DEF 14C: Unusual Machines to Reincorporate in Nevada Following Majority Stockholder Approval

Unusual Machines, Inc. is set to reincorporate from Puerto Rico to Nevada after receiving approval from a majority of its stockholders.

Summary

• Unusual Machines, Inc. is reincorporating from Puerto Rico to Nevada.
• The decision was approved by a majority stockholder consent on March 11, 2024, representing approximately 51.4% of the voting power.
• The company expects to reincorporate in Nevada following 20 calendar days after mailing the information statement on March 26, 2024.
• The reincorporation will be implemented through a merger with a wholly-owned Nevada subsidiary, Unusual Machines, Inc. (UMAC-Nevada).
• Shares of UMAC-Puerto Rico common stock will convert to UMAC-Nevada common stock on a one-for-one basis.
• The Series B Convertible Preferred Stock will also convert on a one-for-one basis.
• The board of directors approved the Nevada reincorporation on March 4, 2024, citing benefits such as corporate governance, ability to attract board members, ease of raising financing, and processing credit card orders.
• The company's common stock will continue to be listed on the NYSE American under the ticker symbol UMAC.
• The record date for stockholders entitled to receive the information statement was March 11, 2024.
• The company will bear the entire cost of furnishing the information statement.

Sentiment

Score: 7

Explanation: The document is primarily informational, detailing a corporate action. The sentiment is neutral to slightly positive due to the anticipated benefits of the reincorporation.

Positives

• CEO Allan Evans will receive material tax benefits as a resident of Puerto Rico, with equity taxed at 4% and exempt from U.S. ordinary income taxes.
• The board believes Nevada offers more protection to corporate officers and favorable indemnification provisions.
• The board believes that the choice of state domicile is important because state corporate law governs the internal affairs of a corporation.
• 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.
• Nevada has a modern and flexible corporation law.
• Nevada's legislature is responsive to business needs and we believe it is actively seeking to increase the number of Nevada corporations by making its corporate law attractive.
• Nevada's Eighth Judicial District has a designated business court devoted exclusively to corporate law issues to help institute case management plans minimizing the interruption of business operations.
• Nevada law on elimination of director and officer liability and indemnification, with certain limited exceptions, of corporate agents provides more assurance for persons acting in these roles than does the law of other states.

Negatives

• While Nevada lacks the prominence, breadth, depth, and predictability of Delaware corporate law, including its extensive body of case law, our Board considered the substantial cost difference and our counsels recommendation that Nevada offers more protection to corporate officers and favorable indemnification provisions.
• Some Nevada laws or the proposed Nevada Articles of Incorporation may deter another person or entity from making a hostile acquisition proposal for part or all of the Company, because they make it harder for the acquirer to acquire control of us without our cooperation.
• The Nevada Reincorporation could discourage such an offer. As a result, an existing stockholder might wish to participate in an unsolicited tender offer but not have an opportunity to do so.
• To the extent that provisions of Nevada law enable us to resist a takeover or a change in control, certain features of the Nevada Reincorporation will make it more difficult for stockholders to change the existing Board and management.
• Additionally, in most jurisdictions it remains unclear how a court would interpret and whether it would enforce some of these provisions, resulting in added uncertainty.

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, notwithstanding the approval, if obtained, of the principal terms of the Merger Agreement by our stockholders, or the adoption of the Merger Agreement by the sole stockholder of 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.
• 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 believes that it would be advantageous to complete the Nevada Reincorporation as soon as possible.

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.
• Ultimately, the cost savings was the driving factor in selecting Nevada.

Industry Context

Many companies have reincorporated in Nevada as we propose to do. Nevada has a modern and well-developed corporate law with management-friendly provisions.

Comparison to Industry Standards

• While Nevada lacks the prominence, breadth, depth, and predictability of Delaware corporate law, including its extensive body of case law, our Board considered the substantial cost difference and our counsels recommendation that Nevada offers more protection to corporate officers and favorable indemnification provisions.
• Many large corporations are incorporated in Nevada in comparison to other states (other than Delaware).

Corporate Governance

Stakeholder Impact

• Stockholders will have their shares converted on a one-for-one basis.
• The reincorporation is expected to improve the Board's ability to manage the Company for the benefit of all stockholders.
• Employees and operations will remain in their current locations.

Next Steps

• File the appropriate Merger documents with the Department of State of Puerto Rico and Secretary of State of Nevada.
• Complete certain legal formalities, including obtaining certain consents and approvals by third parties with respect to certain contracts to which we a party and providing certain notices to regulatory authorities.

Key Dates

Keywords

reincorporation, nevada, corporate governance, stockholders, merger, UMAC, red cat holdings, allan evans