacerbated in circumstances such as ours following a recent acquisitionof operating businesses. We intend to expand the number and types of products we sell as we grow, if and as capital becomes available.Further, because of our reliance on consumer spending which depends on novelty and social trends, and the rapid and constant technologicallyadvancements that characterize our industry, we are subject to periodic sales cycles, and we will therefore need to replace and regularlyintroduce on a timely basis new products and technologies, enhance existing products, and effectively stimulate customer demand for newproducts and upgraded or enhanced versions of our existing products. Similarly, because our product offerings are largely dependent onothers’ drone-related products and activities, we may need to adjust or update as third parties advance or alter their technologyand activities. If we are able to successfully develop, produce and market our products, we will likely need to incur additional expendituresand expand our personnel with additional employees and consultants who are capable of providing the necessary support. We cannot assureyou that our management will be able to manage our growth effectively or successfully. Our failure to meet these challenges could causeus to lose money, and your investment could be lost. 

The replacement and expansion of our products is expectedto place a significant strain on our management, operations and engineering resources. Specifically, the areas that are strained mostby these activities include the following:

The drone industry relies on limited sources to supplycertain components and materials used in the manufacturing of drones. Our intention is to purchase certain components from suppliers basedin the United States, which may lead us to pay higher prices, or select parts from a more limited number of suppliers relative to ourcompetitors, which would adversely impact our gross margin and operating results. Our operating results could be materially, adverselyimpacted 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. All of the components that go into the manufacturingare sourced from third-party suppliers.

Some of the key components used to manufacture ourproducts come from a limited or single source of supply, or by a supplier that could potentially become a competitor. Our contract manufacturersgenerally purchase these components on our behalf from approved suppliers. We are subject to the risk of shortages and long lead timesin the supply of these components and the risk that our suppliers discontinue or modify components used in our products. In addition,the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules.

If we lose access to components from a particularsupplier or experience a significant disruption in the supply of products and components from a current supplier, we may be unable tolocate alternative suppliers of comparable quality at an acceptable price, or at all, and our business could be materially and adverselyaffected. In addition, if we experience a significant increase in demand for our products, our suppliers might not have the capacity orelect not to meet our needs as they allocate components to other customers. Developing suitable alternate sources of supply for thesecomponents may be time-consuming, difficult and costly, and we may not be able to source these components on terms that are acceptableto us, or at all, which may adversely affect our ability to meet our development requirements or to fill our orders in a timely or cost-effectivemanner. Identifying a suitable supplier is an involved process that requires us to become satisfied with the supplier’s qualitycontrol, responsiveness and service, financial stability, labor and other ethical practices, and if we seek to source materials from newsuppliers, there can be no assurance that we could do so in a manner that does not disrupt the manufacture and sale of our products.

Our reliance on single source, or a small number ofsuppliers involves a number of additional risks, including risks related to supplier capacity constraints, price increases, timely delivery,component quality, failure of a key supplier to remain in business and adjust to market conditions, delays in, or the inability to executeon, a supplier roadmap for components and technologies; and natural disasters, fire, acts of terrorism or other catastrophic events, includingglobal pandemics.

We do not own or operate any manufacturing facilities.Certain components and services necessary for the manufacture of our products are available from only a limited number of sources, andother components and services are only available from a single source. Our relationship generally is on a purchase order basis and thesefirms do not have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis. These supplierscould discontinue sourcing merchandise for us at any time. If any of these suppliers were to discontinue its relationship with us, ordiscontinue providing specific products to us, and we are unable to contract with a new supplier that can meet our requirements, or ifthey or such other supplier were to suffer a disruption in their production, we could experience disruption of our inventory flow, a decreasein sales and the possible need to re-design our products. Any such event could disrupt our operations and have an adverse effect on ourbusiness, financial condition and results of operations. Several new and alternative suppliers have begun offering components suitablefor use in our products. With new tooling and electronics, any one of these alternative components could be incorporated into our productsbut our costs could be higher, they may offer less performance, and, as a result, make our products too costly and less desirable.

If we are unable to attract, integrate and retainadditional qualified personnel, including top technical talent, our business could be adversely affected.

Our future success depends in part on our abilityto identify, attract, integrate and retain highly skilled technical, managerial, sales and other personnel, particularly as we attemptto expand our operations and further develop and market our products. We face intense competition for a limited number of qualified individualswith the requisite skills and experience from numerous other companies, including other software and technology companies, many of whomhave greater financial and other resources than we do. These companies also may provide more diverse opportunities and better chancesfor career advancement. Some of these characteristics may be more appealing to high-quality candidates than those we have to offer. Inaddition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity.We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefitsand compensation expenses related to equity awards, and we may lose new employees to competitors or other companies before we realizethe benefit of our investment in recruiting and training them. 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 intonew geographies, we will need to attract and recruit skilled personnel in those areas. We have limited experience with recruiting in geographicareas outside of the United States, and may face additional challenges in attracting, integrating and retaining international employees.If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operationaland managerial requirements, on a timely basis or at all, our business will be adversely affected. Additionally, the Company will operateout of multiple locations including Florida and Puerto Rico subjecting it to local labor market conditions.

Risks Related to Our Sale of Drone-Related Productsand Operations in the Drone Industry.

We operate in an emerging and rapidly evolvingindustry which makes it difficult to evaluate our business and future prospects.

The drone industry is relatively new and is growingrapidly. As a result, it is difficult to evaluate our business and future prospects. We cannot accurately predict whether, and even when,demand for our products will increase, if at all. The risks, uncertainties and challenges encountered by companies operating in emergingand rapidly growing industries include:

As such, our current expectations and projects aboutfuture events and trends may be different from the actual results. Furthermore, if we are unable to address any of the above challengessuccessfully, our business, financial condition, results of operations, and prospectus may be adversely affected by such failure.

We face competition from larger companies thathave substantially greater resources which challenges our ability to establish market share, grow the business, and reach profitability.

The drone industry is attracting a wide range of significantly largercompanies which have substantially greater financial, management, research and marketing resources than we have. The drone hardware andparts and components spaces are dominated by larger Chinese companies such as SZ DJI Technology Company, Ltd and T-Motor. With respectto our FPV products, current and potential future competitors also include a variety of established, well-known diversified consumer electronicsmanufacturers such as Samsung, Sony, LG Electronics (LGE), HTC, Lenovo, Epson, Yuneec, Boscam, Eachine, Walkera, SkyZone, MicroLED andlarge software and other products companies such as Alphabet Inc. (Google), Microsoft, Facebook and Snap. The large number of smallerand/or private companies focused on drone solutions also have competitive advantages over us which we may struggle overcome, particularlyas we seek to further establish and grow our customer base. Our competitors may be able to provide customers with different or greatercapabilities than we can provide, including technical qualifications, pricing, and key technical support. Many of our competitors mayutilize their greater resources to develop competing products and technologies, leverage their financial strength to utilize economiesof scale and offer lower pricing, and hire more qualified personnel by offering more generous compensation packages. Onthe other hand, other small business competitors may be able to offer more cost competitive solutions or may be able to adapt more quicklyto market developments due to lower overhead costs, leveraging of their professional relationships and networks, geographic or specialtyfocuses or greater flexibility inherent in smaller operations and a lower number of personnel.

Among product and service features that drive competitionin our industry are breadth of product line, quality and durability of products, stability, reliability and reputation of the provider,along with cost. Quantity discounts, price erosion, and rapid product obsolescence due to technological improvements are therefore commonin our industry as competitors strive to retain or expand market share. The Company’s abilityto compete effectively will depend on, among other things, the Company’s pricing models, quality of customer service, developmentof new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distributionchannels and capital resources. Competition could lead to an inability to sustain sales levels, a reduction in the rate at which the Companyadds new customers, a decrease in the size of the Company’s market share and a decline in its customers and revenue. In orderto secure sales, we may have to offer comparable products and services at lower pricing which could adversely affect our operating margins.Our inability to compete effectively against these larger companies could have a material adverse effect on our business, financial conditionand operating results.

The development and manufacture of FPV gogglesencompasses several complex processes and several steps of our production processes are dependent upon third party vendors, supply chains,the availability of printed circuit boards (PCBs), optics, and certain chips. Any change in availability of these components, manufacturingor design partners could result in delivery interruptions, which could adversely affect our operating results.

As we continue to develop our products, we must progressthrough the complex and challenging processes involved in the technology and designs on which Fat Shark and Rotor Riot products are founded.Fat Shark and Rotor Riot rely on third party suppliers for the resources needed to navigate these processes and expect to continue torely on such parties when we reach the manufacturing and marketing stages. Our reliance on third-party manufacturers and service providerswill entail risks to which we may not be subject if our future operations were more vertically integrated, including:

Given our early stages, our product technology andmanufacturing processes are evolving which can result in production challenges and difficulties. We may be unable to produce our productsin sufficient quantity and quality to maintain existing customers and attract new customers. In addition, we may experience manufacturingproblems which could result in delays in delivery of orders or product introductions. Any of these events could lead to production andmarketing delays or failure or impact our ability to successfully commercialize our products. If we fail to contract with third partieson favorable terms, coordinate with and supervise their services and contributions to our processes, and leverage those relationshipsto deliver quality products in a timely manner to customers, we could experience reductions or delays in revenue, reputational harm anddiminished brand recognition, higher than expected expenses, or other adverse developments that would materially harm our business.

Several steps of our production processes are dependentupon certain critical machines and tools which could result in delivery interruptions and foregone revenues.

Fat Shark currently has no equipment redundancy tomanufacture our products, meaning we will rely on a limited number of machines to perform a large quantity of steps in the manufacturingand assembly processes. Rotor Riot is limited by the number of personnel it has on staff to assemble custom drones. This may, among otherthings, delay delivery timelines or reduce our revenue and accounts receivable, and/or force us to rely more heavily on third partiesto meet customer deadlines or volume demands, either of which will adversely affect our results of operation and ability to achieve andmaintain profitability. 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. Interruptions in our manufacturingcould be caused by us or our partners including but not limited to equipment problems, the introduction of new equipment into the manufacturingprocess or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair and maintenanceof manufacturing equipment can be extensive. We can provide no assurances that we will not lose potential sales or be able to meet productionorders due to future production interruptions in our manufacturing lines.

We may not be able toprocure necessary key components for our products or may produce or purchase too much inventory.

The drone industry, and theelectronics industry as a whole, can be subject to business cycles. During periods of growth and high demand for products, we may nothave adequate supplies of inventory on hand to satisfy customers’ needs. Furthermore, during these periods of growth, our suppliersmay also experience high demand and, therefore, may not have adequate levels of the components and other materials that the Company requiresto manufacture products so that it can meet customers’ needs. Our inability to secure sufficient components to produce productsfor customers, or similar challenges faced by the drone manufactures we serve, could negatively impact our sales and operating results.We may choose to mitigate this risk by increasing the levels of inventory for certain key components assuming we have available cash resources.Increased inventory levels can increase the potential risk for excess and obsolescence should our forecasts fail to materialize or ifthere are negative factors impacting our customers’ end markets. Such a risk becomes especially prevalent during a recession andmarket downturn. If we purchase too much inventory, we may have to record additional inventory reserves or write-off the inventory,which could have a material adverse effect on our gross margins and on its results of operations.

We may not be able to keep pace with technologicaladvances; and we depend on advances in technology by other companies.

The drone industry in general, and the market forthe sale of drone hardware and component parts in particular, continues to undergo significant changes, primarily due to technologicaldevelopments. Because of the rapid growth and advancement of technology, shifting consumer tastes and the popularity and availabilityof other forms of activities, it is impossible to predict the overall effect these factors could have on potential revenue from, and profitabilityof the drone industry. The development of both drone-related software and hardware is a costly, complex and time-consuming process, andinvestments in product development often involve a long wait until a return, if any, can be achieved on such investment. We might facedifficulties or delays in the development process that will result in our inability to timely offer products that satisfy the market,which might allow competing products to emerge during the development and certification process. We anticipate making significant investmentsin research and development relating to our products and technology, but such investments are inherently speculative and require substantialcapital expenditures. Any unforeseen technical obstacles and challenges that we encounter in the research and development process couldresult in delays in or the abandonment of product commercialization, may substantially increase development costs, and may negativelyaffect our results of operations. In the time it takes to develop or improve upon a product, that product may become obsolete.

It is impossible to predict the overall effect thesefactors could have on our ability to compete effectively in a changing market, and if we are not able to keep pace with these technologicaladvances, then our revenues, profitability and results from operations may be materially adversely affected. It is impossible to predictthe overall effect these factors could have on our ability to compete effectively in a changing market, and if we are not able to keeppace with these technological advances, then our revenues, profitability and results of operations may be materially adversely affected.However, if we struggle to adapt to an industry-shifting technological advancement or competitor offerings that render our products relativelyless attractive or obsolete, including due to competitive pressures we face relative to other drone companies, it could have a materialadverse effect on our business.

Further, we rely on and will continue to rely on componentsof our products that are developed and produced by other companies over which we have limited control. The commercial success of certainof our planned future products will depend in part on advances in these and other technologies by other companies, and our ability toprocure them from such third parties in a timely manner and on economically feasible terms. We may, from time-to-time, contract with andsupport companies developing key technologies in order to accelerate the development of such products for our specific uses. Such activitiesmight not result in useful technologies or components for us.

Lack of long-term purchase orders and commitmentsfrom customers may lead to a rapid decline in sales.

Customers issue purchase orders or use our e-commercesite solely at their own discretion, often shortly before the requested date of shipment. Both our distributor relationships through FatShark and our online sales through Rotor Riot entail short-term contracts under which customers are generally able to cancel orders (withoutpenalty) or delay the delivery of products on relatively short notice, regardless of whether ornot we are in default under our agreements. The online business involves retail customers who are not likely to be repeat customersunless a need arises for updated hardware or software solutions offered by us, which may not occur on a frequent basis, resulting in lackof reliable recurring revenue in that part of our business. In addition, current customers may decide not to purchase products for anyreason. If those customers do not continue to purchase products, sales volume could decline rapidly with little or no warning.

We cannot rely on long-term purchase orders or commitmentsto protect from the negative financial effects of a decline in demand for products. Fat Shark and Rotor Riot typically plan productionand inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. FatShark resellers issue purchase orders but they have options to reschedule or pay cancellation fees. The uncertainty of product ordersmakes it difficult to forecast sales and allocate resources in a manner consistent with actual sales. Moreover, expense levels and theamounts invested in capital equipment and new product development costs are based in part on expectations of future sales and, if expectationsregarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls. As a resultof lack of long-term purchase orders and purchase commitments, and long product development lead times, we may experience a rapid declinein sales.

As a result of these and other factors, investorsshould not rely on revenues and operating results for any one quarter or year as an indication of future revenues or operating results.If quarterly revenues or results of operations fall below expectations of investors or public market analysts, the price of the commonstock could fall substantially.

Our products require ongoing research and developmentand may experience technical problems or delays, which could lead the business to fail.

Our future research and development efforts will remainsubject to all of the risks associated with the development of new products based on emerging and innovative technologies, including,for example, unexpected technical problems or the possible insufficiency of funds for completing development of these products. If technicalproblems or delays arise, further improvements in products and the introduction of future products could be adversely impacted, and wecould incur significant additional expenses and the business may fail. Additionally, we may deploy significant capital or human resourcestowards developing or improving upon a product, only for such efforts to fail to yield the results we hoped for or intended, which wouldmaterially adversely affect our financial condition. This is an acute risk given the relatively new and evolving nature of the drone industry,and constant entrance of new market participants attempting to compete with us. Similarly, if we invest in product research and developmentefforts and a competitor brings a similar product to market before us, or alleges an infringement of their intellectual property, ourability to market the product or compete effectively could be lost. Any such development could materially harm our business.

If we are involved in litigation, it could harmour business or otherwise distract management.

If we become a party to a substantial, complex orextended litigation, it could cause us to incur large expenditures and could distract management. For example, lawsuits by licensors,consumers, employees or stockholders or litigation with federal, state or local governments or regulatory bodies could be very costlyand disrupt business. As described elsewhere in these Risk Factors, our operations and products, as well as those of our customers, collaboratorsand product end-users, come with the inherent possibility of lawsuits arising from product liability, property damage and personal injury,breach of contract and product warranty claims, intellectual property infringement, regulatory violations and sanctions, and data privacyissues, any of which can result in costly and time-consuming litigation which would divert our limited human and capital resources andcould cause other adverse impacts on our business such as reputational harm and loss of future business. While disputes from time-to-timeare not uncommon, we may not be able to resolve such disputes on terms favorable to us which could have a material adverse impact on ourresults of operations and financial condition.

Among other things, claims could be brought againstus if use and misuse of our products causes, personal injury or death. If a consumer causes damage to a person or property using our drone,we as a reseller of the drone could be sued for selling an allegedly defective product. The possibility that the foregoing events occurfrom events involving our products is particularly high, because we supply technology used in the operation of drones which is relativelynovel and are frequently operated at high speeds and altitudes, and often in densely populated areas and/or by individuals who lack ahigh level of experience operating them. These characteristics increase the probability that injury or damage to personal property mightoccur, even absent a defect. Additionally, because Fat Shark’s products are used as ancillary or supplemental components of a drone’sfunctions, we may become involved in disputes arising from a third party’s actions or products that utilize its technology, evenif we were not the direct cause of the issue. Any claims against us, regardless of their merit, could severely harm our financial condition,strain our management and other resources.

Product liability claims might be brought againstus by customers, civilians or private entities or others using or otherwise coming into contact with our products. If we cannot successfullydefend against product liability claims, we could incur substantial liability and costs. Regardless of merit or eventual outcome, productliability claims may cause:

We anticipate the risk of product liability and otherclaims related to our products and their uses will grow as our products begin to be used. We are unable to predict if we will be ableto obtain or maintain insurance for such claims. Insurance coverage is becoming increasingly expensive. We do not have such insuranceand we may not be able to obtain at a reasonable cost or in sufficient amounts to protect us against losses due to liability. A successfulproduct liability claim or series of claims brought against us could cause our stock price to decline and, would adversely affect ourresults of operations and business.

Our business is highly dependent upon our brandrecognition and reputation, and the failure to maintain or enhance our brand recognition or reputation, including due to our high relianceon online and social media platforms, would likely adversely affect our business and operating results.

We believe that maintaining and enhancing Fat Sharkand Rotor Riot brand identity, and our reputation are critical to our relationships with customers and strategic partners and to our abilityto attract new customers and strategic partners. We also believe that the importance of our brand recognition and reputation will continueto increase as competition in our market continues to develop. Our success in this area will depend on a wide range of factors, some ofwhich are beyond our control, including the following:

Any of the foregoing developments or an inabilityto navigate these or other challenges to establish and grow our brand recognition and current and future product popularity could materiallyadversely affect us.

In addition, particularly with respect to Rotor Riot,we are highly dependent on online social media platforms such as Facebook, Instagram and YouTube to advertise our products, market ourbrand and develop and maintain customer loyalty. Each of these platforms requires that users adhere to strict terms and conditions governingcontent, communications and other activities on their platform, which are generally heightened for commercial uses such as ours. If weor third parties such as drone pilots who Rotor Riot uses to market our products online fail to adhere to these requirements, we couldbe limited, restricted or banned from some or all uses, which would materially adversely affect our business.

Future growth and ability to generate and growrevenue and achieve or maintain profitability may be adversely affected if our marketing initiatives are not effective in generating sufficientlevels of brand awareness.

Our future growth and profitability will depend inlarge part upon the effectiveness and efficiency of our marketing efforts, including our ability to:

Planned marketing expenditures are unknown and maynot result in increased total sales or generate sufficient levels of product and brand name awareness. We may not be able to manage marketingexpenditures on a cost-effective basis.

Future acquisitions could disrupt our businessand adversely affect our operating results, financial condition and cash flows.

We may make acquisitions that could be material toour business, operating results, financial condition and cash flows. Our ability as an organization to successfully acquire and integratetechnologies or businesses is unproven. Acquisitions involve many risks, including the following:

We may not succeed in addressing these or other risksor any other problems encountered in connection with the integration of any acquired business. The inability to successfully integratethe business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration,could have a material adverse effect on our business, operating results, financial condition and cash flows.

