Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	Quarterly REPORT pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2024

Or

☐	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

Commission File No. 333-270519

Unusual Machines, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		66-0927642
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4677 L B McLeod Rd

Suite J

Orlando, FL

32811

Address of Principal Executive Offices

Zip Code

(855) 921-4600

(Registrant’s telephone number, including area code)

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 per share	UMAC	NYSE American

Indicate by check mark whether the registrant: (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 ☐

Indicate by check mark whether the registrant 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 ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See 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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12(b)-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2024, 8,300,480 shares of the registrant’s common stock, $0.01 par value per share, were outstanding.

UNUSUAL MACHINES, INC.

2024 QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	4
	Unaudited Consolidated Condensed Balance Sheets	4
	Unaudited Consolidated Condensed Statements of Operations	5
	Unaudited Consolidated Condensed Statements of Changes in Shareholders’ Equity	6
	Unaudited Consolidated Condensed Statements of Cash Flows	7
	Notes to Unaudited Consolidated Condensed Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	37

Unless we state otherwise or the context otherwise requires, the terms “Unusual Machines,” “we,” “us,” “our” and the “Company” refer to Unusual Machines, Inc., a Nevada corporation.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology.

Forward-looking statements are neither historical facts nor assurances of future performance, and are based only on our current beliefs, expectations and assumptions regarding the future of our business, our ability to raise additional capital to meet our liquidity needs, future plans and strategies, projections, anticipated events and trends, the uncertainty of the amount of amortization of certain intangibles, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking are described more fully in the Section entitled “Risk Factors” contained in our final Prospectus filed with the Securities and Exchange Commission on October 25, 2024.

These forward-looking statements speak only as of the date of this Form 10-Q and are subject to business and economic risks. We do not undertake any obligation to update or revise the forward-looking statements to reflect events that occur or circumstances that exist after the date on which such statements were made, except to the extent required by law.

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Unusual Machines, Inc.

Consolidated Condensed Balance Sheets


	September 30, 2024			December 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,685,772		$	894,773
Accounts Receivable		79,907			–
Inventory		1,453,042			–
Prepaid inventory		1,140,511			–
Other current assets		158,093			120,631
Total current assets		4,517,325			1,015,404

Non-current assets:
Property and equipment, net		741			1,254
Deferred offering costs		–			512,758
Operating lease right-of-use assets		340,389			–
Goodwill and intangible assets		19,666,086			–
Total non-current assets		20,007,216			514,012

Total assets	$	24,524,541		$	1,529,416

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	1,032,636		$	114,497
Operating lease liabilities		65,089			–
Deferred revenue		300,517			–
Warrant liabilities		308,964			–
Derivative liability – convertible note conversion option		311,048			–
Total current liabilities		2,018,254			114,497

Long-term liabilities
Convertible note		3,000,000			–
Operating lease liabilities – long term		280,285			–

Total liabilities		5,298,539			114,497

Commitments and contingencies (See note 13)		–			–

Stockholders’ equity:
Series A preferred stock - $0.01 par value, 4,250 authorized and 4,250 and 0 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively		43			–
Series B preferred stock - $0.01 par value, 10,000,000 authorized and 50 and 190 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively		1			2
Series C preferred stock - $0.01 par value, 3,000 authorized and 210 and 0 shares issued and outstanding on September 30, 2024 and December 31, 2023, respectively		2			–
Common stock - $0.01 par value, 500,000,000 authorized and 6,184,983 and 3,217,255 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively		61,850			32,173
Additional paid in capital		27,959,642			5,315,790
Accumulated deficit		(8,795,536	)		(3,933,046	)
Total stockholders’ equity		19,226,002			1,414,919

Total liabilities and stockholders’ equity	$	24,524,541		$	1,529,416

See accompanying condensed unaudited notes to the consolidated condensed financial statements.

Unusual Machines, Inc.

Consolidated Condensed Statement of Operations

For the Three and Nine months Ended September 30, 2024 and 2023

(Unaudited)



	Three months ended September 30,						Nine months ended September 30,
	2024			2023			2024			2023
										(Restated – Note 14)
Revenues	$	1,531,264		$	–		$	3,561,303		$	–

Cost of goods sold		1,131,777			–			2,569,209			–

Gross profit		399,487			–			992,094			–

Operating Expenses
Operations		218,126			–			544,220			–
Research and development		15,000			–			42,078			–
Sales and marketing		252,253			–			795,643			–
General and administrative		1,374,989			353,029			3,728,749			1,965,469
Depreciation and amortization		171			645			513			1,407
Total operating expenses		1,860,539			353,674			5,111,203			1,966,876
Operating loss		(1,461,052	)		(353,674	)		(4,119,109	)		(1,966,876	)

Other Income (Expense)
Interest income		180			–			180			–
Interest expense		(41,465	)		–			(101,648	)		–
Loss on debt extinguishment		(685,151	)		–			(685,151	)		–
Change in fair value of derivatives and warrant liabilities		43,238			–			43,238			–
Other (Income) Expense		(683,198	)		–			(743,381	)		–

Net loss	$	(2,144,250	)	$	(353,674	)	$	(4,862,490	)	$	(1,966,876	)

Net loss per share attributable to common stockholders
Basic and diluted	$	(0.30	)	$	(0.11	)	$	(0.63	)	$	(0.59	)

Weighted average common shares outstanding
Basic and diluted		7,147,866			3,217,255			7,749,285			3,337,402

See accompanying condensed unaudited notes to the consolidated condensed financial statements.

Unusual Machines, Inc.

Consolidated Condensed Statement of Changes in Stockholders’ Equity

For the Nine months Ended September 30, 2024 and 2023

(Unaudited)

Nine months Ended September 30, 2023 (Restated – Note 14)


	Series A, Preferred Stock			Series B, Preferred Stock			Series C, Preferred Stock			Common Stock					Additional Paid-In		Accumulated			Total Stockholders’
	Shares	Value		Shares	Value		Shares	Value		Shares		Value			Capital		Deficit			Equity
Balance, December 31, 2022	–	$	–	140	$	1	–	$	–	3,392,250		$	33,923		$	4,714,041	$	(1,549,584	)	$	3,198,381

Issuance of common shares for services	–		–	–		–	–		–	75,005			750			599,250		–			600,000
Net loss	–		–	–		–	–		–	–			–			–		(1,177,904	)		(1,177,904	)
Balance, March 31, 2023	–	$	–	140	$	1	–	$	–	3,467,255		$	34,673		$	5,313,291	$	(2,727,488	)	$	2,620,477

Conversion of preferred stock	–		–	50		1	–		–	(250,000	)		(2,500	)		2,499		–			–
Net loss	–		–	–		–	–		–	–			–			–		(435,298	)		(435,298	)
Balance, June 30, 2023	–	$	–	190	$	2	–	$	–	3,217,255		$	32,173		$	5,315,790	$	(3,162,786	)	$	2,185,179

Net loss	–		–	–		–	–		–	–			–			–		(353,674	)		(353,674	)
Balance, September 30, 2023	–	$	–	190	$	2	–	$	–	3,217,255		$	32,173		$	5,315,790	$	(3,516,460	)	$	1,831,505

continued

Nine months Ended September 30, 2024

	Series A, Preferred Stock			Series B, Preferred Stock					Series C, Preferred Stock			Common Stock					Additional Paid-In			Accumulated			Total Stockholders’
	Shares	Value		Shares		Value			Shares	Value		Shares		Value			Capital			Deficit			Equity
Balance, December 31, 2023	–	$	–	190		$	2		–	$	–	3,217,255		$	32,173		$	5,315,790		$	(3,933,046	)	$	1,414,919

Issuance of common shares as settlement	–		–	–			–		–		–	16,086			161			64,183			–			64,344
Issuance of common shares, initial public offering, net of offering costs	–		–	–			–		–		–	1,250,000			12,500			3,837,055			–			3,849,555
Issuance of common shares, business combination	–		–	–			–		–		–	4,250,000			42,500			16,957,500			–			17,000,000
Conversion of preferred shares	–		–	(120	)		(1	)	–		–	600,000			6,000			(5,999	)		–			–
Net loss	–		–	–			–		–		–	–			–			–			(1,106,002	)		(1,106,002	)
Balance, March 31, 2024	–	$	–	70		$	1		–	$	–	9,333,341		$	93,334		$	26,168,529		$	(5,039,048	)	$	21,222,816

Conversion of preferred shares	–		–	(20	)		–		–		–	100,000			1,000			(1,000	)		–			–
Issuance of common shares, equity incentive plan	–		–	–			–		–		–	977,899			9,779			(9,779	)		–			–
Stock compensation expense - vested stock	–		–	–			–		–		–	–			–			346,854			–			346,854
Stock option compensation expense	–		–	–			–		–		–	–			–			14,389			–			14,389
Net loss	–		–	–			–		–		–	–			–			–			(1,612,238	)		(1,612,238	)
Balance, June 30, 2024	–	$	–	50		$	1		–	$	–	10,411,240		$	104,113		$	26,518,993		$	(6,651,286	)	$	19,971,821

Issuance of common shares, equity incentive plan	–		–	–			–		–		–	23,743			237			(237	)		–			–
Exchange of common shares for Series A preferred	4,250		43	–			–		–		–	(4,250,000	)		(42,500	)		42,457			–			–
Exchange of convertible note for Series C preferred	–		–	–			–		210		2	–			–			999,998			–			1,000,000
Stock compensation expense – vested stock	–		–	–			–		–		–	–			–			375,345			–			375,345
Stock option compensation expense	–		–	–			–		–		–	–			–			23,086			–			23,086
Net loss	–		–	–			–		–		–	–			–			–			(2,144,250	)		(2,144,250	)
Balance, September 30, 2024	4,250	$	43	50		$	1		210	$	2	6,184,983		$	61,850		$	27,959,642		$	(8,795,536	)	$	19,226,002

See accompanying condensed unaudited notes to the consolidated condensed financial statements.

Unusual Machines, Inc.

Consolidated Condensed Statement of Cash Flows

For the Nine months Ended September 30, 2024 and 2023

(Unaudited)


	Nine months Ended September 30,
	2024			2023
				(Restated – Note 14)
Cash flows from operating activities:
Net loss	$	(4,862,490	)	$	(1,966,876	)
Depreciation		513			1,407
Stock compensation expense as settlement		64,344			600,000
Stock compensation expense		759,673			–
Change in fair value for warrant and derivative liabilities		(43,239	)		–
Loss on debt extinguishment, non-cash component		663,250			–
Change in assets and liabilities:
Accounts receivable		(73,109	)		–
Inventory		337,562			–
Prepaid inventory		(319,532	)		–
Other assets		(29,100	)		33,750
Accounts payable and accrued expenses		630,595			(50,819	)
Operating lease liabilities		(33,056	)		–
Customer deposits and other current liabilities		186,076			–
Net cash used in operating activities		(2,718,513	)		(1,382,538	)

Cash flows from investing activities
Cash portion of consideration paid for acquisition of businesses; net of cash received		(852,801	)		–
Purchase of property & equipment		–			(3,164	)
Net cash used in investing activities		(852,801	)		(3,164	)

Cash flows from financing activities:
Proceeds from issuance of common shares		5,000,000			–
Common share issuance offering costs		(637,687	)		(376,702	)
Net cash provided by (used in) financing activities		4,362,313			(376,702	)

Net increase (decrease) in cash		790,999			(1,762,404	)

Cash, beginning of period		894,773			3,099,422

Cash, end of period	$	1,685,772		$	1,337,018

Supplemental disclosures of cash flow information:
Non-cash consideration paid for assets acquired and liabilities assumed	$	19,000,000		$	–
Deferred acquisition costs	$	100,000		$	–
Deferred offering costs recorded as reduction of proceeds	$	512,758		$	–

See accompanying condensed unaudited notes to the consolidated condensed financial statements.

Unusual Machines, Inc.

Notes to Consolidated Condensed Financial Statements

For the Period Ended September 30, 2024

Note 1 – Organization and nature of business

Unusual Machines, Inc. (“the Company”) is a Nevada corporation engaged in the commercial drone industry. The Company reincorporated from Puerto Rico to Nevada on April 22, 2024.

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 3).

Note 2 – Summary of significant accounting policies

Principles of Consolidation

The consolidated financial statements include accounts of the Company and its wholly owned subsidiaries, Fat Shark and Rotor Riot since the acquisitions on February 16, 2024. Intercompany transactions and balances have been eliminated upon consolidation.

Unaudited interim financial information

The consolidated condensed financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations. Accordingly, these condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A, for the year ended December 31, 2023. The results for any interim period are not necessarily indicative of results for any future period.

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 reflected in these financial statements include those used to (i) determine stock-based compensation, (ii) the fair value of assets acquired and liabilities assumed in business combinations and the value of shares issued as consideration, (iii) reserves and allowances related to accounts receivable, inventory and sales, (iv) the evaluation of long-term assets, including goodwill, for impairment, (v) the fair value of lease liabilities and related right of use assets, the fair value of embedded conversion option derivatives and warrant liabilities, and (vi) the warranty liability reserve.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments and other short-term investments with maturities of three months or less, when purchased, to be cash equivalents. The Company maintains cash deposits in multiple commercial banks and financial services companies. These financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company’s cash balance may at times exceed these limits. At September 30, 2024 and December 31, 2023, the Company had approximately $1.4 million and $0.6 million, respectively, in excess of federally insured limits. The Company continually monitors its position with, and the credit quality of the financial institutions with which it invests.

Accounts Receivable, net

The Company carries its accounts receivable at invoiced amounts. Upon the closing of the acquisitions in February 2024 when we acquired accounts receivable, the Company adopted ASC 326, Financial Instruments – Credit Losses, which the Company evaluates all credit losses as of the reporting date. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based on a history of past write-offs and collections and current credit conditions. Accounts are written-off as uncollectible at the discretion of management. At September 30, 2024 and December 31, 2023, the Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established.

Inventory

Inventories, which consist of finished goods, are stated at the lower of cost or net realizable value, and are measured using the first-in, first-out method. Cost components include direct materials and direct labor, as well as in-bound freight. At each balance sheet date, the Company evaluates the net realizable value of its inventory using various reference measures including current product selling prices, as well as evaluating for excess quantities and obsolescence.

Deferred offering costs

The Company deferred direct incremental costs associated with its IPO. The Company capitalized $127,687 and $376,702 during the nine months ended September 30, 2024 and 2023 prior to the IPO, respectively and the 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, total deferred offering costs of $640,445 were recorded as a reduction to additional paid-in capital generated as a result of the offering.

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, ranging from two to five years.

Leases

The Company has adopted Accounting Standards Codification (ASC) 842, “Leases” which requires the recognition of assets and liabilities associated with lease agreements. As of February 16, 2024, the date of the acquisition, the Company recognized a lease liability obligation of $378,430 and a right-of-use asset for the same amount related to the lease in Orlando, FL.

The Company determines if a contract is a lease or contains a lease at inception. Operating lease liabilities are measured, on each reporting date, based on the present value of the future minimum lease payments over the remaining lease term. The Company's leases do not provide an implicit rate. Therefore, the Company used an effective discount rate of 11.49% based on its last debt financings. Operating lease assets are measured by adjusting the lease liability for lease incentives, initial direct costs incurred and asset impairments. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term with the operating lease asset reduced by the amount of the expense. Lease terms may include options to extend or terminate a lease when they are reasonably certain to occur.

Goodwill and Long-lived Assets

Goodwill represents the future economic benefit arising from other assets acquired in an acquisition that are not individually identified and separately recognized. The Company tests goodwill for impairment in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other, (“ASC 350”). Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired. ASC 350 provides that an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform an impairment test. The impairment test involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not to be impaired. If, however, the fair value of the reporting unit is less than book value, then an impairment loss is recognized in an amount equal to the amount that the book value of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

The estimate of fair value of a reporting unit is computed using either an income approach, a market approach, or a combination of both. Under the income approach, we utilize the discounted cash flow method to estimate the fair value of a reporting unit. Significant assumptions inherent in estimating the fair values include the estimated future cash flows, growth assumptions for future revenues (including gross margin, operating expenses, and capital expenditures), and a rate used to discount estimated future cash flow projections to their present value based on estimated weighted average cost of capital (i.e., the selected discount rate). Management’s assumptions are based on historical data, supplemented by current and anticipated market conditions, estimated growth rates, and management’s plans. Under the market approach, fair value is derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate and consider risk profiles, size, geography, and diversity of products and services.

The Company reviews long-lived assets, including tangible assets and other intangible assets with definitive lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analyses in accordance with ASC 360, “Impairment or Disposal of Long-Lived Assets”. ASC 360 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset group is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals.

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.

