Unusual Machines, Inc. 10-K

 true 2023 FY Amended to include re-audited financial statements 0001956955

 2024-08-08

 us-gaap: IPOMember

 us-gaap: IPOMember

 UMAC:RotorRiotMember

 UMAC:PrepaidInsuranceMember

 UMAC:PrepaidInsuranceMember

 UMAC:DepositAcquisitionsMember

 UMAC:DepositAcquisitionsMember

 us-gaap: ComputerEquipmentMember

 us-gaap: ComputerEquipmentMember

 2022-12-12
 2022-12-13

 2022-12-12
 2022-12-13

 2023-06-01
 2023-06-02

 2023-06-01
 2023-06-02

 UMAC:RevereMember

 2023-03-06
 2023-03-07

 2023-07-09
 2023-07-10

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 country: PR

 country: PR

 Table
of Contents

 UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, D.C. 20549

 FORM 10-K/A

 (Amendment No. 1)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For the fiscal year ended December 31, 2023

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 For the transition period from ________
to _________

 Commission File Number: 333-270519

 (Exact name of registrant as specified in its
charter)

 Puerto
 Rico

 66-0927642

 (State or other jurisdiction of incorporation or organization)

 (I.R.S. Employer Identification No.)

 4667
 1 B McLeod Rd

 Suite
 J

 Orlando,
 FL

 32811

 (Address of principal executive offices)

 (Zip Code)

 Registrant's telephone number, including
area code: (855) 921-4600

 Securities registered pursuant to Section 12(b)
of the Act:

 Title
 of each class

 Trading
 Symbol(s)

 Name
 of each exchange on which registered

 Common
 stock, par value $0.01

 UMAC

 NYSE
 American

 Securities registered pursuant to Section 12(g)
of the Act: Common Stock, par value $0.01 per share: None

 Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
 No

 Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
 No

(1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No

has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
 No

is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

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

has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.

 If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.

 Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's
executive officers during the relevant recovery period pursuant to §240.10D-1(b).

is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
 No

 As of June 30, 2023, the last business day of
the registrant's most recently completed second fiscal quarter, the common stock of the registrant was not listed on any securities
exchange or quoted on any automated quotation system. Accordingly, the aggregate market value of the registrant's common stock
held by non-affiliates cannot be calculated as of such date. The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant was approximately $ 9.7
million as of August 8, 2024 (based on the closing sale price of $2.00 as quoted by the NYSE
American as of such date).

 As of
August 8, 2024, there were 6,184,983
shares of the registrant's common stock outstanding.

 EXPLANATORY NOTE

 Unusual Machines, Inc. (the "Company")
is filing this Amendment No. 1 on Form 10-K/A to amend the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2023, which was filed with the Securities and Exchange Commission ("SEC") on March 22, 2024 (the "Original Form
10-K"). This Amendment No. 1 on Form 10-K/A is being filed (i) to include re-audited financial statements for the fiscal years ended
December 31, 2022 ("FY 2022"), and December 31, 2023 ("FY 2023"), due to our previous auditor's suspension
by the SEC; and (ii) include certain corresponding changes in Item 7 – Management's Discussion and Analysis of Financial Condition
and Results of Operations (the "MD&A") resulting from the re-audited financial statements for FY 2022 and FY 2023.

 Except as described above, no other amendments
are being made to the Original Form 10-K. The Original Form 10-K continues to speak as of the filing date of the Original Form 10-K, and
we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original
Form 10-K except as expressly indicated in this Amendment No. 1 on Form 10-K/A.

 The financial statements of Fat Shark Ltd.
and Rotor Riot, LLC are not contained in the financial statements for FY 2022 and FY 2023 because the Company did not own either entity
as of FY 2022 and FY 2023 and is therefore not required to include either entity's financial statements in the re-audited financial
statements for FY 2022 and FY 2023 contained herein.

 Page

 Item 7.

 Management's Discussion and Analysis of Financial
 Condition and Results of Operations

 Item 8.

 Financial Statements and Supplementary Data

 Item 15.

 Exhibits, Financial Statement Schedules

 Signatures

 i

 Item 7.

 Management's Discussion and Analysis of Financial Condition and Results
 of Operations

 You should read the following discussion and
analysis of our financial condition and results of operations in conjunction with the audited financial statements (prepared in accordance
with accounting principles generally accepted in the United States ("U.S. GAAP")) and related notes included elsewhere in
this Annual Report on Form 10-K/A (this "Form 10-K/A"). The following discussion contains forward-looking statements that
are subject to risks and uncertainties. See " Special Note Regarding Forward-Looking Statements " contained in the Original Form 10-K for a discussion of the uncertainties, risks, and assumptions associated with
those statements. Actual results could differ materially from those discussed in or implied by forward-looking statements as a result
of various factors, including those discussed in our Original Form 10-K filed with the SEC on March 22, 2024, particularly in the section
entitled " Risk Factors."
Unless we state otherwise or the context otherwise requires, the terms "we," "us," "our" and the
"Company" refer to Unusual Machines, Inc. and its subsidiaries. All amounts presented in tables, other than per share amounts,
are in thousands unless otherwise noted.

 Recent Developments

 Initial Public
Offering

 On February 16, 2024,
we closed our initial public offering ("IPO") for the sale of 1,250,000 shares of common stock, at a public offering price
of $4.00 per share. The IPO generated gross proceeds of $5.0 million and net proceeds of approximately $4.5 million. We incurred and
paid additional direct offering costs prior to the close of the IPO of $0.1 million during the six months ended June 30, 2024, and $0.5
million during the year ended December 31, 2023. We used $1.0 million of proceeds to pay for the acquisition of Fat Shark and Rotor Riot
as discussed below.

 Acquisition of Fat Shark and Rotor Riot

 On November 21, 2022, we entered into the
Purchase Agreement with Red Cat Holdings, Inc. ("Red Cat") and Jeffrey Thompson, the founder and Chief Executive Officer
of Red Cat and also director of our Company, pursuant to which we agreed to purchase Red Cat's consumer business consisting of
Fat Shark Holdings Ltd. ("Fat Shark") and Rotor Riot LLC ("Rotor Riot"). Fat Shark and Rotor Riot are in
the business of designing and marketing consumer drones and FPV goggles. Rotor Riot is also a licensed authorized reseller of consumer
drones manufactured by third-parties.

 Under the terms of the Purchase Agreement, as
amended, the Company purchased from Red Cat its Rotor Riot and Fat Shark subsidiaries for $20.1 million
comprised of (i) $1.1 million in cash, (ii) a $2.0 million promissory note issued by the Company to Red Cat (the
"Note"), and (iii) $17.0 million of the Company's common stock or 4,250,000 shares of common stock.

 Simultaneous with
the closing of our IPO, on February 16, 2024, we closed the acquisitions of Fat Shark and Rotor Riot.

 On July 22, 2024, we finalized the working
capital adjustment as stipulated in the Purchase Agreement, which resulted in an increase in the overall purchase price by an additional
$2.0 million. We agreed to increase the principal amount of the original note for the working capital adjustment, which increased the
total Note payable to $4.0 million. In addition, we agreed to extend the maturity date of the Note to November 30, 2025. That Note was
then exchanged for two Notes (the "New Notes").

 Series A Convertible Preferred Stock

 Effective July 16, 2024, we filed a Certificate
of Designations, Preferences and Rights of the Series A Convertible Stock with the Nevada Secretary of State. On July 22, 2024, Red Cat
entered into an Exchange Agreement with the Company pursuant to which Red Cat exchanged 4,250,000 shares of the Company's common
stock, par value $0.01 per share for 4,250 shares of the Company's newly designated Series A Convertible Preferred Stock (the "Series
A"). Red Cat then sold the Series A and the New Notes to two investors on July 22, 2024.

 Nevada Reincorporation

 On April 22, 2024, we completed the change
of our place of incorporation from Puerto Rico to Nevada.