Product quality issues and a higher-than-expectednumber of warranty claims or returns could harm our business and operating results.

The products that we sell could contain defects indesign or manufacture. There can be no assurance we will be able to detect and remedy all defects in the hardware we sell, which couldresult in product recalls, product redesign efforts, loss of revenue, reputational damage and significant warranty and other remediationexpenses. Similar to other mobile and consumer electronics, our products have a risk of overheating in the course of usage or upon malfunction.Any such defect could result in harm to property or in personal injury. If we determine that a product does not meet product quality standardsor may contain a defect, the launch of such product could be delayed until we remedy the quality issue or defect. The costs associatedwith any protracted delay necessary to remedy a quality issue or defect in a new product could be substantial.

Fat Shark and Rotor Riot generally provide a one-yearwarranty on all of our products, except in certain European countries where it can be two years for some consumer-focused products. Theoccurrence of any material defects in our products could expose us to liability for damages and warranty claims in excess of our currentreserves, and we could incur significant costs to correct any defects, warranty claims or other problems. In addition, if any of our productdesigns are defective or are alleged to be defective, we may be required to participate in a recall campaign. In part due to the termsof our warranty policy, any failure rate of our products that exceeds our expectations may result in unanticipated losses. Any negativepublicity related to the perceived quality of our products could affect our brand image and decrease retailer, distributor and consumerconfidence and demand, which could adversely affect our operating results and financial condition. Further, accidental damage coverageand extended warranties are regulated in the United States at the state level and are treated differently within each state. Additionally,outside of the United States, regulations for extended warranties and accidental damage vary from country-to-country. Changes in interpretationof the regulations concerning extended warranties and accidental damage coverage on a federal, state, local or international level maycause us to incur costs or have additional regulatory requirements to meet in the future in order to continue to offer our support services.Our failure to comply with past, present and future similar laws could result in reduced sales of our products, reputational damage, penaltiesand other sanctions, which could harm our business and financial condition.

Estimated future productwarranty claims may be based on a variety of factors including the expected number of field failures over the warranty commitment period,the term of the product warranty period, and the costs for repair, replacement and other associated costs. Because of the foregoing orother contingencies, these estimates could prove to be incorrect, such that our warranty obligations are higher than anticipated. Ourwarranty obligations may be affected by product failure rates, claims levels, material usage and product re-integration and handling costs.Should actual product failure rates, claims levels, material usage, product re-integration and handling costs, defects, errors, bugs orother issues differ from original estimates, we could end up incurring materially higher warranty or recall expenses than we anticipate,which would materially adversely affect our business.

Risks Related to Intellectual Property Protection

If third-party intellectual property infringementclaims are asserted against us, it may prevent or delay our product development and commercialization efforts and have a material adverseeffect on our business and future prospects.

Companies in the consumer electronics, wireless communications,semiconductor, AI, IT, and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerableand costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectualproperty rights. Other companies may hold or obtain patents or inventions or other proprietary rights in technology necessary for ourbusiness. If we are forced to defend against infringement claims, we may face costly litigation, diversion of technical and managementpersonnel, and product shipment delays, even if the allegations of infringement are unwarranted.

Numerous U.S. and foreign issued patents and pendingpatent applications, which are owned by third parties, exist in the fields in which we are pursuing product development and sales. Asthe consumer electronics and drone industries expand and more patents are issued, the risk increases that our current and future productsmay be subject to claims of infringement of the patent rights of third parties. Third parties may assert that we are employing their proprietarytechnology without authorization. There may be third-party patents or patent applications with claims to inventions, materials, engineeringdesigns, or methods of manufacture related to the design, use or manufacture of our products. Because patent applications can take manyyears to issue, there may be patent applications currently pending that may later result in patents that our products may infringe upon.Third parties may obtain patents in the future and claim that use of our technologies or those of third parties with which our technologiesare integrated infringes on these patents. If any third-party patents were to be held by a court to cover the manufacturing process ofany of our products, or any of the characteristics or related components thereof, the holders of any such patents may be able to blockour ability to commercialize such product unless we obtained a license under the applicable patents, or until such patents expire. Similarly,if any third-party patents were to be held by a court to cover aspects of our or our customers’ or strategic partners’ productsor processes, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product unlesswe obtained a license or until such patent expires. In either case, such a license may not be available on commercially reasonable termsor at all.

Parties making intellectual property claims againstus may obtain injunctive or other equitable relief, which could block our ability to further develop and commercialize one or more ofour products. Defense of these claims, regardless of their merit, involves substantial litigation expense and diversion of our management’sattention from our business.

If we are unsuccessful in defending against patentinfringement claims in any jurisdiction where such a dispute arises, our products could be found to infringe on the intellectual propertyrights of others. If a claim of infringement against us succeeds, we may have to pay substantial damages, possibly including treble damagesand attorneys’ fees for willful infringement, pay royalties, redesign our infringing products or obtain one or more licenses fromthird parties, which may be impossible or require substantial time and monetary expenditure. The financial harm caused by any such developmentwith respect to intellectual property disputes and litigation will be heightened to the extent we do not possess, acquire or maintainadequate insurance coverage for these contingencies now or in the future. Further, if there is a successful claim of infringement againstus and we are unable to develop non-infringing technology or license the infringed or similar technology on a timely basis, or if we arerequired to cease using one or more of our business or product names due to a successful trademark infringement claim against us, it couldmaterially adversely affect our business.

We may depend on intellectual property rights includingpatent rights that have not yet been and may not be obtained by us, and our intellectual property rights and proprietary rights may notadequately protect our products.

Our commercial success will depend substantially on the ability toobtain patents and other intellectual property rights and maintain adequate legal protection for products in the United States and othercountries. We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that these assetsare covered by valid and enforceable patents, trademarks, copyrights or other intellectual property rights, or are effectively maintainedas trade secrets. With the closing of this Offering, 12 issued patents, including four issued in the United States, and nine pending patentApplications, including two pending in the United States will be assigned to the Company (directly or through its acquisition of Fat Sharkand Rotor Riot) by UAV Patent Corp. (“UAV”) a wholly-owned subsidiary of Red Cat, in each case with a non-exclusive, non-sublicensableroyalty free perpetual license back to UAV for Red Cat and its present and future subsidiaries to make, use and sell products subjectto such assigned patents and applications solely with respect to military and defense drone applications. See “Business - IntellectualProperty” for more information.

We will apply for patents covering our products, services,technologies, and designs, as we deem appropriate. We may fail to apply for patents on important products, services, technologies or designsin a timely fashion, or at all. We do not know whether, and there can be no assurance that, any of our patent applications will resultin the issuance of any patents. Even if patents are issued, they may not be sufficient to protect our products, technologies, or designs.Our existing and future patents may not be sufficiently broad to prevent others from developing competing products, technologies, or designs.Intellectual property protection and patent rights outside of the United States, particularly in China, are even less predictable. Asa result, the validity and enforceability of patents cannot be predicted with certainty. Moreover, we cannot be certain whether:

The patents we own or license and those that may beissued to us in the future may be challenged, invalidated, rendered unenforceable or circumvented, and the rights granted under any issuedpatents may not provide us with proprietary protection or competitive advantages. Moreover, third parties could practice our inventionsin territories where we do not have patent protection or in territories where they could obtain a compulsory license to our technologywhere patented. Such third parties may then try to import products made using our inventions into the United States or other territories.We cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth, validityand enforceability of the claims upheld in our and other companies’ patents. Further, patents have a limited lifespan. In the UnitedStates, the natural expiration of a patent is 20 years after it is filed, although various extensions may be available. The life of apatent, and the protection it affords, is limited. When the patent life has expired for a product, we will become vulnerable to competitionfrom competitors attempting to replicate the technology that was formerly patent protected. Further, if we encounter delays such as dueto regulatory approvals, the time during which we will be able to market and commercialize a product under patent protection could bereduced.

Unauthorized parties may attempt to copy or otherwiseuse aspects of our processes and products that we regard as proprietary. While we plan to enter into written agreements with certain ofour employees and consultants with terms designed to protect our intellectual property rights, there cannot be any assurance that theseprovisions will provide us the protection sought. Further, any third parties with whom we do not execute such agreements, such as certainof our suppliers, could attempt to dispute our intellectual property rights or misappropriate our technology or trade secrets. Policingunauthorized use of our proprietary information and technology is difficult and can be costly, and our efforts to do so may not preventmisappropriation of our technologies. We may become engaged in litigation to protect or enforce our patent and other intellectual propertyrights or in International Trade Commission proceedings to abate the importation of goods that would compete unfairly with our productsand, if unsuccessful, these actions could result in the loss of patent or other intellectual property rights protection for the key technologieson which our business strategy depends.

We also rely in part on unpatented proprietary technology,and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. We plan torequire employees, contractors, consultants, financial advisors, suppliers, and strategic partners to enter into confidentiality and intellectualproperty assignment agreements (as appropriate), but these agreements may not provide sufficient protection for our trade secrets, know-howor other proprietary information.

The laws of certain countries do not protect intellectualproperty and proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions includingChina, we may be unable to protect our products, services, technologies and designs adequately against unauthorized third-party copying,infringement or use, which could adversely affect our competitive position. To protect or enforce our intellectual property rights, wemay initiate proceedings or litigation against third parties. Such proceedings or litigation may be necessary to protect our trade secretsor know-how, products, technologies, designs, brands, reputation, likeness, authorship works or other intellectual property rights. Suchproceedings or litigation also may be necessary to determine the enforceability, scope and validity of the proprietary rights of others.Any proceedings or lawsuits that we initiate could be expensive, take significant time and divert management’s attention from otherbusiness concerns. Additionally, we may provoke third parties to assert claims against us, which could invalidate or narrow the scopeof our own intellectual property rights. We may not prevail in any proceedings or lawsuits that we initiate and the damages or other remediesawarded, if any, may be commercially valuable. The occurrence of any of these events may adversely affect our business, financial conditionand operating results.

We will register for certain of our trademarks inseveral jurisdictions worldwide. In some jurisdictions where we will apply to register our trademarks, other applications or registrationsmay exist for the same, similar, or otherwise related products or services. If we are not successful in arguing that there is no likelihoodof confusion between our marks and the marks that are the subject of the other applications or registrations owned by third parties, ourapplications may be denied, preventing us from obtaining trademark registrations and adequate protection for our marks in the relevantjurisdictions, which could impact our ability to build our brand identity and market our products and services in those jurisdictions.Whether or not our application is denied, third parties may claim that our trademarks infringe their rights. As a result, we could beforced to pay significant settlement costs or cease the use of these trademarks and associated elements of our brand in the United Statesor other jurisdictions.

Even in those jurisdictions where we are able to registerour trademarks, competitors may adopt or apply to register similar trademarks to ours, may register domain names that mimic ours or incorporateour trademarks, or may purchase keywords that are identical or confusingly similar to our brand names as terms in Internet search engineadvertising programs, which could impede our ability to build our brand identity and lead to confusion among potential customers of ourproducts and services. If we are not successful in proving that we have prior rights in our marks and arguing that there is a likelihoodof confusion between our marks and the marks of these third parties, our inability to prevent these third parties from using may negativelyimpact the strength, value and effectiveness of our brand names and our ability to market our products and prevent consumer confusion.

If we lose our rights under our third-party technologylicenses, our operations could be adversely affected.

Our current or future products may depend in parton technology rights licensed from third parties. We could lose our exclusivity or other rights to use the technology under our licensesif we fail to comply with the terms and performance requirements of the licenses. In addition, certain licensors may terminate a licenseupon our breach and have the right to consent to sublicense arrangements. If we were to lose our rights under any of these licenses, orif we were unable to obtain required consents to future sublicenses, we could lose a competitive advantage in the market, and may evenlose the ability to commercialize certain products or technologies completely. Either of these results could substantially decrease ourrevenues.

Further, to the extent weneed to obtain licenses from third parties to advance our research and development efforts or commercialize or improve upon our products,we may fail to obtain these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to furtherdevelop and commercialize those products, which could harm our business significantly.

The licensingand acquisition of third-party intellectual property rights is a competitive practice, and companies that may be more established, orhave greater resources than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights thatwe may consider necessary or attractive in order to develop and commercialize our products. More established companies may have a competitiveadvantage over us due to their larger size and cash resources or greater hardware or software development, production and commercializationcapabilities. We may not be able to successfully complete such negotiations and ultimately acquire the rights to the intellectual propertysurrounding product candidates that we may seek to acquire, in which case our business could be harmed.

Significant inflation could adversely affect ourbusiness and financial results.

The high rate of inflation and resulting pressureson costs and pricing of business such as ours focused on the manufacture and sale of electronics products could adversely impact ourbusiness and financial results. While inflation has created some salary pressure with our employees who wish to mitigate the impactof inflation, we have not yet suffered inflationary pressures in procurement. A rise in inflation can adversely affect us by increasingour operating costs, including by increasing the costs of materials, freight and labor, which have already been under pressure due tosupply chain constraints and the effects of the COVID-19 pandemic and the recent shortage of chips. The Company has not identified, plannedor taken any actions as of the date of this Prospectus to mitigate inflationary pressures. Further, in the U.S. the Federal Reservehas responded by increasing interest rates to combat inflation, however such increases may result in a reduced demand for our productsand/or an economic downturn. In a highly inflationary environment, or any recession or economic downturn that may result, we may be unableto adjust our business is a manner that adequately addresses these challenges, and these developments could materially adversely affectour business, results of operations and financial condition.

Risks Related to Government Regulation of OurOperations and Industry

Failure to obtain necessary regulatory approvalsfrom the FAA or other governmental agencies by us, our customers, or others who use our products, or limitations put on the use of unmannedaircraft systems, or “UAS,” in response to public privacy or safety concerns, may prevent us from expanding the sales of ourdrone solutions in the United States.

The regulation of UAS anddrone solutions and component parts such as those we offer is subject to substantial change, with regulators including potential alterations,enhancements and additions to existing laws and regulations, and the ultimate treatment is uncertain. A substantial majority of our productsare subject to drone-related regulations enforced by the FAA, either directly or due to their inclusion in UAS offered by third parties.Further, even if some of our operations or products are not directly subject to such regulations, Fat Shark’s customers’ operationsof UAS that includes our products and technology are subject to those regulations, and their failure to comply will adversely affect ourability to sell to them in the future. Further, adverse regulatory actions such as enforcement proceedings affecting customers and otherthird parties with which we do business can also adversely affect us, even if the violation or harm alleged did not arise from our conductor products. Generally, under current FAA regulations the failure to register a UAS, including model aircraft, in accordance with theserules may result in regulatory and criminal sanctions. The FAA may assess civil penalties up to $33,333. Criminal penalties include finesof up to $250,000 and/or imprisonment for up to three years. However, the FAA and other government bodies and agencies are consideringchanges to address the drone industry, which is relatively new and rapidly evolving. For more information on the laws and regulationsapplicable to us and our industry, as well as recent developments involving such laws and regulations and their actual and potential impacton us, see “Business – Government Regulations.” In addition, there exists public concern regarding the privacy and safetyimplications of the use of UAS. This concern has included calls to develop explicit written policies and procedures establishing usagelimitations. We cannot assure you that the response from regulatory agencies, customers and privacy advocates to these concerns will notdelay or restrict the adoption of UAS and related products and technologies in certain markets. These developments, and any additionalregulatory or other burdens imposed on our business and industry due to public health and safety or other concerns presently faced bythe drone industry, could harm us and our customers and suppliers by increasing compliance costs and restricting our operations and productofferings and uses, which could materially adversely affect us.

Rising threats of international tariffs, includingtariffs applied to goods between the U.S. and China, may materially and adversely affect our business.

We are heavily dependent on Chinese imports for ourproducts and operations. For example, a substantial majority of Rotor Riot’s products are manufactured, directly and indirectly,using Chinese vendors. In addition, Fat Shark’s principal contract manufacturer is located in China. We do not have any writtenagreements with our suppliers in China. We rely only on purchase orders. There are inherent risks and uncertainties regarding the enforcementof our rights with respect to our oral agreements and purchase orders. Should our suppliers in China fail to honor our oral agreementsand purchasers orders we will not have any recourse against such suppliers under Chinese law. The legal system in China and the enforcementof laws, rules and regulations in China can change quickly and the Chinese government may intervene or influence the operations of oursuppliers which would adversely impact our business insofar as we would have to seek other suppliers outside of China and such supplierswould most likely charge us more for our products. Rising threats of international tariffs, including tariffs applied to goods tradedbetween the U.S. and China, could materially and adversely affect our business and results of operations. Since the beginning of 2018,there has been increasing rhetoric, in some cases coupled with legislative or executive action, from several U.S. and foreign leadersregarding the possibility of instituting tariffs on the foreign imports of certain materials and products. During this trend, the U.S.and China imposed tariffs or announced proposed tariffs to be applied in the future to certain of each other’s exports. Beginningin 2019, the former Trump administration imposed tariffs on imports of electronics products, including drones and component parts, ofup to 25%. These tariffs apply to the vast majority of Rotor Riot’s and Fat Shark’s respective inventory, and Rotor Riothas in the past been, and either or both entities may in the future be, forced to implement price increases to adjust to the higher costsof production and sale, which imposes the risk of reduced demand for such products and lower sales and resulting revenue. Further, wedo not know if the Biden administration will implement any, or alter current tariffs, in a manner adverse to us. These tariffs or anyfurther costs or restrictions imposed on products that we import, could require us to raise our prices, which may result in the lossof customers and harm our business, particularly since we rely on consumer spending and our products a are typically considered non-essential,and purchases are therefore highly price sensitive.

In addition, changes in political conditions in Chinaand 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, because of ourinvolvement in the Chinese market, any deterioration in political or trade relations might cause a public perception in the U.S. or elsewherethat might cause our business to become less attractive. Such an impact could adversely affect our revenues and cash flows.

We are or may become subject to governmental exportand import controls, economic sanctions and other laws and regulations that could subject us to liability and impair our ability to competein international markets.

While we understand Fat Shark and/or Rotor Riot havehad minimal sales outside of the U.S., we expect to seek to market our products outside of the U.S. The U.S. and various foreign governmentshave imposed controls, export license requirements and restrictions on the import or export of some technologies. Our products are subjectto U.S. export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctionsregulations established by the Treasury Department’s Office of Foreign Assets Controls, and exports of our products must be madein compliance with these laws. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and servicesto countries, governments, and persons targeted by U.S. sanctions. Even though we take precautions to prevent our products from beingprovided to targets of U.S. sanctions, our products, including our firmware updates, could be provided to those targets or provided byour customers despite such precautions.

Further, the manufacture and sale of our products in certain statesand countries may subject us to environmental and other regulations. For example, many of Fat Shark and Rotor Riot’s products relyon electricity generated by lithium-ion batteries, which implicate a variety of environmental and other regulations designed to controlthe production, use, and transportation of hazardous materials such as lithium and other components and minerals deployed in these batteries.In addition, the increasing global focus on climate change, including greenhouse gas (“GHG”) emissions, has resulted in legislativeand regulatory efforts to address the causes and impacts of climate change, and any new and more strict laws and regulations to reduceGHG 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 complianceobligations, which could adversely affect our financial condition and results of operations.

Our failure to obtain required import or export approvalor to comply with other applicable domestic or international laws and regulations for our products or operations could harm our internationaland domestic sales and adversely affect our revenue, or could subject us to costly proceedings, penalties or damages and negative publicity.

If we fail to comply with U.S. and foreign lawsrelated to privacy, data security, and data protection, it could adversely affect our operating results and financial condition.