The following table details the fair value measurements of the Company’s financial liabilities as of September 30, 2024:


	Total		Level 1		Level 2		Level 3
Warrant liabilities	$	308,964	$	–	$	–	$	308,964
Derivative liability – convertible note conversion option		311,048		–		–		311,048
Total	$	620,012	$	–	$	–	$	620,012

Changes in Level 3 financial instruments are as follows:


	December 31,		Purchases, Issuances and		Change in			September 30,
	2023		Settlements		Fair Value			2024
Warrant liabilities	$	–	$	315,303	$	(6,339	)	$	308,964
Derivative liability – convertible note conversion option		–		347,947		(36,899	)		311,048
Total	$	–	$	663,250	$	(43,238	)	$	620,012

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

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

Accrued Warranty

Fat Shark products are warranted against defects in materials and workmanship for a period of two years from the date of shipment. If a defect arises during the warranty period, Fat Shark will either (i) repair the affected product at no charge using new parts or parts that are equivalent to new in performance and reliability; (ii) exchange the affected product with a functionally equivalent product; or (iii) refund the original purchase price for the affected product. Allowances for estimated warranty costs are recorded during the period of sale. The determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 24 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize the additional cost of sales may be required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is included in accrued expenses on the accompanying consolidated balance sheets and amounted to $19,080 and $0 as of September 30, 2024 and December 31, 2023, respectively.

Rotor Riot does not provide any warranty of any kind for any of the equipment it sells or otherwise distributes. Consumers assume all risk for any products purchased or received from Rotor Riot.

Revenue Recognition

The Company recognizes 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 receives revenues from the sale of products from both retail distributers and individual consumers. Sales revenue is recognized when the products are shipped and the price is fixed or determinable, no other significant obligations of the Company exist and collectability is probable. Revenue is recognized when the title to the products has been passed to the customer, which is the date the products are shipped to the customer. This is the date the performance obligation has been met.

Deferred Revenue

Deferred revenue relates to (i) orders placed, but not yet fulfilled and (ii) customer tickets purchased related to the Company’s Rampage event, in which tickets are sold in advance and recognized when the event takes place. All deferred revenue is expected to be recognized within one year. Deferred revenue related to orders placed, but not yet fulfilled totaled $300,517 and $0 as of September 30, 2024 and December 31, 2023, respectively.

Cost of Goods Sold

Cost of goods sold includes inventory costs, direct packaging costs and production related depreciation, if any.

Shipping and Handling Costs

Shipping and handling costs incurred for products shipped to customers are included in general and administrative expenses and amounted to $123,690 since February 16, 2024, the date of the acquisition, through September 30, 2024. The Company did not incur shipping and handling costs in the nine months ended September 30, 2023. Shipping and handling costs charged to customers are included in sales.

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.

The Company’s current provision for the nine months ending September 30, 2024 and 2023 consisted of a tax benefit against which we applied a full valuation allowance, resulting in no current provision for income taxes. Since the Company has not generated an operating profit since inception, there are no deferred tax assets other than a net operating loss carryforward offset by a valuation allowance as of September 30, 2024 and December 31, 2023.

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, expected term and future dividends. The Company recognizes forfeitures as they occur. The fair value of restricted stock is based on our quoted stock price or other fair value indicators on the date of grant. Compensation cost is recognized on a straight-line basis over the service period which is typically the vesting term.

Warrants

The Company accounts for warrants to purchase shares of its common stock in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The Company classifies warrants issued for the purchase of shares of its common stock as either equity or liability instruments based on an assessment of the specific terms and conditions of each respective contract. The assessment considers whether the warrants are freestanding financial instruments or embedded in a host instrument, whether the warrants meet the definition of a liability pursuant to ASC 480, whether the warrants meet the definition of a derivative under ASC 815, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants classified as liabilities are recognized as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss.

Embedded Conversion Option Derivative

The Company accounts for embedded debt conversion features in accordance with the guidance in ASC 815, Derivatives and Hedging (“ASC 815”). If the embedded debt conversion feature is not clearly and closely related to the debt host, then it is required to be bifurcated from the host contract and accounted for separately as a derivative liability. The derivative liability is required to be recorded at its initial fair value on the date of issuance, and each balance sheet date, thereafter. Changes in the estimated fair value of the derivative are recognized as a non-cash gain or loss in the consolidated statements of operations and comprehensive loss. This assessment, which requires the use of professional judgment, is conducted at the time of Note issuance and as of each subsequent quarterly period end date while the Note is outstanding.

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.

Segment Reporting

Since the acquisitions of Fat Shark and Rotor Riot, the Company operates with one reportable segment. The Company bases its reportable segment based on how our Chief Operating Decision Maker manages the business, makes resource allocations and operating decisions, and evaluates operating performance.

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.

Note 3 – Acquisitions

Fat Shark and Rotor Riot

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”) (See Note 12 – Related Party Transactions for additional information). 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 (see Note 8 “Convertible Note” for further details), 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 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:

Schedule of fair value allocation
Cash	$	147,200
Accounts receivable (approximates contractual value)		6,798
Inventories (on hand and prepaid)		2,611,583
Other current assets		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

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 a 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 results of Fat Shark and Rotor Riot have been included in the Consolidated Financial Statements from the date of acquisition. 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):

Schedule of unaudited pro forma results
	For the Nine months Ended						For the Nine months Ended
	September 30, 2024						September 30, 2023
	As Reported			Proforma (unaudited)			As Reported			Proforma (unaudited)
Revenue	$	3,561		$	4,056		$	–		$	4,115
Gross profit/(loss)		992			1,024			–			705
Loss from operations		(4,119	)		(4,163	)		(1,967	)		(3,209	)
Other expense		(743	)		(743	)		–			51
Net loss	$	(4,862	)	$	(4,906	)	$	(1,967	)	$	(3,260	)
Net earnings per share:
Basic	$	(0.63	)	$	(0.63	)	$	(0.59	)	$	(0.37	)

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 from the beginning of the periods presented until the acquisition date 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 the Q1 ’23 that were incurred in Q1 ’24.

Note 4 – Inventories

Inventories, consisting solely of finished goods, totaled $1,453,042 and $0 as of September 30, 2024 and December 31, 2023, respectively. In addition, the Company had prepaid deposits for inventory totaling $1,140,511 and $0 as of September 30, 2024 and December 31, 2023, respectively.

Note 5 – Other Current Assets

Other current assets included as of:

Schedule of other current assets
	September 30, 2024		December 31, 2023
Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions	$	–	$	100,000
Prepaid insurance		94,500		20,631
Rent deposit		59,426		–
Other prepaid expenses		4,167		–
Total other current assets	$	158,093	$	120,631

Note 6 – 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:

Schedule of property and equipment
	September 30, 2024			December 31, 2023
Computer equipment	$	7,738		$	7,738
Accumulated depreciation		(6,997	)		(6,484	)
Total property and equipment, net	$	741		$	1,254

Depreciation expense totaled $513 and $1,407 for the nine months ended September 30, 2024 and 2023, respectively.

Note 7 – Operating Leases

As identified in Note 3 “Acquisitions”, the acquired businesses, specifically Rotor Riot, has entered into a five-year operating lease for approximately 6,900 square feet of warehouse and office space in Orlando, Florida. The lease commenced in November 2023 and expires in October 2028. The Company has valued the ROUA and the associated liability, as of February 15, 2024, at $378,430. The Company has no finance leases. Operating lease expense totaled $65,716 from the date of acquisition through the period ended September 30, 2024. The following is a summary of future lease payments required under the five-year lease agreement:

Schedule of future lease payments
Year	Future Lease Payments		Operating Lease Discount			Operating Lease Liability
2024	$	24,796	$	(9,412	)	$	15,384
2025		101,133		(33,313	)		67,820
2026		105,177		(25,468	)		79,709
2027		109,037		(15,985	)		93,052
2028		94,185		(4,776	)		89,409
Total	$	434,327	$	(88,954	)	$	345,374

Schedule of supplemental information
Supplemental Information
Weighted average remaining lease term (in years)			4.08
Weighted average discount rate			11.49%

Note 8 – Promissory and Convertible Notes

In February 2024 and in conjunction with the acquisition of Fat Shark and Rotor Riot, as discussed in Note 3, the Company issued a promissory note (“Note”) with Red Cat Holdings, Inc. (“Red Cat”) for $2.0 million. In July 2024, the Company finalized its working capital adjustment with Red Cat which increased the overall purchase price by an additional $2.0 million. In accordance with ASC 470, Debt, the additional $2.0 million was treated as a modification that was not treated as a debt extinguishment and expenses related to the debt were expensed as incurred. The additional $2.0 million was added to the existing Note and was reflected as an adjustment to the opening purchase price and was included in the opening balance sheet as of February 16, 2024 as an increase to goodwill and intangible assets. Accordingly, the Note was amended to increase the principal amount of the Note to $4.0 million.

Subsequently and in July 2024, in conjunction with a private sale of Red Cat’s common stock and its promissory note to two accredited investors (“Investors”), the Company issued new notes to the Investors (the “July Notes”) and cancelled the original Note. The July Notes contained 8% per annum interest. In addition, the maturity date of the July Notes was extended to November 30, 2025, subject to certain conditions.

On August 21, 2024, the Company entered into two exchange agreements with the Investors, under which the Investors exchanged their respective 8% July Notes for new 4% Convertible Notes (the “August Notes”). Pursuant to the exchange agreements, the Investors exchanged the $4,000,000 of July Notes for an aggregate of (i) $3,000,000 for the August Notes, (ii) 210 shares of Series C preferred stock, which converts into 630,000 shares of the Company’s common stock, and (iii) 630,000 warrants with a five-year term and an exercise price of $1.99 per share, subject to certain adjustments. The July Notes were cancelled as a part of the exchange agreement. In accordance with ASC 470, since the August Notes were considered a greater than 10% change from the July Notes and a substantive conversion option was added to the August Notes, this exchange was treated as a debt extinguishment.

The August Notes bear interest at 4% annually with interest payable monthly and the principal due on November 30, 2025. The August Notes are convertible into common stock at a fixed $1.99 per share, except in the Event of Default as defined in the August Notes, which the conversion price for an Event of Default Conversion is calculated at a 10% discount of the average three-day volume-weighted average price prior to the conversion date. The Company recognized a loss on debt extinguishment of $685,151 during the three and nine months ended September 30, 2024 related to the August Notes. The loss on extinguishment related to the August Notes include $315,303 fair value related to the warrant liability issued, $347,947 fair value related to the optional conversion feature derivative liability of the remaining principal balance, and $21,901 cash fees paid for legal costs related to the August Notes. The Company used the binomial option pricing method for calculating the derivative fair value related to the warrants and optional conversion feature (see Note 9 – Derivative Liabilities).

Total interest expense for the nine months ended September 30, 2024 was $101,619 The Company had accrued interest of $5,004 as of September 30, 2024 related to the August Notes.

Note 9 – Derivative Liabilities

The fair value of the derivative liabilities are determined using the binomial option pricing model which values the liability on the stock price at the grant date, the estimate volatility of the stock, the risk-free interest rate over the expected term, and certain estimates and probabilities of different outcomes. Changes in the fair value of the derivative is recorded in the income statement in other income and expense on a quarterly basis.

Derivative liability – conversion option

In August 2024 and in conjunction with the issuance of the August Notes as discussed in Note 8 – Convertible Note, the Company recorded a derivative liability related to the optional conversion feature (“Conversion Derivative”) in accordance with ASC 815 as it is not clearly and closely related to the host contract and the embedded debt conversion feature meets the definition of a liability due to a potential variable amount of shares that may be issued upon conversion. The initial fair value on August 21, 2024 for the Conversion Derivative was $347,947. The Conversion Derivative fair value as of September 30, 2024 was $311,048 and the Company recorded a change in fair value of derivative liabilities of $36,899 during the three months ended September 30, 2024.

Warrant Liability

In August 2024 and in conjunction with the issuance of the August Notes as discussed in Note 8 – Convertible Note, the Company issued warrants that include specific provisions and obligations including a fundamental transaction provision that may require a cash payment to the holder upon a triggering event, that in accordance with ASC 815, require the warrants to be classified as a liability. The initial fair value on August 21, 2024 for the Warrant Liability was $315,303 and as of September 30, 2024 the fair value is $308,964 and the Company recorded a change in fair value of derivative liabilities of $6,340 for the three months ended September 30, 2024.

Note 10 – Earnings Per Share and Stockholders’ Equity

Earnings per Share

Outstanding securities not included in the computation of diluted net loss per share because their effect would have been anti-dilutive include 4,250,000 and 0 shares of Series A Convertible Preferred Stock (the “Series A”), as converted as of September 30, 2024 and 2023, respectively. 250,000 and 950,000 shares of Series B Convertible Preferred Stock (the “Series B”), as converted as of September 30, 2024 and 2023, respectively. 630,000 and 0 shares of Series C Convertible Preferred Stock (the “Series C”), as converted as of September 30, 2024 and 2023, respectively. 330,000 of stock options issued to employees as of September 30, 2024, 62,500 of common stock representative warrants issued to the underwriter associated with the February 2024 IPO, 630,000 warrants issued related to the debt conversion, and 1,507,538 shares of common stock, as converted, associated with the Note discussed in Note 8 “Convertible Note”.

Preferred Stock

The preferred stock par value is $0.01.

The Series A is convertible into common stock at a ratio of 1,000 shares of common stock for each share of Series A stock held, subject to certain limitations. The Series A shares are not entitled to vote on any matters submitted to shareholders of the Company.

The Series B 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. The Series B shares are not entitled to vote on any matters submitted to shareholders of the Company.

The Series C is convertible into common stock at a ratio of 3,000 shares of common stock for each share of Series C stock held, subject to certain limitations. The Series C shares are not entitled to vote on any matters submitted to shareholders of the Company.

On July 22, 2024, the Company’s principal shareholder, Red Cat sold all of its securities in the Company to the two unaffiliated third-party Investors. As part of the transaction and just prior to the above sale, 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 for 4,250 shares of the Company’s Series A. The Series A shares can be convertible back into the same amount of shares of common stock as of the date of the original exchange, and as a result the Company did not recognize any gain or loss related to the exchange.

On August 21, 2024, the Company entered into two exchange agreements with the Investors, under which each investor exchanged an aggregate of $1,000,000 of their Notes for an aggregate of 210 shares of the Company’s Series C and 630,000 warrants (see Note 11 – Share Based Awards).

Subsequent to the IPO but prior to September 30, 2024, certain shareholders converted 140 shares of Series B into 700,000 shares of common stock. The Company canceled the 140 shares of Series B upon the conversion.

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

Preferred shares outstanding at September 30, 2024 and December 31, 2023 were as follows:


Preferred Series	Shares as of September 30, 2024		Shares as converted, as of September 30, 2024		Shares as of December 31, 2023		Shares, as converted, as of December 31, 2023
Series A		4,250		4,250,000		–		–
Series B		50		250,000		190		950,000
Series C		210		630,000		–		–

Common Stock

The common stock par value is $0.01.

2024 Transactions

On January 2, 2024, the Company issued 16,086 shares of common stock to its prior Chief Executive Officer as a part of a separation agreement and recognized compensation expense of $64,344 or $4 per share, the value of the IPO in February 2024.

On February 16, 2024 the Company completed its IPO and issued 1,250,000 shares of common stock at the IPO Price for total net proceeds of $3,849,555. The Company incurred $510,000 direct deduction from proceeds, $127,687 in cash disbursements related to offering costs in the nine months ended September 30, 2024 and $512,758 in prior year paid and deferred offering costs as of December 31, 2023 for a total of $1,150,445 offering costs, associated with the IPO which consisted of underwriter, legal, accounting, and other associated filing fees. These costs have been recorded as a reduction of the gross proceeds from the IPO in stockholder’s equity. The Company also incurred additional costs related to warrants to purchase 62,500 shares of common stock issued to the underwriters as partial compensation for services rendered in connection with the IPO, which is preliminarily valued at $250,000 as of the date of the IPO using the IPO Price of $4 per share. The Company is planning to value the warrants using a Black-Scholes valuation model but has not completed this workflow. Any change to the fair value of the warrants would have no change to the Company’s financial statements since the value of the warrants would only impact the “offering costs” and thus entry would be to adjust “Additional Paid-In Capital – Common Stock” and “Additional Paid-In Capital – Warrants”. The warrants are exercisable for common stock at a price of $5.00 per share (125% of the IPO Price) at any time beginning on August 15, 2024 through and including February 16, 2029, the expiration date.

Simultaneously with its IPO and as a part of the Purchase Agreement as discussed in Note 3, the Company issued Red Cat 4,250,000 shares of common stock as consideration of the business combination. These were subsequently exchanged into 4,250 Series A preferred shares as discussed above. As agreed in the Purchase Agreement, $17.0 million of the purchase price would be issued in common stock based on the IPO price of $4.00 per share.

Subsequent to the IPO and prior to September 30, 2024, the Company issued 700,000 shares of common stock related to certain shareholders converting 140 Series B shares into common stock.

On April 30, 2024, the Company issued 937,249 restricted shares of common stock to executive officers and board members of the Company. The shares of restricted stock were granted under the Company’s 2022 Equity Incentive Plan. The restricted shares issued to executive officers are subject to pro rata forfeiture through February 14, 2025.

On May 2, 2024, the Company issued an additional 40,650 of restricted shares of common stock to Allan Evans, the Company’s CEO related to an agreed upon reduction of compensation. The shares of restricted stock were granted under the Company’s 2022 Equity Incentive Plan (the “Plan”).

The April 30, 2024 and May 2, 2024 shares were valued at $1.20 and $1.23 per share, respectively for a total of $1,174,698 to be recognized pro-rata over the vesting period through February 14, 2015 which is the forfeiture period. Stock compensation expense of $679,699 was recognized during the nine months ended September 30, 2024. Unrecognized stock compensation expense related to these shares is $496,661 as of September 30, 2024.

On July 22, 2024, Red Cat sold all of its securities in the Company to two accredited investors in a private transaction. As part of the transaction, 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 for 4,250 shares of the Company’s Series A. There was no gain or loss on this exchange as both the common and preferred shares were determined to have the same fair value as of the exchange date.

On July 30, 2024, the Company issued 23,743 immediately vested restricted shares of common stock to board members of the Company. The shares of restricted stock were granted under the Plan. The shares were valued at $1.79 per share, which was the value of the Company’s common stock on the date of grant, respectively for a total of $42,500 to be recognized as stock compensation expense during the three months ended September 30, 2024.

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.

Note 11 – Share Based Awards

Stock Options

The Plan allows the Company to incentivize key employees and directors with long term compensation awards such as stock options, restricted stock, and other similar types of awards. The Plan is authorized to issue 1,461,876 of awards and has an “evergreen” provision, pursuant to which the number of shares of common stock reserved for issuance pursuant to awards under such plan shall be increased on the first day of each year beginning in 2025 and ending in 2032 equal to the lesser of (a) five percent (5%) of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (b) such smaller number of shares of stock as determined by our board of directors.

During the nine months ended September 30, 2024, the Company’s board of directors approved the grant of 330,000 stock options under the Plan to certain employees. The stock options are subject to certain vesting provisions.

The following table presents the activity for stock options outstanding:

Non-Qualified

Options

Weighted

Average

Exercise Price

Weighted

Average

Remaining

Contractual Term

Aggregate

Intrinsic Value

Outstanding - December 31, 2023

–

Granted

330,000

1.24

9.59

99,200

Forfeited/canceled

–

Exercised

–

Outstanding – September 30, 2024

330,000

1.24

9.59

99,200

The range of assumptions used to calculate the fair value of options granted during the nine months ended September 30, 2024 was:

Schedule of stock options assumptions
Exercise Price	$	1.20 – 1.79
Stock Price on date of grant	$	1.20 – 1.79
Risk-free interest rate		4.080- 4.71%
Dividend yield		–
Expected term (years)		6.11
Volatility		129.45 – 143.46%

The Company recognized $37,475 in stock-based compensation expense related to stock options during the nine months ended September 30, 2024. As of September 30, 2024, there was $335,686 of unrecognized stock-based compensation expense related to unvested stock options to be recognized over the remaining vesting term through 2028.

Restricted Stock

The following table presents the activity for restricted stock outstanding:

Restricted

Awards

Stock

Vested

Unvested

Outstanding - December 31, 2023

–

Granted

1,001,642

501,253

500,389

Forfeited/canceled

–

Outstanding – September 30, 2024

1,001,642

501,253

500,389

The Company recognized $722,200 in stock-based compensation expense related to restricted stock during the nine months ended September 30, 2024. As of September 30, 2024, there was $496,661 of unrecognized stock-based compensation expense related to unvested restricted stock to be recognized over the remaining vesting term through February 15, 2025.

Warrants

The following table presents the activity for warrants outstanding as of September 30, 2024:

Schedule of warrant activity
			Weighted
	Warrants		Average
	Outstanding		Exercise Price
Outstanding - December 31, 2023		–	$	–

Granted		692,500		2.26
Forfeited/cancelled/restored		–		–
Exercised		–		–
Outstanding – September 30, 2024		692,500	$	2.26

As discussed in Note 10, “Earnings Per Share and Stockholders’ Equity”, in connection with the IPO, the Company issued 62,500 representative warrants to its underwriters to purchase shares of common stock. The representative warrants have an exercise price of $5.00 or can be exercised through a cashless exercise feature.

As discussed in Note 8, “Convertible Note”, in connection with the exchange of the $1,000,000 of the Note Payable balance, the Company issued 630,000 warrants to the Investors to purchase shares of common stock. The warrants have an exercise price of $1.99.

All warrants outstanding have a weighted average remaining contractual life of approximately 4.85 years as of September 30, 2024. The intrinsic value of the warrants at September 30, 2024 is $0 as the share price of the Company’s common stock is lower than the strike price of the warrants.

Note 12 – 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.

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 agreed to 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 agreed to 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 receives 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 $585,600 based on the $1.20 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.

Note 13 – Commitments and Contingencies

As part of the business combination that occurred on February 14, 2024, the Company acquired a five-year operating lease for approximately 6,900 square feet of warehouse and office space in Orlando, Florida. The lease commenced in November 2023 and expires in October 2028. See Note 7 – Operating Leases for additional information.

Note 14 – 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 required the Company to obtain new auditors and re-audit its financial statements for the years ended December 31, 2023 and 2022.

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, 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 $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 statements of cash flow 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 September 30, 2023 and for the periods then ended. The previously reported amounts reflect those included in the registration statements the Company filed with the Securities and Exchange Commission on February 1, 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 and stock compensation expense.


Statement of Operations for the Nine months Ended September 30, 2023
	As Filed			Restatement Adjustments			As Restated

Revenue	$	–		$	–		$	–

Cost of goods sold		–			–			–

Gross profit		–			–			–

Operating expenses:
Research and development		–			–			–
General and administrative		1,376,462			589,007			1,965,469
Depreciation and amortization		1,407			–			1,407
Total operating expenses		1,377,869			589,007			1,966,876

Loss from operations		(1,377,869	)		(589,007	)		(1,966,876	)

Other income:
Interest income		–			–			–
Total other income		–			–			–

Net loss before income tax		(1,377,869	)		(589,007	)		(1,966,876	)

Income tax benefit (expense)		–			–			–

Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)

Net loss per share attributable to common stockholders
Basic and diluted	$	(0.41	)	$	(0.17	)	$	(0.59	)

Weighted average common shares outstanding
Basic and diluted		3,337,402			–			3,337,402

Statements of Changes in Stockholders’ Equity – As Filed – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In			Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital			Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041		$	–	$	(1,538,591	)	$	3,209,374

Issuance of common shares		–		–		75,005			750			(750	)		–		–			–
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499			–		–			–
Net loss		–		–		–			–			–			–		(1,377,869	)		(1,377,869	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	4,715,790		$	–	$	(2,916,460	)	$	1,831,505

Statements of Changes in Stockholders’ Equity – Restatement Adjustments – For the Nine months Ended September 30, 2023

Series B, Preferred Stock

Common Stock

Additional Paid-In

Stocks to be

Accumulated

Value

Capital

Issued

Deficit

Total

Balance, December 31, 2022

–

(10,993

)

(10,993

)

Issuance of common shares

–

600,000

–

600,000

Conversion to preferred shares

–

Net loss

–

(589,007

)

(589,007

)

Balance, September 30, 2023

–

600,000

–

(600,000

)

–

Statements of Changes in Stockholders’ Equity – As Restated – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In		Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital		Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041	$	–	$	(1,549,584	)	$	3,198,381

Issuance of common shares		–		–		75,005			750			599,250		–		–			600,000
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499		–		–			–
Net loss		–		–		–			–			–		–		(1,966,876	)		(1,966,876	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	5,315,790	$	–	$	(3,516,460	)	$	1,831,505

Statement of Cash Flows for the Nine months Ended September 30, 2023


	As Filed			Restatement Adjustments			As Restated

Cash flows from operating activities:
Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)
Depreciation		1,407			–			1,407
Stock compensation expense		–			600,000			600,000
Change in assets and liabilities:
Accounts receivable		–			–			–
Deferred offering costs		(376,702	)		376,702			–
Other current assets		33,750			–			33,750
Accounts payable and accrued expenses		(39,826	)		(10,993	)		(50,819	)
Net cash used in operating activities		(1,759,240	)		376,702			(1,382,538	)

Cash flows from investing activities
Purchases of property and equipment		(3,164	)		–			(3,164	)
Net cash used in investing activities		(3,164	)		–			(3,164	)

Cash flows from financing activities:
Deferred offering costs		–			(376,702	)		(376,702	))
Net cash provided by financing activities		–			(376,702	)		(376,702	))

Net increase (decrease) in cash		(1,762,404	)		–			(1,762,402	)

Cash, beginning of period		3,099,422			–			3,099,422

Cash, end of period	$	1,337,018		$	–		$	1,337,018

Supplemental disclosures of cash flow information:
Cash paid for interest	$	–		$	–		$	–
Cash paid for income tax	$	–		$	–		$	–

Note 15 – Subsequent Events

Quarterly Grants to our Board of Directors

On October 22, 2024, the Company issued non-employee directors listed 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 September 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. The fair value per share was based on the quoted trading price as of the close of the market as of October 22, 2024.

Director	Fair Value Per Share	Amount of Restricted Common Stock	Aggregate Fair Value
Cristina Colon	$1.45	7,472	$10,833
Sanford Rich	$1.45	7,472	$10,833
Robert Lowry	$1.45	7,472	$10,833
Jeffrey Thompson	$1.45	6,897	$10,000

Private Placement Agreement

On October 29, 2024 (the “Closing Date”), the Company entered into Securities Purchase Agreements (the "SPA”) with accredited investors (each, an "Investor” and together the "Investors”) for a private placement offering ("Private Placement”), for aggregate gross proceeds of $1.95 million before deducting fees to the placement agent and other expenses payable by the Company in connection with the Private Placement. The Company intends to use the net proceeds of approximately $1.7 million of the Private Placement for working capital and general corporate purposes. As part of the Private Placement, the Company issued an aggregate of 1,286,184 units at a per unit purchase price of $1.52 per unit. Each unit consists of one share of common stock, par value $0.01 per share (the "Common Stock”) and one warrant to purchase one share of the Company’s Common Stock at an exercise price of $1.99 per share (each an "Investor Warrant”) and collectively, the Investor Warrants”). The Investor Warrants have a term of five and a half years from the Closing Date and may not be exercised for 180 days after the Closing Date and are exercisable at $1.99 per share, subject to certain limitations and adjustments set forth in the Investor Warrants. Allan Evans, the Company’s Chief Executive Officer and Sanford Rich and Robert Lowry, each a member of the Company’s board of directors, invested an aggregate of $250,000 in the Private Placement on identical terms to the other Investors.

On November 5, 2024, the Board of Directors of the Company awarded each of the Company’s Chief Executive Officer, Chief Financial Officer and Chief Operation Officer 50,000 restricted shares of the Company’s Common Stock under the Plan as bonuses related to the Private Placement. The restricted shares are valued at $1.96 per share, the closing price of our common stock as of the date of the grant, for a total value of $98,000 for each of the Company’s Officers. The bonuses are subject to the Company’s clawback Policy.

Item 2.

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

The following discussion and analysis should be read in conjunction with the unaudited condensed financial statements and related notes included elsewhere in this Quarterly Report and our audited financial statements and related notes thereto included in our Annual Report on Form 10-K/A for the year ended December 31, 2023, which was filed with the SEC on August 9, 2024. The following discussion contains forward-looking statements that are subject to risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” 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 below and elsewhere in this Quarterly Report and of our final prospectus filed with the SEC on October 25, 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

Private Placement

On October 29, 2024 (the “Closing Date”), we entered into Securities Purchase Agreements (the "SPA”) with accredited investors (each, an "Investor” and together the "Investors”) for a private placement offering ("Private Placement”), for aggregate gross proceeds of $1.95 million before deducting fees to the placement agent and other expenses payable by us in connection with the Private Placement. We intend to use the net proceeds of the Offering for working capital and general corporate purposes. As part of the Private Placement, we issued an aggregate of 1,286,184 units at a per unit purchase price of $1.52 per unit. Each unit consisted of one share of common stock, par value $0.01 per share (the "Common Stock”) and one warrant to purchase one share of the Company’s Common Stock (each an "Investor Warrant”) and collectively, the Investor Warrants”). The Investor Warrants have a term of five and a half years from the Closing Date and may not be exercised for 180 days after the Closing Date and are exercisable at $1.99 per share, subject to certain limitations and adjustments set forth in the Investor Warrants.

Results of Operations – Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023

Revenue

During the three months ended September 30, 2024 we generated revenues totaling $1,531,264 compared to $0 during the three months ended September 30, 2023, representing an increase of $1,531,264 or 100%. We did not generate any revenues until the closing of the acquisitions of Fat Shark Holdings Ltd. (“Fat Shark”) and Rotor Riot LLC (“Rotor Riot”) on February 16, 2024. The majority of our revenue during the quarter relates to completed and fulfilled product sales during the period through our Rotor Riot retail channel and from our B2B wholesale through Fat Shark.

Cost of Goods Sold

During the three months ended September 30, 2024, we incurred cost of goods sold of $1,131,777 compared to $0 during the three months ended September 30, 2023, resulting in an increase of $1,131,777 or 100%. Similar to revenues, we did not incur any cost of goods sold until the closing of the acquisitions on February 16, 2024. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct product costs.

Gross Margin

During the three months ended September 30, 2024, our gross margin was $399,487 compared to $0 during the three months ended September 30, 2023, resulting in an increase of $399,487 or 100%. Our gross margin, as a percentage of sales, totaled 26% during the three months ended September 30, 2024, compared to 0% during the three months ended September 30, 2023. We anticipate our gross margin to fluctuate period to period depending on certain promotions and products that are sold during the period and the margins we generated during the quarter are in line with our expectations and normal operating margins.

Operating Expenses

During the three months ended September 30, 2024, operations expenses totaled $218,126 compared to $0 during the three months ended September 30, 2023, resulting in an increase of $218,126 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any operations expenses. Operations expenses primarily relate to our direct operations including our warehouse personnel and warehouse expenses.

During the three months ended September 30, 2024, research and development expenses was $15,000 compared to $0 for the three months ended September 30, 2023, resulting in an increase of $15,000. Prior to the closing of the acquisitions in February 2024, we did not have any research and development expenses during 2023. Research and development expense primarily relates to new product development as we continue to partner with manufacturers to bring drone component manufacturing to the United States.

During the three months ended September 30, 2024, sales and marketing expenses totaled $252,253 compared to $0 for the three months ended September 30, 2023, resulting in an increase of $252,253 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any sales and marketing expenses. Sales and marketing expenses primarily relate to advertising spend related to Rotor Riot and payroll expenses.

During the three months ended September 30, 2024, general and administrative expenses totaling $1,374,989 compared to $353,029 for the three months ended September 30, 2023, resulting in an increase of $1,021,960 or 289%. The increase primarily relates to stock compensation expense during quarter that we did not have in the previous year, an increase in expenses related to closing the IPO including legal and accounting fees, additional transition and integration related expenses, and the costs related to operating Fat Shark and Rotor Riot.

Net Loss

Our net loss for the three months ended September 30, 2024, totaled $2,144,250 compared to $353,674 for the three months ended September 30, 2023, resulting in an increase in net loss of $1,790,576 or 506%. The increase in net loss primarily relates to stock compensation expense taken during the period, the $685,151 loss on debt extinguishment, of which $663,250 was non-cash, in connection with the $1.0 million debt exchange for Series C preferred shares. In addition, the increase in general and administrative expenses related to closing the initial public offering (the “IPO”) and the increased operations and sales and marketing expenses we incurred since the acquisition from Fat Shark and Rotor Riot. This was partially offset by generating gross margin related to the revenue and cost of goods sold from sales for Fat Shark and Rotor Riot. In the fourth quarter of 2024 we expect to complete our valuation and identification of any intangible assets related to the acquisitions of Fat Shark and Rotor Riot. For any identified intangibles, we will begin to amortize during the fourth quarter which will result in a non-cash charge going forward. However, and until we complete our valuation on intangibles, the amount is uncertain, and the future amortization may or may not be material. After the identification and valuation of intangibles is complete, we will complete our impairment analysis on goodwill and the identified intangibles during the fourth quarter. While the amount is uncertain, we expect that our goodwill impairment could be material.

Results of Operations – Nine months Ended September 30, 2024 compared to the Nine months Ended September 30, 2023

Revenue

During the nine months ended September 30, 2024 we generated revenues totaling $3,561,303 compared to $0 during the nine months ended September 30, 2023, representing an increase of $3,561,303 or 100%. We did not generate any revenues until the closing of the acquisitions of Fat Shark and Rotor Riot on February 16, 2024. Accordingly, our revenues for the nine months ending September 30, 2024 are affected by not having any revenues for half of the first quarter. Revenues relate to completed and fulfilled product sales during the period through our Rotor Riot retail channel and from our B2B wholesale through Fat Shark.