 Unusual Machines Results of Operations

 Years Ended December 31, 2023 and 2022

 During the years ended December 31, 2023 and
2022, we did not generate any revenues and as such did not incur any cost of goods sold.

 Operating Expenses

 During the year ended December 31, 2023, we
incurred research and development expenses totaling $0 compared to $91,325 for the year ended December 31, 2022, resulting in a decrease
of $91,325 or 100%. Prior to the acquisition targets of Rotor Riot and Fat Shark, our primary focus was to create a US made camera sensor,
which we no longer pursued after we signed our purchase agreement to acquire Rotor Riot and Fat Shark.

 During the year ended December 31, 2023, we
incurred general and administrative expenses totaling $2,377,862 compared to $1,079,715 for the year ended December 31, 2022, resulting
in an increase of $1,298,147 or 120.2%. The increase primarily relates to stock compensation expense of $600,000 related to shares issued
for services during 2023 and increased legal expenses and professional fees related to the business combination and for preparation of
becoming a public company.

 Net Loss

 Net loss for the year ended December 31, 2023,
totaled $2,383,462 compared to $1,171,777 for the year ended December 31, 2022, resulting in an increase of $1,211,685 or 103%. The
increase in net loss relates to $600,000 in stock compensation expense and the increase in general and administrative expenses as
we start to build out our operations for the business combination and becoming a public company.

 Unusual Machines Cash Flows

 Years Ended December 31, 2023 and 2022

 Operating Activities

 Net cash used in operating activities was
$1,776,552 during the year ended December 31, 2023 compared to net cash used in operating activities of $1,189,191 during the year ended
December 31, 2022, representing an increase of $587,361 or 49.4%. This increase in net cash used primarily resulted from our increase
in net loss of $1,211,685, changes in other working capital of $20,554 offset by non-cash expenses of $604,715.

 Investing Activities

 Net cash used in investing activities was $3,164
during the year ended December 31, 2023 compared to net cash provided by investing activities of $40,647 during the year ended December
31, 2022, representing an overall decrease of $43,811 or 108%. The cash used in investing activities during 2023 related to purchasing
computer equipment. The cash provided by investing activities during 2022 primarily related to a related party receivable for $45,222
being paid back, offset by the purchase of computer equipment of $4,575 during the year.

 Financing Activities

 Net cash used in financing activities totaled
$424,933 during the year ended December 31, 2023 compared to net cash provided by $462,075 during the year ended December 31, 2022, resulting
in a decrease in a change in net cash by financing activities of $887,008 or 192%. The decrease is related to proceeds received from
exempt private offerings of our common stock in 2022 that were not received in 2023 and the change in deferred offering costs related
to our IPO of $337,108.

 Unusual Machines Liquidity and Capital Resources

 As of December 31, 2023, we had current assets
totaling $1,015,404 primarily consisting of cash balances of $894,773 and other current assets of $120,631. Our current liabilities
as of December 31, 2023 totaled $114,497, consisting entirely of accounts payable and accrued expenses. Our net working capital as of
December 31, 2023 was $900,907.

 On February 16, 2024, we completed our IPO for
the sale of 1,250,000 shares of common stock at a public offering price of $4.00 per share for gross proceeds of $5.0 million. After
paying certain underwriting discounts and commissions, business combination expenses and other expenses related to the IPO, we received
approximately $3.8 million in net proceeds.

 To date, our operations have been funded exclusively
by exempt private offerings of our common stock. In September of 2021, we closed a private offering of 2,276,000 shares of common
stock at a price of $1.00 per share for total proceeds of $2,276,000. In December 2021, we closed an additional private offering of 260,000
shares of common stock at a price of $8.00 per share for total gross proceeds of $2,080,800, of which we received net proceeds of $1,992,000
after fees and other expenses. In 2022, we closed an additional private offering of 56,250 shares of common stock at a price of $8.00
per share for total proceeds of $450,000.

 We believe that the net proceeds from our February
2024 IPO and existing cash balances will be sufficient to fund our current operating plans through at least the next 12 months. We have
based these estimates, however, on assumptions that may prove to be wrong, and we could spend our available financial resources much
faster than we currently expect and need to raise additional funds sooner than we anticipate. If we are unable to raise capital when
needed or on acceptable terms, we may be forced to delay, reduce or eliminate certain operational efforts. We do not anticipate any significant
cost increases post Fat Shark and Rotor Riot acquisitions and with consideration of the combined companies' net loss and cash position,
we expect we will have sufficient working capital to support our operations for at least 12 months from the filing of this Form 10-K/A.

 Critical Accounting Policies and Estimates

 Our financial statements and accompanying notes
have been prepared in accordance with GAAP applied on a consistent basis. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting periods.

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

 Stock Based Compensation

 The Company issued shares of our common stock
to consultants for services performed. Prior to our IPO in February 2024, we were a private company with no active public market for our
common stock. Therefore, we have periodically determined the overall value of our company and the estimated per share fair value of our
common equity at their various dates and valuations based on a per share valuation using the private funding transactions as an estimate.
These values and estimates are subjective.

 Off-Balance Sheet Arrangements

 We have no off-balance sheet arrangements.

 Recently Issued Accounting Pronouncements

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

 Item 8.

 Financial Statements and Supplementary Data

 UNUSUAL MACHINES, INC.

 INDEX TO FINANCIAL STATEMENTS

 Page

 Unusual Machines, Inc. Financial Statements

 Report of Independent Registered Public Accounting Firm (PCAOB ID # 106)

 Balance Sheets at December 31, 2023 and 2022

 Statements of Operations for the years ended December 31, 2023 and 2022

 Statements of Changes in Stockholders' Equity for the years ended December
 31, 2023 and 2022

 Statements of Cash Flows for the years ended December 31, 2023 and 2022

 Notes to Financial Statements

 Report of Independent Registered Public Accounting
Firm

 To the Board of Directors and Stockholders of:

 Unusual Machines, Inc.

 Opinion on the Financial Statements

 We have audited the accompanying balance sheets
of Unusual Machines, Inc. (the "Company") as of December 31, 2023 and 2022, the related statements of operations, changes
in stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in
the United States of America.

 Restatement

 As discussed in Note 9 to the financial statements,
the 2023 and 2022 financial statements, as originally audited by a predecessor auditor, have been restated to correct certain errors.

 Basis for Opinion

 These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

 We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.

 Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 Critical Audit Matters

 The critical audit matters are matters arising
from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. We determined there were no critical audit matters.

 /s/ Salberg & Company, P.A.

 SALBERG & COMPANY, P.A.

 We have served as the Company's auditor
since 2024

 Boca Raton, Florida

 F- 1

 Unusual Machines, Inc.

 Balance Sheets

 December 31,

 2023

 2022

 ASSETS

 Current assets:

 Cash

 $

 $

 120,631

 39,375

 Total current assets

 1,015,404

 3,138,797

 Property and equipment, net

 1,254

 3,690

 Other assets

 –

 Total non-current assets

 514,012

 191,515

 Total assets

 $

 $

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities

 $

 $
 131,931

 Total current liabilities

 131,931

 Stockholders' equity:

 Series B preferred stock - $ 0.01
 par value, 10,000,000 authorized
 and 190 and 140
 shares issued and outstanding at December 31, 2023 and 2022, respectively

 Common stock - $ 0.01
 par value, 500,000,000 authorized
 and 3,217,255 and 3,392,250
 shares issued and outstanding at December 31, 2023 and 2022, respectively

 Additional paid in capital

 5,315,790

 Accumulated deficit

 ( 3,933,046
)

)

 Total stockholders' equity

 Total liabilities and stockholders' equity

 $

 $

 See accompanying independent auditor's report
and notes to the financial statements.