We, either directly or through our customers, collaboratorsor end-users of our products, are or may become subject to a variety of laws and regulations regarding privacy, data protection, and datasecurity. This includes the European Union’s (“EU”) General Data Protection Regulation (the “GDPR”) as aresult of our sales in the EU. These laws and regulations are continuously evolving and developing. The scope and interpretation of thelaws that are or may be applicable to us are often uncertain and may be conflicting, particularly with respect to foreign laws. The applicationof these laws and regulations can arise from our e-commerce platform, social media activities, drone technology and applications, relationshipswith third parties and their operations, or from other activities we undertake now or that we may undertake in the future. Data privacyand 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. Such laws and regulations often vary in scope, may be subject to differing interpretations, and may beinconsistent among different jurisdictions. For example, the GDPR includes operational requirements for companies that receive or processpersonal data of residents of the European Union that are broader and more stringent than those previously in place in the European Unionand in most other jurisdictions around the world. The GDPR includes significant penalties for non-compliance, including fines of up to€20 million or 4% of total worldwide revenue. Additionally, in June 2018, California enacted the California Consumer Privacy Act(the “CCPA”). The CCPA requires covered companies to provide California consumers with new disclosures and will expand therights afforded consumers regarding their data. Fines for noncompliance may be up to $7,500 per violation. Since the CCPA was enacted,Nevada, Maine, Colorado and Virginia have enacted similar legislation designed to protect the personal information of consumers and penalizecompanies that fail to comply, and other states have proposed similar legislation. The costs of compliance with, and other burdens imposedby, the GDPR, CCPA, and similar laws may limit the use and adoption of our products and services and/or require us to incur substantialcompliance costs, which could have an adverse impact on our business.

In the U.S., at least 35states and the District of Columbia introduced or considered almost 200 consumer privacy bills in 2022. More and more states will continueto enact similar laws. Additionally, in June 2022 the American Data Privacy and Protection Act was introduced in the U.S. House of Representatives.As introduced this proposed legislation would establish requirements for how companies handle personal data by, among other things, limitingthe 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 rightto 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 possibilityof civil proceedings for violations. Proposed federal legislation, like the American Data Privacy and Protection Act, will likely continueto be debated and, at some point, may be enacted in some form.

We intend to strive to comply with all applicablelaws, policies, legal obligations, and industry codes of conduct relating to privacy, data security, and data protection. Our limitedresources may adversely affect our compliance effort. Given that the scope, interpretation, and application of these laws and regulationsare often uncertain and may be in conflict across jurisdictions, it is possible that these obligations may be interpreted and appliedin a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Any failure or perceivedfailure by us, customers, or third-party vendors or end-users involved with our products to comply with our privacy or security policiesor 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 resultsand financial condition.

Governments are continuing to focus on privacy anddata security, and it is possible that new privacy or data security laws will be passed or existing laws will be amended in a way thatis material to our business. Any significant change to applicable laws, regulations, or industry practices regarding the personal dataof our employees, agents or customers could require us to modify our practices and may limit our ability to expand or sustain our salesforceor bring our products to market. Changes to applicable laws and regulations in this area could subject us to additional regulation andoversight, any of which could significantly increase our operating costs and materially affect our operating results and financial condition.

Any failures of or damage to, attack on or unauthorizedaccess to our information technology systems or facilities or disruptions to our continuous operations, including the systems, facilitiesor operations of third parties with which we do business, such as resulting from cyber-attacks, could result in significant costs, reputationaldamage and limits on our ability to conduct our business activities.

Our operations will depend on information technologyinfrastructure and computer systems, both internal and external, to, among other things, record and process customer and supplier data,marketing activities and other data and functions and to maintain that data and information securely. In recent years, several organizationshave suffered successful cyber-attacks launched both domestically and from abroad, resulting in the disruption of services to customers,loss or misappropriation of sensitive or private data and reputational harm. If we are subject to a cyber-attack, we could suffer a similarbreach or suspension in the future. Further, we may be unaware of a prior attack and the damage caused thereby until a future time whenremedial actions cannot be taken. Cyber-threats are often sophisticated and are continually evolving. We may not implement effectivesystems and other measures to effectively identify, detect, prevent, mitigate, recover from or remediate the full diversity of cyber-threats orimprove and adapt such systems and measures as such threats evolve and advance in their ability to avoid detection.

A cyber-security incident, or a failure to protectour technology infrastructure, systems and information and our customers, suppliers and others’ information against cyber-security threats,could result in the theft, loss, unauthorized access to, disclosure, misuse or alteration of information, system failures or outages orloss of access to information. The expectations of our customers and regulators with respect to the resiliency of our systems and theadequacy of our control environment with respect to such systems may increase as the risk of cyber-attacks, which is presently elevateddue to the recent work-from-home environment arising from the COVID-19 pandemic, and the consequences of those attacks become morepronounced. We may not be successful in meeting those expectations or in our efforts to identify, detect, prevent, mitigate and respondto such cyber-incidents or for our systems to recover in a manner that does not disrupt our ability to provide products and servicesto our customers or product personal, private or sensitive information about our business, customers or other third parties.

Further, in March 2022 the SEC proposed new rulesdesigned to enhance and standardize disclosure requirements related to cybersecurity incident reporting and cybersecurity risk management,strategy, and governance. Specifically, the proposed rules would impose a new Form 8-K disclosure requirement about material cybersecurityincidents within four business days after a registrant determines that it has experienced such an incident, add requirements to Forms10-Q and 10-K to require updates to previously disclosed cybersecurity incidents, require disclosure of previously undisclosed immaterialcybersecurity incidents that have become material in the aggregate; and require disclosure about the cybersecurity expertise, if any,of members of the Company’s Board of Directors. Under the proposed rule, any unauthorized incident that has compromised the confidentiality,integrity, or availability of an information asset (data, system, or network); or violated the company’s security policies or definitionsof “cybersecurity incident” and “information systems” would be incorporated into the proposed rules. If the proposedrules are adopted as currently drafted or as may be modified, we expect to incur material additional compliance and reporting costs, includingmonitoring, collecting, and analyzing data concerning cyber-security incidents and evaluating and preparing the required disclosure.

The failure to maintain an adequate technology infrastructureand applications with effective cyber-security controls could impact operations, adversely affect our financial results, result inloss of business, damage our reputation or impact our ability to comply with regulatory obligations, leading to regulatory fines and sanctions.We may be required to expend significant additional resources to modify, investigate or remediate vulnerabilities or other exposures arisingfrom cyber-security threats. Failing to prevent or properly respond to a cyber-attack could expose us to regulatory fees orcivil liability, cause us to lose customers or suppliers, prevent us from offering our products including due to resulting regulatoryaction, impair our ability to maintain continuous operations, and inhibit our ability to meet regulatory requirements.

Risks Related To Our Common Stock and this Offering

Our management will have significant discretionover our use of the net proceeds from this Offering and we may use these proceeds in ways with which you may not agree.

Other than payments to Red Cat for the purchase ofFat Shark and Rotor Riot, and if the Red Cat Note is not converted, our management will have considerable discretion in deciding how toapply net proceeds of this Offering. You will not have the opportunity to assess whether the proceeds are being used appropriately beforeyou make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of thisOffering. We cannot assure you that the net proceeds will be used in a manner that would improve our results of operations or increaseour stock price. See “Use of Proceeds.”

Because the market price of shares of our commonstock is subject to fluctuation, you may not be able to sell your common stock at the Offering price.

The market prices of shares of our common stock mayfluctuate significantly in response to factors, some of which are beyond our control, including:

Recently, the stock market, in general, has experiencedextreme price and volume fluctuations due to, among other factors, concerns involving inflation, the Federal Reserve interest rate increases,supply chain shortages, recession fears, and geopolitical turmoil including the war in Ukraine. Continued market fluctuations could resultin extreme market volatility in the price of our common stock which could cause a decline in the value of our common stock below the Offeringprice.

Our stock price may be volatile, whichcould result in substantial losses to investors.

In addition to changes to market prices basedon our results of operations and the factors discussed elsewhere in this “Risk Factors” section, the market price of andtrading volume for our common stock (including any stock-run ups or price declines) may change for a variety of other reasons, not necessarilyrelated to our actual operating performance. The capital markets have experienced extreme volatility particularly with small public companieswith relatively smaller public floats that has often been unrelated to the operating performance of particular companies. These broadmarket fluctuations may adversely affect the trading price of our common stock. In addition, the average daily trading volume of thesecurities of small companies can be very low, which may contribute to future volatility.

Factors that could cause the market priceof our common stock to fluctuate significantly include:

Any of these factors, as well as broader marketand industry factors, may result in large and sudden changes in the trading volume of our common stock (including stock run ups or pricedeclines) and could seriously harm the market price of our common stock, regardless of our operating performance. This may prevent youfrom being able to sell your shares at or above the price you paid for your shares, if at all. In addition, following periods of volatilityin the market price of a company’s shares, shareholders often institute securities class action litigation against that company.Our involvement in any class action suit or other legal proceeding could divert our senior management’s attention and could adverselyaffect our business, financial condition, results of operations and prospects.

Because our public offering price is substantially higher than our nettangible book value per share, you will experience immediate and substantial dilution.

If you purchase our common stock in this Offering,you will pay more for your common stock than the amount paid by our existing shareholders for their common stock on a per share basis.As a result, you will experience immediate and substantial dilution of approximately $3.49 per share, representing the difference betweenthe assumed public Offering price of $4.25 per share, and our pro forma as adjusted net tangible book value per share as of December 31,2022 immediately upon the completion of this Offering.

Because our sole remedy under the Purchase Agreementin the event of any breaches of representations and warranties is to cancel some or all of the 450,000 shares of our common stock placedin escrow, the value of such shares maybe an insufficient remedy.

The Purchase Agreement contains representations andwarranties made by Red Cat and Mr. Jeffrey Thompson, Red Cat’s Chief Executive Officer. Based upon negotiations with Red Cat andits counsel, we agreed that Mr. Thompson, one of our founders, our largest stockholder and a member of our Board shall deposit 450,000shares of our common stock in escrow (the “Escrow Shares”) in order to be available in the event we claim Red Cat and/or Mr.Thompson have breached any of their respective representations and warranties contained in the Purchase Agreement. Red Cat has no liabilityfor such breaches by it. That means if the value of the Escrow Shares is not at least equal to our damages, we will not have a remedysufficient to permit us to recoup all of our damages. The only exception is fraud. Although we negotiated this limited remedy in goodfaith, it is possible that the Escrow Shares may not be sufficient in which case such breach may adversely and materially affect our commonstock price.

If we incur anyfuture impairment in the carrying value of our goodwill asset or write-off our general intangibles, it could depress our stock price.

On a combined pro formabasis, as of December 31, 2022, we had $11,841,723 of estimated goodwill and $1,302,667 of intangible assets on our balance sheet. Goodwilland intangible assets must be evaluated for impairment annually or more frequently if events indicate it is warranted. If the carryingvalue of a reporting unit asset exceeds its current fair value, the goodwill asset is considered impaired. Events and conditions thatcould result in impairment in the value of our goodwill and intangible assets include, but are not limited to, significant negative industryor economic trends, significant decline in the Company’s stock price for a sustained period of time, significant decline in marketcapitalization relative to net book value, limited funding that could delay development efforts, significant changes in the manner ofuse of the assets or the strategy for the Company’s overall business, or safety issues that surface during development efforts,or the end of our product life cycles that will result in impairment of good will. We may in the future be required to record impairmentcharges to write-off goodwill and intangible assets which is also related to our acquisition of Fat Shark and Rotor Riot. Our stock pricecould be negatively impacted should future impairments of our goodwill and/or intangible assets occur. On a combined pro forma basis,as of December 31, 2022, we also had $1,302,667 of estimated intangible assets, net on our balance sheet. A valuation will be performedupon closing of the Business Combination based on final assets acquired and liabilities assumed and final amounts of goodwill and otherintangibles will be determined as a part of that valuation. To the extent that we may be required to write-off the value of our goodwilland/or our intangibles assets, our stock price could be adversely affected.

We will incur significant additional costs as aresult of being a public company, and our management will be required to devote substantial time to compliance with our public companyresponsibilities and corporate governance practices.

Upon completion of this Offering, we expect to incurincreased costs associated with corporate governance requirements that will become applicable to us as a public company, including rulesand 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 Nasdaq. 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 currentemployees, additional hiring of new employees, and increased assistance from consultants. We also expect these rules and regulations tomake it more expensive for us to maintain directors’ and officers’ liability insurance. As a result, it may be more difficultfor us to attract and retain qualified persons to serve on our Board or as executive officers. Furthermore, these rules and regulationswill increase our legal and financial compliance costs and will make some activities more time-consuming and costly. We cannot predictor estimate the amount of additional costs we will incur as a public company or the timing of such costs. In addition, our managementteam will need to devote substantial attention to interacting with the investment community and complying with the increasingly complexlaws pertaining to public companies, which may divert attention away from the day-to-day management of our business, including operational,research and development and sales and marketing activities. Increases in costs incurred or diversion of management’s attentionas 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 controlsand internal controls over financial reporting could have an adverse impact on us.

We will be required to establish and maintain appropriatedisclosure controls and internal controls over financial reporting. Failure to establish those controls, or any failure of those controlsonce established, could adversely impact our public disclosures regarding our business, financial condition or results of operations.In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that needto be addressed or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need tobe addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls overfinancial reporting may have an adverse impact on the price of our common stock.

Because our common stock will be listed on Nasdaq,we will become subject to additional regulations and continued requirements.

We will not proceed with this Offering unless ourcommon stock is listed on Nasdaq. Following the Offering, we will be required to meet the continued listing standards for Nasdaq. Ifwe fail to meet Nasdaq’s listing standards, our common stock may be delisted. Nasdaq requires that the bid price of itslisted common stock remain above $1.00 in order to remain listed. In addition, to maintain a listing on Nasdaq, we must satisfy minimumfinancial and other continued listing requirements and standards, including those regarding director independence and independent committeerequirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirementsstandards, our common stock could be subject to delisting. Delisting would have a negative effect on the price of our common stock andwould impair your ability to sell our common stock when you wish to do so.

Our Board of Directors may authorize and issueshares of new classes of stock that could be superior to or adversely affect current holders of our common stock.

Our Board of Directors has the power to authorizeand issue shares of classes of stock, including preferred stock that have voting powers, designations, preferences, limitations and specialrights, including preferred distribution rights, conversion rights, redemption rights and liquidation rights without further shareholderapproval which could adversely affect the rights of the holders of our common stock. In addition, our Board could authorize the issuanceof a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, whichcould decrease the relative voting power of our common stock or result in dilution to our existing common stockholders. In connectionwith the acquisition from Red Cat, we will issue it a Series A Convertible Preferred Stock which will have a liquidation preference overcommon stockholders of $4.00 and convert into 2,675,000 shares of common stock and may issue common stock or convertible securitiesin the future.

Any of these actions could significantly adverselyaffect the investment made by holders of our common stock. Holders of common stock could potentially not receive dividends that they mightotherwise have received. In addition, holders of our common stock could receive less proceeds in connection with any future sale of theCompany, in liquidation or on any other basis.

If we raise capital in the future may dilute ourexisting stockholders’ ownership and/or have other adverse effects on us, our securities or our operations.

If we are required to raise additional capital byissuing equity securities, our existing stockholders’ percentage ownership may decrease, and these stockholders may experience substantialdilution. Additionally, the issuance of additional shares of common stock or other securities could result in a decline in our stock price.Further, if we are required to raise additional funds by issuing debt instruments, these debt instruments could impose significant restrictionson our operations, including liens on our assets and negative covenants prohibiting us from engaging in certain transactions or corporateactions that may have the effect of limiting our ability to pursue our business strategy and growth objectives.

Common stock eligible for future sale may adverselyaffect the market.

The common stock sold in this Offeringwill be freely-tradable. Additionally, from time-to-time, certain of our stockholders may be eligible to sell all or some of theircommon stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 promulgated under theSecurities Act of 1933 (the “Securities Act”), subject to certain limitations. In general, Rule 144 provides thatany non-affiliate of the Company, who has held restricted common stock for at least 12 months, is entitled to sell theirrestricted stock freely, provided that the Company stays current in its SEC filings. Affiliates, which would include an officer,director or other person in control of the Company may sell after six months (beginning 90 days from the date of thisProspectus) with the following restrictions: (i) the Company is current in its SEC filings, (ii) certain manner of saleprovisions, (iii) the filing of a Form 144, and (iv) volume limitations limiting the sale of shares within anythree-month period to a number of shares that does not exceed 1% of the total number of outstanding shares. A person who hasceased to be an affiliate at least three months immediately preceding the applicable sale and who has owned such shares ofcommon stock for at least six months may sell the shares under Rule 144 without regard to any of the limitations describedabove except for the current public information requirement.

Future sales of substantial amounts of our commonstock in the public market, or the anticipation of these sales, could materially and adversely affect market prices prevailing from time-to-time,and could impair our ability to raise capital through sales of equity or equity-related securities. In addition, the market priceof our common stock could decline as a result of sales of a large number of shares of our common stock in the market or the perceptionthat these sales may occur.

If securities or industry analysts do not publishresearch or reports about our business, or if they adversely change their recommendations regarding our common stock, the market pricefor our common stock and trading volume could decline.

The trading market for our common stock will be influencedby research or reports that industry or securities analysts publish about our business. As of the date of this Prospectus, no analystspublish research reports about us, and we cannot assure you that any will. If analysts do, and one or more analysts who cover us downgradeour common stock, the market price for our common stock would likely decline.

We and our investors face the implications of ourstatus as an emerging growth company under the federal securities laws and regulations.

We qualify as an “emerging growthcompany” pursuant to the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company we haveelected to take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicablegenerally to public companies. These provisions include but are not limited to: reduced disclosure obligations regarding executivecompensation in periodic reports, proxy statements and registration statements; and exemptions from the requirements of holding anonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previouslyapproved.

We will remain an emerging growth company until theearliest of (a) the last day of the fiscal year during which we have total annual gross revenues of at least $1.07 billion; (b) the lastday of our fiscal year following the fifth anniversary of the completion of this Offering; (c) the date on which we have, during the precedingthree-year period, issued more than $1.0 billion in non-convertible debt; or (d) the date on which we are deemed to be a “largeaccelerated filer” under the Exchange Act, which would occur as of the end of any fiscal year if the market value of our commonstock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

We have never paid dividends and we do not expectto pay dividends for the foreseeable future

We intend to retain earnings, if any, to finance thegrowth and development of our business and do not intend to pay cash dividends on shares of our common stock in the foreseeable future.The payment of future cash dividends, if any, depend upon, among other things, conditions then existing including earnings, financialcondition and capital requirements, restrictions in financing agreements, business opportunities and other factors. As a result, capitalappreciation, if any, of our common stock, will be your sole source of gain for the foreseeable future.

USE OF PROCEEDS

We estimate that the net proceeds from this Offeringwill be approximately $_________ after deducting estimated underwriting discounts and estimated offering expenses payable by us. If theunderwriter exercises its over-allotment option in full, we estimate that the net proceeds will be approximately $_____________.

¹ Reflects estimated offering expenses,underwriting discounts, and commissions payable by us and assumes no exercise of the underwriters’ option to purchase additionalshares of our common stock.

²  We intend to use $5,000,000,or approximately __% of the net proceeds of the Offering to pay Red Cat to consummate the Business Combination. See, “TheBusiness Combination.” In addition, we intend to issue Red Cat the Senior Note in the amount of $2.5 million.

³ Includes approximately $231,000that we owe to a related party for unfulfilled orders. See “Related Party Transactions” for moreinformation. We intend to use approximately $_____, or _____% of the net Offering proceeds, for working capital and generalcorporate purposes.

The actual allocation of proceeds realized from thisOffering will depend upon our operating revenues and cash position and our working capital requirements and may change.

Therefore, as of the date of this Prospectus, we cannotspecify with certainty all of the particular uses for the net proceeds to be received upon the completion of this Offering. Accordingly,we will have discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the applicationof the proceeds of this Offering.

Pending our use of the net proceeds from this Offering,we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearinginstruments and U.S. government securities.

CAPITALIZATION

The following table sets forthour capitalization as of December 31, 2022:

The pro forma and pro forma as adjustedinformation below is illustrative only and our capitalization following the completion of this Offering is subject to adjustmentbased on the public offering price of our common stock. You should read this table in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements andrelated notes included elsewhere in this Prospectus. The following table assumes the issuance of 2,352,941 shares of our commonstock at $4.25 per share (the midpoint of the anticipated range of between $4.00-$4.50) and excludes the exercise of the over-allotmentoption by the underwriters and the issuance of the warrants to the underwriters.