Cost of Goods Sold

During the nine months ended September 30, 2024, we incurred cost of goods sold of $2,569,209 compared to $0 during the nine months ended September 30, 2023, resulting in an increase of $2,569,209 or 100%. Similar to revenues, we did not incur any cost of goods sold until the closing of the acquisitions on February 16, 2024. Cost of goods sold primarily relate to product costs from our sales, but also include certain shipping and other direct product costs.

Gross Margin

During the nine months ended September 30, 2024, our gross margin was $992,094 compared to $0 during the nine months ended September 30, 2023, resulting in an increase of $992,094 or 100%. Our gross margin, as a percentage of sales, totaled 28% during the nine months ended September 30, 2024, compared to 0% during the nine months ended September 30, 2023. We anticipate our gross margin to fluctuate period to period depending on certain promotions and products that are sold during the period and the margins we generated during the quarter are in line with our expectations and normal operating margins.

Operating Expenses

During the nine months ended September 30, 2024, operations expenses totaled $544,220 compared to $0 during the nine months ended September 30, 2023, resulting in an increase of $544,220 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any operations expenses. Operations expenses primarily relate to our direct operations including our warehouse personnel and warehouse expenses.

During the nine months ended September 30, 2024, research and development expenses totaled $42,078 compared to $0 for the nine months ended September 30, 2023, resulting in an increase of $42,078 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any research and development expenses during 2023. Research and development expense primarily relates to new product development as we continue to partner with manufacturers to bring drone component manufacturing to the United States.

During the nine months ended September 30, 2024, sales and marketing expenses totaled $795,643 compared to $0 for the nine months ended September 30, 2023, resulting in an increase of $795,643 or 100%. Prior to the closing of the acquisitions in February 2024, we did not have any sales and marketing expenses. Sales and marketing expenses primarily relate to advertising spend related to Rotor Riot and payroll expenses.

During the nine months ended September 30, 2024, general and administrative expenses totaling $3,728,749 compared to $1,965,469 for the nine months ended September 30, 2023, resulting in an increase of $1,763,280 or 90%. The increase relates to increased expenses related to closing the IPO including legal and accounting fees, additional transition and integration related expenses, and the costs related to operating Fat Shark and Rotor Riot.

Net Loss

Our net loss for the nine months ended September 30, 2024, totaled $4,862,490 compared to $1,966,876 for the nine months ended September 30, 2023, resulting in an increase in net loss of $2,895,614 or 147%. The increase in net loss primarily relates the increase in general and administrative expenses related to closing the IPO with additional increase in expenses for operations, sales and marketing expenses we incurred since the acquisition from Fat Shark and Rotor Riot, and other expenses of $743,381 related to interest expense and a large non-cash loss on debt extinguishment during the period. This was partially offset by generating gross margin related to the revenue and cost of goods sold from sales for Fat Shark and Rotor Riot. In the fourth quarter of 2024 we expect to complete our valuation and identification of any intangible assets related to the acquisitions of Fat Shark and Rotor Riot. For any identified intangibles, we will begin to amortize during the fourth quarter which will result in a non-cash charge going forward. However, and until we complete our valuation on intangibles, the amount is uncertain, and the future amortization may or may not be material. After the identification and valuation of intangibles is complete, we will complete our impairment analysis on goodwill and the identified intangibles during the fourth quarter. While the amount is uncertain, we expect that our goodwill impairment could be material.

Cash Flow Analysis

Prior to the closing of our IPO and the acquisitions of Fat Shark and Rotor Riot, we did not have any cash inflows from operations and all cash outflows related to our activities related to our IPO. Our future cash flows from operating activities will be significantly impacted by revenues received, our investment in sales and marketing to drive growth, and general and administrative expenses related to operating a public company. Our ability to meet future liquidity needs will be driven by our operating performance and the extent of continued investment in our operations. Failure to generate sufficient revenues and related cash flows could have a material adverse effect on our ability to meet our liquidity needs and achieve our business objectives.

Operating Activities

Net cash used in operating activities was $2,718,513 during the nine months ended September 30, 2024, compared to net cash used in operating activities of $1,382,538 during the nine months ended September 30, 2023, representing an increase of $1,335,975 or 97%. This increase in net cash used primarily resulted from our increase in net loss of $2,895,614 and an increase in prepaid expenses of $319,532, accounts receivable of $73,109, other assets of $62,850, offset by a decrease in inventory of $337,562, an increase in accounts payable and accrued expenses of $681,414, other liabilities of $153,020 and non-cash expenses of $1,378,790.

Investing Activities

Net cash used in investing activities was $852,801 during the nine months ended September 30, 2024 compared to net cash used in investing activities of $3,164 during the nine months ended September 30, 2023, representing an increase of $849,637. This increase in net cash used related to the $1,000,000 we paid to purchase Fat Shark and Rotor Riot, offset by $147,199 in cash acquired as compared to $3,164 used for purchase of computer equipment during 2023.

Financing Activities

Net cash provided by financing activities totaled $4,362,313 during the nine months ended September 30, 2024, compared to net cash used in financing activities of $376,702 during the nine months ended September 30, 2023, resulting in an increase in net cash provided by financing activities of $4,739,015. The increase primarily relates to proceeds received from our IPO of $5,000,000, offset by change in deferred offering costs and other IPO related expenses of $260,985.

Liquidity and Capital Resources

As of September 30, 2024, we had current assets totaling $4,517,325 primarily consisting of cash balances of $1,685,772, inventory of $1,453,042 and prepaid deposits for inventory of $1,140,511. Our current liabilities as of September 30, 2024 totaled $2,018,255, primarily consisting of accounts payable and accrued expenses of $1,032,637 and customer deposits and other current liabilities of $985,618. Our net working capital as of September 30, 2024 was $2,499,070.

On October 29, 2024, we completed a private placement offering for the sale of 1,286,184 shares of common stock at a price of $1.52 per share for aggregate gross proceeds of $1.95 million before deducting fees to the placement agent and other expenses payable by us in connection with the private placement. We retained approximately $1.7 million in net proceeds.

As of November 13, 2024, we have approximately $2.4 million in cash. We believe that the net proceeds from our 2024 financings and revenues, October 2024 private placement 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. We do not anticipate any significant cost increases post the Fat Shark and Rotor Riot acquisitions and with consideration of the combined companies’ net low and cash position, we expect we will have sufficient working capital to support our operations for at least 12 months.

As described in Note 8 of our financial statements, we issued the August Notes following our agreement with Red Cat on the Working Capital Adjustment. Once the August Notes mature in November 2025, we will need to either (a) raise additional capital, (b) refinance the August Notes, (c) seek an extension of the maturity date of the Notes, or (d) explore the conversion or exchange of the New Notes into equity, which will result in dilution to our shareholders, if the August Notes have not been converted or paid in full prior to the maturity date. If we are unable to raise capital or explore such other options when needed or on acceptable terms, we may default under the obligation pursuant to the New Notes, or be forced to delay, reduce or eliminate certain operational efforts.

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.

Fair value of assets acquired and liabilities assumed in business combination

The Fat Shark and Rotor Riot acquisitions are accounted for as a business combination under ASC 805. We recognized the assets acquired and liabilities assumed at fair value as of the date of acquisition. We have not yet completed our evaluation of the fair value for determining the unallocated purchase price between goodwill and other intangible assets. Such amounts are subject to adjustment during the one-year measurement period. The fair value will be determined based on assumptions used in valuations and estimates determined by management, which are subjective.

Impairment of goodwill and long-lived assets

Goodwill represents the future economic benefit arising from other assets acquired in an acquisition that are not individually identified and separately recognized. Goodwill represents costs in excess of fair values assigned to the underlying identifiable net assets of acquired businesses. Intangible assets from acquired business are recognized at fair value on the acquisition date. We are continuing our evaluation of the fair value of the assets acquired and liabilities assumed from the Fat Shark and Rotor Riot acquisition, and we have not yet determined the unallocated purchase price between goodwill and other intangible assets. Goodwill is tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might be impaired.

Valuation of Inventory

Our policy for valuation of inventory requires us to evaluate the net realizable value of our inventory using various reference measures including current product selling prices, as well as evaluating for excess quantities and obsolescence. We may be required to record inventory write-downs if actual inventory values are less favorable than those estimates by management.

Stock Based Compensation

Certain employees and directors have received grants of restricted common shares in our company. Other employees received grants of stock options in our Company. These awards are accounted for in accordance with guidance prescribed for accounting for equity-based compensation. Based on this guidance and the terms of the awards, the awards are equity classified.

The fair value of restricted stock awards is based on the fair value of the Company’s common stock on the date of grant and expensed over the vesting period.

The fair value of each stock option award is determined using the Black-Scholes option-pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, and the risk-free interest rate over the expected life of the option. The expected volatility was determined considering comparable companies historical stock prices as a peer group for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option. The risk-free interest rate was the rate available from the St. Louis Federal Reserve Bank with a term equal to the expected life of the option. The expected life of the option was estimated based on a mid-point method calculation.

In addition, the Company issued shares of our common stock in 2023 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.

Warrant Classification and Fair Value

The Company classifies warrants issued for the purchase of shares of its common stock as either equity or liability instruments based on an assessment of the specific terms and conditions of each respective contract. The assessment considers whether the warrants are freestanding financial instruments or embedded in a host instrument, whether the warrants meet the definition of a liability pursuant to ASC 480, whether the warrants meet the definition of a derivative under ASC 815, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their fair value. The fair value of the warrant liability is determined using the binomial option pricing model the binomial option pricing model which values the liability on the stock price at the grant date, the estimate volatility of the stock, the expected term until exercise, the risk-free interest rate over the expected term, certain estimates and probabilities of different outcomes.

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 3.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures as of September 30, 2024, were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms because of a material weakness in the Company’s internal control over financial reporting. Specifically, the Company did not maintain effective controls, segregation of duties, and procedures to support the identification of, accounting for, and the evaluation and disclosure of certain transactions, as limited individuals, either the Principal Executive Officer or Principal Financial Officer, initiates all transactions and they also review, evaluate, and approve these same transactions.

Changes in Internal Control Over Financial Reporting

During the nine months ended September 30, 2024, we have:

	·	Continued to strengthen our internal policies, processes, and reviews, including drafting of related documentation thereof;
	·	Engaged outside consultants to ensure that appropriate level of knowledge and experience is applied based on the risk and complexity of the transactions and tasks under review;
	·	Hired additional accounting staff to provide additional segregation of duties within accounting functions;
	·	Started internal control documentation along with the engagement of outside consultants to assist in the design, implementation, and documentation of internal controls to address relevant risks;
	·	Implemented the initial phase of an ERP and financial accounting system and added additional systematic internal controls and timely recording of transactions. We will continue to build out and expand the functionality of our ERP system and build in additional automation and controls.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies or modify certain of the remediation measures described above.

While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the nine months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than the activities described above.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not currently aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors disclosed under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

All recent sales of unregistered securities have previously been reported.

Use of Proceeds

On February 13, 2024, the SEC declared effective our registration statement on Form S-1 (File No. 333-270519), as amended, filed in connection with our IPO. On February 16, 2024, we closed our IPO in which we sold 1,250,000 shares of our common stock, par value $0.01 per share (the “Shares”) at a public offering price of $4.00 per share, resulting in net proceeds of $4.5 million after deducting offering costs, underwriting discounts, and other commissions. We incurred and paid additional direct offering costs prior to the close of the IPO of $0.1 million during the nine months ended September 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.

There has been no material change in the planned use of proceeds from our IPO from that described in the prospectus dated February 16, 2024, filed with the SEC pursuant to Rule 424(b)(1) under the Securities Act. As described in such prospectus, we have used IPO proceeds to pay $1.0 million to Red Cat related to the business combination and acquisition of Fat Shark and Rotor Riot and the remaining amount will be used for working capital and general corporate purposes.

The Company shall use the net proceeds from the sale of the securities issued in the October 2024 private placement for general corporate purposes (which for the avoidance of doubt may include acquisitions, in the Company’s discretion), including working capital.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the nine months ended September 30, 2024.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

None.

Item 5.

Other Information

During the quarter ended September 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 6.

Exhibits

The exhibits required by Item 601 of Regulation S-K and Item 15(b) of this Report are listed in the Exhibit Index below. The exhibits listed in the Exhibit Index are incorporated by reference herein.

EXHIBIT INDEX

				Incorporated by Reference
Exhibit No.	Description		Filed/Furnished Herewith	Form	Exhibit No.	Filing Date
1.1	Form of Underwriting Agreement, dated February 14, 2024, by and between Unusual Machines, Inc. and Dominari Securities, LLC +			8-K	1.1	2/16/24
2.1	Agreement and Plan of Merger by and between Unusual Machines, Inc., a Puerto Rico corporation and Unusual Machines, Inc., a Nevada corporation			8-K	2.1	4/23/24
3.1	Articles of Incorporation			8-K	3.1	10/8/24
3.2	Amended and Restated Bylaws			8-K	3.2	4/23/24
3.3	Certificate of Designations, Preferences and Rights of the Series A Convertible Preferred Stock			8-K	3.1	7/22/24
3.4	Certificate of Designation of Series B Convertible Preferred Stock			8-K	3.3	4/23/24
3.5	Certificate of Designation, Preferences and Rights of Series C Convertible Preferred Stock			8-K	3.1	8/22/24
4.1	Form of 8% Promissory Note +			8-K	4.1	7/22/24
10.1	Form of Exchange Agreement +			8-K	10.1	7/22/24
10.2	Form of Closing Date working Capital Agreement and Consent +			8-K	10.2	7/22/24
10.3	Form of Restricted Stock Agreement			8-K	10.1	7/31/24
10.4	4% Convertible Promissory Note – Titan Multi-Strategy Fund I, Ltd.			S-1	10.20	9/11/24
10.5	4% Convertible Promissory Note – Eleven Ventures LLC +			S-1	10.21	9/11/24
10.6	Common Stock Purchase Warrant – Titan Multi-Strategy Fund I, Ltd. +			S-1	10.22	9/11/24
10.7	Common Stock Purchase Warrant - Eleven Ventures LLC +			S-1	10.23	9/11/24
10.8	Exchange Agreement – Titan Multi-Strategy Fund I, Ltd. +			S-1	10.24	9/11/24
10.9	Exchange Agreement – Eleven Ventures LLC +			S-1	10.25	9/11/24
10.10	Registration Rights Agreement – Titan Multi-Strategy Fund I, Ltd. +			S-1	10.26	9/11/24
10.11	Registration Rights Agreement – Eleven Ventures LLC +			S-1	10.27	9/11/24
10.12	Letter Agreement - Titan Multi-Strategy Fund I, Ltd.			8-K	10.2	10/8/24
10.13	Letter Agreement - Eleven Ventures LLC			8-K	10.1	10/8/24
10.14	Amendment No.1 to 2022 Equity Incentive Plan, as amended	#		8-K	10.3	10/8/24
10.15	Form of Restricted Stock Agreement			8-K	10.1	10/24/24
10.16	Form of Securities Purchase Agreement			8-K	10.1	10/30/24
10.17	Placement Agency Agreement			8-K	10.2	10/30/24
10.18	Registration Rights Agreement			8-K	10.3	10/30/24
10.19	Form of Common Stock Purchase Warrant			8-K	10.4	10/30/24
10.20	Form of Placement Agent Warrant			8-K	10.5	10/30/24
10.21	Form of Lock-up Agreement			8-K	10.6	10/30/24
31.1	Certification of Principal Executive Officer (302)		Filed
31.2	Certification of Principal Financial Officer (302)		Filed
32.1	Certification of Principal Executive Officer (906)		Furnished*
32.2	Certification of Principal Financial Officer (906)		Furnished*
101.INS	Inline XBRL Instance Document		Filed
101.SCH	Inline XBRL Taxonomy Extension Schema		Filed
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase		Filed
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase		Filed
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase		Filed
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase		Filed
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)		Filed

+	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.
*	This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

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, thereunto duly authorized.

	Unusual Machines, Inc.

	By:	/s/ Allan Evans
		Allan Evans Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Brian Hoff
		Brian Hoff Chief Financial Officer

Date: November 14, 2024

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULES 13a-14(a) OR 15D-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Allan Evans, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2024 of Unusual Machines, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 14, 2024

/s/ Allan Evans

Allan Evans

Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULES 13a-14(a) OR 15D-14(a)

UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Brian Hoff, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2024 of Unusual Machines, Inc.

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 14, 2024

/s/ Brian Hoff

Brian Hoff

Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Unusual Machines, Inc. (the “Company”) on Form 10-Q, for the period ended September 30, 2024, as filed with the Securities and Exchange Commission, I, Allan Evans, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

November 14, 2024

/s/ Allan Evans

Allan Evans

Chief Executive Officer

(Principal Executive Officer)

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Unusual Machines, Inc. (the “Company”) on Form 10-Q, for the period ended September 30, 2024, as filed with the Securities and Exchange Commission, I, Brian Hoff, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

November 14, 2024

/s/ Brian Hoff

Brian Hoff

Chief Financial Officer

(Principal Financial Officer)

Cover - shares	9 Months Ended
Cover - shares	Sep. 30, 2024	Nov. 13, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2024
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--12-31
Entity File Number	333-270519
Entity Registrant Name	Unusual Machines, Inc.
Entity Central Index Key	0001956955
Entity Tax Identification Number	66-0927642
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	4677 L B McLeod Rd
Entity Address, Address Line Two	Suite J
Entity Address, City or Town	Orlando
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	32811
City Area Code	855
Local Phone Number	921-4600
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	UMAC
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		8,300,480

Consolidated Condensed Balance Sheets - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Current assets:
Cash and cash equivalents	$ 1,685,772	$ 894,773
Accounts Receivable	79,907	0
Inventory	1,453,042	0
Prepaid inventory	1,140,511	0
Other current assets	158,093	120,631
Total current assets	4,517,325	1,015,404
Non-current assets:
Property and equipment, net	741	1,254
Deferred offering costs	0	512,758
Operating lease right-of-use assets	340,389	0
Goodwill and intangible assets	19,666,086	0
Total non-current assets	20,007,216	514,012
Total assets	24,524,541	1,529,416
Current liabilities
Accounts payable and accrued expenses	1,032,636	114,497
Operating lease liabilities	65,089	0
Deferred revenue	300,517	0
Warrant liabilities	308,964	0
Derivative liability – convertible note conversion option	311,048	0
Total current liabilities	2,018,254	114,497
Long-term liabilities
Convertible note	3,000,000	0
Operating lease liabilities – long term	280,285	0
Total liabilities	5,298,539	114,497
Commitments and contingencies (See note 13)
Stockholders’ equity:
Common stock - $0.01 par value, 500,000,000 authorized and 6,184,983 and 3,217,255 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively	61,850	32,173
Additional paid in capital	27,959,642	5,315,790
Accumulated deficit	(8,795,536)	(3,933,046)
Total stockholders’ equity	19,226,002	1,414,919
Total liabilities and stockholders’ equity	24,524,541	1,529,416
Series A Preferred Stock [Member]
Stockholders’ equity:
Preferrred stock, value	43	0
Series B Preferred Stock [Member]
Stockholders’ equity:
Preferrred stock, value	1	2
Series C Preferred Stock [Member]
Stockholders’ equity:
Preferrred stock, value	$ 2	$ 0

Consolidated Condensed Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	6,184,983	3,217,255
Common stock, shares outstanding	6,184,983	3,217,255
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	4,250	4,250
Preferred stock, shares issued	4,250	0
Preferred stock, shares outstanding	4,250	0
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	50	190
Preferred stock, shares outstanding	50	190
Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	3,000	3,000
Preferred stock, shares issued	210	0
Preferred stock, shares outstanding	210	0

Consolidated Condensed Statement of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Income Statement [Abstract]
Revenues	$ 1,531,264	$ 0	$ 3,561,303	$ 0
Cost of goods sold	1,131,777	0	2,569,209	0
Gross profit	399,487	0	992,094	0
Operating Expenses
Operations	218,126	0	544,220	0
Research and development	15,000	0	42,078	0
Sales and marketing	252,253	0	795,643	0
General and administrative	1,374,989	353,029	3,728,749	1,965,469
Depreciation and amortization	171	645	513	1,407
Total operating expenses	1,860,539	353,674	5,111,203	1,966,876
Operating loss	(1,461,052)	(353,674)	(4,119,109)	(1,966,876)
Other Income (Expense)
Interest income	180	0	180	0
Interest expense	(41,465)	0	(101,648)	0
Loss on debt extinguishment	(685,151)	0	(685,151)	0
Change in fair value of derivatives and warrant liabilities	43,238	0	43,238	0
Other (Income) Expense	(683,198)	0	(743,381)	0
Net loss	$ (2,144,250)	$ (353,674)	$ (4,862,490)	$ (1,966,876)
Net loss per share attributable to common stockholders
Basic	$ (0.30)	$ (0.11)	$ (0.63)	$ (0.59)
Diluted	$ (0.30)	$ (0.11)	$ (0.63)	$ (0.59)
Weighted average common shares outstanding
Basic	7,147,866	3,217,255	7,749,285	3,337,402
Diluted	7,147,866	3,217,255	7,749,285	3,337,402

Consolidated Condensed Statement of Changes in Stockholders' Equity (Unaudited) - USD ($)	Series A Preferred Stocks [Member]	Series B, Preferred Stock [Member]	Series C Preferred Stocks [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2022	$ 0	$ 1	$ 0	$ 33,923	$ 4,714,041	$ (1,549,584)	$ 3,198,381
Beginning balance, shares at Dec. 31, 2022	0	140	0	3,392,250
Issuance of common shares for services				$ 750	599,250		600,000
Issuance of common shares for services, shares				75,005
Net loss						(1,177,904)	(1,177,904)
Ending balance, value at Mar. 31, 2023	$ 0	$ 1	$ 0	$ 34,673	5,313,291	(2,727,488)	2,620,477
Ending balance, shares at Mar. 31, 2023	0	140	0	3,467,255
Beginning balance, value at Dec. 31, 2022	$ 0	$ 1	$ 0	$ 33,923	4,714,041	(1,549,584)	3,198,381
Beginning balance, shares at Dec. 31, 2022	0	140	0	3,392,250
Net loss							(1,966,876)
Ending balance, value at Sep. 30, 2023	$ 0	$ 2	$ 0	$ 32,173	5,315,790	(3,516,460)	1,831,505
Ending balance, shares at Sep. 30, 2023	0	190	0	3,217,255
Beginning balance, value at Mar. 31, 2023	$ 0	$ 1	$ 0	$ 34,673	5,313,291	(2,727,488)	2,620,477
Beginning balance, shares at Mar. 31, 2023	0	140	0	3,467,255
Conversion of preferred shares		$ 1		$ (2,500)	2,499
Conversion of preferred shares, shares		50		(250,000)
Net loss						(435,298)	(435,298)
Ending balance, value at Jun. 30, 2023	$ 0	$ 2	$ 0	$ 32,173	5,315,790	(3,162,786)	2,185,179
Ending balance, shares at Jun. 30, 2023	0	190	0	3,217,255
Net loss						(353,674)	(353,674)
Ending balance, value at Sep. 30, 2023	$ 0	$ 2	$ 0	$ 32,173	5,315,790	(3,516,460)	1,831,505
Ending balance, shares at Sep. 30, 2023	0	190	0	3,217,255
Beginning balance, value at Dec. 31, 2023	$ 0	$ 2	$ 0	$ 32,173	5,315,790	(3,933,046)	1,414,919
Beginning balance, shares at Dec. 31, 2023	0	190	0	3,217,255
Issuance of common shares as settlement				$ 161	64,183		64,344
Issuance of common shares as settlement, shares				16,086
Issuance of common shares, initial public offering, net of offering costs				$ 12,500	3,837,055		3,849,555
Issuance of common shares, initial public offering, net of offering costs, shares				1,250,000
Issuance of common shares, business combination				$ 42,500	16,957,500		17,000,000
Issuance of common shares, business combination, shares				4,250,000
Conversion of preferred shares		$ (1)		$ 6,000	(5,999)
Conversion of preferred shares, shares		(120)		600,000
Net loss						(1,106,002)	(1,106,002)
Ending balance, value at Mar. 31, 2024	$ 0	$ 1	$ 0	$ 93,334	26,168,529	(5,039,048)	21,222,816
Ending balance, shares at Mar. 31, 2024	0	70	0	9,333,341
Beginning balance, value at Dec. 31, 2023	$ 0	$ 2	$ 0	$ 32,173	5,315,790	(3,933,046)	1,414,919
Beginning balance, shares at Dec. 31, 2023	0	190	0	3,217,255
Net loss							(4,862,490)
Ending balance, value at Sep. 30, 2024	$ 43	$ 1	$ 2	$ 61,850	27,959,642	(8,795,536)	19,226,002
Ending balance, shares at Sep. 30, 2024	4,250	50	210	6,184,983
Beginning balance, value at Mar. 31, 2024	$ 0	$ 1	$ 0	$ 93,334	26,168,529	(5,039,048)	21,222,816
Beginning balance, shares at Mar. 31, 2024	0	70	0	9,333,341
Conversion of preferred shares				$ 1,000	(1,000)
Conversion of preferred shares, shares		(20)		100,000
Issuance of common shares, equity incentive plan				$ 9,779	(9,779)
Issuance of common shares, equity incentive plan, shares				977,899
Stock compensation expense – vested stock					346,854		346,854
Stock option compensation expense					14,389		14,389
Net loss						(1,612,238)	(1,612,238)
Ending balance, value at Jun. 30, 2024	$ 0	$ 1	$ 0	$ 104,113	26,518,993	(6,651,286)	19,971,821
Ending balance, shares at Jun. 30, 2024	0	50	0	10,411,240
Issuance of common shares, equity incentive plan				$ 237	(237)
Issuance of common shares, equity incentive plan, shares				23,743
Exchange of common shares for Series A preferred	$ 43			$ (42,500)	42,457
Exchange of common shares for Series A preferred, shares	4,250			(4,250,000)
Exchange of convertible note for Series C preferred			$ 2		999,998		1,000,000
Exchange of convertible note for Series C preferred, shares			210
Stock compensation expense – vested stock					375,345		375,345
Stock option compensation expense					23,086		23,086
Net loss						(2,144,250)	(2,144,250)
Ending balance, value at Sep. 30, 2024	$ 43	$ 1	$ 2	$ 61,850	$ 27,959,642	$ (8,795,536)	$ 19,226,002
Ending balance, shares at Sep. 30, 2024	4,250	50	210	6,184,983

Consolidated Condensed Statement of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities:
Net loss	$ (4,862,490)	$ (1,966,876)
Depreciation	513	1,407
Stock compensation expense as settlement	64,344	600,000
Stock compensation expense	759,673	0
Change in fair value for warrant and derivative liabilities	(43,239)	0
Loss on debt extinguishment, non-cash component	663,250	0
Change in assets and liabilities:
Accounts receivable	(73,109)	0
Inventory	337,562	0
Prepaid inventory	(319,532)	0
Other assets	(29,100)	33,750
Accounts payable and accrued expenses	630,595	(50,819)
Operating lease liabilities	(33,056)	0
Customer deposits and other current liabilities	186,076	0
Net cash used in operating activities	(2,718,513)	(1,382,538)
Cash flows from investing activities
Cash portion of consideration paid for acquisition of businesses; net of cash received	(852,801)	0
Purchase of property & equipment	0	(3,164)
Net cash used in investing activities	(852,801)	(3,164)
Cash flows from financing activities:
Proceeds from issuance of common shares	5,000,000	0
Common share issuance offering costs	(637,687)	(376,702)
Net cash provided by (used in) financing activities	4,362,313	(376,702)
Net increase (decrease) in cash	790,999	(1,762,404)
Cash, beginning of period	894,773	3,099,422
Cash, end of period	1,685,772	1,337,018
Supplemental disclosures of cash flow information:
Non-cash consideration paid for assets acquired and liabilities assumed	19,000,000	0
Deferred acquisition costs	100,000	0
Deferred offering costs recorded as reduction of proceeds	$ 512,758	$ 0

Pay vs Performance Disclosure - USD ($)	3 Months Ended						9 Months Ended
Pay vs Performance Disclosure - USD ($)	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure [Table]
Net Income (Loss)	$ (2,144,250)	$ (1,612,238)	$ (1,106,002)	$ (353,674)	$ (435,298)	$ (1,177,904)	$ (4,862,490)	$ (1,966,876)

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Insider Trading Arrangements [Line Items]
Rule 10b5-1 Arrangement Adopted [Flag]	false
Non-Rule 10b5-1 Arrangement Adopted [Flag]	false
Rule 10b5-1 Arrangement Terminated [Flag]	false
Non-Rule 10b5-1 Arrangement Terminated [Flag]	false

Organization and nature of business

9 Months Ended

Sep. 30, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and nature of business

Note 1 – Organization and nature of business

Unusual Machines, Inc. (“the Company”) is a Nevada corporation engaged in the commercial drone industry. The Company reincorporated from Puerto Rico to Nevada on April 22, 2024.

Summary of significant accounting policies

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Summary of significant accounting policies

Note 2 – Summary of significant accounting policies

Principles of Consolidation

Unaudited interim financial information

Use of Estimates

Cash and Cash Equivalents

Accounts Receivable, net

Inventory

Deferred offering costs

Property and equipment, net

Leases

Goodwill and Long-lived Assets

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

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 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.

The following table details the fair value measurements of the Company’s financial liabilities as of September 30, 2024:


	Total		Level 1		Level 2		Level 3
Warrant liabilities	$	308,964	$	–	$	–	$	308,964
Derivative liability – convertible note conversion option		311,048		–		–		311,048
Total	$	620,012	$	–	$	–	$	620,012

Changes in Level 3 financial instruments are as follows:


	December 31,		Purchases, Issuances and		Change in			September 30,
	2023		Settlements		Fair Value			2024
Warrant liabilities	$	–	$	315,303	$	(6,339	)	$	308,964
Derivative liability – convertible note conversion option		–		347,947		(36,899	)		311,048
Total	$	–	$	663,250	$	(43,238	)	$	620,012

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

Accrued Warranty

Rotor Riot does not provide any warranty of any kind for any of the equipment it sells or otherwise distributes. Consumers assume all risk for any products purchased or received from Rotor Riot.

Revenue Recognition

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.

Deferred Revenue

Cost of Goods Sold

Cost of goods sold includes inventory costs, direct packaging costs and production related depreciation, if any.

Shipping and Handling Costs

Research and Development

Income Taxes

Stock-Based Compensation

Warrants

Embedded Conversion Option Derivative

Net Loss per Share

Segment Reporting

Recent Accounting Pronouncements

Acquisitions

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions

Note 3 – Acquisitions

Fat Shark and Rotor Riot

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

Schedule of fair value allocation
Cash	$	147,200
Accounts receivable (approximates contractual value)		6,798
Inventories (on hand and prepaid)		2,611,583
Other current assets		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

Schedule of unaudited pro forma results
	For the Nine months Ended						For the Nine months Ended
	September 30, 2024						September 30, 2023
	As Reported			Proforma (unaudited)			As Reported			Proforma (unaudited)
Revenue	$	3,561		$	4,056		$	–		$	4,115
Gross profit/(loss)		992			1,024			–			705
Loss from operations		(4,119	)		(4,163	)		(1,967	)		(3,209	)
Other expense		(743	)		(743	)		–			51
Net loss	$	(4,862	)	$	(4,906	)	$	(1,967	)	$	(3,260	)
Net earnings per share:
Basic	$	(0.63	)	$	(0.63	)	$	(0.59	)	$	(0.37	)

Inventories

9 Months Ended

Sep. 30, 2024

Inventory Disclosure [Abstract]

Inventories

Note 4 – Inventories

Other Current Assets

9 Months Ended

Sep. 30, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other Current Assets

Note 5 – Other Current Assets

Other current assets included as of:

Schedule of other current assets
	September 30, 2024		December 31, 2023
Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions	$	–	$	100,000
Prepaid insurance		94,500		20,631
Rent deposit		59,426		–
Other prepaid expenses		4,167		–
Total other current assets	$	158,093	$	120,631

Property and Equipment, net

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment [Abstract]

Property and Equipment, net

Note 6 – Property and Equipment, net

Schedule of property and equipment
	September 30, 2024			December 31, 2023
Computer equipment	$	7,738		$	7,738
Accumulated depreciation		(6,997	)		(6,484	)
Total property and equipment, net	$	741		$	1,254

Depreciation expense totaled $513 and $1,407 for the nine months ended September 30, 2024 and 2023, respectively.

Operating Leases

9 Months Ended

Sep. 30, 2024

Operating Leases

Operating Leases

Note 7 – Operating Leases

Schedule of future lease payments
Year	Future Lease Payments		Operating Lease Discount			Operating Lease Liability
2024	$	24,796	$	(9,412	)	$	15,384
2025		101,133		(33,313	)		67,820
2026		105,177		(25,468	)		79,709
2027		109,037		(15,985	)		93,052
2028		94,185		(4,776	)		89,409
Total	$	434,327	$	(88,954	)	$	345,374

Schedule of supplemental information
Supplemental Information
Weighted average remaining lease term (in years)			4.08
Weighted average discount rate			11.49%

Promissory and Convertible Notes

9 Months Ended

Sep. 30, 2024

Debt Disclosure [Abstract]

Promissory and Convertible Notes

Note 8 – Promissory and Convertible Notes

Total interest expense for the nine months ended September 30, 2024 was $101,619 The Company had accrued interest of $5,004 as of September 30, 2024 related to the August Notes.

Derivative Liabilities

9 Months Ended

Sep. 30, 2024

Derivative Liabilities

Derivative Liabilities

Note 9 – Derivative Liabilities

Derivative liability – conversion option

Warrant Liability

Earnings Per Share and Stockholders’ Equity

9 Months Ended

Sep. 30, 2024

Earnings Per Share And Stockholders Equity

Earnings Per Share and Stockholders’ Equity

Note 10 – Earnings Per Share and Stockholders’ Equity

Earnings per Share

Preferred Stock

The preferred stock par value is $0.01.