 F- 2

 Statements of Operations

 Year Ended December 31,

 2023

 2022

 (As restated

 $
 –

 $
 –

 Cost of goods sold

 –

 –

 Gross profit

 –

 –

 Operating expenses:

 Research and development

 –

 91,325

 General and administrative

 2,377,862

 1,079,715

 Depreciation and amortization

 5,600

 Total operating expenses

 2,383,462

 1,171,925

 Loss from operations

)

 ( 1,171,925
)

 Other income:

 Interest income

 –

 Total other income

 –

 Net loss before income tax

)

)

 Income tax benefit (expense)

 –

 –

 $
)

 $
)

 Net loss per share attributable to common stockholders

 $
 ( 0.72
)

 $
 ( 0.29
)

 Weighted average common shares outstanding

 3,307,118

 4,051,205

 See accompanying independent auditor's report
and notes to financial statements.

 F- 3

 Statements of Changes
in Stockholders' Equity (As restated – Note 9)

 For the Years Ended December
31, 2023 and 2022

 Value

 Value

 Total

 Balance, December 31, 2021

 –

 $
 –

 4,036,000

 $
 40,360

 $
 4,257,605

 $
 ( 377,807
)

 $
 3,920,158

 Issuance of common stock for cash

 –

 –

 56,250

 449,437

 –

 450,000

 Conversion to preferred stock

 ( 700,000
)

 ( 7,000
)

 6,999

 –

 –

 –

 –

 –

 –

 –

)

)

 $

 $

 $

 $
)

 $

 Issuance of common shares for services

 –

 –

 75,005

 599,250

 –

 Conversion to preferred shares

 ( 250,000
)

 ( 2,500
)

 2,499

 –

 –

 –

 –

 –

 –

 –

)

)

 Balance, December 31, 2023

 $

 3,217,255

 $

 $
 5,315,790

 $
 ( 3,933,046
)

 $

 See accompanying independent auditor's report
and notes to financial statements.

 F- 4

 Statements of Cash Flows

 Year Ended December 31,

 2023

 2022

 Cash flows from operating activities:

 $
)

 $
)

 Depreciation

 5,600

 Stock compensation expense

 –

 Change in assets and liabilities:

 Accounts receivable

 –

 Other assets

 18,744

 ( 139,375
)

 ( 17,434
)

 120,131

 Net cash used in operating activities

 ( 1,776,552
)

 ( 1,189,191
)

 Cash flows from investing activities

 Related party receivable

 –

 45,222

 Purchases of property and equipment

)

 ( 4,575
)

 Net cash provided by (used in) investing activities

)

 40,647

 Cash flows from financing activities:

 Proceeds from common stock receivable

 –

 99,900

 Issuance of common stock

 –

 450,000

)

)

 Net cash provided by (used in) financing activities

)

 462,075

 Net increase (decrease) in cash

 ( 2,204,649
)

 ( 686,469
)

 Cash, beginning of year

 3,785,891

 Cash, end of year

 $

 $

 Supplemental disclosures of cash flow information:

 Cash paid for interest

 $
 –

 $
 –

 Cash paid for income tax

 $
 –

 $
 –

 See accompanying independent auditor's report
and notes to financial statements.

 F- 5

 Notes to Financial Statements

 For the Years Ended December
31, 2023 and 2022

 Note
1 – Organization and nature of business

 Unusual Machines, Inc. ("the Company")
is a Nevada corporation engaged in the commercial drone industry. The Company was a Puerto Rican corporation when it closed its IPO, as
defined below. On April 22, 2024, the Company reincorporated as a Nevada corporation.

 On February 16, 2024, the Company closed its
Initial Public Offering (the "IPO") of 1,250,000 shares of common stock at a public offering price of $4.00 per share ("IPO
Price"). The shares are traded on NYSE American. Simultaneous with the closing of the IPO, the Company acquired Fat Shark Holdings
Ltd. ("Fat Shark") and Rotor Riot, LLC ("Rotor Riot") from Red Cat Holdings, Inc. ("Red Cat"). See
Note 8 for additional details.

 Note
2 – Summary of significant accounting policies

 Basis
of Accounting

 The accompanying financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

 Use of Estimates

 The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures
of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Accordingly, actual results could differ from those estimates, and such results could be material. The financial statements include some amounts that are based on management's best estimates and judgments. Significant
estimates in 2023 and 2022 include stock compensation and deferred tax assets.

 Cash

 The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at December 31, 2023 or December 31, 2022.

 The Company maintains cash deposits at a financial
institution that is insured by the Federal Deposit Insurance Corporation up to $ 250,000.
The Company's cash balance may at times exceed these limits. At December 31, 2023 and December 31, 2022, the Company had approximately
$ 0.6 million and $ 2.8
million, respectively, in excess of federally insured limits. The Company continually monitors its positions with, and the credit
quality of the financial institutions with which it invests.

 Deferred
offering costs

 The Company deferred direct incremental costs
associated with its ongoing initial public offering ("IPO"). The Company capitalized $ 424,933
 and $ 87,825
 during the years ended December 31, 2023 and 2022, respectively. Total deferred offering costs were $512,758 as of December 31,
2023. Deferred offering costs consist of primarily legal, advisory, and consulting fees incurred in connection with the formation and
preparation of the IPO. After consummation of the IPO in February 2024, total deferred offering costs of $640,445 were recorded as a
reduction to additional paid-in capital generated as a result of the offering.

 F- 6

 Note
Receivable

 At December 31, 2021, the Company had a loan receivable due from Rotor Riot LLC, a related party, of $ 45,222. The loan did not bear interest. The amount was fully repaid in 2022.

 Property
and equipment, net

 Property and equipment is stated at cost, net
of accumulated depreciation. Depreciation is provided utilizing the straight-line method over the estimated useful lives for owned assets
of three years.

 Fair Values, Inputs and Valuation Techniques
for Financial Assets and Liabilities, and Related Disclosures

 The fair value measurements and disclosure guidance
defines fair value and establishes a framework for measuring fair value. Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement
date. In accordance with this guidance, the Company has categorized its recurring basis financial assets and liabilities into a three-level
fair value hierarchy based on the priority of the inputs to the valuation technique.

 The fair value hierarchy gives the highest priority
to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level
3). The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the
fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input
to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

 The guidance establishes three levels of the fair
value hierarchy as follows:

 Level 1: Inputs are unadjusted,
quoted prices in active markets for identical assets or liabilities at the measurement date;

 Level 2: Inputs are observable,
unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets
or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for
substantially the full term of the related assets or liabilities; and

 Level 3: Unobservable inputs
that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

 Disclosures for Non-Financial Assets Measured
at Fair Value on a Non-Recurring Basis

 The Company's financial instruments mainly consist
of cash, current assets, accounts payable and accrued expenses. The carrying amounts of cash, current assets, accounts payable and accrued
expenses approximates fair value due to the short-term nature of these instruments.

Recognition

 The Company will recognize revenue in
accordance with ASC 606, "Revenue from Contracts with Customers", issued by the Financial Accounting Standards Board
("FASB"). This standard includes a comprehensive evaluation of factors to be considered regarding revenue recognition
including:

 Step 1: Identify the contract with a customer;

 Step 2: Identify the performance obligations in
the contract;

 Step 3: Determine the transaction price;

 Step 4: Allocate the transaction price to the
performance obligations in the contract; and

 Step 5: Recognize revenue when (or as) the Company
satisfies a performance obligation at a point in time.

 The Company did not have any revenue during the
years ended December 31, 2023 and 2022.

 F- 7

 Research and Development

 Research and development expenses include payroll,
employee benefits, and other headcount-related expenses associated with product development. Research and development expenses also include
third-party development costs, materials, and a proportionate share of overhead costs.

 Income
Taxes

 The Company accounts for income taxes using an
asset and liability approach, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences
of events. A valuation allowance is established to reduce deferred tax assets to their estimated realizable value when, in the opinion
of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realizable in the future.