________________ 

MARKET FOR OUR COMMON STOCK

Prior to this Offering, there has been no publicmarket for our common stock. We expect that the initial public offering price will be between $____ and $_____ per Share. We intend tolist the common stock on Nasdaq under the symbol “UMAC” However, there is no assurance that the Offering will be closed andour common stock will be trading on Nasdaq.

Holders

As of March 9, 2023, there were approximately43 stockholders of record of our common stock.

Dividend Policy

We have never paid our stockholders cash dividends,and we do not anticipate paying any cash dividends in the foreseeable future as we intend to retain any earnings for use in our business.Any future determination to pay dividends will be at the discretion of our Board of Directors.

Shares Eligible for Future Sale

Future sales of substantial amounts of shares of ourcommon stock in the public market, including shares issued upon the exercise of outstanding options or warrants, or upon conversion ofconvertible preferred stock or debt, or other securities which we have or may in the future issue, or the anticipation of these sales,could adversely affect market prices prevailing from time-to-time and could impair our ability to raise capital through sales of equitysecurities.

Upon completion of this Offering, we estimate thatwe will have _____ outstanding shares, calculated as of the date of this Prospectus by giving effect to the issuance of the shares hereunder,and assuming no exercise of the underwriter’s option. As of the date of this Prospectus, there are approximately ______ sharesof common stock which may be sold pursuant to Rule 144 under the Securities Act of 1933.

DETERMINATION OF OFFERING PRICE

As there has been no public market for our commonstock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each optiongrant, with input from management, and recent third-party financings consummated by the Company.

Our Board of Directors considered various objective and subjectivefactors to determine the fair value of our common stock as of each grant date, including:

DILUTION

If you invest in our common stock in thisOffering, your ownership interest will be diluted immediately to the extent of the difference between the public offering price per shareof our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after this Offering.

Our historical net tangible book value asof December 31, 2022 was $3,205,684, or $0.47 per share of our common stock. Our historical net tangible book value (deficit) is theamount of our total tangible assets less our total liabilities. Historical net tangible book value (deficit) per share represents ourhistorical net tangible book value (deficit) divided by the 6,784,500 shares of our common stock outstanding as of December 31, 2022.

Our pro forma net tangible book value as ofDecember 31, 2022 was $458,816, or $0.05 per share of our common stock. Pro Forma net tangible book value represents the amount of ourtotal tangible assets, less our total tangible liabilities, after giving effect to the closing referred to the closing of the BusinessCombination. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total numberof shares outstanding as of December 31, after giving effect to the shares of common stock and Series A issued to Red Cat assuming a$4.00 conversion price.

After giving effect to our issuance and sale of2,352,941 shares of common stock in this Offering at an assumed initial public offering price of $4.25 per share (the midpoint of theassumed range of $4.00 and $4.50), and after deducting underwriting discounts and commissions and estimated offering expenses payableby us, and after giving effect to the closing referred to the closing of the Business Combination, our pro forma as adjusted nettangible book value as of December 31, 2022 would have been $8,920,991, or $0.76 per share. This represents an immediate increasein pro forma as adjusted net tangible book value per share of $0.71 to existing stockholders and immediate dilution of $3.49 in pro formaas adjusted net tangible book value per share to new investors purchasing common stock in this Offering. Dilution per share to new investorsis determined by subtracting pro forma as adjusted net tangible book value per share after this Offering from the assumed initial publicoffering price per share paid by new investors. The following table illustrates this dilution on a per share basis:

If the underwriters exercise their option to purchaseadditional shares in full, our pro forma as adjusted net tangible book value per share after this Offering would be $_____ per share,representing an immediate increase in pro forma as adjusted net tangible book value per share of $____ to existing stockholders and immediatedilution in pro forma as adjusted net tangible book value per share of $_____ to new investors purchasing common stock in this Offering,based on the initial public offering price of $_____ per share, and after deducting underwriting discounts and commissions and estimatedoffering expenses payable by us. If any shares are issued upon exercise of outstanding options, you will experience further dilution.

The following table summarizes, on the pro formaas adjusted basis described above, the differences between the number of shares of common stock purchased from us, the total considerationpaid to us and the average price per share paid by existing stockholders and by new investors purchasing shares of common stock in thisOffering. The calculation below is based on the initial public offering price of $4.25 per share, before deducting underwriting discountsand commissions and estimated offering expenses payable by us:

The table above assumes no exercise of the underwriters’option to purchase additional shares in this Offering. If the underwriters’ option to purchase additional shares is exercised infull, the number of shares of our common stock held by existing stockholders would be reduced to ___% of the total number of shares ofour common stock outstanding after this Offering, and the number of shares of common stock held by new investors participating in theoffering would be increased to __% of the total number of shares of our common stock outstanding after this Offering.

The number of shares purchased from us by existingstockholders is based on 6,934,500 shares of our common stock outstanding as of March 3, 2022, excludes:

THE BUSINESS COMBINATION

On November 21, 2022, theCompany, Red Cat and Jeffrey Thompson, the founder and Chief Executive Officer of Red Cat, entered into the Purchase Agreement for theCompany’s purchase of Red Cat’s consumer business consisting of recreational and hobbyist drones, first-person-view goggles,and as a licensed authorized reseller.

The execution and deliveryof the Purchase Agreement followed an internal review by Red Cat of its military and enterprise opportunities to focus its efforts onits Made in America Class 1 ISR Drone development program and Red Cat’s Golden Eagle I, Golden Eagle II, Four Ship and swarm softwareunder development.

Under the terms of the PurchaseAgreement, upon satisfaction of closing conditions including the closing of the Offering, the approval of our common stock forlisting on Nasdaq, and the affirmative vote of a majority of the disinterested stockholders of Red Cat following Red Cat’s filingwith the SEC and mailing of its Proxy Statement in connection therewith, we will purchase Fat Shark and Rotor Riot, for $18 million incash and securities of Unusual, as more fully-described below. Mr. Thompson, who holds approximately 24% of the voting power of Red Cat,shall abstain from the voting on approval of the Purchase Agreement.

The purchase price under the Purchase Agreement is equal to $5 millionin cash (as increased for positive working capital and decreased for negative working capital at closing), $2.5 million in a convertiblesenior note of the Company (referred to in this Prospectus as the “Senior Note”) and $10.5 million in Series A ConvertiblePreferred Stock of the Company (referred to in this Prospectus as the “Series A”), payable at closing. The Senior Note andthe Series A shall have the rights, privileges and preferences as set forth in the form of Senior Note and form of Series A Certificateof Designation in such form and subject to terms and conditions as are agreed by the Company and Red Cat prior to closing. The SeniorNote and Series A will be convertible into our common stock in this Offering at the lesser of $4.00 per share or the public offering priceand shall be subject to a Senior Note and the Series A Certificate of Designation (the “Certificate of Designation”) to befiled with the Secretary of State of Puerto Rico prior to closing. The Senior Note and Certificate of Designation shall contain beneficialownership blockers under which conversion shall be limited to 4.99% and/or 9.99% of the total voting power of the Company, and furthermay be subject to limitations on voting and conversion required in order to conform with requirements of Nasdaq to the issuance of inexcess of 19.99% of the outstanding Unusual Common Stock in accordance with Nasdaq Rule 5635(d). The Senior Note and Series A will includeanti-dilution protection in the case of issuances by us at a price lower than the then applicable conversion price for so long as theSenior Note or Series A remains outstanding under which the conversion price will be reduced to such lower price as the Company shallissue or agree to issue any of its securities.

Under the terms of the PurchaseAgreement Mr. Thompson and the Company have agreed to indemnification obligations, which shall survive for a period of nine months, subjectto certain limitations, which includes a basket of $250,000 before any claim can be asserted and a cap equal to the value of the escrowshares, other than in cases involving fraud. Mr. Thompson agreed to deposit 450,000 shares of our common stock owned by him in to escrowto secure any indemnification obligations, which stock is our sole remedy in the event of any claims, except for fraud. See “Risk Factors” and “Related Party Transactions.”

As a condition to closing,the Company shall enter into an employment agreement with Mr. Brandon Torres Declet, our Chief Executive Officer, including non-competeprovisions, which provisions cannot be amended or waived without the prior written consent of Red Cat. We, Fat Shark and Rotor Riot willalso be subject to five-year non-competition agreements generally restricting activities involving Class I ISR drones for government andinstitutional customers and an agreement to refer government and institutional inquiries to Red Cat.

On November 21, 2022, theCompany’s Board approved the Purchase Agreement. On November 21, 2022, the Board of Directors of Red Cat approved the PurchaseAgreement and submission of the Purchase Agreement to stockholders for approval. In addition, closing of the Purchase Agreement is subjectto successful completion of the Offering, and approval by Nasdaq of listing of our common stock. The Purchase Agreement requires thatRed Cat is required to cooperate with us in connection with the Offering and to prepare and deliver to us audited and unaudited financialstatements prepared in accordance with U.S. generally accepted accounting principles of Fat Shark and Rotor Riot, in such form and forsuch periods as are required to be included in the Registration Statement of which this Prospectus forms a part. We have agreed to registerall of the common stock for which the Senior Note is convertible pursuant to a registration rights agreement for resale by RedCat, or in lieu of issuing the Senior Note, to pay $2.5 million in cash with proceeds of the Offering at closing at our election.

In addition, we have agreedto enter into a Registration Rights Agreement for 100% of the common stock for which the Series A may be converted and to use our bestefforts to file and have declared effective such Registration Statement, on demand and in on a piggy-back basis with any other RegistrationStatements to be filed by us.

Red Cat and the Company have verbally agreed toextend the March 30, 2023 end date in the Purchase Agreement and lower the minimum amount of the Offering from $15 million to $10 millionto be memorialized in an amendment to the Purchase Agreement.

OUR BUSINESS

Overview

We are a development stage technology company whichintends to acquire Fat Shark and Rotor Riot, from Red Cat pursuant to the Purchase Agreement which will close simultaneously with theclosing of this Offering. Fat Shark and Rotor Riot are in the business of developing, producing and selling drone solutions and technology,with an initial focus on first-person view, or FPV, drone technology. Fat Shark is a market leader in FPV, designing and manufacturingultra-low latency video goggles for drone pilots. Rotor Riot’s principal business is the operation of a drone-focused e-commercemarketplace, backed by one of the largest communities of FPV drone pilots in the world. Over the next two years, these businesses planto continue to focus on leveraging and growing their market share in the retail purchase of drone products for use in entertainment, recreationaland competitive racing purposes, which we refer to as “consumer” uses, in the drone technology market. We also plan to explorea potential expansion into new sub-markets, which we refer to as “enterprise” uses, such as public safety and drone deliveryfunctions, organically and/or through strategic acquisitions. This is part of our vision to enable people to be part of the robotics revolution.

We were incorporated in Puerto Rico underthe name “Red Cat Motor Corporation” on July 11, 2019, before changing our name to “AerocarveUS Corporation”on October 20, 2020 and then to “Unusual Machines, Inc.” on July 5, 2022.

Headquartered in Puerto Rico, we intend to build bothorganically and through acquisitions in addition to our planned acquisition of Fat Shark and Rotor Riot, targeting companies within thehighly fragmented drone industry that have valuable IP, revenue generating customers, and great teams.

The Drone Industry

The drone industry continues to expand beyondits military origin to become a powerful business tool and recreational activity. We expect both of these markets to continue to grow.According to a study by Insider Intelligence, total global drone shipments are estimated to reach 2.4 million in 2023 – increasingat a 66.8% compound annual growth rate or CAGR. Drone growth is expected to occur across all industries: direct to consumer or DTC, whichis our current focus, and public safety, and drone delivery, sub-markets we intend to target for expansion in the future. The drone servicesmarket is expected to grow to over $60 billion by 2025, from approximately $4.4 billion in 2018. International Data Corporation Marketshas projected that the small drone market will increase from 3.8 billion in 2022 to 6.2 billion by 2027, and a CAGR of 10.1% from to 2022to 2027.The FAA has forecasted a 300% increase in commercial drones from 2019 to 2023 as per businessinsider.com.

We will also pursue potential acquisitiontargets in the FPV drone technology space that will improve our own hardware and software solutions, rapidly provide the potential togrow our revenues, expand to new industry verticals, and integrate best in class American IP and teams. We cannot assure you we willcomplete any acquisitions or, if we do, achieve these goals. See “Risk Factors.” We believe that verypromising, private companies (such as those we will likely target) are in many instances grossly underfunded and missing out on the abilityto go public and bring their innovative products and solutions to a larger set of customers globally. Unlocking this potential will bekey to industry consolidation and breaking the dominance of China in the drone industry. We stand at the forefront of this importanttrend.

Our acquisition strategy will focus on private technologycompanies that are fundamentally changing the world at an unprecedented pace by making superior new products, establishing new markets,creating new experiences and generating revenue with a significant opportunity for growth. Key technological advances and practices, suchas new drone designs, automation, cloud computing, data analytics and intelligence platforms, open-source software development, developer-focusedsoftware tools, and software-defined networking, storage and computing, are allowing these companies to rapidly effect change in everymajor sector of the global economy.

Puerto Rico Advantages

According to the Puerto Rico Department of EconomicDevelopment and Commerce (“DEDC”), Puerto Rico has become a magnet for some of the world’s leading aviation and aerospacecompanies. With a long history of manufacturing experience and a strong cadre of engineering talent, the island has attracted multi-million-dollarinvestments from these and other major companies in recent years.

Puerto Rico is well positioned to capture much ofthe research, innovation, engineering, service and production activity related to the drone sector. Beyond industry incentives and federaltax programs, the island also offers the drone industry these benefits:

Planned Acquisition

As described under “The Business Combination,”we plan to acquire Fat Shark and Rotor Riot simultaneously with the closing of this Offering. Because the Company is still its developmentstage and has limited operations on a pre-transaction basis, the following is an overview of these entities and each of their principaloperations, products, development effort and marketing strategies, which will entail the Company’s business focus following theacquisition. While each entity exists independently, their operations have been structured and developed to complement each other andoperate largely in tandem, as the below discussions describes in greater detail.

Fat Shark - First Person View Drone Goggles

Fat Shark entered the market in 2007, when founder Greg French beganworking with camera-fitted aircraft and FPV headsets and decided to design and market his own version of these devices. Fifteen yearslater, Fat Shark is now a leading provider of drone racing FPV technology. Fat Shark aims to achieve optimal performance by investingtime and resources to develop quality products, and consulting top drone pilots for feedback and improvement in its product developmentand design efforts. The result is a high-quality product offering which has gained significant popularity and brand recognition withinthe freestyle flight and drone racing culture, including more casual hobbyists and enthusiasts.

Fat Shark and Rotor Riot operate in the drone first-personview, or “FPV,” market of the drone industry. This segment focuses on drones piloted with wearable display devices. Thesedevices are head mounted displays, or “HMDs,” or goggles for drone pilots. These goggles give pilots FPV perspective to controltheir drone in flight. This is a unique experience where the pilot is interacting with an aircraft through visual immersion. In this augmentedreality (AR), the pilot sees only what the drone sees, as if sitting in the pilot seat. This experience is accomplished by live streamingfootage from a camera mounted on the nose of the drone directly into specially designed goggles worn by the pilot. The image is transmittedvia radio (traditionally analog but increasingly digital) to the pilot. The drone remote control unit, the drone, and the FPV gogglesare all interconnected via radio. This effect requires sophisticated electronics that transmit visual information with sufficient speedand reliability to allow pilot control over the drone in real-time. Pilots routinely achieve speeds of over 90 mph in racing and othermission critical applications. Fat Shark’s FPV drone goggles enable the user to operate a drone to be remotely flown for as faras 5-10 miles away.

There are three common categories of FPV flight – freestyle flight,racing, and aerial photography. In freestyle, the pilot navigates around obstacles focused on acrobatics and exploring the environmentaround the aircraft through the HMD. This type of flight can be used for recreational or commercial photography and videography, publicand public safety as well as package delivery. FPV racing describes a growing spectator sport where pilots fly their drones in competitionsthrough a series of obstacles, flags, and gates in a racetrack. Aerial photography is the process of viewing and recording a subject matterfrom the air from the viewpoint of the pilot.

Rotor Riot – Drone-Focused E-commerce Platformand Digital Marketing

Rotor Riot is an e-commerce business focused on dronesand drone-related parts, with a marketing strategy which emphasizes drone culture and the popularity of drone racing and pilots withinthat culture. Rotor Riot sells drones and starter kits, flight design cameras, video transmitters, and FPV goggles, as well as the mounts,airframes and accessories to build or operate drone aircraft. Rotor Riot in partnership with Fat Shark designs, develops, assembles, andsells each of these FPV components both individually and in packages containing competitor product offerings. These products have gainedpopularity in FPV racing, and Rotor Riot sponsors multiple drone racing pilots. The Fat Shark and Rotor Riot product portfolios combinefor a total of over 400 SKUs, managed at its own state of the art fulfillment center in Orlando, FL. Rotor Riot also purchases and resellsdrones and components from leading manufacturers, including industry leader DJI, while custom designing and building its own line of brandedproducts and accessories.

Rotor Riot also offers customer support services,repair services and replacement parts for upkeep and maintenance for drone flyers seeking to improve upon their drone system’s hardware.These offerings are focused on capitalizing on the resulting need and enhancing customer experience long-term, in the hopes of achievingand maintaining customer loyalty and recurring revenue streams.

Rotor Riot markets through social media and attractsbuyers to its e-commerce platforms through digital advertising aimed towards drone enthusiasts. Rotor Riot maintains a robust presenceon Facebook and YouTube, and also sponsors real-world drone competitions and in-person educational experiences. As of February 16, 2023,Rotor Riot’s YouTube account has 260,000 subscribers, and its Facebook page has 42,000 followers. In addition, sports networks,and sponsors such as NBC, Sky, Liberty Media, Fox Sports, MGM, Hearst, and Twitter broadcast and sponsor global events where professionaldrone pilots and amateurs compete for prizes and sponsorships. Drone racing is a global sport with chapters, leagues, and pilots and establishedguidelines, rules and regulations for participation adopted by organizations such as MultiGP, Drone Racing League (“DRL”),IUDRO, DR1 Racing, Rotomatch League, FPVR, and Freespace Drone Racing. Pilots specially design their custom-built aircraft, selectingand customizing frames, motors, propellors and controllers for speed and maneuverability from Rotor Riot. Rotor Riot sponsors five ofthe leading pilots on the competitive FPV racing circuit, including the 2019 and 2018 Drone Racing League champion. Drone pilots and spectatorsalike experience real-time flight through their own HMD. In addition, Fat Shark sponsored its first drone racing championship in 2015.

Rotor Riot also leverages the popularity of its productsamong competitive racing pilots by entering into agreements with the pilots to market its products. Under these agreements, each pilotagrees to represent the Rotor Riot brand to the public and periodically provide marketing materials, typically videos, that the Companycan publish on its website and social media platforms, in exchange for cash payments. In addition, the Company pays the pilots a percentageof the proceeds from the sales of that pilot’s “signature” products, and of sales generated from the pilot’s onlinemarketing materials.

Products

Set forth below are overviews of our principal productofferings and product development efforts.

Fat Shark FPV Products

Rotor Riot Retail Sales

In addition to marketing Fat Shark’s products,Rotor Riot also resells a variety of drones and drone-related products, including competitor FPV goggles as well as competitor offerings,through its website. Rotor Riot had 95,356 unique visitors to its e-commerce website in October 2022 with 110,782 total sessions.Rotor Riot has 55,520 customers.

Product Warranties

Fat Shark provides a two-year warranty on its products.

Rotor Riot does not provide warranties for the productsit sells. Rotor Riot has launched Kwad Care, a program that helps pilots cover damages to their Rotor Riot Built and Tuned Drones. KwadCare is a monthly paid membership that grants customers that have bought built and tuned drones from Rotor Riot access to free repairlabor, discounts on replacement parts, and VIP customer care. Current Rotor Riot customers are charged $19.99 per month which includeslabor on repairs and 20% discount on replacement parts.

Suppliers

Rotor Riot purchases itsinventory from over 60 suppliers. A majority of the inventory is purchased from the following vendors: T-Motor, ASI, Caddx, and DroneNerds.

