DEF 14A: Unusual Machines Plans Reincorporation from Puerto Rico to Nevada

Unusual Machines, Inc. is set to reincorporate from Puerto Rico to Nevada following approval by a majority of stockholders.

Summary

• Unusual Machines, Inc. is reincorporating from Puerto Rico to Nevada.
• The decision was approved by stockholders holding approximately 51.4% of the voting power on March 11, 2024.
• The reincorporation will be implemented through a merger with a wholly-owned Nevada subsidiary, Unusual Machines, Inc. (UMAC-Nevada).
• The company's name will remain Unusual Machines, Inc.
• Stockholders of UMAC-Puerto Rico will receive one share of UMAC-Nevada common stock for each share they currently hold.
• The company expects to reincorporate in Nevada following 20 calendar days after mailing the Information Statement.
• The Board of Directors approved the Nevada Reincorporation on March 4, 2024.
• The Information Statement is being mailed on or about March 26, 2024, to stockholders of record as of March 11, 2024.
• The trading symbol for the common stock will remain UMAC and will continue to be listed on the NYSE American.

Sentiment

Score: 7

Explanation: The document is primarily informational and procedural, with a slightly positive tone due to the perceived benefits of reincorporating in Nevada. The move is presented as beneficial for the company's long-term management and stockholder value.

Positives

• Nevada has a modern and flexible corporation law.
• Nevada's legislature is responsive to business needs and actively seeks to increase the number of Nevada corporations.
• Nevada's Eighth Judicial District has a designated business court devoted exclusively to corporate law issues.
• Nevada law on elimination of director and officer liability and indemnification provides more assurance for persons acting in these roles.
• Nevada has no state corporate income tax and no taxes on corporate shares.
• The Board believes that the Nevada Reincorporation will improve the Boards ability to manage the Company for the benefit of all stockholders.

Negatives

• Nevada lacks the prominence, breadth, depth, and predictability of Delaware corporate law, including its extensive body of case law.
• The Nevada Reincorporation could discourage a takeover offer that a majority of stockholders may deem to be in their best interests.
• The Nevada Reincorporation will make it more difficult for stockholders to change the existing Board and management.

Risks

• The Merger Agreement may be terminated and the Reincorporation may be abandoned at any time before it is completed and for any reason by the Board of either the Company or UMAC-Nevada or both.
• The Merger Agreement may be amended at any time prior to the date Nevada Reincorporation is completed, either before or after the stockholders have voted to adopt this proposal, subject to applicable law.
• There is uncertainty as to whether a state or federal court would enforce these charter provisions.
• The exclusive forum provision in the Nevada Articles of Incorporation will reduce the risk that we could become subject to duplicative litigation in multiple forums, as well as the risk that the outcome of cases in multiple forums could be inconsistent, even though each forum purports to follow Nevada law or federal securities law. Any of these could expose the Company to increased expenses or losses.

Future Outlook

The Company expects to complete the Nevada Reincorporation as soon as reasonably practicable, subject to legal formalities and third-party consents.

Management Comments

• The Board believes that it is important for the Company to be able to draw upon the established statutory scheme of Nevada law in making legal and business decisions while helping to preserve the stockholder rights that our stockholders are accustomed to, in the interest of maximizing long-term stockholder value.
• After careful consideration, the Board believes that it is in the best interests of the Company and its stockholders to complete the Nevada Reincorporation.

Industry Context

Reincorporating in states like Nevada or Delaware is a common practice for companies seeking more favorable corporate governance laws, tax benefits, and increased flexibility in managing their business.

Comparison to Industry Standards

• Many companies choose to incorporate in Delaware due to its well-established corporate law and extensive case law, providing predictability and guidance for corporate decision-making.
• However, Nevada is also a popular choice, particularly for companies seeking cost savings and management-friendly provisions.
• Compared to Delaware, Nevada offers more protection to corporate officers and favorable indemnification provisions, which can be attractive to companies looking to attract and retain qualified directors and officers.
• The document mentions that many large corporations are incorporated in Nevada in comparison to other states (other than Delaware).

Corporate Governance

Stakeholder Impact

• Stockholders will have their rights governed by Nevada law instead of Puerto Rico law.
• Directors and officers may benefit from greater protection from liability under Nevada law.
• The reincorporation is not expected to change the business, management, fiscal year, assets or liabilities or location of facilities.

Next Steps

• File Merger documents with the Department of State of Puerto Rico and Secretary of State of Nevada.
• Obtain consents and approvals by third parties with respect to certain contracts.
• Provide certain notices to regulatory authorities.

Key Dates

Keywords

reincorporation, Nevada, Puerto Rico, corporate law, stockholders, UMAC, merger, governance