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

Preferred shares outstanding at September 30, 2024 and December 31, 2023 were as follows:


Preferred Series	Shares as of September 30, 2024		Shares as converted, as of September 30, 2024		Shares as of December 31, 2023		Shares, as converted, as of December 31, 2023
Series A		4,250		4,250,000		–		–
Series B		50		250,000		190		950,000
Series C		210		630,000		–		–

Common Stock

The common stock par value is $0.01.

2024 Transactions

Subsequent to the IPO and prior to September 30, 2024, the Company issued 700,000 shares of common stock related to certain shareholders converting 140 Series B shares into common stock.

2023 Transactions

Share Based Awards

9 Months Ended

Sep. 30, 2024

Equity [Abstract]

Share Based Awards

Note 11 – Share Based Awards

Stock Options

The following table presents the activity for stock options outstanding:

Non-Qualified

Options

Weighted

Average

Exercise Price

Weighted

Average

Remaining

Contractual Term

Aggregate

Intrinsic Value

Outstanding - December 31, 2023

–

Granted

330,000

1.24

9.59

99,200

Forfeited/canceled

–

Exercised

–

Outstanding – September 30, 2024

330,000

1.24

9.59

99,200

The range of assumptions used to calculate the fair value of options granted during the nine months ended September 30, 2024 was:

Schedule of stock options assumptions
Exercise Price	$	1.20 – 1.79
Stock Price on date of grant	$	1.20 – 1.79
Risk-free interest rate		4.080- 4.71%
Dividend yield		–
Expected term (years)		6.11
Volatility		129.45 – 143.46%

Restricted Stock

The following table presents the activity for restricted stock outstanding:

Restricted

Awards

Stock

Vested

Unvested

Outstanding - December 31, 2023

–

Granted

1,001,642

501,253

500,389

Forfeited/canceled

–

Outstanding – September 30, 2024

1,001,642

501,253

500,389

Warrants

The following table presents the activity for warrants outstanding as of September 30, 2024:

Schedule of warrant activity
			Weighted
	Warrants		Average
	Outstanding		Exercise Price
Outstanding - December 31, 2023		–	$	–

Granted		692,500		2.26
Forfeited/cancelled/restored		–		–
Exercised		–		–
Outstanding – September 30, 2024		692,500	$	2.26

Related Party Transactions

9 Months Ended

Sep. 30, 2024

Related Party Transactions

Note 12 – Related Party Transactions

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 13 – Commitments and Contingencies

Restatement of Previously Issued Financial Statements

9 Months Ended

Sep. 30, 2024

Accounting Changes and Error Corrections [Abstract]

Restatement of Previously Issued Financial Statements

Note 14 – Restatement of Previously Issued Financial Statements


Statement of Operations for the Nine months Ended September 30, 2023
	As Filed			Restatement Adjustments			As Restated

Revenue	$	–		$	–		$	–

Cost of goods sold		–			–			–

Gross profit		–			–			–

Operating expenses:
Research and development		–			–			–
General and administrative		1,376,462			589,007			1,965,469
Depreciation and amortization		1,407			–			1,407
Total operating expenses		1,377,869			589,007			1,966,876

Loss from operations		(1,377,869	)		(589,007	)		(1,966,876	)

Other income:
Interest income		–			–			–
Total other income		–			–			–

Net loss before income tax		(1,377,869	)		(589,007	)		(1,966,876	)

Income tax benefit (expense)		–			–			–

Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)

Net loss per share attributable to common stockholders
Basic and diluted	$	(0.41	)	$	(0.17	)	$	(0.59	)

Weighted average common shares outstanding
Basic and diluted		3,337,402			–			3,337,402

Statements of Changes in Stockholders’ Equity – As Filed – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In			Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital			Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041		$	–	$	(1,538,591	)	$	3,209,374

Issuance of common shares		–		–		75,005			750			(750	)		–		–			–
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499			–		–			–
Net loss		–		–		–			–			–			–		(1,377,869	)		(1,377,869	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	4,715,790		$	–	$	(2,916,460	)	$	1,831,505

Statements of Changes in Stockholders’ Equity – Restatement Adjustments – For the Nine months Ended September 30, 2023

Series B, Preferred Stock

Common Stock

Additional Paid-In

Stocks to be

Accumulated

Value

Capital

Issued

Deficit

Total

Balance, December 31, 2022

–

(10,993

)

(10,993

)

Issuance of common shares

–

600,000

–

600,000

Conversion to preferred shares

–

Net loss

–

(589,007

)

(589,007

)

Balance, September 30, 2023

–

600,000

–

(600,000

)

–

Statements of Changes in Stockholders’ Equity – As Restated – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In		Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital		Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041	$	–	$	(1,549,584	)	$	3,198,381

Issuance of common shares		–		–		75,005			750			599,250		–		–			600,000
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499		–		–			–
Net loss		–		–		–			–			–		–		(1,966,876	)		(1,966,876	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	5,315,790	$	–	$	(3,516,460	)	$	1,831,505

Statement of Cash Flows for the Nine months Ended September 30, 2023


	As Filed			Restatement Adjustments			As Restated

Cash flows from operating activities:
Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)
Depreciation		1,407			–			1,407
Stock compensation expense		–			600,000			600,000
Change in assets and liabilities:
Accounts receivable		–			–			–
Deferred offering costs		(376,702	)		376,702			–
Other current assets		33,750			–			33,750
Accounts payable and accrued expenses		(39,826	)		(10,993	)		(50,819	)
Net cash used in operating activities		(1,759,240	)		376,702			(1,382,538	)

Cash flows from investing activities
Purchases of property and equipment		(3,164	)		–			(3,164	)
Net cash used in investing activities		(3,164	)		–			(3,164	)

Cash flows from financing activities:
Deferred offering costs		–			(376,702	)		(376,702	))
Net cash provided by financing activities		–			(376,702	)		(376,702	))

Net increase (decrease) in cash		(1,762,404	)		–			(1,762,402	)

Cash, beginning of period		3,099,422			–			3,099,422

Cash, end of period	$	1,337,018		$	–		$	1,337,018

Supplemental disclosures of cash flow information:
Cash paid for interest	$	–		$	–		$	–
Cash paid for income tax	$	–		$	–		$	–

Subsequent Events

9 Months Ended

Sep. 30, 2024

Subsequent Events [Abstract]

Subsequent Events

Note 15 – Subsequent Events

Quarterly Grants to our Board of Directors

Director	Fair Value Per Share	Amount of Restricted Common Stock	Aggregate Fair Value
Cristina Colon	$1.45	7,472	$10,833
Sanford Rich	$1.45	7,472	$10,833
Robert Lowry	$1.45	7,472	$10,833
Jeffrey Thompson	$1.45	6,897	$10,000

Private Placement Agreement

Summary of significant accounting policies (Policies)

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation

Unaudited interim financial information

Unaudited interim financial information

Use of Estimates

Use of Estimates

Cash and Cash Equivalents

Cash and Cash Equivalents

Accounts Receivable, net

Accounts Receivable, net

Inventory

Inventory

Deferred offering costs

Deferred offering costs

Property and equipment, net

Property and equipment, net

Leases

Leases

Goodwill and Long-lived Assets

Goodwill and Long-lived Assets

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

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

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 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.

The following table details the fair value measurements of the Company’s financial liabilities as of September 30, 2024:


	Total		Level 1		Level 2		Level 3
Warrant liabilities	$	308,964	$	–	$	–	$	308,964
Derivative liability – convertible note conversion option		311,048		–		–		311,048
Total	$	620,012	$	–	$	–	$	620,012

Changes in Level 3 financial instruments are as follows:


	December 31,		Purchases, Issuances and		Change in			September 30,
	2023		Settlements		Fair Value			2024
Warrant liabilities	$	–	$	315,303	$	(6,339	)	$	308,964
Derivative liability – convertible note conversion option		–		347,947		(36,899	)		311,048
Total	$	–	$	663,250	$	(43,238	)	$	620,012

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

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

Accrued Warranty

Accrued Warranty

Rotor Riot does not provide any warranty of any kind for any of the equipment it sells or otherwise distributes. Consumers assume all risk for any products purchased or received from Rotor Riot.

Revenue Recognition

Revenue Recognition

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.

Deferred Revenue

Deferred Revenue

Cost of Goods Sold

Cost of Goods Sold

Cost of goods sold includes inventory costs, direct packaging costs and production related depreciation, if any.

Shipping and Handling Costs

Shipping and Handling Costs

Research and Development

Research and Development

Income Taxes

Income Taxes

Stock-Based Compensation

Stock-Based Compensation

Warrants

Warrants

Embedded Conversion Option Derivative

Embedded Conversion Option Derivative

Net Loss per Share

Net Loss per Share

Segment Reporting

Segment Reporting

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Summary of significant accounting policies (Tables)

9 Months Ended

Sep. 30, 2024

Accounting Policies [Abstract]

Schedule of fair value measurements of financial liabilities


	Total		Level 1		Level 2		Level 3
Warrant liabilities	$	308,964	$	–	$	–	$	308,964
Derivative liability – convertible note conversion option		311,048		–		–		311,048
Total	$	620,012	$	–	$	–	$	620,012

Schedule of Level 3 financial instruments


	December 31,		Purchases, Issuances and		Change in			September 30,
	2023		Settlements		Fair Value			2024
Warrant liabilities	$	–	$	315,303	$	(6,339	)	$	308,964
Derivative liability – convertible note conversion option		–		347,947		(36,899	)		311,048
Total	$	–	$	663,250	$	(43,238	)	$	620,012

Acquisitions (Tables) - Fat Shark And Rotor Riot [Member]

9 Months Ended

Sep. 30, 2024

Business Acquisition [Line Items]

Schedule of fair value allocation

Schedule of fair value allocation
Cash	$	147,200
Accounts receivable (approximates contractual value)		6,798
Inventories (on hand and prepaid)		2,611,583
Other current assets		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

Schedule of unaudited pro forma results

Schedule of unaudited pro forma results
	For the Nine months Ended						For the Nine months Ended
	September 30, 2024						September 30, 2023
	As Reported			Proforma (unaudited)			As Reported			Proforma (unaudited)
Revenue	$	3,561		$	4,056		$	–		$	4,115
Gross profit/(loss)		992			1,024			–			705
Loss from operations		(4,119	)		(4,163	)		(1,967	)		(3,209	)
Other expense		(743	)		(743	)		–			51
Net loss	$	(4,862	)	$	(4,906	)	$	(1,967	)	$	(3,260	)
Net earnings per share:
Basic	$	(0.63	)	$	(0.63	)	$	(0.59	)	$	(0.37	)

Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2024

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of other current assets

Schedule of other current assets
	September 30, 2024		December 31, 2023
Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions	$	–	$	100,000
Prepaid insurance		94,500		20,631
Rent deposit		59,426		–
Other prepaid expenses		4,167		–
Total other current assets	$	158,093	$	120,631

Property and Equipment, net (Tables)

9 Months Ended

Sep. 30, 2024

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Schedule of property and equipment
	September 30, 2024			December 31, 2023
Computer equipment	$	7,738		$	7,738
Accumulated depreciation		(6,997	)		(6,484	)
Total property and equipment, net	$	741		$	1,254

Operating Leases (Tables)

9 Months Ended

Sep. 30, 2024

Operating Leases

Schedule of future lease payments

Schedule of future lease payments
Year	Future Lease Payments		Operating Lease Discount			Operating Lease Liability
2024	$	24,796	$	(9,412	)	$	15,384
2025		101,133		(33,313	)		67,820
2026		105,177		(25,468	)		79,709
2027		109,037		(15,985	)		93,052
2028		94,185		(4,776	)		89,409
Total	$	434,327	$	(88,954	)	$	345,374

Schedule of supplemental information

Schedule of supplemental information
Supplemental Information
Weighted average remaining lease term (in years)			4.08
Weighted average discount rate			11.49%

Earnings Per Share and Stockholders’ Equity (Tables)

9 Months Ended

Sep. 30, 2024

Earnings Per Share And Stockholders Equity

Schedule of preferred shares outstanding


Preferred Series	Shares as of September 30, 2024		Shares as converted, as of September 30, 2024		Shares as of December 31, 2023		Shares, as converted, as of December 31, 2023
Series A		4,250		4,250,000		–		–
Series B		50		250,000		190		950,000
Series C		210		630,000		–		–

Share Based Awards (Tables)

9 Months Ended

Sep. 30, 2024

Equity [Abstract]

Schedule of stock option activity

Non-Qualified

Options

Weighted

Average

Exercise Price

Weighted

Average

Remaining

Contractual Term

Aggregate

Intrinsic Value

Outstanding - December 31, 2023

–

Granted

330,000

1.24

9.59

99,200

Forfeited/canceled

–

Exercised

–

Outstanding – September 30, 2024

330,000

1.24

9.59

99,200

Schedule of stock options assumptions

Schedule of stock options assumptions
Exercise Price	$	1.20 – 1.79
Stock Price on date of grant	$	1.20 – 1.79
Risk-free interest rate		4.080- 4.71%
Dividend yield		–
Expected term (years)		6.11
Volatility		129.45 – 143.46%

Schedule of restricted stock activity

Restricted

Awards

Stock

Vested

Unvested

Outstanding - December 31, 2023

–

Granted

1,001,642

501,253

500,389

Forfeited/canceled

–

Outstanding – September 30, 2024

1,001,642

501,253

500,389

Schedule of warrant activity

Schedule of warrant activity
			Weighted
	Warrants		Average
	Outstanding		Exercise Price
Outstanding - December 31, 2023		–	$	–

Granted		692,500		2.26
Forfeited/cancelled/restored		–		–
Exercised		–		–
Outstanding – September 30, 2024		692,500	$	2.26

Restatement of Previously Issued Financial Statements (Tables)

9 Months Ended

Sep. 30, 2024

Accounting Changes and Error Corrections [Abstract]

Schedule of restatement adjustments in financial statements


Statement of Operations for the Nine months Ended September 30, 2023
	As Filed			Restatement Adjustments			As Restated

Revenue	$	–		$	–		$	–

Cost of goods sold		–			–			–

Gross profit		–			–			–

Operating expenses:
Research and development		–			–			–
General and administrative		1,376,462			589,007			1,965,469
Depreciation and amortization		1,407			–			1,407
Total operating expenses		1,377,869			589,007			1,966,876

Loss from operations		(1,377,869	)		(589,007	)		(1,966,876	)

Other income:
Interest income		–			–			–
Total other income		–			–			–

Net loss before income tax		(1,377,869	)		(589,007	)		(1,966,876	)

Income tax benefit (expense)		–			–			–

Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)

Net loss per share attributable to common stockholders
Basic and diluted	$	(0.41	)	$	(0.17	)	$	(0.59	)

Weighted average common shares outstanding
Basic and diluted		3,337,402			–			3,337,402

Statements of Changes in Stockholders’ Equity – As Filed – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In			Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital			Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041		$	–	$	(1,538,591	)	$	3,209,374

Issuance of common shares		–		–		75,005			750			(750	)		–		–			–
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499			–		–			–
Net loss		–		–		–			–			–			–		(1,377,869	)		(1,377,869	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	4,715,790		$	–	$	(2,916,460	)	$	1,831,505

Statements of Changes in Stockholders’ Equity – Restatement Adjustments – For the Nine months Ended September 30, 2023

Series B, Preferred Stock

Common Stock

Additional Paid-In

Stocks to be

Accumulated

Value

Capital

Issued

Deficit

Total

Balance, December 31, 2022

–

(10,993

)

(10,993

)

Issuance of common shares

–

600,000

–

600,000

Conversion to preferred shares

–

Net loss

–

(589,007

)

(589,007

)

Balance, September 30, 2023

–

600,000

–

(600,000

)

–

Statements of Changes in Stockholders’ Equity – As Restated – For the Nine months Ended September 30, 2023


	Series B, Preferred Stock				Common Stock						Additional Paid-In		Stocks to be		Accumulated
	Shares		Value		Shares			Value			Capital		Issued		Deficit			Total
Balance, December 31, 2022		140	$	1		3,392,250		$	33,923		$	4,714,041	$	–	$	(1,549,584	)	$	3,198,381

Issuance of common shares		–		–		75,005			750			599,250		–		–			600,000
Conversion to preferred shares		50		1		(250,000	)		(2,500	)		2,499		–		–			–
Net loss		–		–		–			–			–		–		(1,966,876	)		(1,966,876	)

Balance, September 30, 2023		190	$	2		3,217,255		$	32,173		$	5,315,790	$	–	$	(3,516,460	)	$	1,831,505