Fat Shark’sprimary contract manufacturer is Shenzhen Fat Shark Technology Ltd., referred to elsewhere in this Prospectus as the“Supplier”, which is located in Shenzhen, China and provides product manufacturing services, including raw materialprocurement, under a requirements agreement with us. The majority owner of this entity is the wife of Fat Shark’s founder. Wedo not have any written agreements with the Supplier and rely only on purchase orders. See “Related PartyTransactions” for more information. Also see the Risk Factor titled “Rising threats of internationaltariffs, including tariffs applied to goods between the U.S. and China, may materially and adversely affect our business.”on page 26 for more information.

Tariffs

Because we contract with foreign vendors toobtain our inventory, we are subject to tariffs and import/export regulations. In particular, because Fat Shark’s principalmanufacturer is located in China, and approximately 68% of Rotor Riot’s inventory is purchased directly from China-basedvendors, all of these items are subject to tariffs. Further, because of these tariffs and Rotor Riot’s reliance on Chinesevendors, Rotor Riot has had to raise prices from some of the products it sells. See the Risk Factor titled “Rising threats ofinternational tariffs, including tariffs applied to goods between the U.S. and China, may materially and adversely affect ourbusiness.” on page 26 for more information.

Customers

Fat Shark’s sales model is a“B2B2C” model, meaning it sells to retail distributors which in turn sell the products to end users. Rotor Riot is aprincipal customer of Fat Shark accounting for approximately 4% of Fat Shark’s revenue in its fiscal year ended December 31,2021. Rotor Riot’s customers are therefore end users of the drones and drone products it sells to drone enthusiasts, hobbyistsand competitive racers, which includes the Fat Shark FPV goggles as well as drones and drone components offered by third parties.Fat Shark’s other customers are also competitors of Rotor Riot, as these customers purchase Fat Shark inventory and sell it todrone users. Because their products are presently focused on recreational drone uses, the end users who purchase these products aremainly enthusiasts, hobbyists, competitive droner racers, photographers and videographers.

The culture of FPV flight has and we believewill continue to inspire a new generation of pilots. These are the people and customers who enjoy exploring the world through a newand unique perspective, the people who find solace in the world of flight, and the people who innovate new technologies to enablethe culture to thrive. The FPV community has taken the knowledge of 80 years of model aviation to the next level, allowing for amore immersive experience with new and emerging technologies.

Sales and Marketing Strategy

Following the planned acquisition, and assuming wecan raise sufficient capital in this Offering or subsequent financings, we will deploy a robust sales and marketing strategy.We intend to sell and market our products in the following ways, in addition to Rotor Riot’s existing marketing and sales channelsdescribed above:

In addition, as we strive to grow our operations,we intend to deploy a “land-and-expand” business model in which we plan to establish relationships with new customers andgrow those relationships over time by providing high quality products and services. We believe the acquisition of Fat Shark and RotorRiot, and the product quality and brand recognition they have developed, will be an important component of this strategy.

Growth Strategy

We plan to organically grow by building and sellingbest in class FPV drone technologies. In parallel, we are investing in the development of products, services and go-to-market strategiesthat serve a broader set of industries. Lastly, we will take a proactive approach to search for and acquire promising private companieswith complementary businesses. Our business strategy includes the following:

Competition

While competition as described below is a concern,we believe that Brandon Torres Declet, our Chief Executive Officer, has a significant background in the drone business which we believeis a competitive advantage. See “Management and Board of Directors.”

Rotor Riot competes with a number of significantlylarger, better capitalized companies. SZ DJI Technology Company, Ltd., commonly known as DJI, is a leader in the consumer drone segmentwith a global market share estimated at more than 70%, according to industry research firms. In addition to competing with DJI, RotorRiot purchases and sells DJI products on its website. Other Rotor Riot competitors include GetFPV, Race Day Quads, PyroDrone, Parrot,and Lumenier. Race Day Quads is a larger, direct competitor in the FPV sector. We will compete against these companies by leveragingour visibility on the Internet through Rotor Riot’s Facebook page which as of February 22, 2023 has more than 41,000 members andour Rotor Riot YouTube channel which as of February 22, 2023 has more than 260,000 subscribers. The Rotor Riot brand has been atthe center of the racing and freestyle culture of drones since 2015. Rotor Riot sponsors five leading FPV pilots on the competitive racingcircuit, including the Drone Racing League champion pilot in 2018 and 2019.

Fat Shark competes against DJI which is the dominantmarket leader in the consumer segment. Fat Shark also competes with other FPV headset companies that include Skyzone, Orqa, and HD Zero.The Fat Shark brand has been synonymous with FPV headsets to many industry participants since the emergence of the market in 2008. FatShark continues to compete through partnerships with other FPV companies and a focus on superior design, manufacturing and product quality.

There has also been a proliferation of startups inthe drone industry, driving fragmentation and lowering prices. We believe that this fragmentation does little to address the needs ofusers of drones or our future customers. We expect that as the industry grows, customers will ultimately rely on companies and platformsthat consolidate solutions to unify the key categories of the drone industry. As part of our acquisition strategy, the Company is engagingcompanies with industry-leading technology and intellectual property, or customers that can be brought together under our brand. We believethat this consolidation strategy will enable us to grow faster in the developing drone industry.

We expect competition in the drone industry, whichis already intense, to increase as other companies enter the drone market, as customers’ requirements evolve, and as new productsand technologies are introduced. Several of our competitors have greater name recognition, much longer operating histories, greater financialresources, more and better-established customer relationships, larger sales forces and significantly greater resources. As a result, theymay be able to respond more quickly to new or emerging technologies and changes in customer requirements or devote greater resources tothe development, promotion and sale of their products than us, hampering our ability to successfully compete with respect to certain ofthese factors. Increased competition may lead to price cuts or the introduction of products available for free or a nominal price, fewercustomer orders, reduced gross margins, longer sales cycles and loss of market share. We may not be able to compete successfully againstcurrent and future competitors, and our business, results of operations and financial condition maybe harmed if we fail to meet thesecompetitive pressures.

Government Regulation of Drones

In the U.S., the FAA is responsible for the regulationand oversight of civil aviation within the U.S. Its primary mission is to ensure the safety of civil aviation. The FAA has adopted thename “unmanned aircraft” to describe aircraft systems without a flight crew on board. More common names include: drone, UAS,UAV, and remotely operated aircraft.

The FAA began issuing regulations governing dronesin 2005 with their scope and frequency expanding in recent years with the significant increase in the number of drones sold. In December2015, the FAA’s UAS Registration Task Force, of which our CEO and Chairman Brandon Torres Declet was a member, announced that alldrones weighing more than 250 grams, or 0.55 pounds, must be registered with the FAA. As of July 2022, the FAA reported the registrationof 858,550 drones, of which 318,455 were commercial and 536,482 were recreational. In addition, more than 286,184 remote pilots were certified.

In December 2015, the FAA enacted the primaryregulation governing the use of drones, 14 CFR Part 107 (“Part 107”), which governs the use of drones weighing less than55 pounds, on takeoff, including everything that is on board or otherwise attached to the drone. Key provisions of Part 107 includethe following: (1) the drone must remain within either the visual line of sight (“VLOS”) of the remote pilot in command andthe person manipulating the flight controls or the VLOS of a visual observer; (2) the drone must at all times remain close enough tothe remote pilot and person manipulating the flight controls for these people to see it with unaided vision; (3) drones may only operatein daylight or civil twilight (30 minutes before official sunrise to 30 minutes after official sunset); (4) drones may not exceed a maximumgroundspeed of 100 mph; (5) drones may not exceed a maximum altitude of 400 feet above ground level, or if they exceed this altitude,must remain within 400 feet of a structure; (6) drones cannot operate in Class B, C, D, and E airspace without permission; (7) the pilotin command must conduct a pre-flight inspection; (8) to operate a drone, the pilot must either hold a remote pilot airman certificateor be under the direct supervision of someone with such a certificate; (9) drone operators must register their drones with the FAA.

In January 2021, the FAA finalized rules requiringthat drones be identifiable remotely. These rules became effective for drone manufacturers in September 2022 and for will be effectivefor drone pilots in September 2023. The FAA believes that remote ID technologies will enhance safety and security by allowing theFAA, law enforcement, and federal security agencies to identify drones flying in their jurisdiction. These efforts lay the foundationfor more complex operations, such as those beyond visual line of sight at low altitudes, as the FAA and the drone industry move towarda traffic management ecosystem for Unmanned Aircraft System flights separate from, but complimentary to, the air traffic management system.

On March 10, 2022, the FAA’s Unmanned AircraftSystems Beyond Visual Line of Sight Aviation Rulemaking Committee (“ARC”), of which our CEO and Chairman Brandon Torres Decletwas a member, issued its final report to the FAA. In terms of key recommendations, the ARC recommends that the FAA set an acceptable levelof risk (“ALR”) for UAS that is consistent across all types of operations being performed. The ARC envisions that this approachwill allow the FAA to adopt a common and consistent set of regulations and guidance, giving operators the flexibility to meet the ALRthrough qualitative or quantitative methods, or a hybrid approach. Next, the ARC recommends a series of modifications to the right ofway rules in Low Altitude Shielded Areas (within 100’ of a structure or critical infrastructure as defined in 42 U.S.C. § 5195(c)(2)and in Low Altitude Non-Shielded Areas (below 400’) to accommodate unmanned aircraft (“UA”) operations.

We cannot assure you that any final legislation orrules enacted in furtherance of the FAA’s or other regulatory bodies’ announced proposals will result in the expanded useof our products, or that they will not limit or restrict their use or our market share.

The Company believes that the oversight of the FAAis beneficial to the drone industry generally, and the Company specifically. Approximately 10% of the drones sold by Rotor Riot are belowthe 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. Because Fat Shark only develops and produces FPV goggles and associated components, FAA regulationsdo not currently govern the sale, registration or operation of Fat Shark products.

Environmental Considerations

Compliance with applicable environmental laws sinceinception has not had a material effect upon our capital expenditures, earnings or competitive position. However, drones are battery operatedwhich use electricity for charging. To that extent, except for users who use solar and other non-electrical power to charge drones, usersof drones we sell burn carbon which negatively affects the environment. Further, the SEC’s climate change rules, when passed willlikely increase our compliance costs.

Research and Development

Research and development activities are part of FatShark’s business, and we will follow a disciplined approach to investing our resources to create new drone technologies and solutions.In the years ending April 30, 2022 and 2021, Fat Shark’s research and development costs were approximately 15.5% and 5.7%, respectively,of its revenues. A fundamental part of this approach is a well-defined screening process that helps us identify commercial opportunitiesthat support desired technological capabilities in the markets we serve. Our research will include the enhancement of our goggle productsfor consumers that enjoy FPV flight and to enterprise customers whose problems could be solved via FPV flight.

Employees and Human Capital Resources

As of March 7, 2023, we had three full-time employees.We believe that we maintain good relations with our employees. However, with our acquisition of Fat Shark and Rotor Riot, we expect toadd 11 employees and one consultant. We currently have one consultant who we pay $10,000 a month. Upon the consummation of the BusinessCombination, we intend to continue Fat Shark’s relationship with Greg French and will pay Mr. French an annual consulting fee of$150,000 or $12,500 per month. We intend to evaluate how we attract and retain the best talent in the industry and create a world classculture. Since our business is new and evolving, we have not evaluated these factors historically.

Legal Proceedings

From time-to-time, we may become involved in variouslegal proceedings that arise in the ordinary course of business or otherwise. Legal proceedings are subject to inherent uncertaintiesas to timing, outcomes, costs, expenses and time expenditures by our management and others on our behalf. We are currently not a partyto any litigation and have been advised Fat Shark and Rotor Riot are not included in any litigation.

Facilities

Our principal executive offices are located at 151Calle De San Francisco Ste. 200 PMB 2106 San Juan, Puerto Rico 00901-1607. Rotor Riot also has a three-year lease for a 3,700 sq. footfacility in Orlando, FL. As the Company expands, we will seek to expand our facilities to support engineers, technical and support staffwe intend to hire. There is a large pool of available properties in Florida and Puerto Rico. Specifically, we will also be looking foradditional warehouse and office space in South Florida with immediate access to airports and multi-modal logistics (air, sea,land) for more rapid shipping of FPV products.

Intellectual Property

Our commercial success will depend substantially onthe ability to obtain patents and other intellectual property rights and maintain adequate legal protection for products in the UnitedStates and other countries. We will be able to protect our intellectual property from unauthorized use by third parties only to the extentthat these assets are covered by valid and enforceable patents, trademarks, copyrights or other intellectual property rights, or are effectivelymaintained as trade secrets.

We recently filed for a trademark on our logo.We expect to acquire from Red Cat the following patents and trademarks related to the Fat Shark and Rotor Riot brands and productsfollowing the acquisition of those entities:

The following table summarizes currently issued patents(indicated by “Issued”) including the grant dates thereof, and patent applications (indicated by “Pending or Published”),currently held and/or used by Red Cat and its subsidiaries in connection with Fat Shark’s and Rotor Riot’s operations. Asthe chart indicates, some of these patents are in the U.S., where when issued the patent protection generally applies for 20 years fromthe date the patent application was made (subject to potential extension, if applied for and granted). In general, patent protection providesthe patent holder with a monopoly on the invention within its scope for the duration of the patent.

Trademark Portfolio

The following table summarizes current registeredtrademarks (indicated by “Registered”) including the registration dates, held and/or used by Red Cat and its subsidiariesin connection with Fat Shark’s and Rotor Riot’s operations. As the chart indicates, these trademarks are registered in theU.S. and abroad.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

The following discussionand analysis of financial condition and results of operations should be read together with our financial statements and accompanyingnotes, and our appearing elsewhere in this Prospectus. This Management’s Discussion and Analysis contains forward-looking statementsthat involve risks and uncertainties. Please see “Forward-Looking Statements” set forth in the beginning of this Prospectusand see “Risk Factors” beginning on page 8 for a discussion of certain risk factors applicable to ourbusiness, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occurin future periods. Please note that because we and Red Cat have different fiscal years, the period-to-period results are not comparable.

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Overview

We are a Puerto Rico corporation organizedin 2019. We are engaged in the commercial drone industry but to date have not generated any material revenues. Our current primary businessobjective is to consummate the Business Combination which we believe will accelerate our role in this industry. See “TheBusiness Combination”.

Simultaneous with the closing of this Offering,we will acquire Fat Shark and Rotor Riot from Red Cat with a goal of becoming a first-person view, or “FPV,” technology marketleader. Fat Shark is a leader in FPV, designing and manufacturing ultra-low latency video goggles for drone pilots. Rotor Riot is ane-commerce marketplace, backed by the largest community of FPV drone pilots in the world. Over the next two years, our goal is to materiallygrow these businesses, while expanding into new enterprise verticals like public safety and drone delivery. This is part of our visionto enable people to be part of the robotics revolution. Red Cat acquired Rotor Riot in January 2020 and Fat Shark in November 2020.

The following management discussion and analysisincludes the results of operations, cash flow activities and liquidity and capital resources for each Unusual Machines, Fat Shark andRotor Riot and are marked accordingly below.

Unusual Machines Results of Operations

Years Ended December 31, 2022 and 2021

Revenue

During the year ended December 31, 2022, wedid not generate any revenues compared to $4,989 revenues during the year ended December 31, 2021 representing a decrease of $4,989 or100%. Revenues from 2021 related to limited sales to Rotor Riot which did not occur in 2022.

Operating Expenses

During the year ended December 31, 2022, weincurred research and development expenses totaling $91,325 compared to $0 for the year ended December 31, 2021 resulting in an increaseof $91,325 or 100%. The increase relates to professional fees for product design work that was subsequently placed on hold given theproposed business combinations of Fat Shark and Rotor Riot.

During the year ended December 31, 2022, weincurred general and administrative expenses totaling $1,150,522 compared to $166,868 for the year ended December 31, 2021, resultingin an increase of $983,654 or 589.5%. The increase primarily relates to Unusual Machines building out its operations. This includes hiringan executive team, legal expenses related to the business combination, and professional fees for preparation of becoming a public company.

Net Loss

Net loss for the year ended December 31, 2022,totaled $1,242,584 compared to $161,876 for the year ended December 31, 2021, resulting in an increase of $1,080,708. The increase innet loss is almost entirely related to the increase in general and administrative expenses and research and development expenses as westart to build out our operations for the business combination and becoming a public company.

Fat Shark Results of Operations

Six Months Ended October 31, 2022 and2021

Revenue

During the six months ended October 31, 2022(or the “2022 period”), Fat Shark generated revenues totaling $1,983,871 compared to $1,894,496 revenues during the six monthsended October 31, 2021 (or the “2021 period) representing an increase of $89,375 or 4.5%. Revenues can fluctuate from period toperiod and the modest difference between periods was not related to any specific reason but generally reflective of normal changes asthe life cycles of our products mature. During the 2022 period, the Company launched its newest product, the Dominator while revenuesduring the 2021 period reflected the discounted sales of products at the end of their life cycle.

Cost of Goods Sold

During the six months ended October 31, 2022,Fat Shark incurred cost of goods sold of $1,727,121 compared to $1,887,766 during the six months ended October 31, 2021 resulting ina decrease of $160,645 or 9.3%. The entire decrease related to higher relative material costs during the 2021 period as the Company loweredprices to promote sales of products near the end of their life cycle. The lower sales prices required more materials in order to generatea relatively comparable level of sales.

Gross Margin

During the six months ended October 31, 2022,Fat Shark gross margin was $256,750 compared to $6,730 during the six months ended October 31, 2021, resulting in an increase of $250,020or 97.4%. Fat Shark gross margin, as a percentage of sales, totaled 12.9% during the six months ended October 31, 2022 compared to 0.4%during the six months ended October 31, 2021. During the first quarter of the 2022 period, Fat Shark launched its newest product, theDominator, which generated higher gross margins compared to the 2021 period when the promotional, discounted sales of outdated productsresulted in significantly lower gross margins.

Operating Expenses

During the six months ended October 31, 2022,Fat Shark incurred operations expense totaling $135,030, compared to $141,834 during the six months ended October 31, 2021, resultingin a decrease of $6,804 or 5.0%. The decrease during the 2022 period reflects lower professional fees compared to the 2021 period, partiallyoffset by higher payroll expense compared to the 2021 period.

During the six months ended October 31, 2022,Fat Shark incurred research and development expenses totaling $143,469 compared to $215,555 for the six months ended October 31, 2021resulting in a decrease of $72,086 or 50.2%. The decrease primarily relates to the release of the new Dominator googles, which resultedin a lower need of research and development expenses during the 2022 period.

During the six months ended October 31, 2022,Fat Shark sales and marketing expenses totaled $9,726 compared to $31,853 for the six months ended October 31, 2021, resulting in a decreaseof $22,127 or 227.5%. The decrease primarily relates to certain personnel working during the 2021 period who were not employed duringthe 2022 period.

During the six months ended October 31, 2022,Fat Shark incurred general and administrative expenses totaling $60,893 compared to $100,149 for the six months ended October 31, 2021,resulting in a decrease of $39,256 or 64.5%. The decrease primarily relates entirely to lower payroll and business travel costs comparedto the 2021 period.

Net Loss

Fat Shark net loss for the six months endedOctober 31, 2022, totaled $139,728 compared to $530,782 for the six months ended October 31, 2021 resulting in a decrease of $391,054or 279.9%. The decrease in Fat Shark net loss is primarily related to the increase in overall gross margin from the launch of the Dominatorgoogle combined with pricing discounts from the prior year. In addition, Fat Shark incurred less research and development expense dueto the release of its new product.

Fat Shark Results of Operations

Years Ended April 30, 2022 and 2021

Revenue

During the year ended April 30, 2022 (or the“2022 period”), Fat Shark generated revenues totaling $2,627,792 compared to $2,887,475 during the year ended April 30, 2021(or the “2021 period), representing a decrease of $259,683 or 9.0%. Revenues can fluctuate from period to period and are generallyreflective of normal changes as the life cycles of our products mature. During the 2022 period, the Company’s key products werein a later stage of their maturation which resulted in lower sales compared to the 2021 period.