 The Company recognizes benefits of uncertain tax
positions if it is more likely than not that such positions will be sustained upon examination based solely on their technical merits,
as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Company's policy
is to recognize interest and penalties related to unrecognized tax benefits as a part of income tax expense.

 Stock-Based Compensation

 Stock options are valued using the estimated grant-date
fair value method of accounting in accordance with ASC Topic 718, Compensation – Stock Compensation. Fair value is determined based
on the Black-Scholes Model using inputs reflecting our estimates of expected volatility, term and future dividends. The Company recognizes
forfeitures as they occur. The fair value of stock grants is based on our stock price on the date of grant. Compensation costs are recognized
on a straight-line basis over the service period which is the vesting term.

 Net
Loss per Share

 Basic and diluted net loss per share is calculated based on the weighted-average
of common shares outstanding in accordance with FASB ASC Topic 260, Earnings per Share. Diluted net loss per share is calculated
based on the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares. When the Company
reports a net loss, the calculation of diluted net loss per share excludes potential common shares as the effect would be anti-dilutive.

 Recent Accounting Pronouncements

 In November 2023, new accounting guidance was
issued that updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that
are regularly provided to the Chief Operating Decision Maker (the "CODM") and included within each reported measure of a segment's
profit or loss. This new guidance also requires disclosure of the title and position of the individual identified as the CODM and an explanation
of how the CODM uses the reported measures of a segment's profit or loss in assessing segment performance and deciding how to allocate
resources. The new guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024. The new guidance is required to be applied retrospectively to all prior periods presented in the financial
statements. Early adoption is also permitted. On January 1, 2024, the Company adopted ASC 280, Segment Reporting. The Company currently
operates a single segment and the Company does not anticipate any net effect related to the adoption.

 In December 2023, new accounting guidance was
issued related to income tax disclosures. The new guidance requires disaggregated information about a reporting entity's effective
tax rate reconciliation as well as additional information on income taxes paid. The new guidance is effective on a prospective basis for
annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been
issued or made available for issuance. This new guidance will likely not result in additional required disclosures when adopted.

 F- 8

 Note
3 – Other Assets

 Other current and non-current assets at December 31 included:

 Schedule of other assets

 2023

 2022

 Current assets:

 Prepaid insurance

 $
 20,631

 $
 39,375

 Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions

 –

 Total current assets

 $
 120,631

 $
 39,375

 Non-current assets:

 Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions

 $
 –

 $

 Total non-current assets

 $
 –

 $

 Note
4 – Property and equipment, net

 Property and equipment consist of assets with
an estimated useful life greater than one year. Property and equipment are reported net of accumulated depreciation, and the reported
values are periodically assessed for impairment. Property and equipment as of December 31 was as follows:

 Schedule of property and equipment

 2023

 2022

 Computer equipment

 $
 7,738

 $
 4,575

 Accumulated depreciation

 ( 6,484
)

 ( 885
)

 Total property and equipment, net

 $
 1,254

 $
 3,690

 Depreciation expense totaled $ 5,600
 and $ 885 for the year ended December 31, 2023
and 2022, respectively.

 Note 5 – Earnings Per Share and Stockholders' Equity

 Earnings per Share

 Basic net loss per share is computed by dividing
net loss, which is allocated based upon the proportionate amount of weighted average shares outstanding, to each class of stockholder's
stock outstanding during the period. For the calculation of diluted net loss per share, net loss per share attributable to common stockholders
for basic net loss per share is adjusted by the effect of dilutive securities, including awards under our equity compensation plans.

 Outstanding securities not included in the computation
of diluted net loss per share because their effect would have been anti-dilutive include 950,000
 and 700,000
 shares of Series B Preferred Stock, as converted as of December 31, 2023 and 2022, respectively.

 Preferred Stock

 The preferred stock par value is $0.01. The Series
B preferred stock is convertible into common stock at a ratio of 5,000 shares of common stock for each share of Series B stock held, subject
to certain limitations. Series B preferred shares are not entitled to vote on any matters submitted to shareholders of the Company.

 F- 9

 On December 13, 2022, the Company issued 140 Series
B preferred shares in connection with the cancellation of 700,000 shares of common stock.

 On June 1, 2023, the Company issued an additional
 50 Series B preferred shares in connection with the cancellation of 250,000 shares of common stock.

 Series B preferred shares outstanding at December 31, 2023 totaled
 190 which are convertible into 950,000 shares of common stock.

 Series B preferred shares outstanding at December 31, 2022 totaled 140 which are convertible into 700,000 shares
of common stock.

 The common stock par value is $ 0.01.

 2023 Transactions

 On March 7, 2023, the Company issued 75,000 shares
of common stock to an investment banking firm ("Revere") as a fee for the termination of the January 2023 engagement with
Revere. These shares were allocated by Revere to some of the Company's existing shareholders. The Company recorded $ 600,000 of stock
compensation expense related to the issuance of the shares valued at $8.00 per share, which was based on the most recent private sale
of common stock for the Company.

 On July 10, 2023, the Company's Board of
Directors approved a 1-for-2 reverse stock split of our issued and outstanding shares of common stock. In accordance with Staff Accounting
Bulletin Topic 4.C, the Company has given retroactive effect to reverse stock split. In addition and in accordance with FASB ASC 260,
 Earnings Per Share, the Company has retroactively adjusted the computations of basic and diluted share calculations.

 2022 Transactions

 The Company issued 56,250 shares of common stock
during the year ended December 31, 2022 for gross proceeds of $ 450,000.

 The Company received $ 99,900 of proceeds in 2022
related to stocks issued as of December 31, 2021, which was recorded as a subscription receivable asset at December 31, 2021.

 On December 14, 2022, the Company amended its
Articles of Incorporation to, among other things, increase the number of authorized shares of common stock from 90,000,000 to 500,000,000.

 Note
6 – Business Combination

 Fat Shark and Rotor Riot

 On November 21, 2022,
the Company entered into a Share Purchase Agreement (the "Purchase Agreement"), as amended, with Red Cat Holdings, Inc. ("Red
Cat,") and Jeffrey Thompson, the founder and Chief Executive Officer of Red Cat, pursuant to which the Company agreed to purchase
Red Cat's consumer business consisting of Fat Shark Holdings, Ltd. ("Fat Shark") and Rotor Riot, LLC ("Rotor Riot")
(the "Business Combination") for a total of $20.1 million (the "Purchase Price"). Fat Shark and Rotor Riot are
in the business of designing and marketing consumer drones and first-person-view ("FPV") goggles. Rotor Riot is also a licensed
authorized reseller of consumer drones manufactured by third-parties. The Purchase Price was comprised of (i) $1.1 million in cash, (ii)
a $2.0 million promissory note issued by the Company to Red Cat, and (iii) $17.0 million of the Company's common stock and subject
to certain working capital adjustments. See Note 10 – Subsequent Events for additional information.

 F- 10

 Note 7 – Related Party Transactions

 In November 2022, the Company entered into the
Purchase Agreement, as amended with Red Cat and Jeffrey Thompson, the Company's former Chief Executive Officer and President and
current director and also the current Chief Executive Officer of Red Cat, pursuant to which, among other things, Mr. Thompson and the
Company have agreed to indemnification obligations, which shall survive for a period of nine months from February 16, 2024, subject to
certain limitations, which includes a basket of $250,000 before any claim can be asserted and a cap equal to the value of 100,000 shares
of our common stock owned by him to secure any indemnification obligations, which stock is our sole remedy, except for fraud. Our prior
Chief Executive Officer, Mr. Brandon Torres Declet, negotiated the terms of the Purchase Agreement on an arms' length basis with
Joe Freedman who was the head of Red Cat's Special Committee. The transaction was ultimately approved by the Company's and
Red Cat's board of directors. On March 8, 2023, a majority of the disinterested Red Cat shareholders approved the transactions contemplated
in the Purchase Agreement in a special meeting. Mr. Thompson recused himself from such vote.