Statement of Cash Flows for the Nine months Ended September 30, 2023


	As Filed			Restatement Adjustments			As Restated

Cash flows from operating activities:
Net loss	$	(1,377,869	)	$	(589,007	)	$	(1,966,876	)
Depreciation		1,407			–			1,407
Stock compensation expense		–			600,000			600,000
Change in assets and liabilities:
Accounts receivable		–			–			–
Deferred offering costs		(376,702	)		376,702			–
Other current assets		33,750			–			33,750
Accounts payable and accrued expenses		(39,826	)		(10,993	)		(50,819	)
Net cash used in operating activities		(1,759,240	)		376,702			(1,382,538	)

Cash flows from investing activities
Purchases of property and equipment		(3,164	)		–			(3,164	)
Net cash used in investing activities		(3,164	)		–			(3,164	)

Cash flows from financing activities:
Deferred offering costs		–			(376,702	)		(376,702	))
Net cash provided by financing activities		–			(376,702	)		(376,702	))

Net increase (decrease) in cash		(1,762,404	)		–			(1,762,402	)

Cash, beginning of period		3,099,422			–			3,099,422

Cash, end of period	$	1,337,018		$	–		$	1,337,018

Supplemental disclosures of cash flow information:
Cash paid for interest	$	–		$	–		$	–
Cash paid for income tax	$	–		$	–		$	–

Organization and nature of business (Details Narrative) - IPO [Member]	Feb. 16, 2024 $ / shares shares
Subsidiary, Sale of Stock [Line Items]
Stock issued new, shares \| shares	1,250,000
Public offering price \| $ / shares	$ 4.00

Summary of significant accounting policies (Details - Fair value measurements of financial liabilities) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Platform Operator, Crypto Asset [Line Items]
Warrant liabilties	$ 308,964
Derivative liability - convertible note conversion option	311,048
Total	620,012
Fair Value, Inputs, Level 1 [Member]
Platform Operator, Crypto Asset [Line Items]
Warrant liabilties	0
Derivative liability - convertible note conversion option	0
Total	0
Fair Value, Inputs, Level 2 [Member]
Platform Operator, Crypto Asset [Line Items]
Warrant liabilties	0
Derivative liability - convertible note conversion option	0
Total	0
Fair Value, Inputs, Level 3 [Member]
Platform Operator, Crypto Asset [Line Items]
Warrant liabilties	308,964
Derivative liability - convertible note conversion option	311,048
Total	$ 620,012	$ 0

Summary of significant accounting policies (Details - Changes in Level 3 financial instruments)	9 Months Ended
	Sep. 30, 2024 USD ($)
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]
Financial instruments, ending balance	$ 620,012
Fair Value, Inputs, Level 3 [Member]
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]
Financial instruments, beginning balance	0
Purchases issuances and settlements	663,250
Unrealized losses	(43,238)
Financial instruments, ending balance	620,012
Warrant [Member] \| Fair Value, Inputs, Level 3 [Member]
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]
Financial instruments, beginning balance	0
Purchases issuances and settlements	315,303
Unrealized losses	(6,339)
Financial instruments, ending balance	308,964
Derivative [Member] \| Fair Value, Inputs, Level 3 [Member]
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]
Financial instruments, beginning balance	0
Purchases issuances and settlements	347,947
Unrealized losses	(36,899)
Financial instruments, ending balance	$ 311,048

Summary of significant accounting policies (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Feb. 16, 2024	Dec. 31, 2023
Federal deposit insurance corporation	$ 250,000
Cash uninsured amount	1,400,000			$ 600,000
Allowance for doubtful accounts	0			0
Deferred offering costs	$ 0			512,758
Estimated useful lives	two to five years
Lease liability	$ 345,374
Right-of-use asset	$ 340,389			0
Effective discount rate	11.49%
Accrued expenses	$ 19,080			0
Deferred revenue	300,517			0
Deferred tax assets	0			0
General and Administrative Expense [Member]
Shipping and handling costs	123,690	$ 0
Orlando, FL [Member] \| Rotor Riot [Member]
Lease liability			$ 378,430
Right-of-use asset			$ 378,430
IPO [Member]
Amortization of deferred offering costs	127,687	$ 376,702
Deferred offering costs				$ 1,150,445
Adjustment to APIC for deferred offering costs	$ 640,445

Acquisitions (Details - Fair value allocation) - Fat Shark And Rotor Riot [Member]	Feb. 16, 2024 USD ($)
Business Acquisition [Line Items]
Cash	$ 147,200
Accounts receivable (approximates contractual value)	6,798
Inventories (on hand and prepaid)	2,611,583
Other current assets	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

Acquisitions (Details - Pro Forma Info) - Fat Shark And Rotor Riot [Member] - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Business Acquisition [Line Items]
Revenue	$ 3,561	$ 0
Gross profit/(loss)	992	0
Loss from operations	(4,119)	(1,967)
Other expense	(743)	0
Net loss	$ (4,862)	$ (1,967)
Net earnings per share:
Basic	$ (0.63)	$ (0.59)
Pro Forma [Member]
Business Acquisition [Line Items]
Revenue	$ 4,056	$ 4,115
Gross profit/(loss)	1,024	705
Loss from operations	(4,163)	(3,209)
Other expense	(743)	51
Net loss	$ (4,906)	$ (3,260)
Net earnings per share:
Basic	$ (0.63)	$ (0.37)

Acquisitions (Details Narrative)	Feb. 16, 2024 USD ($) $ / shares shares
IPO [Member]
Business Acquisition [Line Items]
Share price of Red Cat \| $ / shares	$ 4.00
Fat Shark And Rotor Riot [Member]
Business Acquisition [Line Items]
Payments to acquire business	$ 1,000,000
Cash deposit	100,000
Issuance of promissory note	$ 4,000,000
Issuance of common stock under acquisition \| shares	4,250,000
Consideration paid	$ 22,100,000

Inventories (Details Narrative) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Inventory Disclosure [Abstract]
Inventory	$ 1,453,042	$ 0
Prepaid deposits for inventory	$ 1,140,511
Prepaid and deposits for inventory		$ 0

Other Current Assets (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Restructuring Cost and Reserve [Line Items]
Prepaid insurance	$ 94,500	$ 20,631
Rent deposit	59,426	0
Other prepaid expenses	4,167	0
Total other current assets	158,093	120,631
Fat Shark And Rotor Riot [Member]
Restructuring Cost and Reserve [Line Items]
Deposit related to Rotor Riot, LLC and Fat Shark, Ltd. acquisitions	$ 0	$ 100,000

Property and Equipment, net (Details) - USD ($)	Sep. 30, 2024	Dec. 31, 2023
Property, Plant and Equipment [Abstract]
Computer equipment	$ 7,738	$ 7,738
Accumulated depreciation	(6,997)	(6,484)
Total property and equipment, net	$ 741	$ 1,254

Property and Equipment, net (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 513	$ 1,407

Operating Leases (Details - Lease maturity)	Sep. 30, 2024 USD ($)
Lessee, Lease, Description [Line Items]
Operating Lease Discount	$ (88,954)
Operating Lease Liability	345,374
Future Lease Payments	434,327
Year 2024 [Member]
Lessee, Lease, Description [Line Items]
Future Lease Payments, 2024	24,796
Operating Lease Discount	(9,412)
Operating Lease Liability	15,384
Year 2025 [Member]
Lessee, Lease, Description [Line Items]
Operating Lease Discount	(33,313)
Operating Lease Liability	67,820
Future Lease Payments, 2025	101,133
Year 2026 [Member]
Lessee, Lease, Description [Line Items]
Operating Lease Discount	(25,468)
Operating Lease Liability	79,709
Future Lease Payments, 2026	105,177
Year 2027 [Member]
Lessee, Lease, Description [Line Items]
Operating Lease Discount	(15,985)
Operating Lease Liability	93,052
Future Lease Payments, 2027	109,037
Year 2028 [Member]
Lessee, Lease, Description [Line Items]
Operating Lease Discount	(4,776)
Operating Lease Liability	89,409
Future Lease Payments, 2028	$ 94,185

Operating Leases (Details - Lease supplemental information)	Sep. 30, 2024
Operating Leases
Weighted average remaining lease term (in years)	4 years 29 days
Weighted average discount rate	11.49%

Operating Leases (Details Narrative) - USD ($)	7 Months Ended	9 Months Ended
Operating Leases (Details Narrative) - USD ($)	Sep. 30, 2024	Sep. 30, 2024	Feb. 16, 2024	Dec. 31, 2023
Operating lease right-of-use asset	$ 340,389	$ 340,389		$ 0
Orlando, FL [Member] \| Rotor Riot [Member]
Operating lease right-of-use asset			$ 378,430
Operating lease expense	$ 65,716
Rotor Riot Lease [Member]
Lease description		As identified in Note 3 “Acquisitions”, the acquired businesses, specifically Rotor Riot, has entered into a five-year operating lease for approximately 6,900 square feet of warehouse and office space in Orlando, Florida. The lease commenced in November 2023 and expires in October 2028.

Promissory and Convertible Notes (Details Narrative) - USD ($)		1 Months Ended	3 Months Ended		9 Months Ended
	Aug. 21, 2024	Jul. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Short-Term Debt [Line Items]
Gain (Loss) on Extinguishment of Debt			$ (685,151)	$ 0	$ (685,151)	$ 0
July Notes [Member] \| Red Cat [Member]
Short-Term Debt [Line Items]
Interest rate		8.00%
Maturity date		Nov. 30, 2025
August Notes [Member] \| Two Exchange Agreement [Member]
Short-Term Debt [Line Items]
Interest rate	4.00%
Note, description	Pursuant to the exchange agreements, the Investors exchanged the $4,000,000 of July Notes for an aggregate of (i) $3,000,000 for the August Notes, (ii) 210 shares of Series C preferred stock, which converts into 630,000 shares of the Company’s common stock, and (iii) 630,000 warrants with a five-year term and an exercise price of $1.99 per share, subject to certain adjustments.
Debt Instrument, Convertible, Conversion Price	$ 1.99
Gain (Loss) on Extinguishment of Debt			685,151		685,151
Interest Expense, Debt					101,619
Debt Instrument, Increase, Accrued Interest					5,004
Red Cat [Member]
Short-Term Debt [Line Items]
Additional purchase price		$ 2,000,000
Fair Value Related Warrant Liability [Member] \| August Notes [Member] \| Two Exchange Agreement [Member]
Short-Term Debt [Line Items]
Gain (Loss) on Extinguishment of Debt	$ 315,303
Fair Value Related To Derivative Liability [Member] \| August Notes [Member] \| Two Exchange Agreement [Member]
Short-Term Debt [Line Items]
Gain (Loss) on Extinguishment of Debt	347,947
Cash Fees Paid For Legal Costs [Member] \| August Notes [Member] \| Two Exchange Agreement [Member]
Short-Term Debt [Line Items]
Gain (Loss) on Extinguishment of Debt	$ 21,901
Fat Shark And Rotor Riot [Member]
Short-Term Debt [Line Items]
Issuance of convertible promissory note			$ 2,000,000		$ 2,000,000

Derivative Liabilities (Details Narrative) - USD ($)	3 Months Ended
Derivative Liabilities (Details Narrative) - USD ($)	Sep. 30, 2024	Aug. 21, 2024
Derivative Liabilities
Conversion derivative fair value	$ 311,048	$ 347,947
Change in fair value derivative liabilties	36,899
Fair value of warrant liability	308,964	$ 315,303
Change in fair value warrant liability	$ 6,340

Earnings Per Share and Stockholders' Equity (Details - Preferred shares outstanding) - shares	Sep. 30, 2024	Dec. 31, 2023
Series A Preferred Stock [Member]
Outstanding shares	4,250	0
Shares as converted	4,250,000	0
Series B Preferred Stock [Member]
Outstanding shares	50	190
Shares as converted	250,000	950,000
Series C Preferred Stock [Member]
Outstanding shares	210	0
Shares as converted	630,000	0

Earnings Per Share and Stockholders’ Equity (Details Narrative) - USD ($)											3 Months Ended	9 Months Ended
	Aug. 21, 2024	Jul. 30, 2024	Jul. 22, 2024	May 02, 2024	Apr. 30, 2024	Feb. 16, 2024	Jan. 02, 2024	Jul. 10, 2023	Jun. 01, 2023	Mar. 07, 2023	Mar. 31, 2024	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Exchanged aggregate amount												$ 1,000,000
Cancelled shares upon conversion												330,000
Common stock, par value												$ 0.01		$ 0.01
Deferred offering costs												$ 0		$ 512,758
Warrants exercise price												$ 2.26		$ 0
Purchase price											$ 17,000,000
Stock expense												$ 679,699
Unrecognized stock compensation expense												496,661
Executive Officers And Board Members [Member]
Issuance of restricted shares					937,249
Share price					$ 1.20
Issuance of restricted shares, value					$ 1,174,698
Chief Executive Officer [Member]
Issuance of restricted shares				40,650
Share price				$ 1.23
Issuance of restricted shares, value				$ 1,174,698
Board Members [Member]
Share price		$ 1.79
Vested restricted shares of common stock		23,743
Stock compensation expense related to issuance of shares		$ 42,500
Board Of Directors [Member]
Reverse stock spli								1-for-2 reverse stock split
IPO [Member]
Issuance of common stock						1,250,000
Total net proceeds from IPO completion						$ 3,849,555
Deferred offering costs														$ 1,150,445
Share price						$ 4.00
IPO [Member] \| Direct Deduction From Proceeds [Member]
Deferred offering costs												510,000
IPO [Member] \| Cash Disbursements [Member]
Deferred offering costs												$ 127,687
IPO [Member] \| Paid Prior Year [Member]
Deferred offering costs														$ 512,758
January 2023 Engagement [Member]
Issuance of common stock										75,000
Share price										$ 8.00
Stock compensation expense related to issuance of shares										$ 600,000
Prior Chief Executive Officer [Member]
Stock issued for compensation, shares							16,086
Stock issued for compensation, value							$ 64,344
Underwriters [Member] \| IPO [Member]
Warrants issued, shares						62,500
Warrants issued, value						$ 250,000
Warrants exercise price						$ 5.00
Two Exchange Agreements [Member] \| Investors [Member]
Exchanged aggregate amount	$ 1,000,000
Warrants issued for debt	630,000
Red Cat [Member]
Issuance of common stock under acquisition						4,250,000
Purchase price						$ 17,000,000
Series B Preferred Stock [Member]
Preferred stock, par value												$ 0.01		$ 0.01
Converted shares												140
Shares converted for debt												250,000		950,000
Cancelled shares upon conversion												140
Cancelled shares upon conversion									50
Convertible Common Stock [Member]
Converted shares												700,000
Cancelled shares upon conversion									250,000
Convertible Common Stock [Member] \| Red Cat [Member]
Converted shares			4,250,000
Series A Preferred Stock [Member]
Preferred stock, par value												$ 0.01		$ 0.01
Shares converted for debt												4,250,000		0
Series A Preferred Stock [Member] \| Red Cat [Member]
Converted shares			4,250
Series C Preferred Stock [Member]
Preferred stock, par value												$ 0.01		$ 0.01
Shares converted for debt												630,000		0
Series C Preferred Stock [Member] \| Two Exchange Agreements [Member] \| Investors [Member]
Shares converted for debt	210
Series A Convertible Preferred Stock [Member]
Anti-dilutive shares												4,250,000	0
Series B Convertible Preferred Stock [Member]
Anti-dilutive shares												250,000	950,000
Series C Convertible Preferred Stock [Member]
Anti-dilutive shares												630,000	0
Share-Based Payment Arrangement, Option [Member]
Anti-dilutive shares												330,000
Common Stock Warrants [Member]
Anti-dilutive shares												62,500
Warrants Issued Related To Debt Conversion [Member]
Anti-dilutive shares												630,000
Convertible Note Common Stock [Member]
Anti-dilutive shares												1,507,538

Share Based Awards (Details - Stock options activity)	9 Months Ended
Share Based Awards (Details - Stock options activity)	Sep. 30, 2024 USD ($) $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Non-Qualified Options granted	330,000
Equity Option [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Non-Qualified Options outstanding, beginning	0
Options outstanding, weighted average exercise price, beginning \| $ / shares	$ 0
Aggregate intrinsic value granted outstanding, beginning \| $	$ 0
Non-Qualified Options granted	330,000
Options granted, weighted average exercise price \| $ / shares	$ 1.24
Options outstanding, weighted average remaining contractual term	9 years 7 months 2 days
Options granted, aggregatge intrinsic value \| $	$ 99,200
Non-Qualified Options forfeited/canceled	0
Options forfeited/cancelled, weighted average exercise price \| $ / shares	$ 0
Non-Qualified Options exercised	0
Options exercised, weighted average exercise price \| $ / shares	$ 0
Non-Qualified Options outstanding, ending	330,000
Options outstanding, weighted average exercise price, ending \| $ / shares	$ 1.24
Options outstanding, weighted average remaining contractual term	9 years 7 months 2 days
Aggregate intrinsic value granted outstanding, ending \| $	$ 99,200

Share Based Awards (Details - Stock options assumptions) - Equity Option [Member]	9 Months Ended
	Sep. 30, 2024 $ / shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Dividend yield	0.00%
Expected term (years)	6 years 1 month 9 days
Minimum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Exercise Price	$ 1.20
Stock Price on date of grant	$ 1.20
Risk-free interest rate	4.08%
Volatility	129.45%
Maximum [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Exercise Price	$ 1.79
Stock Price on date of grant	$ 1.79
Risk-free interest rate	4.71%
Volatility	143.46%

Share Based Awards (Details - Restricted stock)	9 Months Ended
Share Based Awards (Details - Restricted stock)	Sep. 30, 2024 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock granted, unvested	330,000
Restricted Stock [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock outstanding unvested, beginning	0
Restricted stock granted, unvested	1,001,642
Restricted stock forfeited/cancelled	0
Restricted stock outstanding unvested, ending	1,001,642
Restricted Stock [Member] \| Awards Vested [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock outstanding unvested, beginning	0
Restricted stock granted, unvested	501,253
Restricted stock forfeited/cancelled	0
Restricted stock outstanding unvested, ending	501,253
Restricted Stock [Member] \| Awards Unvested [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Restricted stock outstanding unvested, beginning	0
Restricted stock granted, unvested	500,389
Restricted stock forfeited/cancelled	0
Restricted stock outstanding unvested, ending	500,389

Share Based Awards (Details - Warrant activity)	9 Months Ended
Share Based Awards (Details - Warrant activity)	Sep. 30, 2024 $ / shares shares
Equity [Abstract]
Warrants outstanding, beginning \| shares	0
Warrants outstanding, weighted average exercise price, beginning \| $ / shares	$ 0
Warrants granted \| shares	692,500
Warrants granted, weighted average exercise price \| $ / shares	$ 2.26
Warrants forfeited/cancelled/restored \| shares	0
Warrants forfeited/cancelled/restored, weighted average exercise price \| $ / shares	$ 0
Warrants exercised \| shares	0
Warrants exercised, weighted average exercise price \| $ / shares	$ 0
Warrants outstanding, ending \| shares	692,500
Warrants outstanding, weighted average exercise price, ending \| $ / shares	$ 2.26

Share Based Awards (Details Narrative) - USD ($)		9 Months Ended
Share Based Awards (Details Narrative) - USD ($)	Feb. 16, 2024	Sep. 30, 2024	Sep. 30, 2023
Subsidiary, Sale of Stock [Line Items]
Authorized shares		1,461,876
Non-Qualified Options granted		330,000
Stock-based compensation expense		$ 759,673	$ 0
Note payable balance		$ 1,000,000
Issued warrants		630,000
Warrants exercise price		$ 1.99
Weighted average remaining contractual term		4 years 10 months 6 days
Share-Based Compensation Arrangement by Share-Based Payment Award, Equity Instruments Other than Options, Aggregate Intrinsic Value, Outstanding		$ 0
IPO [Member] \| Underwriters [Member]
Subsidiary, Sale of Stock [Line Items]
[custom:WarrantsIssuedShares]	62,500
Equity Option [Member]
Subsidiary, Sale of Stock [Line Items]
Non-Qualified Options granted		330,000
Stock-based compensation expense		$ 37,475
Unvested Stock Options [Member]
Subsidiary, Sale of Stock [Line Items]
Unrecognized stock-based compensation expense		$ 335,686
Restricted Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Non-Qualified Options granted		1,001,642
Stock-based compensation expense		$ 722,200
Unvested Restricted Stock [Member]
Subsidiary, Sale of Stock [Line Items]
Unrecognized stock-based compensation expense		$ 496,661

Related Party Transactions (Details Narrative) - Management Services Agreement [Member] - Consultant [Member] - USD ($)	Apr. 30, 2024	Sep. 30, 2024
Related Party Transaction [Line Items]
Consultant obligation		$ 250,000
Restricted Common Stock [Member]
Related Party Transaction [Line Items]
Granted fully vested shares of restricted common stock	488,000
Granted fully vested shares of restricted common stock, value	$ 585,600

Commitments and Contingencies (Details Narrative)	9 Months Ended
Commitments and Contingencies (Details Narrative)	Sep. 30, 2024
Rotor Riot Lease 1 [Member]
Lease description	As part of the business combination that occurred on February 14, 2024, the Company acquired a five-year operating lease for approximately 6,900 square feet of warehouse and office space in Orlando, Florida. The lease commenced in November 2023 and expires in October 2028.

Restatement of Previously Issued Financial Statements (Details - Restatement adjustments) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue	$ 1,531,264			$ 0			$ 3,561,303	$ 0
Cost of goods sold	1,131,777			0			2,569,209	0
Gross profit	399,487			0			992,094	0
Operating expenses:
Research and development	15,000			0			42,078	0
General and administrative	1,374,989			353,029			3,728,749	1,965,469
Depreciation and amortization	171			645			513	1,407
Total operating expenses	1,860,539			353,674			5,111,203	1,966,876
Loss from operations	(1,461,052)			(353,674)			(4,119,109)	(1,966,876)
Other income:
Total other income	(683,198)			0			(743,381)	0
Net loss	$ (2,144,250)	$ (1,612,238)	$ (1,106,002)	$ (353,674)	$ (435,298)	$ (1,177,904)	$ (4,862,490)	$ (1,966,876)
Net loss per share attributable to common stockholders basic	$ (0.30)			$ (0.11)			$ (0.63)	$ (0.59)
Net loss per share attributable to common stockholders diluted	$ (0.30)			$ (0.11)			$ (0.63)	$ (0.59)
Weighted average common shares outstanding basic	7,147,866			3,217,255			7,749,285	3,337,402
Weighted average common shares outstanding diluted	7,147,866			3,217,255			7,749,285	3,337,402
Beginning balance, value	$ 19,971,821	21,222,816	1,414,919	$ 2,185,179	2,620,477	3,198,381	$ 1,414,919	$ 3,198,381
Issuance of common shares						600,000
Conversion to preferred shares
Ending balance, value	19,226,002	19,971,821	21,222,816	1,831,505	2,185,179	2,620,477	19,226,002	1,831,505
Cash flows from operating activities:
Depreciation							513	1,407
Stock compensation expense							759,673	0
Change in assets and liabilities:
Accounts receivable							73,109	(0)
Other current assets							29,100	(33,750)
Accounts payable and accrued expenses							630,595	(50,819)
Net cash used in operating activities							(2,718,513)	(1,382,538)
Cash flows from investing activities
Purchases of property and equipment							0	(3,164)
Net cash used in investing activities							(852,801)	(3,164)
Cash flows from financing activities:
Net cash provided by financing activities							4,362,313	(376,702)
Net increase (decrease) in cash							790,999	(1,762,404)
Cash, beginning of period			894,773			3,099,422	894,773	3,099,422
Cash, end of period	1,685,772			1,337,018			$ 1,685,772	$ 1,337,018
Common Stock [Member]
Other income:
Net loss
Beginning balance, shares	10,411,240	9,333,341	3,217,255	3,217,255	3,467,255	3,392,250	3,217,255	3,392,250
Beginning balance, value	$ 104,113	$ 93,334	$ 32,173	$ 32,173	$ 34,673	$ 33,923	$ 32,173	$ 33,923
Issuance of common shares, shares						75,005
Issuance of common shares						$ 750
Conversion to preferred shares, shares		100,000	600,000		(250,000)
Conversion to preferred shares		$ 1,000	$ 6,000		$ (2,500)
Ending balance, shares	6,184,983	10,411,240	9,333,341	3,217,255	3,217,255	3,467,255	6,184,983	3,217,255
Ending balance, value	$ 61,850	$ 104,113	$ 93,334	$ 32,173	$ 32,173	$ 34,673	$ 61,850	$ 32,173
Additional Paid-in Capital [Member]
Other income:
Net loss
Beginning balance, value	26,518,993	26,168,529	5,315,790	5,315,790	5,313,291	4,714,041	5,315,790	4,714,041
Issuance of common shares						599,250
Conversion to preferred shares		(1,000)	(5,999)		2,499
Ending balance, value	27,959,642	26,518,993	26,168,529	5,315,790	5,315,790	5,313,291	27,959,642	5,315,790
Retained Earnings [Member]
Other income:
Net loss	(2,144,250)	(1,612,238)	(1,106,002)	(353,674)	(435,298)	(1,177,904)
Beginning balance, value	(6,651,286)	(5,039,048)	(3,933,046)	(3,162,786)	(2,727,488)	(1,549,584)	(3,933,046)	(1,549,584)
Issuance of common shares
Conversion to preferred shares
Ending balance, value	$ (8,795,536)	$ (6,651,286)	$ (5,039,048)	(3,516,460)	$ (3,162,786)	(2,727,488)	$ (8,795,536)	(3,516,460)
Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue								0
Cost of goods sold								0
Gross profit								0
Operating expenses:
Research and development								0
General and administrative								1,376,462
Depreciation and amortization								1,407
Total operating expenses								1,377,869
Loss from operations								(1,377,869)
Other income:
Interest income								0
Total other income								0
Net loss before income tax								(1,377,869)
Income tax benefit (expense)								0
Net loss								$ (1,377,869)
Net loss per share attributable to common stockholders basic								$ (0.41)
Net loss per share attributable to common stockholders diluted								$ (0.41)
Weighted average common shares outstanding basic								3,337,402
Weighted average common shares outstanding diluted								3,337,402
Beginning balance, value						3,209,374		$ 3,209,374
Ending balance, value				1,831,505				1,831,505
Cash flows from operating activities:
Depreciation								1,407
Stock compensation expense								0
Change in assets and liabilities:
Accounts receivable								0
Deferred offering costs								(376,702)
Other current assets								33,750
Accounts payable and accrued expenses								(39,826)
Net cash used in operating activities								(1,759,240)
Cash flows from investing activities
Purchases of property and equipment								(3,164)
Net cash used in investing activities								(3,164)
Cash flows from financing activities:
Deferred offering costs								0
Net cash provided by financing activities								0
Net increase (decrease) in cash								(1,762,404)
Cash, beginning of period						$ 3,099,422		3,099,422
Cash, end of period				$ 1,337,018				1,337,018
Supplemental disclosures of cash flow information:
Cash paid for interest								0
Cash paid for income tax								$ 0
Previously Reported [Member] \| Series B Preferred Stock [Member]
Other income:
Beginning balance, shares						140		140
Beginning balance, value						$ 1		$ 1
Conversion to preferred shares, shares								50
Conversion to preferred shares								$ 1
Ending balance, shares				190				190
Ending balance, value				$ 2				$ 2
Previously Reported [Member] \| Common Stock [Member]
Other income:
Beginning balance, shares						3,392,250		3,392,250
Beginning balance, value						$ 33,923		$ 33,923
Issuance of common shares, shares								75,005
Issuance of common shares								$ 750
Conversion to preferred shares, shares								(250,000)
Conversion to preferred shares								$ (2,500)
Ending balance, shares				3,217,255				3,217,255
Ending balance, value				$ 32,173				$ 32,173
Previously Reported [Member] \| Additional Paid-in Capital [Member]
Other income:
Beginning balance, value						4,714,041		4,714,041
Issuance of common shares								(750)
Conversion to preferred shares								2,499
Ending balance, value				4,715,790				4,715,790
Previously Reported [Member] \| Stocks To Be Issued [Member]
Other income:
Beginning balance, value						0		0
Ending balance, value				0				0
Previously Reported [Member] \| Retained Earnings [Member]
Other income:
Net loss								(1,377,869)
Beginning balance, value						(1,538,591)		(1,538,591)
Ending balance, value				(2,916,460)				(2,916,460)
Revision of Prior Period, Adjustment [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue								0
Cost of goods sold								0
Gross profit								0
Operating expenses:
Research and development								0
General and administrative								589,007
Depreciation and amortization								0
Total operating expenses								589,007
Loss from operations								(589,007)
Other income:
Interest income								0
Total other income								0
Net loss before income tax								(589,007)
Income tax benefit (expense)								0
Net loss								$ (589,007)
Net loss per share attributable to common stockholders basic								$ (0.17)
Net loss per share attributable to common stockholders diluted								$ (0.17)
Weighted average common shares outstanding basic								0
Weighted average common shares outstanding diluted								0
Beginning balance, value						(10,993)		$ (10,993)
Issuance of common shares								600,000
Ending balance, value				0				0
Cash flows from operating activities:
Depreciation								0
Stock compensation expense								600,000
Change in assets and liabilities:
Accounts receivable								0
Deferred offering costs								376,702
Other current assets								0
Accounts payable and accrued expenses								(10,993)
Net cash used in operating activities								376,702
Cash flows from investing activities
Purchases of property and equipment								0
Net cash used in investing activities								0
Cash flows from financing activities:
Deferred offering costs								(376,702)
Net cash provided by financing activities								(376,702)
Net increase (decrease) in cash								0
Cash, beginning of period						$ 0		0
Cash, end of period				$ 0				0
Supplemental disclosures of cash flow information:
Cash paid for interest								0
Cash paid for income tax								$ 0
Revision of Prior Period, Adjustment [Member] \| Series B Preferred Stock [Member]
Other income:
Beginning balance, shares						0		0
Beginning balance, value						$ 0		$ 0
Ending balance, shares				0				0
Ending balance, value				$ 0				$ 0
Revision of Prior Period, Adjustment [Member] \| Common Stock [Member]
Other income:
Beginning balance, shares						0		0
Beginning balance, value						$ 0		$ 0
Ending balance, shares				0				0
Ending balance, value				$ 0				$ 0
Revision of Prior Period, Adjustment [Member] \| Additional Paid-in Capital [Member]
Other income:
Beginning balance, value						0		0
Issuance of common shares								600,000
Ending balance, value				600,000				600,000
Revision of Prior Period, Adjustment [Member] \| Stocks To Be Issued [Member]
Other income:
Beginning balance, value						0		0
Ending balance, value				0				0
Revision of Prior Period, Adjustment [Member] \| Retained Earnings [Member]
Other income:
Net loss								(589,007)
Beginning balance, value						(10,993)		(10,993)
Ending balance, value				(600,000)				(600,000)
As Restated [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Revenue								0
Cost of goods sold								0
Gross profit								0
Operating expenses:
Research and development								0
General and administrative								1,965,469
Depreciation and amortization								1,407
Total operating expenses								1,966,876
Loss from operations								(1,966,876)
Other income:
Interest income								0
Total other income								0
Net loss before income tax								(1,966,876)
Income tax benefit (expense)								0
Net loss								$ (1,966,876)
Net loss per share attributable to common stockholders basic								$ (0.59)
Net loss per share attributable to common stockholders diluted								$ (0.59)
Weighted average common shares outstanding basic								3,337,402
Weighted average common shares outstanding diluted								3,337,402
Beginning balance, value						3,198,381		$ 3,198,381
Issuance of common shares								600,000
Ending balance, value				1,831,505				1,831,505
Cash flows from operating activities:
Depreciation								1,407
Stock compensation expense								600,000
Change in assets and liabilities:
Accounts receivable								0
Deferred offering costs								0
Other current assets								33,750
Accounts payable and accrued expenses								(50,819)
Net cash used in operating activities								(1,382,538)
Cash flows from investing activities
Purchases of property and equipment								(3,164)
Net cash used in investing activities								(3,164)
Cash flows from financing activities:
Deferred offering costs								(376,702)
Net cash provided by financing activities								(376,702)
Net increase (decrease) in cash								(1,762,402)
Cash, beginning of period						$ 3,099,422		3,099,422
Cash, end of period				$ 1,337,018				1,337,018
Supplemental disclosures of cash flow information:
Cash paid for interest								0
Cash paid for income tax								$ 0
As Restated [Member] \| Series B Preferred Stock [Member]
Other income:
Beginning balance, shares						140		140
Beginning balance, value						$ 1		$ 1
Conversion to preferred shares, shares								50
Conversion to preferred shares								$ 1
Ending balance, shares				190				190
Ending balance, value				$ 2				$ 2
As Restated [Member] \| Common Stock [Member]
Other income:
Beginning balance, shares						3,392,250		3,392,250
Beginning balance, value						$ 33,923		$ 33,923
Issuance of common shares, shares								75,005
Issuance of common shares								$ 750
Conversion to preferred shares, shares								(250,000)
Conversion to preferred shares								$ (2,500)
Ending balance, shares				3,217,255				3,217,255
Ending balance, value				$ 32,173				$ 32,173
As Restated [Member] \| Additional Paid-in Capital [Member]
Other income:
Beginning balance, value						4,714,041		4,714,041
Issuance of common shares								599,250
Conversion to preferred shares								2,499
Ending balance, value				5,315,790				5,315,790
As Restated [Member] \| Stocks To Be Issued [Member]
Other income:
Beginning balance, value						0		0
Ending balance, value				0				0
As Restated [Member] \| Retained Earnings [Member]
Other income:
Net loss								(1,966,876)
Beginning balance, value						$ (1,549,584)		(1,549,584)
Ending balance, value				$ (3,516,460)				$ (3,516,460)

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