Cost of Goods Sold

During the year ended April 30, 2022, FatShark incurred cost of goods sold of $2,569,307 compared to $2,361,342 during the year ended April 30, 2021 resulting in an increaseof $207,965 or 8.8%. The increase relates to higher costs of products being sold including increases in material costs due to the globalsupply chain issues, and an increase in products sold during the year ended April 30, 2022.

Gross Margin

During the year ended April 30, 2022, FatShark gross margin was $58,485 compared to $526,133 during the year ended April 30, 2021, resulting in a decrease of $467,648 or 88.9%.Fat Shark’s gross margin, as a percentage of sales, totaled 2.2% during the year ended April 30, 2022 compared to 18.2% duringthe year ended April 30, 2021. The lower level of gross margin primarily related to Fat Shark providing pricing discounts associatedwith the sales of products at the end of their life cycle in anticipation of the release of its new product, the Dominator.

Operating Expenses

During the year ended April 30, 2022, FatShark’s operations expenses totaled $252,545 compared to $208,990 during the year ended April 30, 2021, resulting in an increaseof $43,555 or 20.8%. The increase during the 2022 period reflects higher professional services fees compared to the 2021 period.

During the year ended April 30, 2022, FatShark incurred research and development expenses totaling $407,881 compared to $165,427 for the year ended April 30, 2021 resulting inan increase of $242,454 or 146.6%. The increase primarily relates to an increase in payroll and material costs for Fat Shark relatedto its next generation product release.

During the year ended April 30, 2022, FatShark’s sales and marketing expenses totaled $60,616 compared to $27,110 for the year ended April 30, 2021, resulting in an increaseof $33,506 or 123.6%. Sales and marketing expenses were higher during the 2022 period as the Company was preparing for the launch ofthe Dominator compared to the 2021 period when the Company’s then existing key products had been previously launched and did notrequire extensive sales and marketing efforts.

During the year ended April 30, 2022, FatShark incurred general and administrative expenses totaling $169,096 compared to $121,053 for the year ended April 30, 2021, resultingin an increase of $48,043 or

39.7%. The increase primarily relates to higherpayroll and business travel costs which increased by $21,147 and 14,552, respectively, compared to the 2021 period.

Net Loss

Fat Shark’s net loss for the year endedApril 30, 2022, totaled $910,723 compared to $27,890 for the year ended April 30, 2021 resulting in an increase of $882,833. The increasein Fat Shark’s net loss is primarily related to lower gross margin for Fat Shark related to pricing discounts on end-of-life cycleproducts and higher research and development expenses related to the release of the new generation product, the Dominator.

Rotor Riot Results of Operations

Six Months Ended October 31, 2022 and2021

Revenue

During the six months ended October 31, 2022 (or the “2022period”), Rotor Riot generated revenues totaling $

1,624,947 compared to $914,460 during thesix months ended October 31, 2021 (or the “2021 period”), representing an increase of $710,487 or 77.7%. The increase inrevenues primarily related to the Company’s newly launched strategic initiatives, primarily focused on increased digital marketingefforts results in a strong increase in sales compared to the 2021 period.

Cost of Goods Sold

During the six months ended October 31, 2022,Rotor Riot incurred cost of goods sold of $1,394,051 compared to $781,797 during the six months ended October 31, 2021 resulting in anincrease of $612,254 or 78.3%. The increase relates to higher revenue as revenue increased by a consistent 77.7% during the same period.

Gross Margin

During the six months ended October 31, 2022,Rotor Riot’s gross margin was $230,896 compared to $132,663 during the six months ended October 31, 2021, resulting in an increaseof $98,233 or 74.0%. Gross margin, as a percentage of sales, totaled 14.2% during the six months ended October 31, 2022 compared to 14.5%during the six months ended October 31, 2021. Gross margin as a percentage of sales remained relatively consistent over the same period.

Operating Expenses

During the six months ended October 31, 2022,Rotor Riot incurred operations expenses totaling $197,808 compared to $148,203 during the six months ended October 31, 2021, resultingin an increase of $49,605 or 33.5%. The increase primarily relates to increased office and facilities expenses as well as meals, training,and travel.

During the six months ended October 31, 2022,Rotor Riot incurred research and development expenses totaling $27,295 compared to $23,849 for the six months ended October 31, 2021resulting in an increase of $3,446 or 14.4%. The increase primarily relates to increased payroll costs.

During the six months ended October 31, 2022,Rotor Riot’s sales and marketing expenses totaled $353,565 compared to $113,577 for the six months ended October 31, 2021, resultingin an increase of $239,988 or 211.3%. Sales and marketing expenses were significantly higher in the 2022 period as the Company launchednew strategic initiatives, including an increase in the scope and breadth of its digital advertising programs. These initiatives resultedin significant increases in payroll, advertising, and video production costs.

During the six months ended October 31, 2022,Rotor Riot incurred general and administrative expenses totaling $98,591 compared to $99,150 for the six months ended October 31, 2021,resulting in a decrease of $559 or 0.6%.

Net Loss

Rotor Riot’s net loss for the six monthsended October 31, 2022, totaled $535,419 compared to $324,536 for the six months ended October 31, 2021 resulting in an increase of $210,883or 65.0%. The increase in net loss is primarily related to increased sales and marketing expenses during the 2022 period. In the 2022period, the Company launched new strategic initiatives, including an increase in the scope and breadth of its digital advertising programs.These initiatives resulted in significant increases in payroll, advertising, and video production costs.

Rotor Riot Results of Operations

Year Ended April 30, 2022 and 2021

Revenue

During the year ended April 30, 2022 (or the“2022 period”), Rotor Riot generated revenues totaling $2,028,149 compared to $2,194,503 during the year ended April 30,2021 (or the “2021 period”), representing a decrease of $166,354 or 7.6%. Revenues can fluctuate from period to period andare generally reflective of normal changes through the life cycles of the products that we sell.

Cost of Goods Sold

During

the year ended April 30, 2022, Rotor Riotincurred cost of goods sold of $1,587,647 compared to $1,638,070 during the year ended April 30, 2021 resulting in a decrease of $50,396or 3.1%. The decrease related to lower revenues during the 2022 period.

Gross Margin

During the year ended April 30, 2022, RotorRiot’s gross margin was $440,475 compared to $556,433 during the year ended April 30, 2021, resulting in a decrease of $115,958or 20.8%. Gross margin, as a percentage of sales, totaled 21.7% during the year ended April 30, 2022 compared to 25.4% during the yearended April 30, 2021. The lower level of gross margin primarily related to higher costs of products being sold including increases inmaterial costs due to the global supply chain issues.

Operating Expenses

During the year ended April 30, 2022, RotorRiot incurred operations expense totaling $372,473 compared to $374,556 during the year ended April 30, 2021, resulting in a decreaseof $2,083 or 0.6%.

During the year ended April 30, 2022, RotorRiot incurred research and development expenses totaling $58,719 compared to $28,368 for the year ended April 30, 2021, resulting inan increase of $30,351 or 107.0%. The increase primarily relates to increased payroll costs.

During the year ended April 30, 2022, RotorRiot incurred sales and marketing expenses totaling $220,007 compared to $81,449 for the year ended April 30, 2021, resulting in an increaseof $138,558 or 170.1%. The increase primarily relates to an increase in payroll and advertising program costs for Rotor Riot.

During the year ended April 30, 2022, RotorRiot incurred general and administrative expenses totaling $220,366 compared to $121,342 for the year ended April 30, 2021, resultingin an increase of $99,024 or 81.6%. The increase primarily related to increased information technology costs associated with the implementationof more sophisticated software systems. Additionally, office, meals, travel, and training expenses also increased.

Net Loss

Rotor Riot’s net loss for the year endedApril 30, 2022, totaled $596,878 compared to $69,609 for the year ended April 30, 2021 resulting in an increase of $527,269. The increasein net loss is primarily related to increased stock compensation, general and administrative, and sales and marketing expenses.  

Liquidity and Capital Resources

Unusual Machines Cash Flows

Year Ended December 31, 2022 and 2021

Operating Activities

Net cash used in operating activities was$1,231,794 during the year ended December 31, 2022 compared to net cash used in operating activities of $162,821 during the year endedDecember 31, 2021, representing an increase of $1,068,973 or 656%. This increase in net cash used primarily resulted from our increasein net loss of $1,242,584 offset by non-cash expenses of $885 and changes in working capital of $9,905.

Financing Activities

Net cash provided by financing activitiestotaled $549,900 during the year ended December 31, 2022 compared to $3,948,065 during the year ended December 31, 2022, resulting ina decrease in net cash provided by financing activities of $3,398,165 or 86.1%. The decrease is entirely related to proceeds receivedfrom exempt private offerings of our common stock.

Fat Shark Cash Flows

Six Months Ended October 31, 2022 and2021

Operating Activities

Fat Shark net cash used in operating activitieswas $3,053,300 during the six months ended October 31, 2022 compared to net cash used in operating activities of $240,444 during thesix months ended October 31, 2021 representing an increase of $2,830,472. This increase in net cash used primarily resulted from FatShark’s increase in other assets, most of which is prepaid inventory of $2,146,775, increase in inventory of $670,560, increasein accounts receivable of $514,044, and net loss of $139,728. This was offset by non-cash expenses of $47,483 and changes in other workingcapital of $370,355.

Financing Activities

Fat Shark net cash provided by financing activitiestotaled $3,007,298 during the six months ended October 31, 2022 compared to $517,128 during the six months ended October 31, 2021, resultingin an increase of net cash provided by financing activities of $2,490,170. Cash provided by financing activities during the six monthsended October 31, 2022 consisted of $3,007,298 of proceeds from a related party as compared to 2,137,928 of proceeds from a related partyduring the six months ended October 31, 2021. In addition, Fat Shark made payments of $1,620,800 related to debt obligations during thesix months ended October 31, 2021. These debt obligations have been fully repaid and no payments were made during the six months endedOctober 31, 2022.

Fat Shark Cash Flows

Year Ended December 31, 2022 and 2021

Operating Activities

Fat Shark net cash used in operatingactivities was $783,810 during the year ended April 30, 2022 compared to net cash used in operating activities of $156,189 duringthe year ended April 30, 2021 representing an increase of $643,227 or 411.8%. This increase in net cash used primarily resulted fromFat Shark’s increase in net loss of $882,833 offset by non-cash expenses of $29,867 and changes in working capital of$209,739.

Financing Activities

Fat Shark net cash provided by financing activitiestotaled $848,195 during the year ended April 30, 2022 compared to $201,027 during the year ended April 30, 2021. The cash provided byfinancing activities in 2022 consisted of $2,468,995 of proceeds from a related party offset by $1,620,800 payments on debt obligations.The cash provided by financing activities in 2021 consisted of $201,027 of cash acquired through Red Cat’s acquisition of Fat Shark.

Rotor Riot Cash Flows

Six Months Ended October 31, 2022 and2021

Operating Activities

Rotor Riot net cash used in operating activitieswas $953,367 during the six months ended October 31, 2022 compared to net cash used in operating activities of $480,015 during the sixmonths ended October 31, 2021 representing an increase of $501,595 or 104.5%. This increase in net cash used primarily resulted fromRotor Riot’s increase in net loss of $210,883 and changes in working capital of $290,712.

Financing Activities

Rotor Riot net cash provided by financingactivities totaled $960,915 during the six months ended October 31, 2022 compared to $415,834 during the six months ended October 31,2021. The cash provided by financing activities during the six months ended October 31, 2022 consisted of $960,915 of proceeds from arelated party. Cash provided by financing activities during the six months ended October 31, 2021 consisted of $607,157 of proceeds froma related party offset by $191,323 from payments related to debt obligations. These debt obligations have been fully repaid and no paymentswere made during the six months ended October 31, 2022.

Rotor Riot Cash Flows

Year Ended December 31, 2022 and 2021

Operating Activities

Rotor Riot net cash used in operating activitieswas $678,206 during the year ended April 30, 2022 compared to net cash used in operating activities of $433,294 during the year endedApril 30, 2021 representing an increase of $405,999 or 93.7%. This increase in net cash used primarily resulted from Rotor Riot’sincrease in net loss of $527,269 offset by changes in working capital of $121,270.

Financing Activities

Rotor Riot net cash provided by financingactivities totaled $591,339 during the year ended April 30, 2022 compared to $488,723 during the year ended April 30, 2021. The cashprovided by financing activities in 2022 consisted of $860,384 of proceeds from a related party offset by payments on debt obligationsof $269,045. Cash provided by financing activities in 2021 consisted of proceeds of $338,449 and proceeds of $150,274 from debt obligations.

Unusual Machines Liquidity and Capital Resources

As of December 31, 2022, we had current assets totaling$3,326,622 primarily consisting of cash balances of $3,099,422. Our current liabilities as of December 31, 2022 totaled $120,938, consistingentirely of accounts payable and accrued expenses. Our net working capital as of December 31, 2022 was $3,205,684. Our cash balance asof March 3, 2023 was approximately $2,600,000.

To date, our operations and business developmenthave been funded exclusively by exempt private offerings of our common stock. In the Fall of 2021, we closed a private offering of 4,552,000shares of common stock at a price of $0.50 per share for total proceeds of $2,276,000. On December 31, 2021, we closed an additional privateoffering of 482,500 shares of common stock at a price of $4.00 per share for total gross proceeds of $1,930,000, of which we receivednet proceeds of $1,842,000 after fees and other expenses. On July 25, 2022, we closed an additional private offering of 150,000 sharesof common stock at a price of $4.00 per share for total proceeds of $600,000. While we have sufficient cash resources to support our operationsfor the next 12 months, we cannot complete the acquisition of Fat Shark and Rotor Riot unless we close this Offering. Assuming we do acquireFat Shark and Rotor Riot, we expect we will have sufficient working capital to support our operations for at least 12 months followingthe closing of this Offering.

Going Concern

The reports from the independent registered publicaccounting firm for the fiscal year ended April 30, 2022 for Fat Shark Holdings Ltd. and for the fiscal year ended April 30, 2022 forRotor Riot, LLC, includes an explanatory paragraph stating each company has recurring net losses from operations, negative operating cashflows, does not yet generate revenue from operations and will need additional working capital for ongoing operations. These factors, amongothers, raise substantial doubt about each company's ability to continue as a going concern. If Fat Shark and Rotor Riot obtain sufficientfunding, including advances from us with the proceeds of this Offering, we expect each will no longer operate as a going concern. Withthe closing of this Offering, we will not be a going concern, however, we note our continuing losses in the going concern risk factoron page 8.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes havebeen prepared in accordance with GAAP applied on a consistent basis. The preparation of financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiods.

We regularly evaluate the accounting policies andestimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financialstatements. 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 fromthose estimates made by management. 

Property and equipment are stated at cost. Depreciationand amortization are computed using straight-line methods over the estimated useful lives of the related assets. When property and equipmentis retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any resultinggain or loss on disposition is reflected in operations. Repairs and maintenance are expensed as incurred; expenditures for additions,improvements and replacements are capitalized. The various classes of fixed assets are depreciated over their estimated useful lives asfollows:

Computer equipment – 3years

Goodwill represents the excessof the purchase price of an acquisition over the estimated fair value of identifiable net assets acquired. The measurement periods forthe valuation of assets acquired and liabilities assumed ends as soon as information on the facts and circumstances that existed as ofthe acquisition date becomes known, not to exceed 12 months. Adjustments in a purchase price allocation may require a change in the amountsallocated to goodwill during the periods in which the adjustments are determined. 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncementsthat are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, andthe Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impacton its financial position or results of operations.

MANAGEMENT AND BOARD OF DIRECTORS

Board of Directors, Executive Officers and Significant Employees

Set forth below are our executive officers and members of our Board ofDirectors (the “Board”).

Our directors hold office until the next annual meetingof shareholders of the Company and until their successors have been elected and qualified. Our officers are elected by and serve at thediscretion of the Board.

Biographies

Brandon Torres Declet, ChiefExecutive Officer, and Chairman of the Board of the Directors

Brandon Torres Declet has served as the Chief Executive Officer andChairman of the Board of the Company since April 2022. Prior to that, he provided strategic and fiduciary leadership at AgEagle AerialSystems, Inc. (NYSE: UAVS), a leading commercial drone company, as Chief Executive Officer and Director from May 2021 to January 2022,and as Chief Operating Officer from April 2021 to May 2021. Previously, he founded Measure UAS, Inc. (“Measure”) in May 2014and served as its Chief Executive Officer from its founding until November 2019, where he built and grew this aerial intelligence companyto the top 5% of drone firms by revenue – subsequently selling the Measure drone services business to the Aerodyne Group in November2019, where he served as Chairman of Aerodyne Measure until April 2021. After his first successful exit, he founded and developed a droneSaaS platform Ground Control at Measure Global, Inc., which provides drone mission planning, data collection, processing, analysis, andintelligence reporting, he had his second successful exit selling that SaaS business to AgEagle for combination of cash and stock valuedat $45 million less certain adjustments in April 2021.

Mr. Declet and his team at Measure earned a Technologyand Engineering Emmy™ Award for technical work in drone cinematography and was recognized with the Frost & Sullivan Award forGrowth Excellence. In public service, he was appointed Senior Advisor to Oxford University’s Centre for Technology and Global Affairsand by the U.S. Secretary of Transportation to the FAA’s Advanced Aviation Advisory Committee (AAAC). He has also served as Counselto U.S. House of Representatives; Homeland Security Committee; Counsel on Capitol Hill to Senator Feinstein, Congresswoman Harman, andCounsel to the Senate Intelligence and Judiciary Committees.

As a global Chief Executive Officer, Chief OperatingOfficer, and Board Director with extensive operational experience, he has built, led, and advised public and private companies duringcomplex business evolutions and exits through challenging turnarounds, disruptive transformations, scaling, and strategic pivots. Recognizedand trusted by the Fortune 500 as a leading Latino and Puerto Rican drone industry entrepreneur and policy expert, he has 20+ years’experience intersecting top government agencies and corporate industry in highly regulated markets and has firsthand experience successfullynavigating regulatory challenges.

A drone industry thought leader, Mr. Declet has beenfeatured on CNN, CNBC, Fox News, and Commercial UAV News among others. In 2018 and 2019, he was named a Tech Titan by Washingtonian Magazine.

Mr.Declet’s management and public company experience, his experience in the drone business and his role as President and Chief ExecutiveOfficer of the Company, led to his appointment as a director.

Matthew Newman, President

Mr. Newman has served as the Company’s President since September2020. From January 2014 to September 2019, he served as a Director of Sales at SRC Solutions Inc., a 5G test solutions company.

Brian Hoff, Chief Financial Officer

Mr. Hoff has served as the Company’s Chief FinancialOfficer since November 2022. Prior to that, he served as the Chief Financial Officer of Auddia, Inc. (Nasdaq: AUUD), a technology companyfocused on audio media, from April 2021 to October 2022. He served as Vice President and Controller at STACK Infrastructure, a digitalinfrastructure company, from October 2019 to April 2021, and as Controller at Coalfire, a cybersecurity company, from November 2011 untilOctober 2019.

Robert Lowry, Director

Mr. Lowry has served as a director of the Companysince August 2022. Mr. Lowry has been the owner of Sebring Assisted Living Facility since 1998, and the owner of Homestead Assisted LivingFacility since 2007. Mr. Lowry’s experience as a business entrepreneur and his experience inoperational finance led to his appointment as a director.

Thomas Walker, Director

Mr. Walker has served as a director of the Companysince November 2022. He has served as Chief Executive Officer of DroneUp LLC, a drone services and logistics company since November 2016.Mr. Walker’s experience as an entrepreneur and Chief Executive Officer of a drone company ledto his appointment as a director.

Jeffrey Thompson, Director

Mr. Thompson has served as a director of the Companysince inception in 2019. He served as the Company’s principal executive officer from inception until April 2022. Mr. Thompson hasbeen President and Chief Executive Officer of Red Cat since May 15, 2019. Mr. Thompson was a director of Panacea Life Sciences Holdings,Inc. (OTCQB:PLSH), a producer and marketer of products made from industrial hemp (CBD), from January 2019 until April 2020. Mr. Thompson’smanagement and public company experience, his experience in the drone business and his role as President and Chief Executive Officerof Red Cat, led to his appointment as a director.