 In February 2024, the Company completed the acquisitions
to purchase Fat Shark and Rotor Riot from Red Cat. Jeffrey Thompson is the founder and current Chief Executive Officer of Red Cat. Mr.
Thompson is also the founder, prior Chief Executive Officer and current member on the Board of Directors of Unusual Machines. Prior to
the acquisition, Mr. Thompson held 328,500 shares of common stock in Unusual Machines, which represented approximately 10% prior to the
acquisition and IPO.

 Note 8 – Income Taxes

 The Company was incorporated and based in Puerto
Rico, as of and for the years ended December 31, 2023 and 2022. As such, the Company is not subject to taxation by the United States as
Puerto Rico has its own taxing authority. Since inception, the Company has incurred net losses in each year of operations. The current
provision for the reporting periods presented in these financial statements consisted of a tax benefit against which the Company applied
a full valuation allowance, resulting in no current provision for income taxes.

 As of December 31, 2023 and 2022, the
Company had gross net operating losses of approximately $ 3.9
million and $ 1.5 million,
respectively. Deferred tax assets related to the future benefit of these net operating losses for tax purposes totaled approximately
$0.7 million and
$0.3 million,
respectively, calculated using the base Puerto Rico corporate tax rate of 18.5%. Since the Company has not generated revenue or
operating profit since inception, the Company has applied a full valuation allowance against our deferred tax assets as of December
31, 2023 and 2022. Since the Company has reincorporated as a Nevada corporation in April 2024, the use of net operating losses may
be limited. A reconciliation of income taxes at the effective statutory rate and the provision for income taxes was as follows:

 Effective income tax rate

 2023

 2022

 Puerto Rico statutory rate

 18.5 %

 18.5 %

 Effects of:

 State and local taxes

 – %

 – %

 Change in valuation allowance

 ( 18.5)%

 ( 18.5)%

 Effective rate

 – %

 – %

 The Company continuously monitors its current and prior filing positions
in order to determine if any unrecognized tax positions should be recorded. The analysis involves considerable judgement and is based
on the best information available. For the periods ended December 31, 2023 and 2022, the Company is not aware of any positions which require
an uncertain tax position liability.

 F- 11

 Note 9 – Restatement of Previously Issued Financial Statements

 On April 16, 2024, the Company changed their independent
PCAOB-registered accounting firm and terminated its engagement with their prior auditor. On May 3, 2024, the Securities and Exchange Commission
("SEC") issued an order that instituted a cease-and-desist against the Company's previous auditor, which stated that
all necessary Exchange Act Filings presented must be audited by a qualified, independent, PCAOB-registered public accountant. As a result,
the Company's previously issued financial statements for the years ended December 31, 2023 and 2022 were required to be re-audited.

 The Company engaged a new, an independent and
registered accounting firm, to re-audit the Company's previously issued financial statements. During the Company's re-audits,
it was noted that certain transactions were not recorded in the correct period, certain accounts should have been classified as a non-current
asset rather than a current asset, stock compensation expense of $600,000 related to the March 7, 2023 common stock issuance was not recorded
and deferred offering costs were classified as an operating activity rather than a financing activity. Expenses totaling $81,800 were
originally recorded in 2022 but related to 2021 expenses and expenses totaling $10,993 were originally recorded in 2023 but related to
2022 expenses.

 With this restatement, the transactions previously
recorded in the incorrect period have been updated to the correct period, classifications on the balance sheet and cash flow statement
have been corrected and the stock compensation previously not recorded has been properly recorded.

 The following presents reconciliations of the impacted financial statement
line items as filed to the restated amounts as of December 31, 2023 and 2022 and for the years then ended. The previously reported amounts
reflect those included in the Original Filing of our Annual Report on Form 10-K as of and for the years ended December 31, 2023 filed
with the SEC on March 22, 2024. These amounts are labeled "As Filed" in the tables below. The amounts labeled "Restatement
Adjustments" represent the effects of these restatements due to the timing differences, balance sheet reclassifications and stock
compensation expense.

 F- 12

 Restatement
schedules

 Balance Sheet as of December 31, 2023

 ASSETS

 Current assets:

 Cash and cash equivalents

 $

 $
 –

 $

 ( 512,758
)

 –

 120,631

 –

 120,631

 Total current assets

 1,528,162

 ( 512,758
)

 1,015,404

 Non-current assets:

 Property and equipment, net

 1,254

 –

 1,254

 –

 Other assets

 –

 –

 –

 Total non-current assets

 1,254

 514,012

 Total assets

 $

 $
 –

 $

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities

 $

 $
 –

 $

 Total current liabilities

 –

 Stockholders' equity:

 Series B preferred stock, par

 –

 Common stock, par

 –

 Additional paid in capital

 4,715,790

 5,315,790

 Accumulated deficit

 ( 3,333,046
)

 ( 600,000
)

 ( 3,933,046
)

 Total stockholders' equity

 –

 Total liabilities and stockholders' equity

 $

 $
 –

 $

 F- 13

 Statement of Operations for the Year Ended December 31, 2023

 $
 –

 $
 –

 $
 –

 Cost of goods sold

 –

 –

 –

 Gross profit

 –

 –

 –

 Operating expenses:

 Research and development

 –

 –

 –

 General and administrative

 1,788,855

 589,007

 2,377,862

 Depreciation and amortization

 5,600

 –

 5,600

 Total operating expenses

 1,794,455

 589,007

 2,383,462

 Loss from operations

)

)

)

 Other income:

 Interest income

 –

 –

 –

 Total other income

 –

 –

 –

 Net loss before income tax

)

)

)

 Income tax benefit (expense)

 –

 –

 –

 $
)

)

 $
)

 Net loss per share attributable to common stockholders

 $
 ( 0.54
)

 ( 0.18
)

 $
 ( 0.72
)

 Weighted average common shares outstanding

 3,307,118

 –

 3,307,118

 F- 14

 Statements of Changes in Stockholders' Equity – As Filed – For the Year Ended December 31, 2023

 Value

 Value

 Total

 $

 $

 $

 $
 –

 $
 ( 1,538,591
)

 $
 3,209,374

 Issuance of common shares for services

 –

 –

 75,005

 ( 750
)

 –

 –

 –

 Conversion to preferred shares

 ( 250,000
)

 ( 2,500
)

 2,499

 –

 –

 –

 –

 –

 –

 –

 –

 –

)

)

 Balance, December 31, 2023

 $

 3,217,255

 $

 $
 4,715,790

 $
 –

 $
 ( 3,333,046
)

 $

 Statements of Changes in Stockholders' Equity – Restatement Adjustments – For the Year Ended December 31, 2023

 Value

 Value

 Total

 –

 $
 –

 –

 $
 –

 $
 –

 $
 –

 $
)

 $
)

 Issuance of common shares for services

 –

 –

 –

 –

 –

 –

 Conversion to preferred shares

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

)

)

 Balance, December 31, 2023

 –

 $
 –

 –

 $
 –

 $

 $
 –

 $
 ( 600,000
)

 $
 –

 Statements of Changes in Stockholders' Equity – As Restated – For the Year Ended December 31, 2023

 Value

 Value

 Total

 $

 $

 $

 $
 –

 $
)

 $

 Issuance of common shares for services

 –

 –

 75,005

 599,250

 –

 –

 Conversion to preferred shares

 ( 250,000
)

 ( 2,500
)

 2,499

 –

 –

 –

 –

 –

 –

 –

 –

 –

)

)

 Balance, December 31, 2023

 $

 3,217,255

 $

 $
 5,315,790

 $
 –

 $
 ( 3,933,046
)

 $

 F- 15

 Statement of Cash Flows for the Year Ended December 31, 2023

 Cash flows from operating activities:

 $
)

 $
)

 $
)

 Depreciation

 5,600

 –

 5,600

 Stock compensation expense

 –

 Change in assets and liabilities:

 Accounts receivable

 –

 –

 –

)

 424,933

 –

 18,744

 –

 18,744

 ( 6,441
)

)

 ( 17,434
)

 Net cash used in operating activities

 ( 2,201,485
)

 424,933

 ( 1,776,552
)

 Cash flows from investing activities

 Purchases of property and equipment

)

 –

)

 Net cash used in investing activities

)

 –

)

 Cash flows from financing activities:

 –

)

)

 Net cash used in financing activities

 –

)

)

 Net increase (decrease) in cash

 ( 2,204,649
)

 –

 ( 2,204,649
)

 Cash, beginning of year

 –

 Cash, end of year

 $

 $
 –

 $

 Supplemental disclosures of cash flow information:

 Cash paid for interest

 $
 –

 $
 –

 $
 –

 Cash paid for income tax

 $
 –

 $
 –

 $
 –

 In addition, amounts were restated in the following footnote:

 Note 5 – Earnings Per Share and Stockholders' Equity

 F- 16

 Balance Sheet as of December 31, 2022

 ASSETS

 Current assets:

 Cash and cash equivalents

 $

 $
 –

 $

)

 –

 139,375

 ( 100,000
)

 39,375

 Total current assets

 3,326,622

 (187,825
)

 3,138,797

 Non-current assets:

 Property and equipment, net

 3,690

 –

 3,690

 –

 Other assets

 –

 Total non-current assets

 3,690

 187,825

 191,515

 Total assets

 $

 $
 –

 $

 LIABILITIES AND STOCKHOLDERS' EQUITY

 Current liabilities

 $
 120,938

 $
 10,993

 $
 131,931

 Total current liabilities

 120,938

 10,993

 131,931

 Stockholders' equity:

 Series B preferred stock, par

 –

 Common stock, par

 –

 Additional paid in capital

 –

 Accumulated deficit

 ( 1,538,591
)

)

)

 Total stockholders' equity

 3,209,374

)

 Total liabilities and stockholders' equity

 $

 $
 –

 $

 F- 17

 Statement of Operations for the Year Ended December 31, 2022

 $
 –

 $
 –

 $
 –

 Cost of goods sold

 –

 –

 –

 Gross profit

 –

 –

 –

 Operating expenses:

 Research and development

 91,325

 –

 91,325

 General and administrative

 1,150,522

 ( 70,807
)

 1,079,715

 Depreciation and amortization

 –

 Total operating expenses

 1,242,732

 ( 70,807
)

 1,171,925

 Loss from operations

 ( 1,272,732
)

 ( 1,171,925
)

 Other income:

 Interest income

 –

 Total other income

 –

 Net loss before income tax

)

)

 Income tax benefit (expense)

 –

 –

 –

 $
)

 $

 $
)

 Net loss per share attributable to common stockholders

 $
 ( 0.31
)

 $
 0.02

 $
 ( 0.29
)

 Weighted average common shares outstanding

 4,006,007

 45,198

 4,051,205

 F- 18

 Statements of Changes in Stockholders' Equity – As Filed – For the Year Ended December 31, 2022

 Value

 Value

 Total

 Balance, December 31, 2021

 –

 $
 –

 3,776,000

 $
 37,760

 $
 2,268,240

 $
 1,892,065

 $
 ( 296,007
)

 $
 3,902,058

 Issuance of common stock for cash

 –

 –

 316,250

 3,163

 2,438,802

 ( 1,892,065
)

 –

 549,900

 Conversion to preferred stock

 ( 700,000
)

 ( 7,000
)

 6,999

 –

 –

 –

 –

 –

 –

 –

 –

 –

)

)

 $

 $

 $

 $
 –

 $
 ( 1,538,591
)

 $
 3,209,374

 Statements of Changes in Stockholders' Equity – Restatement Adjustments – For the Year Ended December 31, 2022

 Value

 Value

 Total

 Balance, December 31, 2021

 –

 $
 –

 260,000

 $
 2,600

 $
 1,989,365

 $
 ( 1,892,065
)

 $
 ( 81,800
)

 $
 18,100

 Issuance of common stock for cash

 –

 –

 ( 260,000
)

 ( 2,600
)

 ( 1,989,365
)

 1,892,065

 –

 ( 99,900
)

 Conversion to preferred stock

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 –

 $
 –

 –

 $
 –

 $
 –

 $
 –

 $
)

 $
)

 Statements of Changes in Stockholders' Equity – As Restated – For the Year Ended December 31, 2022

 Value

 Value

 Total

 Balance, December 31, 2021

 –

 $
 –

 4,036,000

 $
 40,360

 $
 4,257,605

 $
 –

 $
 ( 377,807
)

 $
 3,920,158

 Issuance of common stock for cash

 –

 –

 56,250

 449,437

 –

 –

 450,000

 Conversion to preferred stock

 ( 700,000
)

 ( 7,000
)

 6,999

 –

 –

 –

 –

 –

 –

 –

 –

 –

)

)

 $

 $

 $

 $
 –

 $
)

 $

 F- 19

 Statement of Cash Flows for the Year Ended December 31, 2022

 Cash flows from operating activities:

 $
)

 $

 $
)

 Depreciation

 –

 Change in assets and liabilities:

 Accounts receivable

 –

)

 –

 ( 24,153
)

 ( 115,222
)

 ( 139,375
)

 120,938

 ( 807
)

 120,131

 Net cash used in operating activities

 ( 1,231,794
)

 42,603

 ( 1,189,191
)

 Cash flows from investing activities

 Related party receivable

 –

 45,222

 45,222

 Purchases of property and equipment

 ( 4,575
)

 –

 ( 4,575
)

 Net cash provided by (used in) investing activities

 ( 4,575
)

 45,222

 40,647

 Cash flows from financing activities:

 Proceeds from common stock receivable

 –

 99,900

 99,900

 Issuance of common stock

 549,900

 ( 99,900
)

 450,000

 –

)

)

 Net cash provided by financing activities

 549,900

)

 462,075

 Net increase (decrease) in cash

 ( 686,469
)

 –

 ( 686,469
)

 Cash, beginning of year

 3,785,891

 –

 3,785,891

 Cash, end of year

 $

 $
 –

 $

 Supplemental disclosures of cash flow information:

 Cash paid for interest

 $
 –

 $
 –

 $
 –

 Cash paid for income tax

 $
 –

 $
 –

 $
 –

 F- 20

 Note 10 – Subsequent Events

 Fat Shark and Rotor Riot Acquisition

 On February 16, 2024, the Company closed on the
acquisitions of both Fat Shark and Rotor Riot from Red Cat and Jeffrey Thompson, the founder and Chief Executive Officer of Red Cat (the
"Business Combination"). Fat Shark and Rotor Riot are in the business of designing and marketing consumer drones and first-person-view
("FPV") goggles. Rotor Riot is also a licensed authorized reseller of consumer drones manufactured by third-parties.

 The Company specializes in the production and
sale of small drones and essential components and with the acquisitions of Fat Shark and Rotor Riot, it brings brand recognition and a
strong curated retail channel in the FPV drone market segment. This Business Combination is a realization of the Company's strategy
to build its business both organically and through strategic acquisitions that leverage our retail business to onshore production of critical
drone components. With the transition to onshoring production of drone components, the Company intends to expand into B2B channels for
customers that require a domestic supply chain.

 The Business Combination was based on a share
purchase agreement (the "Purchase Agreement") that was executed on November 21, 2022. From November 21, 2022 to February 16,
2024, the Purchase Agreement was subject to several amendments and subject to certain working capital adjustments. Under the terms of
the Purchase Agreement, as amended, the consideration paid for the acquired assets consisted of (i) $1.0 million in cash and a cash deposit
of $0.1 million made in 2022, (ii) issuance of a $4.0 million 18 month promissory note to Red Cat after a working capital adjustment made
in July 2024, and (iii) the issuance of 4,250,000 shares of the Company's common stock, which represented approximately 48.66% of
the outstanding common stock of the Company on February 16, 2024, after the effect of the issued shares (collectively the "Consideration
Paid"). The Company has currently valued the Red Cat common stock at $4.00 per share which represents the IPO price of the Company's
common stock on February 15, 2024. Accordingly, the value of the Consideration Paid is equal to $22,100,000.

 The acquisitions met the definition of a business
combination under ASC 805, Business Combinations, and therefore the assets acquired and liabilities assumed are accounted for at fair
value. The Company has not completed its evaluation of the fair value of assets acquired and liabilities assumed of Fat Shark and Rotor
Riot for the purpose of its 2024 fiscal year financial reporting and as such has not fully determined the unallocated purchase price between
goodwill and other intangible assets. Such amounts are subject to adjustment during the one-year measurement period.

 The following represents the fair value allocation of Fat Shark and
Rotor Riot Purchase Price:

 Cash

 $
 147,200

 Accounts receivable (approximates contractual value)

 6,798

 Inventories (on hand and prepaid)

 2,611,583

 10,892

 Right of use asset - operating

 378,430

 Other long-term assets

 59,426

 Goodwill and intangible assets (unallocated purchase price)

 19,666,086

 Total assets

 22,880,415

 Accounts payable and accrued liabilities

 287,544

 Customer deposits

 114,441

 Operating lease liability – current and long-term

 378,430

 Total liabilities

 780,415

 Total purchase price

 $
 22,100,000

 F- 21

 Initial goodwill and intangible assets relate
to Fat Shark and Rotor Riot being FPV market leaders and their well-known and established brands within the industry. Combining these
entities and their existing customer base along with Unusual Machines strategy of extending to B2B sales of drone components will provide
strategic advantage. The Company will evaluate the amount of goodwill and intangibles that are expected to be deductible for tax purposes
once the unallocated purchase price is finalized.

 The table below presents the results as reported
by the Company and unaudited pro forma results of the Company, assuming that the acquisition of Fat Shark and Rotor Riot at the beginning
of each period are as follows. The unaudited pro forma results are not necessarily indicative of what actually would have occurred had
the acquisitions been in effect for the periods presented (in thousands, except per share data):

 For the Year Ended

 For the Year Ended

 December 31, 2023

 December 31, 2022

 As Reported

 Proforma

 (unaudited)

 As Reported

 Proforma

 (unaudited)

 $

 –

 $

 4,682

 $

 –

 $

 4,890

 Gross profit/(loss)

 –

 549,739

 –

 Loss from operations

 (2,383

)

 (5,005

)

 (1,172

)

 (2,572

)

 Other expense

 –

 $

 (2,383

)

 $

 (5,061

)

 $

 (1,172

)

 $

 (2,608

)

 Net earnings per share:

 Basic

 $

 (0.72

)

 $

 (0.58

)

 $

 (0.29

)

 $

 (0.27

)

 This unaudited consolidated pro forma financial
information is presented for informational purposes only. The unaudited consolidated pro forma adjustments are based on preliminary estimates,
information available and certain assumptions, and may be revised as additional information becomes available. In addition, the unaudited
pro forma financial information does not reflect any adjustments for non-recurring items or anticipated synergies resulting from the acquisition.

 The unaudited pro forma financial information
for the periods presented includes adjustments to: 1) eliminate intercompany revenue and associated cost of sales for sales of product
from Fat Shark to Rotor Riot, 2) to adjust fair value for certain Fat Shark inventory as if the acquisition had occurred as of the beginning
of the respective periods and 3) to include acquisition related expenses in 2023 that were incurred in 2024.

 Nevada Reincorporation

 On April 19, 2024, the Company entered into an
Agreement and Plan of Merger with its wholly owned subsidiary, Unusual Machines, Inc., a Nevada corporation ("UMAC Nevada"),
pursuant to which the Company agreed to merge with and into UMAC Nevada with UMAC Nevada continuing as the surviving corporation in the
merger. The merger was consummated on April 22, 2024. As a result, the Company reincorporated from Puerto Rico to Nevada.

 F- 22

 Management Services Agreement

 On April 30, 2024 ("Grant
Date"), the Company's board of directors approved the Company entering into a two-year Management Services Agreement (the
"Agreement") with 8 Consulting LLC (the "Consultant") for the services of our Chief Executive Officer, Dr. Allan
Evans, whereby the Consultant will cause Dr. Evans to perform his services as the Company's Chief Executive Officer and the Consultant
will be compensated on behalf of Dr. Evans by the Company in connection with his performance of such services. The Agreement allows Dr.
Evans to receive favorable tax benefits as a resident of the Commonwealth of Puerto Rico who will perform such services in Puerto Rico.
Pursuant to the Agreement, Dr. Evans will perform the duties and responsibilities that are customary for a chief executive officer of
a public company that either have revenues similar to the Company on a pro forma basis as reflected in the Prospectus filed with the SEC
on February 15, 2024, or if pre-revenues, are an active and on-going business that are performing pre-revenue activities. The Consultant
will cause Dr. Evans, as Chief Executive Officer, (i) to undertake primary responsibility for managing all aspects of the Company and
overseeing the preparation of all reports, registration statements and other filings required filed by the Company with the SEC and executing
the certifications required the Sarbanes Oxley Act of 2002 and the rules of the SEC as the principal executive officer of the Company;
(ii) attend investor meetings and road shows in connection with the Company's fundraising and investor relations activities; (iii)
to report to the Company's board of directors; (iv) to perform services for such subsidiaries of the Company as may be necessary.

 The Consultant will receive
a $250,000 fee per year payable in monthly installments. In addition, the Consultant was granted 488,000 fully vested shares of restricted
common stock. The fair value of the shares was based on the quoted trading price on the Grant Date and will be recognized over the service
period (see below). The grant of restricted common stock was made under the Company's 2022 Equity Incentive Plan. The shares of
restricted common stock are subject to pro rata forfeiture from February 14, 2024 until February 14, 2025, in the event that Dr. Evans
is terminated or ends his services to the Company for any reason other than death or disability, as defined in the Internal Revenue Code.
 The Company and Dr. Evans previously entered into an Offer Letter dated November 27, 2023, under
which he would serve as the Company's Chief Executive Officer effective as of December 4, 2023. The Agreement terminates and replaces
the Offer Letter dated November 27, 2023.

 Equity Incentive Plan Issuances

 On April 30, 2024, the
Board of the Company approved the grant of restricted shares of common stock to the following executive officers of the Company set forth
on the table below in such amounts and with vesting set forth opposite their respective names. The shares of restricted common stock were
granted under the Company's 2022 Equity Incentive Plan. The shares of restricted stock are subject to pro rata forfeiture from February
14, 2024 until February 14, 2025, in the event that any executive officer is terminated or ends his services to the Company for any reason
other than death or disability, as defined in the Internal Revenue Code. On May 2, 2024, the Board of the Company approved another grant
of restricted shares of common stock to Mr. Evans (through 8 Consulting LLC) in exchange for a $50,000 per year fee reduction. The fee
disclosed above is after the $50,000 credit. The fair value per share was based on the quoted trading price as of the close of the market
as of the different grant dates and the value will be recognized over the period the shares are subject to forfeiture (see below).

 Executive Officer

 Amount of Restricted Common Stock

 Vesting

 Fair Value Per Share

 Aggregate Fair Value

 Allan Evans through 8 Consulting LLC

 488,000

 Fully vested

 $1.20

 $585,600

 Allan Evans through 8 Consulting LLC

 40,650

 Fully vested

 $1.23

 $50,000

 Brian Hoff

 293,000

 50% vested and 50% vests on January 1, 2025

 $1.20

 $351,600

 Andrew Camden

 50,000

 Fully vested

 $1.20

 $60,000

 F- 23

 In addition, on April
30, 2024, the Board of the Company approved the grant of fully vested restricted shares of common stock to the following directors of
the Company set forth on the table below, in such amounts set forth opposite their respective names, for their services as a director
and, where applicable, as a Committee Chair. The shares of restricted common stock were granted under the Company's 2022 Equity
Incentive Plan. The fair value per share was based on the quoted trading price as of the close of the market as of the grant date.

 Fair Value Per Share

 Amount of Restricted Common Stock

 Aggregate Fair Value

 Cristina Col n

 $1.20

 27,083

 $32,500

 Robert Lowry

 $1.20

 27,083

 $32,500

 Sanford Rich

 $1.20

 27,083

 $32,500

 Jeffrey Thompson

 $1.20

 25,000

 $30,000

 On July 30, 2024, the
Board of the Company issued non-employee directors set forth in the table below, the equity portion of their quarterly compensation. Each
of the directors received a vested restricted stock grant for services as a director (and where applicable, committee member) during the
quarter ended June 30, 2024. The shares of restricted common stock were granted under the Company's 2022 Equity Incentive Plan and
was subject to each director executing the Company's standard Restricted Stock Agreement, which occurred on July 29, 2024. The fair
value per share was based on the quoted trading price as of the close of the market as of July 17, 2024. The directors also received a
cash grant for the quarter of $5,416.67 for committee members and $5,000 for non-committee members.

 Fair Value Per Share

 Amount of Restricted Common Stock

 Aggregate Fair Value

 Cristina Col n

 $1.79

 6,052

 $10,833

 Robert Lowry

 $1.79

 6,052

 $10,833

 Sanford Rich

 $1.79

 6,052

 $10,833

 Jeffrey Thompson

 $1.79

 5,587

 $10,000

 Working Capital Adjustment

 On July 22, 2024 the
Company finalized its working capital adjustment related to the acquisitions of Fat Shark and Rotor Riot for an additional $2.0 million
and a total Purchase Price of $22.1 million. The additional $2.0 million was added to the existing note payable for a total of $4.0 million
and extended the maturity date to November 30, 2025 and the goodwill and intangible assets was increased by $2.0 million.

 Series A Convertible Preferred Stock

 Effective July 16, 2024, the Company filed a Certificate of Designations,
Preferences and Rights of the Series A Convertible Stock with the Nevada Secretary of State. On July 22, 2024, Red Cat entered into an
Exchange Agreement with the Company pursuant to which Red Cat exchanged 4,250,000 shares of the Company's common stock, par value
$0.01 per share for 4,250 shares of the Company's newly designated Series A Convertible Preferred Stock (the "Series A").
Red Cat then sold the Series A and the New Notes to two investors on July 22, 2024.

 F- 24

 Item 15.

 Exhibits and Financial Statement Schedules

 EXHIBIT INDEX

 Incorporated by Reference

 Exhibit

 Description

 Filed/Furnished

 Form

 Exhibit

 Filing

 No.

 Herewith

 No.

 Date

 1.1

 Form of Underwriting Agreement, dated February 14, 2024, by and between Unusual Machines, Inc. and Dominari Securities, LLC +

 1.1

 2/16/2024

 2.1

 Agreement and Plan of Merger by and between Unusual Machines, Inc., a Puerto Rico corporation and Unusual Machines, Inc., a Nevada corporation

 2.1

 3.1

 Articles of Incorporation

 3.1

 3.2

 Bylaws

 3.2

 3.3

 Certificate of Designation of Series A Convertible Preferred Stock

 3.1

 7/22/2024

 3.4

 Certificate of Designation of Series B Convertible Preferred Stock

 3.3

 3.5

 Form of Common Stock Certificate

 3.4

 4.1

 Revised Form of Representatives Warrant

 S-1/A

 10.7

 2/1/2024

 4.2

 Form of Representatives Warrant

 4.1

 2/16/2024

 4.3

 Form of 8% Promissory Note +

 4.1

 7/22/2024

 4.4

 Description of Securities

 4.7

 3/22/24

 10.1

 Share Purchase Agreement+

 S-1

 10.1

 3/14/2023

 10.1(a)

 Amended and Restated Amendment No. 1 to Share Purchase Agreement

 S-1/A

 10.2

 5/3/2023

 10.1(b)

 Amendment No. 2 to Share Purchase Agreement

 S-1/A

 10.3

 10.1(c)

 Amendment No. 3 to Share Purchase Agreement

 S-1/A

 10.4

 9/19/2023

 10.1(d)

 Amendment No. 4 to Share Purchase Agreement

 S-1/A

 10.5

 12/15/2023

 10.2

 Employment Agreement with Brian Hoff #+

 S-1

 10.6

 3/14/2023

 10.2(a)

 Form of Amendment No. 1 to the to Employment Agreement with Brian Hoff #

 S-1/A

 10.11A

 10.3

 Form of Patent Assignment

 S-1/A

 10.6

 10.4

 Form of Trademark Assignment

 S-1/A

 10.7

 10.5

 Form of Non-Compete Agreement

 S-1/A

 10.8

 10.6

 Form of Restricted Stock Unit Agreement

 S-1/A

 10.18

 10.7

 Revised Form of Registration Rights Agreement

 S-1/A

 10.6

 12/15/2023

 10.8

 Amended 2022 Equity Incentive Plan #

 S-1/A

 10.11

 12/15/2023

 10.9

 Brandon Torres Declet Termination and Release Agreement

 S-1/A

 10.22

 12/15/2023

 10.10

 Form of Lock-up Agreement

 S-1/A

 10.14

 2/1/2024

 10.11

 Form of Lock-up Agreement – Jeffrey Thompson

 S-1/A

 10.15

 2/1/2024

 10.12

 Allan Evans Non-Compete Agreement

 10.9

 2/22/2024

 10.13

 Management Services Agreement #

 10.1

 5/6/2024

 10.14

 Form of Restricted Stock Agreement

 10.2

 5/6/2024

 10.15

 Form of Exchange Agreement +

 10.1

 7/22/2024

 10.16

 Form of Closing Date Working Capital Agreement and Consent +

 10.2

 7/22/2024

 10.17

 Form of Restricted Stock Agreement

 10.1

 7/31/2024

 14.1

 Code of Ethics

 S-1/A

 10.17

 16.1

 Letter from BF Borgers CPA PC

 16.1

 4/16/2024

 19.1

 Insider Trading Compliance Policy

 19.1

 3/22/2024

 21.1

 List of Subsidiaries

 (1)

 31.1

 Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 (1)

 31.2

 Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 (1)

 32.1

 Certification of the Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 (3)

 32.2

 Certification of the Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 (3)

 97.1

 Clawback Policy

 97.1

 3/22/2024

 101.INS

 (1)

 101.SCH

 (1)

 101.CAL

 (1)

 101.DEF

 (1)

 101.LAB

 (1)

 101.PRE

 (1)

 (1)

 +

 Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC Staff upon request.

 #

 Indicates management contract or compensatory plan, contract or agreement.

 (1)

 Filed herein

 (3)

 Furnished herein.

 SIGNATURES

 Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunder duly authorized.

 Unusual Machines, Inc.

 By:

 / s/
 Allan Evans

 Allan Evans

 Chief Executive Officer, President and Director

 (Principal Executive Officer)

 By:

 / s/
 Brian Hoff

 Brian Hoff

 Chief Financial Officer

 Date: August 9, 2024

 Pursuant to the requirements
of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated

 SIGNATURE

 TITLE

 DATE

 /s/ Allan Evans

 Chief Executive Officer, President and Director

 Allan Evans

 (Principal Executive Officer)

 /s/ Brian Hoff

 Chief Financial Officer

 Brian Hoff

 (Principal Financial and Accounting Officer)

 /s/ Cristina Col n

 Cristina Col n

 /s/ Robert Lowry

 Robert Lowry

 /s/ Sanford Rich

 Sanford Rich

 /s/

 Jeffrey Thompson