Cristina A. Colón, Director

Ms. Colón has a served as a director of theCompany since August 2022. Ms. Colón has been the owner of Cinmarc & Associates LLC, a public housing consulting firm, since2018 and has served as its President since August 2021. Ms. Colón has also been the owner/operator Café de La Plaza, arestaurant located in Palmas del Mar, Puerto Rico, since 2009. From 2019 to 2021, Ms. Colón served as an investor relations specialistat OptimizeRX, a medical technology company. Ms. Colón’s experience as an entrepreneur and her marketing and investor relationsexperience led to her appointment as a director.

Composition of our Board of Directors

Our Board of Directors currently consists of fivemembers. Our directors hold office until their successors have been elected and qualified or until the earlier of their death, resignationor removal. There are no family relationships among any of our directors or executive officers.

Director Independence

Our Board has determined that all of our present directorsare independent, in accordance with standards under the Nasdaq Listing Rules, other than Mr. Declet and Mr. Thompson. Our Board determinedthat, under the Nasdaq Listing Rules, Mr. Declet is not an independent director because he is the Chief Executive Officer of the Company.It has also been determined that Mr. Thompson is not an independent director, having previously been Chief Executive Officer of the Companyin the last three years.

Our Board has determined that Mr. Lowry, Mr. Walker,and Ms. Colón are independent under the Nasdaq Listing Rules’ independence standards for Audit Committee members. Our Board hasalso determined that they are independent under the Nasdaq Listing Rules independence standards for Compensation Committee members andfor Governance and Nominating committee members.

Committees of the Board of Directors

Audit Committee

The Audit Committee, whichcurrently consists of Mr. Lowry (Chair), Mr. Walker, and Ms. Colón. Each member of the Audit Committee is an independent director as definedby the rules of the SEC and Nasdaq. The Audit Committee has the sole authority and responsibility to select, evaluate and engage independentauditors for the Company. The Audit Committee reviews with the auditors and with the Company’s financial management all mattersrelating to the annual audit of the Company.

The Audit Committee monitorsthe integrity of our financial statements, monitors the independent registered public accounting firm’s qualifications and independence,monitors the performance of our internal audit function and the auditors, and monitors our compliance with legal and regulatory requirements.The Audit Committee also meets with our auditors to review the results of their audit and review of our annual and interim financial statements.

The Audit Committee plansto meet at least on a quarterly basis to discuss with management the annual audited financial statements and quarterly financial statementsand meets from time to time to discuss general corporate matters.

Audit Committee FinancialExpert

Our Board determined thatMr. Lowry is qualified as an Audit Committee Financial Expert, as that term is defined by the rules of the SEC, in compliance with theSarbanes-Oxley Act of 2002.

Compensation Committee

The Compensation Committee,which currently consists of Mr. Walker (Chair), Ms. Colón, and Mr. Lowry each of whom are independent directors. Among other things, theCompensation Committee reviews, recommends and approves salaries and other compensation of the Company’s executive officers, andadministers the Company’s Equity Incentive Plan (including reviewing, recommending and approving stock option and other equity incentivegrants to executive officers). 

The Compensation Committeewill meet in executive session to determine the compensation of the Chief Executive Officer of the Company. In determining the amount,form, and terms of such compensation, the Committee will consider the annual performance evaluation of the Chief Executive Officer conductedby the Board in light of company goals and objectives relevant to Chief Executive Officer compensation, competitive market data pertainingto Chief Executive Officer compensation at comparable companies, and such other factors as it deems relevant, and is guided by, and seeksto promote, the best interests of the Company and its shareholders.

In addition, subject to existingagreements, the Compensation Committee is authorized to determine the salaries, bonuses, and other matters relating to compensation ofthe executive officers of the Company using similar parameters. It may set performance targets for determining periodic bonuses payableto executive officers. It is also authorized to review and make recommendations to the Board regarding executive and employee compensationand benefit plans and programs generally, including employee bonus and retirement plans and programs (except to the extent specificallydelegated to a Board appointed committee with authority to administer a particular plan). In addition, the Compensation Committee approvesthe compensation of non-employee directors and reports it to the full Board.

The Compensation Committeealso reviews and makes recommendations with respect to shareholder proposals related to compensation matters.

The Compensation Committeemay, in its sole discretion and at the Company’s cost, retain or obtain the advice of a compensation consultant, legal counsel orother adviser. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensationconsultant, legal counsel and other adviser retained by the committee.

Corporate Governance andNominating Committee

The Corporate Governanceand Nominating Committee (the “Nominating Committee”), consists of Ms. Colón (Chair), Mr. Lowry, and Mr. Walker, each of whommeets the independence requirements of all other applicable laws, rules and regulations governing director independence, as determinedby the Board.

The Nominating Committee has the authority to identifyindividuals qualified to become members of the Board, consistent with criteria approved by the Board; recommend to the Board the directornominees for the next annual meeting of shareholders at which directors are to be elected; recommend to the Board candidates to fill anyvacancies on the Board; develops, recommend to the Board, and reviews the corporate governance guidelines applicable to the Company; andoversees the evaluation of the Board and management.

It is authorized to considerand recruit candidates to fill positions on the Board, including as a result of the removal, resignation or retirement of any director,an increase in the size of the Board or otherwise. The Nominating Committee has the authority to conduct, subject to applicable law, anyand all inquiries into the background and qualifications of any candidate for the Board and such candidate’s compliance with theindependence and other qualification requirements established by the Nominating Committee.

In selecting and recommendingcandidates for election to the Board or appointment to any committee of the Board, the Nominating Committee does not believe that it isappropriate to select nominees through mechanical application of specified criteria. Rather, the Nominating Committee shall consider suchfactors at it deems appropriate, including, without limitation, the following: personal and professional integrity, ethics and values;experience in corporate management, such as serving as an officer or former officer of a publicly-held company; experience in the Company’sindustry; experience as a board member of another publicly-held company; diversity as required by the Nasdaq Rules; diversity of expertiseand experience in substantive matters pertaining to the Company’s business relative to other directors of the Company; practicaland mature business judgment; and composition of the Board (including its size and structure). 

The Nominating Committeewill develop and recommend to the Board a policy regarding the consideration of director candidates recommended by the Company’sshareholders and procedures for submission by shareholders of director nominee recommendations.

The Nominating Committee oversees the evaluation ofthe Board and management. It also develops and recommends to the Board a set of corporate governance guidelines applicable to the Company,which the Nominating Committee shall periodically review and revise as appropriate. In discharging its oversight role, the NominatingCommittee is empowered to investigate any matter brought to its attention.

Board and Committee Meetingsin Fiscal Year 2022

In the fiscal year endedDecember 31, 2022, the Board had three meetings and acted on 4 occasions by unanimous consent. We did not have any Committees during 2022.

There were no directors who attended fewerthan 75 percent of the number of Board meetings during the fiscal year ended December 31, 2022.

Board Diversity

While we do not have a formalpolicy on diversity, the Board considers diversity to include race, ethnicity, gender as well as the skill set, background, reputation,type and length of business experience of the Board members as well as a particular nominee’s contributions to that mix.  TheBoard believes that diversity brings a variety of ideas, judgments and considerations that benefit the Company and its shareholders. Although there are many other factors, the Board seeks individuals with experience on operating and growing businesses.

Nasdaq’s Board Diversity Rule, which will applyto us following this Offering, requires smaller reporting companies that are listed on Nasdaq to (i) publicly disclose board-level diversitystatistics using a standardized template; and (ii) have, or explain why they do not have, at least two diverse directors. The Rule alsoprovides additional flexibility for smaller reporting companies, which can meet the diversity objective by including two female directors,and for all companies with five or fewer directors, which can meet the diversity objective by including one diverse director.

The Nasdaq Diversity Rule provides that a newly listedcompany must provide a Board Diversity Matrix on its website within one year of its initial listing.

Because we presently have five directors, the NasdaqBoard Diversity Rule requires that we either have one diverse director or explain why we do not. The Company has two diverse directors,Mr. Declet who self identifies as Hispanic and Ms. Colón who self identifies as both female and Hispanic.

Board Leadership Structure

Brandon Torres Declet servesas the Chairman of the Board and actively interfaces with management, the Board and counsel regularly. We have chosen to combinethe Chief Executive Officer and Board Chairman positions, as we believe that this Board leadership structure is the most appropriate forthe Company. Because we are a small company, it is more efficient to have the leadership of the Board in the same hands as the Chief ExecutiveOfficer. The challenges faced by us at this stage – closing the acquisition of Fat Shark and Rotor Riot and this Offering as wellas implementing our business and marketing plans, integrating the acquisitions, continuing and managing our growth– are most efficientlydealt with by one person who is familiar with both the operational aspects as well as the strategic aspects of our business.

Board Risk Oversight

The Company’s riskmanagement function is overseen by the Board. The Company’s management keeps the Board apprised of material risks and provides itsdirectors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect us, andhow management addresses those risks. Brandon Torres Declet, Chairman of the Board, works closely together with the other members of theBoard when material risks are identified on how to best address such risks. If the identified risk poses an actual or potential conflictwith management, the Company’s independent directors may conduct the assessment. Presently, the primary risks affecting us are ourliquidity and the lack of revenue.

Family Relationships

There are no family relationshipsamong any of our officers or directors.

Involvement in Legal Proceedings

We are not aware of any ofour directors or officers being involved in any legal proceedings in the past 10 years relating to any matters in bankruptcy, insolvency,criminal proceedings (other than traffic and other minor offenses) or being subject to any of the items set forth under Item 401(f) ofRegulation S-K of the SEC.

Code of Ethics

The Board has adopted a Codeof Business Conduct and Ethics (the “Code of Ethics”) that applies to all of the Company’s employees, including theCompany’s Chief Executive Officer and Chief Financial Officer. Although not required, the Code of Ethics also applies to the Company’sdirectors. The Code of Ethics provides written standards that we believe are reasonably designed to deter wrongdoing and promote honestand ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships,full, fair, accurate, timely and understandable disclosure and compliance with laws, rules and regulations and the prompt reporting ofillegal or unethical behavior, and accountability for adherence to the Code of Ethics. 

EXECUTIVE AND DIRECTOR COMPENSATION 

Summary Compensation Table

The following table sets forth information concerningall cash and non-cash compensation awarded to, earned by or paid to our Chief Executive Officer, two most highly paid executive officerswith compensation exceeding $100,000 during the fiscal years ended December 31, 2022 and 2021, and two additional individuals forwhom the foregoing would apply but for the fact that they were not executive officers of the Company as of December 31, 2022 (each a“Named Executive Officer”).

(1) Mr. Thompson served as the Company’s ChiefExecutive Officer from July 2019 to May 2022, when he replaced in such role by Brandon Torres Declet. Mr. Thompson is also the ChiefExecutive Officer and a director of Red Cat.

(2) Mr. Declet was appointed Chief ExecutiveOfficer in May 2022 and did not serve during the 2021 fiscal year.

Fat Shark and Rotor Riot Summary Compensation Information

Set forth below is summary compensation informationsimilar to that set forth above, but reflecting amounts paid, payable or allocable to Fat Shark or Rotor Riot for executive officersof one or both of those entities who exceeded the enumerated threshold and which the Company anticipates hiring as an executive officerof the Company (directly or through Fat Shark or Rotor Riot) in connection with the acquisition of those entities in the Business Combination(the “Business Combination Officers”). See “The Business Combination” for more information.

_________________

(1) Represents principal position(s) held at Red Cat,Fat Shark and/or Rotor Riot.

(2) Represents the aggregate grant date fair valuecomputed in accordance with FASB ASC Topic 718 of 10-year options to purchase 100,000 shares of Red Cat common stock at an exercise priceof $2.60, which become fully vested on June 7, 2024.

2022 Equity Incentive Plan

Effective October 1, 2022, the Board approved theCompany’s 2022 Equity Incentive Plan (the “Plan). The Plan provides for the award of restricted stock units, stockoptions (incentive and non-qualified), stock awards and stock appreciation rights to officers, directors, employees and consultants whoprovide services to the Company.

The Company has reserved 1,496,391 shares of commonstock for issuance under the Plan, which represents approximately 10% of the outstanding common stock on a fully-diluted basis after givingeffect to the exercise and conversion of all outstanding stock which may be issued outside of the Plan including preferred stock, theSenior Note, to the extent issued, and warrants and giving effect to this Offering and Business Combination, assuming no over-allotmentoption is exercised by the underwriter(s). This number will increase to the extent of any future issuances of common stock or derivativesecurities following this Offering. The Board may terminate the Plan at any time. Unless sooner terminated, the Plan will terminate tenyears after the effective date of the Plan. The number of shares of common stock covered by each outstanding stock right, and the numberof shares of common stock which have been authorized for issuance under the Plan as well as the price per share of common stock (or cash,as applicable) covered by each such outstanding option or SAR, shall be proportionately adjusted for any increases or decrease in thenumber of issued shares of common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification,or any other increase or decrease in the number of issued shares of common stock effected without receipt of consideration by the Company.

Employment Agreements

Employment Agreement with Brandon Torres Declet,Chief Executive Officer and Chairman

The Employment Agreement with Mr. Decleteffective January 1, 2023 provides that he will serve as our Chief Executive Officer of the Company, on an at will basis. Pursuant to hisEmployment Agreement, Mr. Declet receives an annual base salary of $250,000. In addition, Mr. Declet’s Employment Agreemententitles him to the following:

Additionally, under his Employment Agreement,if Mr. Declet is terminated by the Company without Cause or terminates his employment for Good Reason, he will be entitled to six months’annual base salary and COBRA premiums, as well as accelerated vesting of 50% of the then unvested RSUs, if applicable.

For this purpose, Good Reason is generallydefined as (i) any reduction in his base salary, (ii) any material diminution of his authorities, titles or offices, (iii) being requiredto report to anyone other than the Board of Directors, (iv) a request by the Company to relocate, or (v) material breach of his EmploymentAgreement without cure after 30 days’ written notice.

Cause is generally defined as (i) failureto perform his material duties under the Employment Agreement, following 30 days’ written notice without cure, (ii) willful misconductor gross negligence or breach of a fiduciary duty owed to the Company, (iii) conviction of our guilty pleas to a felony or other criminaloffense involving moral turpitude, (iv) any act or omission involving dishonesty, disloyalty, or fraud causing or reasonably expectedto cause significant economic harm to the Company, or (v) material breach of his Employment Agreement without cure after 30 days’written notice.

Mr. Declet’s Employment Agreement will be reviewed by our Boardof Directors upon the consummation of this Offering.

Employment Agreement with Brian Hoff, Chief FinancialOfficer

The Employment Agreement with Mr. Hoff effective November1, 2022 provides that he will serve as the Chief Financial Officer of the Company on an at will basis. Pursuant to his Employment Agreement,Mr. Hoff receives an annual base salary of $250,000. In addition, Mr. Hoff’s Employment Agreement entitles him to the following:

Additionally, under his Employment Agreement, if Mr.Hoff is terminated by the Company without Cause or terminates his employment for Good Reason, he will be entitled to six months’annual base salary and COBRA premiums, as well as accelerated vesting of 50% of the then unvested RSUs, if applicable.

For this purpose, Good Reason is generally definedas (i) any reduction in his base salary, (ii) any material diminution of his authorities, titles or offices, (iii) being required to reportto anyone other than the Chief Executive Officer, (iv) a request by the Company to relocate, or (v) material breach of his EmploymentAgreement without cure after 30 days’ written notice.

Cause is generally defined as (i) failure to performhis material duties under the Employment Agreement, following 30 days’ written notice without cure, (ii) willful misconduct or grossnegligence or breach of a fiduciary duty owed to the Company, (iii) conviction of our guilty pleas to a felony or other criminal offenseinvolving moral turpitude, (iv) any act or omission involving dishonesty, disloyalty, or fraud causing or reasonably expected to causesignificant economic harm to the Company, or (v) material breach of his Employment Agreement without cure after 30 days’ writtennotice.

Director Compensation

To date, we have not paid our non-employee directorsany compensation for services on our Board. Following the Business Combination we anticipate granting our non-employee directors a quarterlygrant cash and/or restricted stock units, or RSUs commencing upon the consummation of this Offering.

Employee Benefit Plans

The Company currently has a 2022 Equity IncentivePlan, a 401(k) plan, and will adopt the medical, dental, and vision coverage that is currently offered to Rotor Riot’s employeesfor the Company’s employees upon closing of the Business Combination.

RELATED PARTY TRANSACTIONS

The following is a description of transactions sinceJanuary 1, 2020, to which we were a party or will be party, in which the amount involved exceeded or will exceed the lesser of $120,000or 1% of the average of our total assets at year-end for the last two completed fiscal years, and any of our directors, executive officersor holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with,any of these individuals or entities, had or will have a direct or indirect material interest. Aspermitted by the SEC rules, discussion of employment relationships or transactions involving the Company’s executive officers anddirectors, and compensation solely resulting from such employment relationships or transactions, or service as a director of the Company,as the case may be, has been omitted to the extent disclosed in the Executive Compensation or the Director Compensation section of thisProspectus, as applicable.

On September 10, 2021, our founder and former ChiefExecutive Officer Jeffrey Thompson subscribed for 2,400,000 shares of our common stock for a total subscription price of $24,000. Formore information on the private offering to which this related, see “Recent Sales of Unregistered Securities.” Mr. Thompsonsubsequently subscribed for an additional 52,000 shares of our common stock on September 14, 2021 for an additional $26,000.

In November 2022 we entered into the Purchase Agreementwith Red Cat and Jeffrey Thompson, the Company’s former Chief Executive Officer and President and current director, pursuant towhich, among other things, Mr. Thompson and the Company have agreed to indemnification obligations, which shall survive for a period ofnine months, subject to certain limitations, which includes a basket of $250,000 before any claim can be asserted and a cap equal to thevalue of the Escrow Shares, other than in cases involving fraud. Mr. Thompson agreed to deposit 450,000 shares of our common stock ownedby him, which we refer to herein as the “Escrow Shares,” in to escrow to secure any indemnification obligations, which stockis our sole remedy, except for fraud.

In November 2020, Red Cat acquired Fat SharkHoldings for a total purchase price of $8.4 million. In January 2020, Red Cat acquired Rotor Riotfor a total purchase price was $2.0 million.

Since July 2017, Fat Shark has used ShenzhenFatshark Co, Ltd., referred to herein as the “Supplier,” a drone manufacturing company located in Shenzhen, China, asits primary contract manufacturer for Fat Shark’s drone products. In exchange for the Supplier’s manufacturing serviceswith respect to these products, Fat Shark pays the Supplier amounts equal to 115% of the sum of the bill of material and the laborcosts for such production. Ms. Molly Mo, a majority owner of the Supplier is the wife of Greg French, the founder and a consultantof Fat Shark. Since January 1, 2020, Fat Shark has paid or accrued a total of $12,261,440 in purchase orders to the Supplier. Asof January 31, 2023, Fat Shark owed the related party Supplier $231,000, which does not include unfilled purchase orders ofapproximately $1.2 million.

PRINCIPAL STOCKHOLDERS

The following table lists, based on amounts outstandingas of March 7, 2023 (before the Offering) and estimated amounts to be outstanding after the Offering (based on certain assumptions describedbelow), the number of shares of common stock beneficially owned by (i) each person, entity or group (as that term is used in Section 13(d)(3)of the Exchange Act) known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each of ourdirectors (iii) each of our named executive officers and the executive officers of Fat Shark and Rotor Riot as described under “ExecutiveCompensation,” and (iv) all executive officers and directors as a group. Information relating to beneficial ownership of commonstock by our principal stockholders and management is based upon information furnished by each person using “beneficial ownership”concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directlyor indirectly has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power,which includes the power to dispose or direct the disposition of the security. The person is also deemed to be a beneficial owner of anysecurity of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person maybe deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to whichhe or she may not have any pecuniary interest. Except as noted below, each person has sole voting and investment power with respect tothe shares beneficially owned and each shareholder's address is c/o Unusual Machines, Inc., 151 Calle De San Francisco, Ste 200 PMB 2106,San Juan, PR 00901-1607.

Applicable percentage ownership before the Offeringis based on 6,934,500 shares of common stock outstanding as of the date stated above and excludes for this purpose shares of common stockissuable upon conversion of the Series A and Senior Note to be issued by the Company to Red Cat upon the closing of the Business Combinationwhich will occur simultaneously with or immediately prior to this Offering. The Series A and Senior Note are each subject to beneficialownership limitations, as more fully described under “The Business Combination.”

Applicable percentage ownership after theOffering is based on the issuance of _______ shares of common stock in this Offering (based on $___ per share (the mid –point ofthe range) and excludes ________ shares of common stock issuable if the underwriter exercises its option to purchase additional shares.

*Less than 1%

(1) The amount of shares beneficiallyowned by Mr. Thompson before the Offering only includes shares of the Company’s common stock personally owned by Mr. Thompson. Mr.Thompson is the Chief Executive Officer of Red Cat. Does not include the shares of common stock issuable upon conversion of theSeries A and Senior Note to be issued to Red Cat in the Business Combination, which are subject to beneficial ownership limitations. Wehave been informed by Red Cat’s counsel that Mr. Thompson is not deemed to be the beneficial owner of the sharesbeneficially owned by Red Cat. Address is 15 Ave. Munoz Rivera Ste 2200, San Juan, PR 00901.

(2) Address is 295 Palmas Inn Way, Ste 104 PMB115, Humacao, PR 00791.

(3) Address is 145 Sandy Hook Rd N, Sarasota,FL 34242.

(4) Address is 463 Adams St, Denver, CO 80206.Jonathan Honig has the power to sell and vote common stock owned by Eleven Ventures.

Change-in-Control Agreements

The Company does not have any change-in-control agreementswith any of its executive officers.

DESCRIPTION OF SECURITIES

Our authorized capital stock consists of500,000,000 shares of common stock, par value $0.01 per share, of which 6,934,500 shares are outstanding as of March 7, 2023, and10,000,000 shares of “blank check” preferred stock, par value $0.01 per share, of which no shares are outstanding, as ofthe date of this Prospectus.

The following description summarizes the materialterms of our securities, which does not purport to be complete and is qualified in its entirety by reference to our Amended and RestatedArticles of Incorporation, and the Certificate of Designation setting forth the terms of our authorized seriesof preferred stock, each of which are filed as an exhibit to the Registration Statement of which this Prospectus is a part, and to theapplicable provisions of Puerto Rican law, including the Puerto Rico General Corporate Act.

Common Stock

The holders of our common stock are entitled to onevote for each share held of record on all matters submitted to a vote of the stockholders and do not have cumulative voting rights. Accordingly,holders of a majority of the shares of outstanding common stock entitled to vote in any election of directors may elect all of the directorsstanding for election, subject to any voting rights of any preferred. Subject to preferences that may be applicable to any outstandingshares of preferred stock, the holders of common stock are entitled to receive ratably such dividends as may be declared by the Boardout of funds legally available therefor. Upon the liquidation, dissolution or winding up of the Company, holders of our common stock areentitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding sharesof preferred stock. Holders of common stock have no preemptive rights and no right to convert their common stock into any other securities.Our common stock has no redemption or sinking fund provisions. The rights, preferences and privileges of the holders of the common stockare subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that the Boardmay designate and issue in the future. All outstanding shares of common stock are fully paid and non-assessable.

“Blank Check” Preferred Stock

Pursuant to our Articles of Incorporation, ourBoard has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock, in one ormore series. Our Articles of Incorporation provide that our Board has the authority, without further action by the shareholders, todesignate and issue shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictionsgranted to or imposed upon the preferred stock. Preferred stock may be designated and issued without authorization of shareholdersunless such authorization is required by applicable law, the rules of the principal market or other securities exchange on which ourstock is then listed or admitted to trading.

Our Board may authorize the issuance of preferredstock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of common stock. Theissuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes could,under some circumstances, have the effect of delaying, deferring or preventing a change in control of the Company. 

Series A Convertible Preferred Stock

We expect to issue 2,675,000 shares of SeriesA upon the closing of the Business Combination, which subject to the other closing conditions will occur simultaneously with this Offering.The material terms of the Series A are summarized elsewhere in this Prospectus under “The Business Combination.”

Series B Convertible Preferred Stock

We have 140 outstanding shares of Series B ConvertiblePreferred Stock (the “Series B”). Each share of Series B is convertible into 10,000 shares of our common stock at the electionof the holder, subject to a 4.99% beneficial ownership limitation which may be increased to up to 9.99% upon 61 days’ written noticefrom the holder. The Series B is non-voting and has no other special rights other than the conversion feature.

Convertible Note

We expect to issue the Senior Note upon the closingof the Business Combination, which subject to the other closing conditions will occur simultaneously with this Offering. The materialterms of the Senior Note are summarized elsewhere in this Prospectus under “The Business Combination.”

Anti-Takeover Effects of Provisions of our Articlesof Incorporation, our Bylaws and Puerto Rico Law

Certain provisions in our Amended and Restated Articlesof Incorporation and Bylaws summarized below may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offeror takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premiumbeing paid over the market price for the shares held by stockholders.

“Blank Check” Preferred Stock.

Underour Articles of Incorporation the Board may authorize the issuance of one or more series of preferred stock with such rights, preferencesand limitations as the Board may determine, including voting or conversion rights that could adversely affect the voting power or otherrights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitionsand other corporate purposes could, under some circumstances, have the effect of delaying, deferring or preventing a change in controlof the Company.

Advance Notice Requirements for StockholderProposals and Director Nominations.

Our Bylaws will provide that, stockholders seekingto bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting ofstockholders, must provide timely notice thereof in writing. To be timely, a stockholder’s notice generally must be delivered toand received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary of the precedingyear’s annual meeting; provided, that, in the event that the date of such meeting is advanced more than 30 days prior to, or delayedby more than 60 days after, the anniversary of the preceding year’s annual meeting of our stockholders, a stockholder’s noticeto be timely must be so delivered not earlier than the close of business on the 120th day prior to such meeting and not later than theclose of business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement ofthe date of such meeting is first made. Our Bylaws also will specify certain requirements as to the form and content of a stockholder’snotice. These provisions may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominationsfor directors at an annual meeting of stockholders.

Special Meeting Limitations

Under our Bylaws, special meetings of thestockholders may be called only by (i) our Board, or (ii) a holder of at least 20% of the shares entitled to vote at the meeting.

Transfer Agent and Registrar

The transfer agent and registrar for our common stockis Equity Stock Transfer.

UNDERWRITING

Subject to the terms and conditions set forthin the underwriting agreement, dated            , 2023 between us and _________, as representative of the underwriters named below, or the “Representative,” and the sole book-running manager of thisoffering, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchasefrom us, the shares of common stock shown opposite its name below:

Under the terms of the underwriting agreement,the underwriters are committed to purchase all of the shares offered by this prospectus (other than the shares subject to the underwriters’option to purchase additional shares), if the underwriters buy any of such shares. The underwriting agreement provides that the obligationsof the several underwriters are subject to certain conditions precedent such as the receipt by the underwriters of officers’ certificatesand legal opinions and approval of certain legal matters by their counsel. We have agreed to indemnify the underwriters and certain oftheir controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments thatthe underwriters may be required to make in respect of those liabilities.

The underwriters are offering the shares, subjectto prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validityof the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officer’scertificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject ordersin whole or in part.

Option to Purchase Additional Shares

Wehave granted to the underwriters an option, exercisable for 45 days from the date of this Prospectus,to purchase, from time to time, in whole or in part, up to an aggregate of _____ sharesfrom us at the public offering price set forth on the cover page of this prospectus, less underwriting discounts and commissions. Ifthe underwriters exercise this option, each underwriter will be obligated, subject to certain conditions, to purchase a number of additionalshares approximately proportionate to that underwriter’s initial purchase commitment as indicated in the table above.

Commission and Expenses

The underwriters have advised us that they proposeto offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to certaindealers, which may include the underwriters, at that price less a concession not in excess of _____ per share of common stock. The underwritersmay allow, and certain dealers may reallow, a discount from the concession not in excess of _____ per share of common stock to certainbrokers and dealers. After the initial offering, the underwriters may change the offering price and other selling terms.

We have paid _________, a $50,000 advance uponthe execution of the Letter of Engagement between us and _________, dated March 2, 2023 (as amended), to be credited against the accountableexpenses actually incurred by _________ in connection with this Offering. To the extent that the accountable expenses actually incurredby _________ in connection with this Offering amount to less than $_____, the difference will be reimbursed to us in compliance withFINRA Rule 5110(g)(4)(A).

Underwriter’s Warrants

We have agreed to issue warrants to _________to purchase a number of shares equal to five percent (5%) of the total number of shares sold in this Offering at an exercise price equalto 125% of the public offering price of the shares sold in this Offering. Underwriter’s Warrants will be exercisable 180 days fromthe commencement date of sales in this Offering, will have a cashless exercise provision and will terminate on the fifth anniversary ofthe commencement date of sales in this Offering. Underwriter’s Warrants will provide for immediate “piggyback” registrationrights with respect to the registration of the common stock underlying the Warrants. Underwriter’s Warrants will also provide forcustomary anti-dilution provisions for stock dividends, splits, mergers, and any future issuance of ordinary shares or ordinary sharesequivalents at prices (or with exercise and/or conversion prices) below the exercise price. Underwriter’s Warrants shall also providefor automatic exercise immediately prior to expiration. Underwriter’s Warrants shall not be callable or cancellable. We are registeringthe sale of Underwriter’s Warrants and the shares underlying Underwriter’s Warrants in this Offering.

Underwriter’s Warrants and the underlyingshares may be deemed to be compensation by FINRA, and therefore will be subject to FINRA Rule 5110(e)(1). In accordance with FINRA Rule5110(e)(1), neither Underwriter’s Warrants nor any of our ordinary shares issued upon exercise of Underwriter’s Warrants maybe sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transactionthat would result in the effective economic disposition of such securities by any person, for a period of 180 days immediately followingthe commencement date of sales in this Offering, subject to certain exceptions. Underwriter’s Warrants to be received by _________and related persons in connection with this Offering: (i) fully comply with lock-up restrictions pursuant to FINRA Rule 5110(e)(1); and(ii) fully comply with transfer restrictions pursuant to FINRA Rule 5110(e)(2).

Right of First Refusal

For a period of twenty-four (24) months from the Closing, the Companywill grant to _________ an irrevocable right of first refusal to act as sole investment banker, sole book-runner and/or sole placementagent, at _________’s sole discretion, for each and every future public and private equity and debt offering, including all equitylinked financings, during such twenty-four (24) month period for the Company, or any successor to or any subsidiary of the Company, onterms customary to _________. _________, shall have the sole right to determine whether or not any other broker-dealer shall havethe right to participate in any such offering and the economic terms of any such participation.

The following table shows the public offeringprice, the underwriting discounts and commissions that we are to pay the underwriters and the proceeds, before expenses, to us in connectionwith this Offering. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additionalshares.

We estimate expenses payable by us in connectionwith this Offering, other than the underwriting discounts and commissions referred to above, will be approximately $_____. To the extentthat the accountable expenses actually incurred by the _________ in connection with this Offering amount to less than $_____, the differencewill be reimbursed to us in compliance with FINRA Rule 5110(g)(4)(A). We have agreed to reimburse the _________ up to $125,000 for theirfees and expenses of legal counsel and other out-of-pocket expenses, roadshow expenses and cost of background checks. We have also agreedto reimburse the _________ for certain of their expenses incurred in connection with the offering’s settlement and closing inan amount not to exceed $30,000. Such reimbursed fees and expenses, as set forth in the underwriting agreement, are deemed underwritingcompensation for this Offering by FINRA.

Listing

We have applied to list our common stock on theNasdaq Capital Market under the symbol “UMAC.” The approval of our common stock for listing on Nasdaq is a condition to theclosing of this Offering.

No Sales of Similar Securities

We, our officers and our directors have agreed,subject to certain specified exceptions, not to directly or indirectly, for a period of 8 months after the date of the underwriting agreement,or 6 months in case of any other holder of outstanding securities, after the date of the underwriting agreement, in the case of our officersand directors:

In addition, we and each such person agrees that,without the prior written consent of the underwriters, we or such other person will not, during the restricted period, make any demandfor, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisableor exchangeable for common stock.

The underwriters may, in their sole discretionand at any time or from time to time before the termination of the 8 months or 6 months periods release all or any portion of the securitiessubject to lock-up agreements.

Subject to compliance with the notificationrequirements under FINRA Rule 5131 applicable to lock-up agreements with our directors or officers, if the underwriters, withour prior consent, agree to release or waive the restrictions set forth in a lock-up agreement with one of our directors or officersand provides us with notice of the impending release or waiver at least three business days before the effective date of therelease or waiver, we agree to announce the impending release or waiver by a press release through a major news service at leasttwo business days before the effective date of the release or waiver.

Market Making, Stabilization and Other Transactions

The underwriters may make a market in the commonstock as permitted by applicable laws and regulations. However, the underwriters are not obligated to do so, and the underwriters maydiscontinue any market-making activities at any time without notice in their sole discretion. Accordingly, no assurance can be given asto the liquidity of the trading market for the common stock, that you will be able to sell any of the common stock held by you at a particulartime or that the prices that you receive when you sell will be favorable.

The underwriters have advised us that they,pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, and certain persons participatingin the offering, may engage in short sale transactions, stabilizing transactions, syndicate covering transactions or the imposition ofpenalty bids in connection with this offering. These activities may have the effect of stabilizing or maintaining the market price ofthe common stock at a level above that which might otherwise prevail in the open market. Establishing short sales positions may involveeither “covered” short sales or “naked” short sales.

“Covered” short sales are salesmade in an amount not greater than the underwriters’ option to purchase additional shares of our common stock in this Offering.The underwriters may close out any covered short position by either exercising their option to purchase additional shares of our commonstock or purchasing shares of our common stock in the open market. In determining the source of shares to close out the covered shortposition, the underwriters will consider, among other things, the price of shares available for purchase in the open market as comparedto the price at which they may purchase shares through the option to purchase additional shares.

“Naked” short sales are sales inexcess of the option to purchase additional shares of our common stock. The underwriters must close out any naked short position by purchasingshares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downwardpressure on the price of the shares of our common stock in the open market after pricing that could adversely affect investors who purchasein this Offering.

A stabilizing bid is a bid for the purchaseof shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the common stock. A syndicatecovering transaction is the bid for or the purchase of shares of common stock on behalf of the underwriters to reduce a short positionincurred by the underwriters in connection with the offering. Similar to other purchase transactions, the underwriters’ purchasesto cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing orretarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price thatmight otherwise exist in the open market. A penalty bid is an arrangement permitting the underwriters to reclaim the selling concessionotherwise accruing to a syndicate member in connection with the offering if the common stock originally sold by such syndicate memberare purchased in a syndicate covering transaction and therefore have not been effectively placed by such syndicate member.

Neither we, nor any of the underwriters makeany representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on theprice of our common stock. The underwriters are not obligated to engage in these activities and, if commenced, may end any of these activitiesat any time.

Passive Market Making

The underwriters may also engage in passive marketmaking transactions in our common stock on the NASDAQ in accordance with Rule 103 of Regulation M during a period before thecommencement of offers or sales of shares of our common stock in this Offering and extending through the completion of distribution. Apassive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independentbids are lowered below the passive market maker’s bid, that bid must then be lowered when specified purchase limits are exceeded.Passive market making may cause the price of our common stock to be higher than the price that otherwise would exist in the open marketin the absence of those transactions. The underwriters are not required to engage in passive market making and, if commenced, may endpassive market making activities at any time.

Electronic Distribution

A prospectus in electronic format may be madeavailable by e-mail or on the web sites or through online services maintained by one or more of the underwriters, selling group members(if any) or their affiliates. The underwriters may agree with us to allocate a specific number of shares of common stock for sale to onlinebrokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.Other than the prospectus in electronic format, the information on the underwriters’ web sites and any information contained inany other web site maintained by any of the underwriters is not part of this prospectus, has not been approved and/or endorsed by us orthe underwriters and should not be relied upon by investors.

Other Activities and Relationships

The underwriters and certain of their respectiveaffiliates are full service financial institutions engaged in a wide range of activities for their own accounts and the accounts of customers,which may include, among other things, corporate finance, mergers and acquisitions, merchant banking, equity and fixed income sales, tradingand research, derivatives, foreign exchange, futures, asset management, custody, clearance and securities lending. The underwriters andcertain of their affiliates have, from time to time, performed, and may in the future perform, various investment banking and financialadvisory services for us and our affiliates, for which they received or will receive customary fees and expenses.

In addition, in the ordinary course of its business,the underwriters and their respective affiliates may, directly or indirectly, hold long or short positions, trade and otherwise conductsuch activities in or with respect to debt or equity securities and/or bank debt of, and/or derivative products. Such investment and securitiesactivities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendationsor publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend toclients that they acquire, long or short positions in such securities and instruments.

Stamp Taxes

If you purchase shares of common stock offered inthis prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, inaddition to the offering price listed on the cover page of this prospectus.

LEGAL MATTERS

The validity of the securitiesbeing offered by this Prospectus will be passed upon for us by Nason, Yeager, Gerson, Harris & Fumero, P.A., Palm Beach Gardens,Florida, Carmel, Milazzo & Feil LLP, New York, New York is acting as counsel to the underwriters.

EXPERTS

The consolidated financial statements of theCompany as of December 31, 2022 and 2021, and as of April 30, 2022 and 2021 for Fat Shark and Rotor Riot, and for the years thenended, included in this Prospectus have been so included in reliance on the report of BF Borgers, CPA, PC an independent registered publicaccounting firm, which includes an explanatory paragraph about the Company’s ability to continue as a going concern, given on theauthority of said firm as experts in auditing and accounting.

INTERESTS OF NAMED EXPERTS AND COUNSEL

None.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC this registration statementon Form S-1 under the Securities Act with respect to the shares of common stock being offered by this Prospectus. This Prospectus, whichconstitutes a part of this registration statement, does not contain all of the information in this registration statement and its exhibits.For further information with respect to us and the common stock offered by this Prospectus, you should refer to this registration statementand the exhibits filed as part of that document. Statements contained in this Prospectus as to the contents of any contract or any otherdocument referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filedas an exhibit to this registration statement. Each of these statements is qualified in all respects by this reference.

Upon completion of this Offering, we will be subjectto the informational requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and otherinformation with the SEC. You can read our SEC filings, including the registration statement, at the SEC’s website at www.sec.gov.We also maintain a website at https://unusualmachines.com/investors and upon completion of this Offering, you may access,free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments tothose reports, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Theinformation contained on, or that can be accessed through, our website is not a part of this prospectus. Upon completion of this Offering,you may also request a copy of these filings, at no cost, by writing or telephoning us at: Unusual Machines, Inc., 151 Calle De San Francisco,Ste 200 PMB 2106 San Juan, Puerto Rico 00901-1607 or contacting us at +1 855-921-4600.

UNUSUAL MACHINES, INC.

INDEX TO FINANCIAL STATEMENTS

UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIALSTATEMENTS

The pro forma adjustmentsrelated to the Share Purchase Agreement are described in the notes to the unaudited pro forma combined financial information and principallyinclude the following:

The adjustments to fairvalue and the other estimates reflected in the accompanying unaudited pro forma condensed consolidated financial statements may be materiallydifferent from those reflected in the combined company’s consolidated financial statements subsequent to the Share Purchase. Inaddition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or resultsof operations of the combined companies. Reclassifications and adjustments may be required if changes to Fat Shark’s and Rotor Riot’sfinancial presentation are needed to conform Fat Shark’s and Rotor Riot’s accounting policies to the accounting policies ofUnusual Machines, Inc.

These unaudited pro formacondensed combined financial statements do not give effect to any anticipated synergies, operating efficiencies or cost savings that maybe associated with the Share Purchase Agreement or Initial Public Offering. These financial statements also do not include any integrationcosts the companies may incur related to the transactions as part of combining the operations of the companies.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS