UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

Check the appropriate box:

RED CAT HOLDINGS, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

February 3, 2023

To Our Shareholders:

It is my pleasure to invite you to attend a Special Meeting of Stockholders (the “Special Meeting”) of Red Cat Holdings, Inc. (“Red Cat” or the “Company”). The Special Meeting will be held on March 8, 2023 as an audio-only conference call. You can attend the Special Meeting by calling 877-407-3088 (Toll Free), We have adopted a virtual format for our Special Meeting to protect the health and well-being of our employees, directors, stockholders and other stakeholders in light of the ongoing COVID-19 pandemic. Additionally, we believe that a virtual meeting allows us to make participation accessible for stockholders from any geographic location with telephonic connectivity  The Special Meeting will begin at approximately 12 p.m., Eastern Time.

At the Special Meeting, you will be asked to approve the sale of Rotor Riot, LLC (“Rotor Riot”) and Fat Shark Holdings, Ltd (“Fat Shark”), each a wholly owned subsidiary of the Company, to Unusual Machines Inc. (“Unusual”), pursuant to a Share Purchase Agreement dated as of November 21, 2022 (the “Share Purchase Agreement”). The Company has agreed to sell, and Unusual has agreed to purchase, Rotor Riot and Fat Shark for $18 million in cash, notes and stock as follows: (i) $5.0 million in cash, (ii) a $2.5 million 8% Senior Secured Convertible Promissory Note that will mature on the 3 year anniversary date of the closing of the transaction, plus (iii) $10.5 million in Series A Convertible Preferred Stock. Jeffrey Thompson, our founder and Chief Executive Officer is also a founder of Unusual and a stockholder in both companies. Mr. Thompson will abstain from voting on the proposed transactions. The Company’s Board of Directors has unanimously approved the Share Purchase Agreement and recommends shareholders vote in favor of the transaction.

A majority of the votes cast in favor of the transaction will be required to approve Proposal One, the Share Purchase Agreement, excluding any votes held by Jeffrey Thompson, our Chief Executive Officer, who is a significant shareholder of both the Company and Unusual.  As of January 27, 2023, the record date for the meeting, there were 55,131,784 shares eligible to vote, including 54,309,554 shares of common stock outstanding and 822,230 votes held by holders of Series B Preferred Stock eligible to vote on an as-converted basis.  A majority of the votes cast in favor of the transaction will be required to approve the Share Purchase Agreement, excluding any votes held by Jeffrey Thompson, our Chief Executive Officer, who is also a significant stockholder of both the Company and Unusual.  As of the January 27, 2023 record date, Mr. Thompson owned 12,304,877 shares of our common stock based on his Form 4 filings with the SEC and other related information available to us, representing approximately 22% of votes eligible to be cast at the meeting.  After excluding Mr. Thompson's shares, Proposal One will require the affirmative vote of 50.1%, or 21,413,882 of the disinterested shares.  Based on their Form 4 filings and other information available to us, our officers and directors are expected to vote approximately 2,283,000 shares "FOR " Proposal One.

On November 21, 2022, our Board of Directors (i) determined that it was advisable and in the best interests of Red Cat and its stockholders to enter into the Share Purchase Agreement and (ii) approved the Share Purchase Agreement and the transactions contemplated therein.

We are soliciting proxies for use at the Special Meeting to consider and vote upon proposals to (i) approve the sale of Rotor Riot and Fat Shark on the terms and subject to the conditions set forth in the Share Purchase Agreement (as it may be amended from time to time and including all exhibits and schedules thereto), and (ii) adjourn the Special meeting, if necessary, to solicit additional proxies if there are insufficient votes in favor of the proposed transactions. Our Board of Directors unanimously recommends that you vote “FOR” each of the foregoing proposals.

Your vote is important. Whether or not you plan to attend the audio-only Special Meeting, to ensure that your shares will be represented, please cast your vote as soon as possible via the internet, or, if you received a paper proxy card and voting instructions by mail, by completing and returning the enclosed proxy card in the postage-prepaid envelope. Your vote by proxy will ensure your representation at the Special Meeting regardless of whether or not you attend virtually.

YOUR VOTE IS IMPORTANT

Your vote is important. As described in your electronic proxy materials notice or on the enclosed paper proxy card and voting instructions, please vote by: (1) accessing the internet website or (2) signing and dating the proxy card as promptly as possible and returning it in the enclosed envelope (to which no postage need be affixed if mailed in the United States).  Even if you plan to attend the virtual Special Meeting, we recommend that you vote your shares in advance, so that your vote will be counted if you later decide not to attend online.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON MARCH 8, 2023: THE PROXY STATEMENT WILL BE AVAILABLE AT WWW.REDCAT.VOTE ON OR ABOUT FEBRUARY 7, 2023.

RED CAT HOLDINGS, INC.

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

MARCH 8, 2023

To the Shareholders:

This notice of the Special Meeting, proxy statement, form of proxy are being distributed or made available on or about February 9, 2023.

Whether or not you plan to attend the audio-only conference call Special Meeting, we encourage you to vote or submit your proxy via the internet, or request and submit your proxy card as soon as possible, so that your shares may be represented at the meeting.

RED CAT HOLDINGS, INC.

15 AVE. MUNOZ RIVERA, STE 2200

SAN JUAN, PUERTO RICO 00901

PROXY STATEMENT FOR THE SPECIAL MEETING OF STOCKHOLDERS

February 3, 2023

INFORMATION ABOUT SOLICITATION AND VOTING

The accompanying proxy is solicited on behalf of the board of directors of Red Cat Holdings, Inc. (“we,” “us,” the “Company,” “our company” or “Red Cat”) for use at a Special Meeting of Stockholders (the “Special Meeting”), to be held as an audio-only conference call by calling 877-407-3088 (Toll Free) on March 8, 2023 at 12 p.m. Eastern Time, and any adjournment or postponement thereof.

INTERNET AVAILABILITY OF PROXY MATERIALS AND VOTING

We will be mailing proxy materials to all stockholders of record as of January 27, 2023.  Proxy materials will also be available online at www.redcat.vote  We encourage stockholders to vote online to ensure their votes are counted.

GENERAL INFORMATION ABOUT THE MEETING

What is the purpose of the Special Meeting?

The purpose is to have stockholders vote upon the proposals described in this Proxy Statement.

What proposals are scheduled to be voted on at the Special Meeting?

Stockholders will be asked to vote upon the following two proposals:

1. Approve the sale by the Company of Rotor Riot, LLC ("Rotor Riot") and Fat Shark Holdings, Ltd. ("Fat Shark" and together with Rotor Riot, the "Target Companies), each a wholly owned subsidiary of the Company, to Unusual Machines, Inc. ("Unusual").  The sale is pursuant to a Share Purchase Agreement dated November 21, 2022, by and between (i) the Company, as seller, (ii) Unusual, as purchaser, and (iii) Jeffrey Thompson, the principal stockholder of the Company ("Principal Stockholder") who is also a significant stockholder of Unusual.  The total purchase price of $18 million consists of (i) $5.0 million in cash, subject to adjustment based on the working capital balances of the Target Companies on the closing date, (ii) $2.5 million in the form of an 8% Senior Secured Promissory Note that will mature on the 3 year anniversary date of the closing of the transaction convertible into common stock of Unusual (the "Unusual Note"), and (iii) $10.5 million shares of Series A, Convertible Preferred Stock convertible into shares of common stock of Unusual (the "Unusual Preferred Stock").

2. To approve an adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the proposal to approve the Share Purchase Agreement (The “Adjournment Proposal”).

What is the recommendation of our Board of Directors on each of the proposals scheduled to be voted upon at the Special Meeting?

Our Board of Directors recommends that you vote your shares:

Why are we having a virtual only meeting?

We have adopted a virtual format for our Special Meeting to protect the health and well-being of our employees, directors, stockholders and other stakeholders in light of the ongoing COVID-19 pandemic. Additionally, we believe that a virtual meeting allows us to make participation accessible for stockholders from any geographic location with telephonic connectivity.

Who may attend and how do I attend?

All holders of our common stock as of the Record Date, or their duly appointed proxies, may attend the Special Meeting (via webinar or phone call). Set forth below is a summary of the information you need to attend the Special Meeting:

What if I have technical difficulties or trouble accessing the virtual Special Meeting?

We will have technicians ready to assist you with any technical difficulties you may have in accessing the virtual Special Meeting. If you encounter any difficulties, please call: 877-804-2062 (Toll Free) or email proxy@equitystock.com.

A replay of the Special Meeting will be posted as soon as practical on www.redcat.vote.

Who can vote at the Special Meeting? 

As of January 27, 2023, the Record Date, there were 55,131,784 shares eligible to vote, including 54,309,554 shares of common stock outstanding and 822,230 votes held by holders of Series B Preferred Stock eligible to vote on an as-converted basis. Each share is entitled to one vote on each matter and there is no cumulative voting.

How do I vote my shares?

Whether you plan to attend the virtual Special Meeting or not, we urge you to vote by proxy. All shares represented by valid proxies that we receive through this solicitation, and that are not revoked, will be voted in accordance with your instructions on the proxy card or as instructed via Internet or telephone. Except as set forth below, if you properly submit a proxy without giving specific voting instructions, your shares will be voted in accordance with the Board of Director’s recommendations. Voting by proxy will not affect your right to attend the Special Meeting.

If your shares are registered directly in your name through our stock transfer agent, Equity Stock Transfer, or you have stock certificates, you may vote:

3. By Internet. The website address for Internet voting is www.redcat.vote. Please click “Vote Your Proxy” and enter your control number.
4. By mail. Mark, date, sign and mail promptly the Proxy Card, ATTN: Shareholder Services.
5. At the Special Meeting. If you are a shareholder of record, you can participate and vote your shares at the Special Meeting by visiting www.redcat.vote and then clicking “Vote Your Proxy”. You may then enter the control number included on your Proxy Card and view the proposals and cast your vote.

If your shares are held in “street name,” your bank, broker or other nominee should provide to you a request for voting instructions along with the Company’s proxy solicitation materials. By completing the voting instruction card, you may direct your nominee how to vote your shares. If you partially complete the voting instruction but fail to complete one or more of the voting instructions, then your nominee may be unable to vote your shares with respect to the proposal as to which you provided no voting instructions. Alternatively, if you want to vote your shares during the Special Meeting, you must contact your nominee directly in order to obtain a proxy issued to you by your nominee holder. Note that a broker letter that identifies you as a stockholder is not the same as a nominee-issued proxy. If you fail to present a nominee-issued proxy to proxy@equitystock.com by 5:00 p.m. Eastern Time on March 6, 2023, you will not be able to vote your nominee- held shares during the Special Meeting.

Can I change my vote or revoke my proxy?

A stockholder of record who has given a proxy may revoke it at any time before it is exercised at the Special Meeting by:

Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a proxy, you must contact that firm to revoke any prior voting instructions.

Will I be able to ask questions at the Special Meeting?

Shareholders may submit live questions on the conference line while attending the virtual Special Meeting. Only questions pertinent to meeting matters or our Company will be answered during the meeting, subject to time constraints. Questions that are substantially similar may be grouped and answered together to avoid repetition.

What is the quorum requirement for the Special Meeting?

The holders of a majority of the voting power of the shares of our common stock entitled to vote at the Special Meeting as of the Record Date must be present at the Special Meeting in order to hold the Special Meeting and conduct business. This presence is called a quorum. Your shares are counted as present at the Special Meeting if you are present and vote in person at the Special Meeting, if you vote in advance of the Special Meeting by mail or internet or by telephone or if you have properly submitted a proxy. Shares held by Mr. Thompson will be counted as present at the Special Meeting for purposes of a quorum.

What is the vote required for each proposal?

For Proposal One, approval of the Share Purchase Agreement proposal will be obtained if the number of votes cast “FOR” the proposal at the Special Meeting by holders of disinterested shares of the Company Common Stock represents a majority of votes cast by holders of disinterested shares cast by stockholders.

For Proposal Two, approval of the Adjournment Proposal will be obtained if the number of votes cast “FOR” the proposal at the Special Meeting represents a majority of the votes cast by stockholders.

How are abstentions and broker non-votes treated?

Abstentions (i.e. shares present at the Special Meeting and marked “abstain”) and “broker non-votes” are each included in the determination of the number of shares present and entitled to vote at the meeting for purposes of determining the presence or absence of a quorum for the transaction of business at the Special Meeting; however, neither abstentions nor broker non-votes are counted as voted either for or against a proposal and, as such, will not affect the outcome of the vote on any proposal.

A “broker non-vote” occurs when your broker submits a proxy for your shares but does not indicate a vote for a particular proposal because the broker has not received voting instructions from you and is not authorized to vote on that proposal without instructions. A broker is authorized to vote shares held for a beneficial owner on “routine” matters without instructions from the beneficial owner of those shares, but is not authorized to vote shares held for a beneficial owner on “non-routine” matters without instructions from the beneficial owner of those shares.

Proposal One is considered a “non-routine” matter. If you do not provide your broker with specific instructions on how to vote your shares, the broker that holds your shares will not be authorized to vote on Proposal One. Accordingly, we encourage you to provide voting instructions to your broker, whether or not you plan to attend the Special Meeting.

What does it mean if I receive more than one proxy card?

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. To make certain all of your shares are voted, please follow the instructions included on each proxy card and vote each proxy card via the internet or by mail. If you requested or received paper proxy materials and you intend to vote by mail, please complete, sign and return each proxy card you received to ensure that all of your shares are voted.

Who is paying for this proxy solicitation?

We will pay the expenses of soliciting proxies, including preparation, assembly, printing and mailing of this Proxy Statement, the proxy card and any other information furnished to stockholders. Following the original mailing of the proxy materials, we and our agents, including directors, officers and other employees, without additional compensation, may solicit proxies by mail, email, telephone, facsimile, by other similar means or in person. Following the original mailing of the proxy materials, we will request brokers, custodians, nominees and other record holders to forward copies of the proxy materials to persons for whom they hold shares and to request authority for the exercise of proxies. In such cases, upon the request of the record holders, we will reimburse such holders for their reasonable expenses. If you choose to access the proxy materials or vote via the internet, you are responsible for any internet access charges you may incur.

Where can I find the voting results?

Voting results will be tabulated and certified by the inspector of elections appointed for the Special Meeting. The preliminary voting results will be announced at the Special Meeting. The final results will be tallied by the inspector of elections and filed with the U.S. Securities and Exchange Commission (the “SEC”) in a current report on Form 8-K within four business days of the Special Meeting.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement and other documents referred to herein contain, or may contain, forward-looking statements that involve risks and uncertainties relating to the Share Purchase Agreement. Any statements that are not historical fact are forward-looking statements. When used in this proxy statement, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements and relate to a variety of matters, including but not limited to (i) the timing and anticipated completion of the Share Purchase Agreement; (ii) the benefits expected to result from the proposed Share Purchase Agreement; (iii) the tax consequences of the Share Purchase Agreement; and (iv) other statements that are not purely statements of historical fact. These forward-looking statements are made on the basis of current beliefs, expectations and assumptions of our management, are not guarantees of performance and are subject to significant risks and uncertainties.

For information about other potential factors that could affect the Company’s business and financial results, investors should also review the risk factors in the Company’s Annual Report on Form 10-K filed with the SEC on July 27, 2022 as amended August 15, 2022 and the Company’s Quarterly Report on Form 10-Q filed with the SEC on December 15, 2022 as well as its Current Reports on Form 8-K filed with the SEC.

All forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update such forward-looking statements to reflect events that occur or circumstances that exist after the date of this Proxy Statement except as required by federal securities law.

Risks Related to the Matters Under Consideration.

The announcement and pendency of the matters considered under Proposal One, whether or not completed, may adversely affect the trading price of our common stock.

The announcement and pendency of the transactions set forth for approval may adversely affect the trading price of our common stock, our business or our relationships with clients, customers, suppliers and employees. Third parties may be unwilling to enter into material agreements with the Company and/or the Target Companies. New or existing customers, suppliers and business partners may prefer to enter into agreements with our competitors who have not expressed an intention to sell their business because customers, suppliers and business partners may perceive that such new relationships are likely to be more stable. Additionally, employees working in the Company and/or the Target Companies, as applicable, may lose focus or seek other employment. In addition, while the completion of the transactions are pending, we may be unable to attract and retain key personnel and our management’s focus and attention and employee resources may be diverted from operational matters.

Completion of matters considered under Proposal One are dependent on the funding of Unusual which is uncertain but required to close the Share Purchase Agreement.

Completion of the transactions set forth for approval are not certain and depend upon the closing of the initial public offering (IPO) of common stock by Unusual and the listing of its shares for trading on The NASDAQ Capital Market. Unusual has filed a Registration Statement on Form S-1 with the Securities and Exchange Commission (“SEC”) for registration of its initial public offering under the Securities Act of 1933, as amended (the “1933 Act”), which has not been declared effective by the SEC as of the date of this Proxy Statement. Even if approved by our stockholders, the closing of the Share Purchase Agreement and sale of the Target Companies may not occur if Unusual is unable to register its common stock for sale with the SEC or its initial public offering cannot be completed or is delayed. Currently, Unusual does not have the cash or resources to complete the transactions, even if approved by our stockholders, without completion of the IPO and does not have the financial resources to satisfy its obligations under the Senior Note. Following closing, we will become a significant stockholder and noteholder of Unusual. As such, the ability of Unusual to raise additional capital and be successful will become a risk to us.

The matters considered under Proposal One will require significant management resources.

The implementation of the Share Purchase Agreement will require significant time, attention, and resources of our senior management, potentially diverting their attention from the conduct of the Company’s business.

If we fail to complete the transactions contemplated in Proposal One, our business and financial performance may be adversely affected.

The completion of the transaction contemplated in Proposal One is subject to the satisfaction or waiver of various conditions, including the approval by a majority of our disinterested stockholders and the absence of a material adverse effect with respect to the Target Companies’ business, which may not be satisfied in a timely manner or at all.

If not completed, we may have difficulty recouping the costs incurred in connection with negotiating the transaction, preparing the Share Purchase Agreement and this proxy statement. Our directors, executive officers and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transactions, and we will have incurred significant third-party transaction costs, in each case, without any commensurate benefit, which may have a material and adverse effect on our stock price and results of operations.

In addition, if not completed, the Board of Directors, in discharging its fiduciary obligations to our stockholders, may evaluate other strategic options including, but not limited to, continuing to operate the Target Companies for the foreseeable future or an alternative sale transaction relating to the Target Companies. An alternative sale transaction, if available, may yield lower consideration than the proposed transaction, be on less favorable terms and conditions than those contained in the Share Purchase Agreement and involve significant delay. Any future sale or other transactions may be subject to further stockholder approval.

Finally, if not completed, the announcement of the termination of the Share Purchase Agreement may adversely affect our relationships with customers, suppliers and employees, which could have a material adverse effect on our ability to effectively operate the Target Companies, including as a result of our determination to focus our energies on our enterprise and government segments. In the event that we determine that a superior offer is available and we proceed with that alternative, we may be required to pay a termination fee of $500,000 to Unusual under certain circumstances, each of which could have further adverse effects on our business, results of operations and the trading price of our common stock.

You will not receive any of the proceeds from Proposal One.

The proceeds from the transactions contemplated in Proposal One will be received by the Company, not our stockholders. As discussed elsewhere in this proxy statement, the Company does not plan to distribute any of the proceeds to stockholders, and instead plans to use such proceeds to pursue its general business operations, including the costs associated with the transactions.

The Company will be subject to certain contractual restrictions while the transactions contemplated in Proposal One are pending.

The Share Purchase Agreement restricts the Company from making certain acquisitions and divestitures, entering into certain contracts, and taking other specified actions until the earlier of the completion of the transactions or the termination of the Share Purchase Agreement. These restrictions will apply during the period in which Unusual is seeking to complete its financing involving its initial public offering and listing on NASDAQ, which is anticipated to take several months following approval of Proposal One by our stockholders and may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the transactions completion and could have the effect of delaying or preventing other strategic transactions or providing the Company capital in order to pursue its enterprise and government businesses.

The Company could suffer adverse effects that could be exacerbated by any delays in completion of the transactions contemplated in Proposal One.

Adverse effects arising from the pendency of the Share Purchase Agreement Transaction could be exacerbated by any delays in completion of the Share Purchase Agreement Transaction or termination of the Share Purchase Agreement.

Our directors and executive officers may have interests in the transactions involving Proposal One other than, or in addition to, the interests of our stockholders generally.

Our Chief Executive Officer, Chairman and founder, Jeffrey Thompson, is also the founder of Unusual and Chief Executive Officer and Chairman from its inception in July 2019 until April 2022. Mr. Thompson also owns 1,557,000 shares of Unusual common stock he acquired as a founder, which represents approximately 23% prior to giving effect to the Unusual IPO and the issuance of any securities under the Share Purchase Agreement. Accordingly, Mr. Thompson’s interest in the matters under consideration under Proposal One are different from, or are in addition to, the interests of our stockholders generally. The Board of Directors was aware of the interests of Mr. Thompson and formed a special committee of independent directors in order to negotiate the Share Purchase Agreement, and requires that Mr. Thompson’s ownership interest in the Company be excluded from the calculation of votes “in favor” of the transactions contemplated in Proposal One. In addition, Mr. Thompson did not participate in the deliberations and considerations of the Board of Directors in considering the Share Purchase Agreement and the transactions under consideration in Proposal One.

In light of the forgoing factors, including the different interests of Mr. Thompson, as well as the requirements of Nevada law as described below, we have determined that a majority of the votes cast in favor of the transaction will be required to approve the Share Purchase Agreement, excluding any votes held by Jeffrey Thompson, our Chief Executive Officer who is also a significant stockholder of the Company, and Unusual. As of January 27, 2023, the record date for the meeting, there were 55,131,784 shares eligible to vote, including 54,309,554 shares of common stock outstanding and 822,230 votes held by holders of Series B Preferred Stock eligible to vote on an as-converted basis.  A majority of the votes cast in favor of the transaction will be required to approve the Share Purchase Agreement, excluding any votes held by Jeffrey Thompson, our Chief Executive Officer, who is also a significant stockholder of both the Company and Unusual.  As of the January 27, 2023 record date, Mr. Thompson owned 12,304,877 shares of our common stock based on his Form 4 filings with the SEC and other related information available to us, representing approximately 22% of votes eligible to be cast at the meeting.  After excluding Mr. Thompson's shares, Proposal One will require the affirmative vote of 50.1%, or 21,413,882 of the disinterested shares.  Based on their Form 4 filings and other information available to us, our officers and directors are expected to vote approximately 2,283,000 shares "FOR " Proposal One.

  The Share Purchase Agreement limits our ability to pursue alternatives.

The Share Purchase Agreement, contains provisions that may make it more difficult for us to sell the Target Companies to any party other than Unusual. These provisions include the prohibition on our ability to solicit competing proposals and the requirement that we pay Unusual a termination-fee of $500,000 in certain circumstances in the event that we accept a superior proposal.

These provisions could make it less advantageous for a third party that might have an interest in acquiring the Target Companies to consider or propose an alternative transaction, even if that party were prepared to pay consideration with a higher value than the consideration to be paid by Unusual.

Holders of the Company’s common stock will not have appraisal or dissenters’ rights in connection with the Share Purchase Agreement.

Neither Nevada law nor our Articles of Incorporation or Bylaws, as amended, provide Company stockholders with appraisal or dissenters’ rights in connection with the transactions under consideration in Proposal One.

The Share Purchase Agreement may be terminated in accordance with its terms and the transaction may not be completed. We may owe a break-fee in connection with a termination of the Share Purchase Agreement under certain circumstances.

The completion of the Share Purchase Agreement Transaction is subject to the satisfaction or waiver of a number of conditions. These conditions to closing may not be fulfilled and, accordingly, the transaction, even if approved by stockholders, may not be completed. In addition, if not completed by March 30, 2023, either the Company or Unusual may terminate the Share Purchase Agreement, provided that the right to terminate the Share Purchase Agreement shall not be available to a party whose breach of any representation, warranty, covenant, or agreement in the Share Purchase Agreement has been the principal cause of, or resulted in the failure of the closing to be contemplated..  In addition, each of Red Cat and Unusual may elect to terminate the Share Purchase Agreement in certain circumstance. Red Cat may be required to pay a termination fee to Unusual if Red Cat terminates the Share Purchase Agreement in certain circumstances. If the Share Purchase Agreement is terminated by either party, the Company may incur substantial fees in connection with the termination of the Share Purchase Agreement and will not recognize the anticipated benefits of the transaction, including receipt of the purchase price.

Termination of the Share Purchase Agreement could negatively impact the Company.

If the Share Purchase Agreement is terminated in accordance with its terms and the transactions contemplated in Proposal One are not completed, the ongoing business of the Company may be adversely affected by a variety of factors. The Company’s business may be impacted by having foregone other strategic opportunities during the pendency of the transaction, the failure to obtain the anticipated benefits of completing the transaction, changes to existing business relationships caused by uncertainties pending the transaction, payment of certain costs, and the attention, time, and resources of our senior management and other employees devoted to the transaction, diverting their attention from the conduct of our business and the ability to refocus energies on the enterprise and government segments of the business. The Company may also be negatively impacted if the Share Purchase Agreement is terminated and the Board is unable to execute an alternative strategic transaction offering equivalent or more attractive benefits than the benefits to be provided in the pending transaction.

Failure to complete the transactions contemplated in Proposal One could cause the Company’s stock price to decline.

The failure to complete and close the Share Purchase Agreement the may create doubt as to the value of the Company and about the Company’s ability to effectively implement its current business strategies and/or a strategic transaction, which may result in a decline in the Company’s stock price.

The Company will have discretion in the use of the net proceeds.

If completed, the purchase price consisting of a minimum of $5 million in cash paid at closing, unless adjusted will be paid directly to the Company. The Company currently plans to use such funds for costs and expenses of the transaction as well as increasing its focus upon the enterprise and government sectors. The Company retains the right to revise the purchase price, including following approval by the stockholders of Proposal One, including the cash payable at closing, in the event that the Company’s Board of Directors determines that such adjustment is in the best interests of its stockholders, for example, in the event that the Unusual IPO produces less proceeds from the sale of Unusual securities than may be anticipated at present.

The amount of consideration the Company will receive is subject to uncertainties.

Pursuant to the Share Purchase Agreement, the amount of consideration that the Company will receive from Unusual is subject to uncertainties by virtue of the purchase price adjustments set forth in the Share Purchase Agreement, which is subject to adjustments based on levels of working capital at closing. Working capital balances fluctuate over time and it is expected that the amount of working capital reflected in the pro-forma financial statements presented in this proxy statement will be reduced significantly prior to closing, with the cash proceeds from sales of inventory, among other things, reducing intercompany loan balances to zero or close to the average working capital that would be reflected for normal monthly operations. In addition, the value to the Company from the Senior Secured Note and the Series A Preferred Stock to be received at closing is uncertain and may not be realized and depends to a large extent on the ability of Unusual to succeed as a separate company.

The Company will incur significant transaction costs in connection with the transaction contemplated in Proposal One.

The Company has incurred, and expects to incur, significant non-recurring costs associated with the transactions contemplated in Proposal One, even if the stockholders of the Company fail to approve Proposal One. These costs and expenses include financial advisory, legal, accounting, consulting, and other advisory fees and expenses, restructuring costs, employee benefits-related expenses, public company filing fees and other regulatory expenses, printing expenses, and other related charges. Through the date of this proxy statement, the Company has incurred aggregate transaction costs of approximately $75,000, which have been defrayed by a $100,000 non-refundable earnest money deposit paid by Unusual. Based on information available as of the date of this proxy statement, the Company anticipates incurring additional transaction costs of approximately $150,000 in connection with the transactions contemplated in Proposal One, most of which are contingent upon the closing. Some of these costs are payable by the Company regardless of whether the closing of the Share Purchase Agreement occurs.

Risks Related to the Company and its Continuing Operations if the Transactions Contemplated in Proposal One are Completed

If the Share Purchase Agreement is completed, we will no longer be engaged in the hobbyist and consumer segments and our future results of operations will be dependent solely on our efforts to capitalize on enterprise and government business (including domestic and international military, border security and safety) and differ materially from our previous results of operations.

Since January 2020, we acquired four separate businesses operating in various aspects of the drone industry. Following the acquisition of Teal Drones, Inc. in August 2021, the Company focused on integrating and organizing its acquired businesses. These efforts included refining the establishment of Enterprise and Consumer segments to sharpen the Company’s focus on the unique opportunities in each sector of the drone industry. The Enterprise segment, which includes Teal Drones and Skypersonic, Inc. is focused on opportunities in the commercial sector, including military. Enterprise is building the infrastructure to manage drone fleets, fly and provide services remotely, and navigate confined industrial interior spaces and dangerous military environments. The Consumer segment, which includes Rotor Riot and Fat Shark, is focused on enthusiasts and hobbyists which are expected to increase as drones become more visible in our daily lives. Effective May 1, 2022, we began to manage our business operations through these business segments. The reportable segments were identified based on how our chief operating decision maker (“CODM”), which is a committee comprised of our Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) and our Chief Financial Officer (“CFO”), manages our business, makes resource allocation and operating decisions, and evaluates operating performance. The financial results for each segment for the three and six months ended, as reported in our most recently filed 10-Q, were as follows:

The following table sets forth specific asset categories which are reviewed by our CODM in the evaluation of operating segments:

The descriptions and amounts under the heading “Consumer”, if the Share Purchase Agreement transactions close, will no longer be available to the Company following closing. As a result, the Company’s assets and performance of its Enterprise segment will be its only business and assets following the closing.

We will continue to incur the expenses of complying with public company reporting requirements following the closing of the sale of the Target Companies notwithstanding the decrease in the size of our operations.

After the closing of the transactions contemplated in Proposal One, we will continue to be required to comply with the reporting requirements of the Securities Exchange Act of 1934 and as a NASDAQ listed company. The expense of complying with these requirements is expected to at least initially represent a greater percentage of our revenues and overall operating expenses than they did prior to the closing because of our reduced operations following the disposition of the Target Companies.

The market price of our common stock may be adversely affected by the transactions contemplated in Proposal One and we may fail to satisfy the continued listing standards of The NASDAQ Capital Market, which could result in the delisting of our common stock.

The continued listing standards of The NASDAQ Capital Market include, among other things, requirements that we maintain certain levels of stockholders’ equity, net income from continuing operations or market capitalization and a minimum trading price. Recently, our stock price has failed to close above $1.00 per share for extended periods. As a result, even if we were to regain compliance, we may not be able to continue to meet the $1.00 minimum bid price requirement of The NADAQ Capital Market and/or satisfy other of the continued listing requirements.

PROPOSAL ONE: THE SALE OF ROTOR RIOT AND FAT SHARK

At discussed elsewhere in this proxy statement, including under, the holders of the Company’s common stock, other than the shares owned by our Chairman and Chief Executive Officer (the “Disinterested Shareholders”) will consider and vote on Proposal One. The Disinterested Shareholders should read this proxy statement carefully in its entirety, including but not limited to the section entitled “The Share Purchase Agreement Transaction” including the annexes (which are incorporated by reference herein), for more detailed information concerning the Share Purchase Agreement. A copy of the Share Purchase Agreement is attached to this proxy statement as Annex A.

Under the Nevada Revised Statutes we determined that Jeffrey Thompson is deemed to an “interested shareholder” of the Company. The Nevada Revised Statutes generally prohibit a Nevada corporation, such as the Company, from engaging in a combination with any shareholder considered an interested shareholder of the corporation. However, Section 78.439 of the Nevada Revised Statutes permits such a transaction provided that is approved by a majority the outstanding shares of the corporation not owned by the interested shareholder. Because he owns approximately 23% of the outstanding capital stock of Unusual, the transactions contemplated in Proposal One are considered by us to be a combination with an interested shareholder under the Nevada Revised Statutes. Accordingly, we believe that is it is prudent to approve the sale by the Disinterested Shareholders and we are therefore asking the Disinterested Shareholders to approve the sale of the Target Companies by adopting the following resolution:

“WHEREAS, the Board of Directors of the Company has determined that it is expedient and in the best interests of the Company and its stockholders for the Company to dispose and sell its consumer businesses consisting of Rotor Riot, LLC and Fat Shark Holdings, Ltd. (the “Target Companies” on the terms and subject to the conditions set forth in that certain Share Purchase Agreement, by and between the Company, Jeffrey Thompson, and Unusual Machines, Inc. dated as of November 21, 2022 (as it may be amended from time to time and including all exhibits and schedules referenced therein and/or attached thereto, the “Share Purchase Agreement”).

RESOLVED, that the sale of the Target Companies on the terms and subject to the conditions set forth in the Share Purchase Agreement is hereby approved, authorized and adopted in all respects.”

A vote in favor of the Proposal One will be deemed the approval of the Share Purchase Agreement, the terms and conditions thereof, and the transactions contemplated therein and thereby, including any and all amendments thereto approved by the Board of Directors of the Company following approval.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL ONE. 

PROPOSAL TWO: ADJOURNMENT PROPOSAL

If the number of shares of common stock present in person or represented by proxy at the Special Meeting and voting in favor of Proposal One is insufficient to approve the Purchase and Sale Agreement at the time of the Special Meeting, we intend to move to adjourn the Special Meeting, if necessary or appropriate (as determined by our Board of Directors) to a later time or date, from time to time, in order to enable the Board of Directors to solicit additional proxies in respect of Proposal One.

In the Adjournment Proposal, we are asking you to authorize the holder of any proxy solicited by the Board of Directors to vote in favor of granting discretionary authority to the proxy holders, and each of them individually, to adjourn the Special Meeting to another time and place for the purpose of soliciting additional proxies. If our stockholders approve the Adjournment Proposal, we could adjourn the Special Meeting and any adjourned session of the Special Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from stockholders that have previously voted.

Required Vote; Recommendation of the Board of Directors

Approval of Proposal Two requires the affirmative vote of the holders of a majority of the Company’s common stock present in person or by proxy and entitled to vote on the matter at the Special Meeting (meaning that of the shares of common stock represented at the Special Meeting and entitled to vote, a majority of them must be voted “FOR” the Adjournment Proposal for it to be approved). For Proposal Two, Mr. Thompson’s will be entitled to cast a vote “For” Proposal Two which shall be counted. For purposes of the vote on Proposal Two, an abstention will have the same effect as voting “AGAINST” the Adjournment Proposal, but the failure to sign and return your proxy card or vote by telephone, fax, over the Internet or in person at the Special Meeting will have no effect on the outcome of the proposal. Broker non-votes will also have no effect on the outcome of the proposal.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL TWO.

THE SHARE PURCHASE AGREEMENT TRANSACTION

The discussion in this proxy statement is qualified in its entirety by reference to the Share Purchase Agreement, a copy of which is attached to this proxy statement as Annex A and hereby incorporated by reference into this proxy statement. We encourage you to read the Share Purchase Agreement carefully and, in its entirety, as it is the legal document that governs the Sale.

Overview of the Share Purchase Agreement

On November 21, 2022 (the “Effective Date”), the Company, as seller, and Jeffrey Thompson, as principal stockholder, entered into a Share Purchase Agreement with Unusual pursuant to which Unusual will acquire, upon the terms and conditions set forth in the Share Purchase Agreement, 100% of the issued and outstanding equity interests of the Target Companies, for a total purchase price of $18 million consisting of (i) $5.0 million in cash, subject to adjustment for the Target Companies’ working capital balance on the closing date, and a $2.5 million 8% Senior Secured Convertible Promissory Note that will mature on the 3 year anniversary date of the closing of the transaction (the “Unusual Note”) of Unusual convertible into common stock of Unusual, and (ii) $10.5 million in shares of Series A Convertible Preferred Stock (the “Unusual Preferred Stock”) of Unusual. Each of the Unusual Note and the Unusual Preferred Stock are convertible into Unusual common stock, par value $0.001 per share, at the lower of (A) $4.00 (subject to adjustment for stock splits, stock dividends or similar events) or (B) the Offering price of Unusual in its initial public offering transaction. The Unusual Note and the Unusual Preferred Stock contain 4.99/9.99% beneficial ownership blockers and other usual and customary provisions, including price protection for lower priced issuances, for so long as the Unusual Note or the Unusual Preferred Stock remain outstanding. In addition, all shares of Unusual common stock issuable upon conversion of Unusual’s 8% Senior Secured Convertible Notes and Series A Convertible Preferred Stock are subject to a registration rights agreement which obligates Unusual to register the shares of common stock issuable for resale by Red Cat under certain circumstances.

The Share Purchase Agreement is attached hereto as Annex A.

The 8% Senior Secured Convertible Note is attached hereto as Annex B.

The Security Agreement is attached hereto as Annex C

The Series A Convertible Preferred Stock Certificate of Designation is attached hereto as Annex D.

The Registration Rights Agreement is attached hereto as Annex E

The discussions in this proxy statement of the Share Purchase Agreement, 8% Senior Secured Note that will mature on the 3 year anniversary date of the closing of the transaction, Security Agreement, Series A Convertible Preferred Stock Certificate of Designation, and Registration Rights Agreement are qualified in their entirety by reference to the copies thereof attached to this proxy statement as Annex A-E hereto and are incorporated by reference into this proxy statement. We encourage you to read the Annexes carefully and in their entirety as they are the legal documents that govern the transactions submitted for approval under Proposal One.

Parties to the Share Purchase Agreement

Red Cat Holdings, Inc.

Based in San Juan Puerto Rico, Red Cat acquired four separate businesses operating in various aspects of the drone industry. Following the acquisition of Teal Drones, Inc. in August 2021, the Company focused on integrating and organizing its acquired businesses. These efforts included refining the establishment of Enterprise and Consumer segments to sharpen the Company’s focus on the unique opportunities in each sector of the drone industry. The Enterprise segment, which includes Teal Drones, Inc. and Skypersonic, Inc. is focused on opportunities in the commercial sector, including the military. Enterprise is building the infrastructure to manage drone fleets, fly and provide services remotely, and navigate confined industrial interior spaces and dangerous military environments. The Consumer segment, which includes Rotor Riot and Fat Shark, is focused on enthusiasts and hobbyists which are expected to increase as drones become more visible in our daily lives. Effective May 1, 2022, we began to manage our business operations through these business segments.

Effective May 15, 2019, the Company closed a Share Exchange Agreement (the “SEA”) with Red Cat Propware, Inc. (“Propware”), a privately-held Nevada corporation and each of its shareholders. Under the SEA, we acquired all of the issued and outstanding capital stock of Propware, in exchange for issuance to the Propware shareholders of: (i) 236,000,000 (pre-split) shares of common stock, and (ii) 2,169,068 (pre-split) shares of newly-designated Series A Preferred Stock. Our Series A Preferred Stock has been fully converted.

Jeffrey Thompson, founded the Company in 2018 as a privately held company, which became public as described above. He currently serves as our CEO and Chairman of the Board.

Unusual Machines, Inc.

Unusual is a Puerto Rico corporation organized in 2019. It is a development stage technology company engaged in the commercial drone industry and its current primary business objective is to acquire the Target Companies. Unusual intends for the Target Companies to continue to focus on leveraging and growing the market share in the consumer and hobbyist sectors of drone products for use in entertainment, recreational and competitive racing purposes. Unusual also plans to explore a potential expansion into new sub-markets such as public safety and drone delivery functions, organically and/or through strategic acquisitions.

Background to the Share Purchase Agreement

The following chronology summarizes the key meetings and events that led to the signing of the Share Purchase Agreement. This chronology does not purport to catalogue every conversation among the officers of Red Cat, the Board of Directors or the representatives of Red Cat, and other parties, including those employed by or associated with Unusual.

Strategic Review Process

From time to time, the Board of Directors and our senior management team review and evaluate strategic opportunities and alternatives as part of a long-term strategy to increase stockholder value. Such opportunities include remaining as a stand-alone entity, potential acquisitions of companies, businesses or assets that align with our strategic objectives and potential dispositions of one of more businesses. Following the acquisition of Teal Drones, Inc. in August 2021, the Company began to establish separate enterprise and consumer divisions in anticipation of growth in government customers including defense, public safety, and infrastructure. The Company expects enterprise customers to become its most significant revenue drivers for the fiscal year beginning May 1, 2023, anchored by Teal. Following the Teal acquisition, several major driving forces were examined by the Board of Directors and senior management including the following:

Teal Drones 

Skypersonic

Sale of Target Companies

In August of 2022, our Chief Operating Officer, Allan Evans, had several informal discussions with Brandon Torres Declet, Chief Executive Officer of Unusual, regarding a potential transaction involving the sale of the Target Companies to Unusual. On August 23, 2022, Evans and Mr. Torres Declet met in person for further discussions. Following that meeting, Unusual provided an unsolicited draft Letter of Intent outlining proposed terms for the acquisition of the Target Companies (the “LOI”).

On September 2, 2022, our Chief Operating Officer, Allan Evans, our Chief Financial Officer and our Lead Director Joseph Freedman, held a conference call to discuss the LOI.

On September 12, 2022, Mr. Freedman spoke with Mr. Torres Declet by telephone to discuss the LOI and to discuss his background and vision and the circumstances surrounding his appointment as CEO of Unusual Machines. During the call, issues related to competing with the Company, financing and the cash position of Unusual Machines were also raised.

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On September 15, 2022, the Board of Directors met by video conference, with outside legal and financial advisers participating. The Board of Directors heard an informal presentation from Think Equity!, its investment banking firm, addressing the condition of the public markets, the Company’s present market capitalization , the interest in the markets of an enterprise division separated from a consumer division, and the prospects for a successful spin-out in the current depressed market. No written report was provided. The Board discussed various aspects of the proposed LOI including valuation, a no-shop period, and current valuation and stock price of the Company. The Board of Directors also analyzed the conflict of interest concerning the Company’s Chief Executive Officer and his position as a founder, significant stockholder and board member of Unusual. Accordingly, the Board determined that a special committee consisting of Mr. Freedman and Mr. Moe, both independent directors, would be established to consider and evaluate the proposed sale of the Target Companies (the “Special Committee”). Mr. Freedman served as chair of the Special Committee. In addition, the Board determined that Mr. Thompson would be excluded from negotiations and abstain from voting on all matters related to the transaction.

During the period between September 15, 2022 and September 25, 2022, the Company’s outside legal counsel exchanged several drafts of the LOI with Unusual.

On September 23, 2022, the Company held its annual meeting of shareholders in Newport, Rhode Island. Following the meeting, the Special Committee met with Mr. Evans to discuss management’s views on the advantages of moving forward with an exclusive focus on the infrastructure segment, including military, border control, police and homeland security type opportunities. Afterwards, Mr. Torres Declet met with the Special Committee in person and reviewed materials he distributed outlining the proposal and future prospects for Unusual, including his background and experience as a drone company executive, Unusual’s present funding, its future IPO, its commitment to consumer focus, the terms of the purchase contract and securities to be issued and other aspects of the transaction should the transaction be approved. Outside counsel to the Company was also present and discussed legal requirements for approval, legal fiduciary duty obligations of directors of a Nevada publicly traded company to entertain alternative proposals, desire to obtain a third-party independent valuation and stockholder votes required for approval. The Special Committee indicated to Mr. Torres Declet that the Company would require that it entertain alternative bids and solicit proposals from third parties as part of the process in order for the Company to proceed with any proposal from Unusual, matters to which Mr. Torres Declet agreed in principal at the meeting.

On September 27, 2022, the Special Committee met via conference call with the Company’s outside legal counsel to consider the September 25, 2022, version of the LOI. The Special Committee focused on the risk and significance to the potential transaction of a successful initial public offering by Unusual and the nature of and parties to the representations and warranties being requested by Unusual with respect to the Target Companies. Following the meeting, the Company’s outside legal counsel spoke with Unusual’s legal counsel to discuss certain issues relating to the LOI.

On September 28, 2022, the Company’s outside legal counsel met with the Special Committee via conference call and briefed the Committee on the call with Unusual’s legal counsel the day before. Following that call, the Special Committee met again via conference call with Mr. Torres Declet and counsel to Unusual via conference call to discuss certain aspects of the documentation requests by Unusual. In particular, the Company generally rejected Unusual’s proposal that the Company provide business representations and warranties with respect to the operations of the Target Companies and indemnification rights that could be asserted against the Company for a period following closing. After that call, the Company’s outside legal counsel spoke with Mr. Thompson who indicated his approval to personally provide Unusual certain operational representations and warranties and his willingness to pledge Unusual shares to as security to Unusual to support any indemnification obligations in connection with the business representations and warranties. The Company’s legal counsel updated the Special Committee via conference call. There was a follow-up conference call with the Special Committee and Mr. Torres Declet to further discuss the proposed transaction. Over the next several days, the parties exchanged marked-up drafts of the LOI, the Special Committee had several calls to discuss the mark-ups, and remaining issues were resolved.

On September 29, 2022, the Special Committee met via conference call to address further LOI revisions.

On October 1, 2022, Unusual provided an executed version of the revised LOI to the Special Committee.

On October 2, 2022, counsel to the Company sent a message and non-disclosure agreement to a third-party potential alternative bidder for the Target Companies that had previously expressed interest in Fat Shark involved in the virtual headset business. In the call that followed, the potential bidder indicated it would not be interested in making an offer and no longer had interest in the specific business performed by Fat Shark.

On October 3, 2022, the full Board of Directors met by video conference to receive the recommendations of the Special Committee and consider the LOI and the proposed transaction. Mr. Thompson did not attend the meeting and did not participate in the deliberations or recommendations. The Company’s legal counsel outlined for the Board the history of the negotiations of the LOI and responded to questions of the Board members with respect thereto and outlined steps for a valuation, receiving alternative proposals and submission of a transaction to a vote of shareholders as contemplated by the LOI. After discussion, the members of the Board unanimously approved the LOI and authorized execution by the Company.

On October 3, 2022, the Company engaged Vantage Point Advisors, Inc. to prepare a valuation to be used in connection with the transaction.

Between October 4, 2022, and November 16, 2022, the Company’s management team worked with representatives of Unusual to facilitate due diligence review of the Target Companies and held discussions with other potential alternative bidders for the Target Companies. The management team also provided information and materials to Vantage Point Advisors to be used in their valuation of the Target Companies. In addition, during this period, the Company’s outside legal counsel worked with the Special Committee and representatives of Unusual to draft, negotiate and finalize the Share Purchase Agreement.

On November 16, 2022, the Special Committee met with outside legal counsel via a conference call to discuss the status of the Share Purchase Agreement. That was followed by a video conference call of senior management of each of the Company and Unusual to discuss the proposed transaction.

On November 21, 2022, the Board of Directors held a special meeting by video conference to consider the proposed transaction and the Share Purchase Agreement. The Company’s newly appointed director Mary Beth Long as well as the full board were provided with a lengthy presentation by the Special Committee and outside legal counsel of the history and negotiation of the Share Purchase Agreement. The Company’s Chief Financial Officer also participated in the meeting and provided comments. The Company’s outside legal counsel reviewed the history and nature of the Unusual relationship, the relationship of Mr. Thompson to Unusual, and the negotiation of the Share Purchase Agreement. The outside legal counsel and Special Committee responded to numerous questions from the Board members including the impact of the transaction on the projected revenues and cash flow of the Company. After discussion, the members of the Board present at the meeting unanimously (i) determined that the transactions contemplated in the Share Purchase Agreement are in the best interests of the Company and its stockholders, and (ii) approved the Share Purchase Agreement and the transactions contemplated therein, with Mr. Thompson abstaining from the vote.

Fair Market Value Analysis by Vantage Point Advisors, Inc.

On October 3, 2022, the Board engaged Vantage Point Advisors, Inc. (“VPA”) to prepare a fair market value analysis of each of the Target Companies. On December 14, 2022, VPA delivered draft reports to the Board with respect to each Target Company providing its analysis of the fair market value analysis of each Target Company as of November 30, 2022.

Summary of Material Financial Analysis

Vantage Point Advisors, Inc. (“VPA”), which was subsequently acquired by Stout Risius Ross, LLC, was engaged by the Company to provide a valuation of the Target Companies in connection with the proposed transaction. As part of its engagement, VPA, at the request of the Company, on December 14, 2022, provided to the Company materials regarding VPA's valuation of the Target Companies.

VPA's materials were provided for the information of the Company in its review of the Target Companies in connection with the proposed Transaction and were not to be used for any other purpose. VPA's materials did not address the underlying business decision of the Company, its board of directors or any other party to enter into the Share Purchase Agreement, or the relative merits of the proposed Transaction as compared to any alternative transaction or strategy that may have been available to the Company or the Target Companies. The materials were not intended to provide the sole basis for the Company's evaluation of the proposed Transaction, did not purport to contain all information that may have been required by, or of interest to, the Company in connection with such evaluation, and did not constitute an opinion or recommendation to the Company, its board of directors, any security holder of the Company or any other person or entity as to how to vote or act with respect to any matter relating to the Target Companies, the proposed Transaction or otherwise. VPA's materials did not constitute an opinion as to the fairness of the consideration, the financial terms or any other aspect of the proposed transaction.

With the consent of the Company, VPA assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information furnished by or discussed with the Company, the Target Companies and their respective representatives or otherwise available from public sources. VPA's role in reviewing such information was limited solely to performing such review as VPA deemed necessary and appropriate to support its analyses, and such review was not conducted on behalf of the Company, the Target Companies or any other person. With respect to the projections regarding the Target Companies prepared by Company management and provided to VPA, VPA was advised and assumed that they were reasonably prepared on bases reflecting the best currently available information, estimates and judgments of the management of the Company as to the future financial performance of the Target Companies. VPA expressed no view or opinion with respect to such projections or the assumptions or circumstances on which they were based. At the direction of the Company, VPA assumed that such projections provided a reasonable basis upon which to evaluate the Target Companies and, at the Company's direction, VPA relied upon such projections for purposes of its analyses.

VPA further relied upon and assumed, without independent verification, that there had been no change in the business, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Target Companies since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to it, and that there was no information or any facts that would make any of the information discussed with or reviewed by VPA incomplete or misleading. In connection with its analyses, VPA did not conduct a physical inspection of the properties, assets or facilities of the Target Companies and was not requested to, and did not, make an independent evaluation or appraisal of the assets or liabilities (fixed, contingent, derivative, off balance sheet or otherwise) of the Target Companies , nor was VPA furnished with any such evaluations or appraisals. VPA's materials did not constitute a solvency opinion or credit rating, and VPA had no obligation to evaluate the solvency of the Company, the Target Companies or any other person or entity under any law. VPA's analyses addressed only the estimated fair market value of the Target Companies and did not address any term or aspect of the Purchase and Sale Agreement or the proposed Transaction.

VPA is not an expert on, and did not provide an opinion, counsel, advice or interpretation as to, legal, accounting, regulatory, insurance or tax matters. VPA relied, with the Company's consent, on the assessments of the Company, the Target Companies and their respective advisors as to all legal, accounting, regulatory, insurance and tax matters with respect to the Target Companies. VPA's materials were necessarily based on conditions as in effect on, and the information made available to VPA as of, the date of the materials. None of the Company, its board of directors nor VPA has undertaken any obligation to update, revise or reaffirm the materials or the information, analyses or conclusions therein. Based upon and subject to the foregoing, and the qualifications and limitations and other matters set forth in the materials, VPA estimated the Target Companies had an enterprise value range of $5.1 million to $5.7 million, as of November 30, 2022.

Summary of Material Financial Analysis

The following is a summary of the valuation methodologies performed by VPA and provided to the Board in connection with VPA’s analysis relating to the Target Companies. The following is a summary only and does not purport to be a complete description of the financial analyses performed by VPA. Some of the summaries of financial analyses below include information presented in tabular form format. In order to fully understand VPA’s analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of VPA’s analyses.

Selected Company Analysis

With respect to its analysis of Rotor Riot, VPA performed a selected company analysis in which VPA reviewed certain financial and stock market data for the following public companies VPA deemed relevant:

VPA reviewed, among other things, the business enterprise value (“BEV”) as a multiple of revenue for the last fiscal year (“LFY”) and 1-year forward. The selected company analysis resulted in minimum, lower (first) quartile, median, upper (third) quartile, and maximum BEV to revenue ratios as follows:

Taking into account the results of the selected company analysis, VPA applied selected multiple ranges of 1.00x to 1.10x to LFY revenue of $2.0 million, and 0.60x. to 0.65x to 1-year forward revenue of $3.7 million. The selected company analysis indicated a total enterprise value range for Rotor Riot of $2.1 million to $2.3 million.

Analysis of Fat Shark

With respect to its analysis of Fat Shark, VPA performed a selected company analysis in which VPA reviewed certain financial and stock market data for the following public companies VPA deemed relevant:

VPA reviewed, among other things, the BEV as a multiple of revenues for the LFY and 1-year forward. The selected company analysis resulted in minimum, lower (first) quartile, median, upper (third) quartile, and maximum BEV to revenue ratios as follows:

Taking into account the results of the selected company analysis, VPA applied selected multiple ranges of 1.15x to 1.25x to LFY revenue of $2.6 million and 0.75x to 0.85x to 1-year forward revenue of $4.7 million. The selected company analysis indicated a total enterprise value range for Fat Shark of $3.3 million to $3.6 million.

Selected Transaction Analysis

With respect to its analysis of Rotor Riot, VPA reviewed transactions involving the following entities:

VPA reviewed, among other things, BEV as a multiple of revenues for the last twelve months (“LTM”). The selected transaction analysis resulted in minimum, lower (first) quartile, median, upper (third) quartile, and maximum BEV to revenue ratios as follows:

Taking into account the results of the selected transaction analysis, VPA applied the selected multiple range of 0.90x to 1.00x to $2.0 million, the most recent LTM financial data available for Rotor Riot. The selected transaction analysis indicated a total enterprise value range for Rotor Riot of $1.8 to $2.0 million.

With respect to its analysis of Fat Shark, VPA reviewed transactions involving the following entities:

VPA reviewed, among other things, the BEV as a multiple of revenues for the LTM period. The selected transaction analysis resulted in minimum, lower (first) quartile, median, upper (third) quartile, and maximum BEV to revenue ratios as follows:

Taking into account the results of the selected transaction analysis, VPA applied the selected multiple range of 1.15x to 1.25x revenue to $2.6 million, the most recent LTM data available for Fat Shark. The selected transaction analysis indicated total enterprise value range for Fat Shark of $3.0 to $3.3 million.

Income Approach – Discounted Cash Flow Analysis

VPA performed a discounted cash flow analysis of Rotor Riot based on projections provided by management. VPA applied a terminal multiple range of 0.9x to 1.0x to 2027 estimated revenue. VPA applied discount rates ranging from 14.0% to 16.0%.

The discounted cash flow analysis indicated an enterprise value range of $0.5 million to $0.6 million for Rotor Riot.

VPA performed discounted cash flow analysis of Fat Shark based on projections provided by management. VPA applied a terminal growth rate of range 2.5 percent to 3.5 percent to Fat Shark’s estimated terminal year cash flow. VPA applied discount rates ranging from 12.0% to 14.0%.

The discounted cash flow analysis indicated an enterprise value range of $3.0 million to $3.9 million for Fat Shark.

Agreements Related to the Share Purchase Agreement

The Share Purchase Agreement

The following discussion sets forth the material terms of the Share Purchase Agreement and is qualified in its entirety by reference to the complete text of the Purchase Agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference into this proxy statement. You are encouraged to read the Purchase Agreement carefully and in its entirety. The summary of the Share Purchase Agreement is included in this information statement only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding the parties or their respective businesses. You should read the information provided elsewhere in this information statement for information regarding the parties and their respective businesses. This summary may not contain all of the information about the Purchase Agreement that is important to you. You should refer to the full text of the Share Purchase Agreement for details of the transaction and the terms and conditions of the Share Purchase Agreement.

Additionally, the representations, warranties and covenants described in this summary and contained in the Purchase Agreement have been made only for the purpose of the Share Purchase Agreement and, as such, are intended solely for the benefit of the Company and Unusual. In many cases, these representations, warranties and covenants are subject to limitations agreed upon by the parties and are qualified by certain disclosures exchanged by the parties in connection with the execution of the Share Purchase Agreement. Furthermore, many of the representations and warranties contained in the Share Purchase Agreement are the result of a negotiated allocation of contractual risk among the parties and, taken in isolation, do not necessarily reflect facts about the Company and Unusual, their respective subsidiaries and affiliates or any other party. Likewise, any references to materiality contained in the representations and warranties may not correspond to concepts of materiality applicable to investors or stockholders. Finally, information concerning the subject matter of the representations and warranties may have changed since the date of the Share Purchase Agreement or may change in the future, and these changes may not be fully reflected in the public disclosures made by the Company and Unusual. As a result of the foregoing, you are strongly encouraged not to rely on the representations, warranties and covenants contained in the Share Purchase Agreement, or any descriptions thereof, as accurate characterizations of the state of facts or condition of the Company, the Target Companies, Unusual or any other party. You are likewise cautioned that you are not a third-party beneficiary under the Purchase Agreement and do not have any direct rights or remedies pursuant to the Share Purchase Agreement.

Sale of the Target Companies

Upon the terms and subject to the conditions of the Share Purchase Agreement, Unusual will purchase from the Company all outstanding capital stock of the Target Companies for a total purchase price of $18 million consisting of (i) $5.0 million in cash, subject to adjustment for the Target Companies’ working capital balance as of the closing date, (ii) a $2.5 million of Unusual Notes, and (iii) $10.5 million in Unusual Convertible Preferred.

Closing

The closing will take place at 11:30 AM EST, or as soon as commercially practicable unless the Share Purchase Agreement has been terminated pursuant to its terms or unless another time or date is agreed to by the parties.

Escrow Shares

At the Closing, the Principal Stockholder shall deliver to the escrow agent, 450,000 shares of Unusual common stock, to provide security for the Company’s and the Principal Stockholder’s indemnification obligations under the Share Purchase Agreement.

Post-Closing Audit; Purchase Price Adjustment

The Share Purchase Agreement provides that no more than 10 and no later than three days prior to the Closing Date, we will prepare and deliver to Unusual (i) an unaudited preliminary consolidated balance sheets of the Target Companies (the “Unaudited Preliminary Balance Sheets”) as of the Closing Date and a preliminary unaudited profit and loss statement for the period ending on the Closing Date (the “Preliminary Unaudited Profit & Loss Statement”), in accordance GAAP (collectively, the “Closing Trial Balance”), (ii) a statement (the “Estimated Working Capital Statement”) setting forth our reasonable and good faith estimate of the Closing Date Working Capital, by reference to the Closing Trial Balance and (iii) a statement setting forth the calculation of the amount by which the estimated Closing Date Working Capital either exceeds the Agreed Working Capital (such amount, the “Estimated Working Capital Excess Amount”) or is less than the Agreed Working Capital (such amount, the “Estimated Working Capital Deficiency Amount”).

If there was an Estimated Working Capital Excess Amount or an Estimated Working Capital Deficiency Amount, at the Closing the aggregate Consideration shall be adjusted upward or downward dollar-for-dollar as appropriate. If there is an Estimated Working Capital Excess Amount, the amount shall be paid to Red Cat as additional cash Consideration at the Closing, unless Red Cat agrees to payment terms for current assets such as inventory. Working capital balances fluctuate over time and it is expected that the amount of working capital reflected in the pro-forma financial statements presented in this proxy statement will be reduced significantly prior to closing, with the cash proceeds from sales of inventory, among other things, reducing intercompany loan balances to zero or close to the average working capital that would be reflected for normal monthly operations. If there is an Estimated Working Capital Deficiency Amount, the amount shall first be credited to the Unusual Note amount and any additional amount applied as a reduction in the cash Consideration.

Within 45 days after the Closing Date or as soon thereafter as is reasonably practical using commercially reasonable efforts, Unusual will prepare and deliver to us (i) closing balance sheets of each of the Target Companies as of the Closing Date, in accordance with GAAP (the “Closing Date Balance Sheets”), (ii) the calculations (the “Working Capital Calculations”) of the Working Capital of each of the Target Companies (the “Working Capital”) as of the Closing Date, and (iii) a statement setting forth the actual calculation of the Closing Date Working Capital of both Target Companies. The same procedure outlined above shall be followed in paying Red Cat the actual excess of the Closing Date Working Capital over the Estimated Closing Date Working Capital or in crediting Unusual the amount by which the actual Closing Date Working Capital deficiency exceeds the Estimated Working Capital.

Representations and Warranties

Representations and Warranties by Unusual

The Share Purchase Agreement contains customary representations and warranties made by Unusual to the Company. Specifically, the representations and warranties of Unusual in the Share Purchase Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules delivered by Unusual to the Company, as may or may not be specifically indicated in the text of the Share Purchase Agreement) relate to the following subject matters, among other things:

• the organization, standing and power of Unusual and its subsidiaries;

• the charter documents of Unusual;

• the capital structure of each of Unusual’s subsidiaries and Unusual’s ownership interest in each such subsidiary;

• the capital structure of Unusual;

• Unusual’s corporate power and authority to enter into the Share Purchase Agreement and the other agreements entered into in connection therewith, and to consummate the transactions contemplated thereby, and the enforceability of the Share Purchase Agreement and the other agreements entered into in connection therewith;

• the absence of conflicts with or defaults under Unusual’s organizational documents, material contracts, applicable law or required permits or approvals from governmental authorities or third parties, or result in the imposition of any encumbrances, other than permitted encumbrances, each as relates to the Share Purchase Agreement, the other agreements contemplated thereby, and the Share Purchase Agreement, and subject to the terms of the Share Purchase Agreement;

• the absence of any governmental consents required in connection with Unusual’s execution, delivery, and performance of the Share Purchase Agreement;

• the approval of the Share Purchase Agreement and the transactions contemplated thereby by the Board of Directors of Unusual;

• broker, finder or other fees and expenses;

• legal proceedings and government orders with respect to Unusual;

• certain financial information of Unusual and its subsidiaries;

• the absence of undisclosed liabilities of Unusual;

• the registration statement filed by Unusual with the SEC in connection with the Unusual IPO (the “Registration Statement”);

• compliance by Unusual with respect to certain employment matters;

• the accuracy of information contained in the Share Purchase Agreement or in any agreement, certificate, or other documents furnished to the Company or Principal Stockholder by Unusual;

• the absence of covenant to notify of any “disqualification events” under the Securities Act of 1933, as amended (the “Securities Act”); and

• having entered into a letter of intent with an underwriter to underwrite the Offering in connection with the Unusual IPO (as described below).

Representations and Warranties by the Company and Principal Stockholder

The Share Purchase Agreement contains certain representations and warranties made by the Company and the Principal Stockholder, each jointly and severally, to Unusual concerning Red Cat. Specifically, the representations and warranties of the Company and the Principal Stockholder in the Share Purchase Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules delivered by the Company to Unusual, as may or may not be specifically indicated in the text of the Share Purchase Agreement) relate to the following subject matters, among other things:

• the Company’s corporate power and authority to enter into the Share Purchase Agreement and perform its obligations under the Share Purchase Agreement, subject to approval of the Share Purchase Agreement by the holders of a majority of the outstanding disinterested shares of Red Cat common stock (the “Requisite Red Cat Vote”), and the other agreements entered into in connection therewith, and to consummate the transactions contemplated thereby, and the enforceability of the Share Purchase Agreement and the other agreements entered into in connection therewith;

• the absence of conflicts with or defaults under Unusual’s organizational documents, material contracts, applicable law or required permits or approvals from governmental authorities or third parties, or result in the imposition of any encumbrances, other than permitted encumbrances, each as relates to the Share Purchase Agreement, the other agreements contemplated thereby, and the Share Purchase Agreement, and subject to the terms of the Share Purchase Agreement;

• the absence of any governmental consents in connection with the Company’s execution, delivery, and performance of the Share Purchase Agreement;

• the approval of the Share Purchase Agreement and the transactions contemplated thereby by the Board of Directors of Company and the submission of the Share Purchase Agreement to the disinterested stockholders of the Company for approval;

• the absence of any anti-takeover statue or regulation applicable to the Share Purchase Agreement;

• broker, finder or other fees and expenses;

• the Company’s ownership of the capital stock of the Target Companies;

• the absence of options, warrants or other rights relating to the capital stock of the Target Companies;

• legal proceedings and government orders with respect to the Company or the Target Companies;

• the compliance of all reports, schedules and forms filed by the Company under the Securities Act, and Securities Exchange Act of 1934, as amended, with all applicable law, and that the Company’s financial statements have been prepared in accordance with GAAP and fairly present the financial condition and results of operation of the Company and its subsidiaries;

•  the Company’s investment intent with respect to the Unusual Note and the shares of Unusual to be acquired in connection with conversion of the Unusual Note and the Unusual Preferred Stock (the “Exchange Shares”);

•  the investment experience and accredited investor status of the Company;

•  the status of the Exchange Shares as “restricted securities” under the Securities Act;

•  the legend that the certificate representing the Unusual Note, Unusual Preferred Stock and Exchange Shares may bear; and

•  that the information supplied by the Company and included in the Unusual IPO Registration Statement will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

Representations and Warranties by Principal Stockholder Regarding Target Companies

In addition to the representations and warranties of the Company and the Principal Stockholder set forth above concerning Red Cat, the Share Purchase Agreement also contains certain representations and warranties made by the Principal Stockholder to Unusual with respect to the Target Companies. Specifically, the representations and warranties of the Principal Stockholder in the Share Purchase Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules delivered by the Company to Unusual, as may or may not be specifically indicated in the text of the Share Purchase Agreement) relate to the following subject matters, among other things:

• the organization, standing and power of each Target Company;

• the corporate power and authority of each Target Company to execute and deliver the Share Purchase Agreement, and related documents, and consummate the transactions contemplated thereby, and the enforceability of the Share Purchase Agreement and the other agreements entered into in connection therewith against each Target Company;

• the absence of conflicts with or defaults under each Target Company’s organizational documents, material contracts, applicable law or required permits or approvals from governmental authorities or third parties, or result in the imposition of any encumbrances, other than permitted encumbrances, each as relates to the Share Purchase Agreement, the other agreements contemplated thereby, and the Share Purchase Agreement, and subject to the terms of the Share Purchase Agreement;

• the possession by each Target Company of all necessary certificates, authorizations and permits issued by government authorities;

• broker, finder or other fees and expenses;

• the organizational documents and corporate records of each Target Company;

• the capital structure of each of the Target Companies and the Company’s ownership interest in the capital stock of each Target Company;

• the absence of options, warrants or other rights relating to the capital stock of the Target Companies;

• the financial statements of the Target Companies;

• the absence of any undisclosed liabilities of each Target Company;

• the compliance of each Target Company with applicable laws;

• the compliance of each Target Company with regulatory requirements, including:

• the compliance of each Target Company with environmental laws;

• legal proceedings and government orders with respect to the Target Companies;

• title to and condition of personal property of the Target Companies;

• real property owned or leased;

• employment matters;

• labor relations;

• material contracts;

• tax matters;

• guaranties;

• insurance;

• inventories;

• intellectual property rights;

• powers of attorney;

• absence of any Material Adverse Effects (as defined below);

• accounts and notes receivable and payable;

• related parties;

• bank accounts;

• accuracy of information furnished; and

• employment compliance;

For purposes of the Share Purchase Agreement, “Material Adverse Effect” means any event, occurrence, fact, condition or change that is materially adverse to (a) the business, results of operations, condition (financial or otherwise) prospects or assets of any Party, or (b) the ability of any Party to consummate the transactions contemplated in the Share Purchase Agreement.

Other Representations and Warranties by the Principal Stockholder

In addition to the representations and warranties of the Principal Stockholder made with the Company, and of the Principal Stockholder with respect to the Target Companies, described above, the Share Purchase Agreement contains certain representations and warranties made by the Principal Stockholder to Unusual. Specifically, the representations and warranties of the Principal Stockholder in the Share Purchase Agreement (many of which are qualified by concepts of knowledge, materiality and/or dollar thresholds and are further modified and limited by confidential disclosure schedules delivered by the Company to Unusual, as may or may not be specifically indicated in the text of the Share Purchase Agreement) relate to the following subject matters, among other things:

• the power and authority of the Principal Stockholder to enter into the Share Purchase Agreement and the other agreements entered into in connection therewith, and to consummate the transactions contemplated thereby, and the enforceability of the Share Purchase Agreement and the other agreements entered into in connection therewith;

• the absence of conflicts with applicable law or required permits or approvals from governmental authorities or third parties, [or result in the imposition of any encumbrances, other than permitted encumbrances, each as relates to the Share Purchase Agreement, the other agreements contemplated thereby, and the Share Purchase Agreement, and subject to the terms of the Share Purchase Agreement];

• the possession by Principal Stockholder of all necessary certificates, authorizations and permits issued by government authorities;

• broker, finder or other fees and expenses;

• ownership of the Unusual Escrow Shares;

• the absence of options, warrants or other rights relating to the Escrow Shares; and

• the compliance of each Target Company with certain employment related laws.

Survival of Representations and Warranties

The Share Purchase Agreement provides that the representations and warranties and indemnification obligations of Red Cat, the Principal Stockholder and Unusual described below shall survive the Closing Date for a period of one (1) year from the Closing Date; provided, however, that the representations and warranties of (i) Unusual with respect to organization, capital structure, authority, non-contravention, governmental consents, board approval, Rule 506(d) bad actor disqualification representations and covenants; (ii) the Company and the Principal Stockholder with respect authority, non-contravention, governmental consents, capitalization, rights, warrants, options, and (iii) the Principal Stockholder with respect to compliance with environmental laws, and employment matters, shall survive the Closing Date until the expiration of the period specified in the applicable statute of limitations; provided, further, any claims with respect to the tax representations shall survive the Closing for a period of 90 days following the expiration of the applicable statute of limitations period. If, at any time prior to the expiration of the limitation periods described in this paragraph including any applicable statute of limitations, any Indemnified Party delivers to the Indemnifying Party a written notice asserting in good faith a claim for recovery under the indemnification provisions described below, then the claim asserted in such notice shall survive such expiration time until such time as such claim is fully and finally resolved including the expiration of any applicable time to appeal.

General Release

The Share Purchase Agreement provides that Red Cat shall unconditionally and irrevocably release and forever discharge, effective as of the Closing Date, each Target Company and its officers, managers, directors, employees and agents, from any and all rights, claims, demands, judgments, obligations, liabilities and damages, whether accrued or unaccrued, asserted or unasserted, and whether known or unknown, relating exclusively to such Target Company which ever existed, now exist, or may hereafter exist, by reason of any tort, breach of contract, violation of Law or other act or failure to act which shall have occurred at or prior to the Closing Date, or in relation to any other liabilities of such Target Company to Red Cat, other than any fraud, willful misconduct or gross negligence of such person.

Indemnification

Indemnification by Red Cat

The Share Purchase Agreement provides that Red Cat will defend, indemnify and hold harmless Unusual and its affiliates (which, after the Closing shall include the Target Companies) and their respective directors, officers, managers, employees (the “Unusual Indemnitees”) and agents from, against and in respect of, the full amount of:

(i)  (A) any and all actions, suits, proceedings, demands, liabilities, damages, claims, deficiencies, fines, penalties, interest, assessments, judgments, losses, taxes, costs and expenses, including, without limitation, reasonable fees and disbursements of counsel (collectively, the “Indemnified Losses”) arising from or in connection with any breach or violation of any of the representations and warranties of Red Cat, contained in the Share Purchase Agreement or (B) any and all Indemnified Losses arising from or in connection with any breach or violation of the covenants or agreements exclusively of Red Cat contained in the Share Purchase Agreement (other than with respect to tax matters it being understood that the remedy for any such breach, violation or failure shall be pursuant to the section of the Share Purchase Agreement specifically dealing with tax matters); and

(ii)  any and all Indemnified Losses not reserved for on the Closing Trial Balance related to the business or operations of any Target Company prior to the Closing Date.

Indemnification by Principal Stockholder

The Share Purchase Agreement provides that the Principal Stockholder will defend, indemnify and hold harmless the Unusual Indemnitees from, against and in respect of, the full amount of:

(i)  any and all Indemnified Losses arising from or in connection with any breach or violation of any of the representations and warranties of Red Cat or any Target Company or the Principal Stockholder contained in the Share Purchase Agreement or (B) any and all Indemnified Losses arising from or in connection with any breach or violation of the covenants or agreements of the Principal Stockholder or any Target Company contained in the Share Purchase Agreement (other than with respect to tax matters it being understood that the remedy for any such breach, violation or failure shall be pursuant to the section of the Share Purchase Agreement specifically dealing with tax matters);

(ii)  any and all Indemnified Losses related to or arising from claims for breach of contract existing on or prior to the Closing Date, and/or which are brought after the Closing Date for acts and omissions of any Target Company or Red Cat, which occurred prior to the Closing Date;

(iii)  any and all Indemnified Losses related to or arising from any Target Company Products delivered by either Target Company prior to the Closing Date, including without limitation, Indemnified Losses for Target Company Product recalls, Target Company Product defects, warranty claims, personal injury or death;

(iv)  any and all Indemnified Losses which relate to any Legal Proceedings which are not set forth on the specified schedules to the Share Purchase Agreement, existing on or prior to the Closing Date, and/or which are brought after the Closing Date for acts and omissions of any Target Company or Red Cat, which occurred prior to the Closing Date; and

(v)  any and all Indemnified Losses not reserved for on the Closing Trial Balance related to the business or operations of any Target Company prior to the Closing Date.

Indemnification by Unusual

The Share Purchase Agreement provides that Unusual will defend, indemnify and hold harmless Red Cat and its Affiliates and their respective directors, officers, managers, employees and agents from, against and in respect of, the full amount of

(i)  any and all Indemnified Losses arising from or in connection with any breach or violation of any of the representations or warranties of Unusual contained in the Share Purchase Agreement,

(ii)  any and all Indemnified Losses arising from or in connection with any breach or violation of any of the covenants or agreements of Unusual contained in the Share Purchase Agreement.

(iii)  Any and all Indemnified Losses arising from the Offering or the Registration Statement.

The indemnification obligations discussed above are subject to the following limitations:

(a) The aggregate sums payable with respect to the indemnification obligations exceed (i) with respect to Red Cat and the Principal Stockholder, the Escrow Shares, and (ii) with respect to Unusual, $1.8 million.    

 (b) The Share Purchase Agreement provides that no Party shall be obligated to indemnify and hold harmless any other under for breaches of representations and warranties unless and until all Indemnified Losses in respect of which such Party is obligated to provide indemnification exceed $250,000 (the “Basket Amount”) following which such Party shall be obligated to indemnify and hold harmless, the other Party for all such Indemnified Losses (not merely the amount by which the Indemnified Losses exceed the Basket Amount); provided, however the Basket Amount shall not apply to indemnity obligations for Indemnified Losses arising as a result of fraud or breaches of the representations and warranties of the Principal Stockholder with respect to the capitalization of the Target Companies, rights, warrants and options relating to the Target companies, and the absence of a Material Adverse Effect with respect to either of the Target Companies.

(c) The foregoing limitations on the Party’s indemnification obligations do not apply to matters related to fraud.

Interim Covenants

Form S-1. As soon as practicable following the Effective Date, Unusual shall file a Form S-1 Registration Statement (the “Registration Statement”) with the SEC providing for Unusual to sell at least $15 million of Unusual Common Stock, plus an additional $2.5 million in shares of Unusual Common Stock issuable upon conversion of the Unusual Note to be offered by Red Cat or certain affiliated parties as selling stockholders on a delayed or continuous basis following the Offering, or in the Offering by the underwriter for Unusual (the “Offering”). Unusual may use a portion of the proceeds to pay additional cash consideration in lieu of issuing the Unusual Note as part of the Consideration at the Closing. Unusual shall not file the Registration Statement, or any amendment thereto, absent the express prior written approval therefor by Red Cat, such consent not to be unreasonably withheld, delayed or denied.

Interim Operation of Target Companies. The Share Purchase Agreement provides that, from the Effective Date until the Closing Date, the Company shall cause each Target Company to operate it business in accordance with its ordinary course and past practice. In addition, during the period commencing on the Effective Date and until the Closing Date, each Target Company shall and Red Cat shall cause such Target Company to, except to the extent Unusual specifically gives its prior written consent to the contrary:

(i)  use its best efforts to preserve intact its business organization and the goodwill of its customers, suppliers and others having business relations with it;

(ii)  use its best efforts to keep available to Unusual the services of such Target Company’s officers, managers, employees, independent contractors and agents;

(iii)  promptly furnish to Unusual a copy of any correspondence received from or delivered to any governmental authority;

(iv)  maintain and keep its properties and assets in the same repair and condition as they were on the date of the Share Purchase Agreement, ordinary wear and tear excepted;

(v)  continue and maintain the approval process in the ordinary course of business with respect to the Target Company products and any Target Company products being developed by such Target Company; and

(vi)  continuously maintain insurance coverage substantially equivalent to the insurance coverage in existence on the Effective Date.

The Share Purchase Agreement also provides that, during the period from the Effective Date to the Closing Date, except with the prior written consent of Unusual, no Target Company shall and Red Cat shall not permit such Target Company to, directly or indirectly:

(i)  amend or otherwise change such Target Company’s charter documents;

(ii)  issue, sell or authorize for issuance or sale, shares of any class of its equity securities (including, but not limited to, by way of share split or dividend) or any subscriptions, options, warrants, rights, or enter into any agreements or commitments of any character obligating it to issue or sell any such securities, unless the sole purchaser is Red Cat;

(iii)  issue or sell any indebtedness including any convertible indebtedness;

(iv)  redeem, purchase or otherwise acquire directly or indirectly any shares of its authorized share capital or any option, warrant or other right to purchase or acquire any such shares;

(v)  declare or pay any dividend or other distribution to its equity holders;

(vi)  sell, transfer, surrender, abandon or dispose of any of its assets or property rights (tangible or intangible), except for sales or dispositions of inventory in the ordinary course of business consistent with past practice;

(vii)  grant, make or subject itself or any of its assets or properties to any Lien;

(viii)  create, incur or assume any liability other than Indebtedness which would remain with such Target Company after the Closing Date, except in the ordinary course of business consistent with past practice;

(ix)  enter into, amend or terminate any material Target Company contract;

(x)  commit to make any capital expenditures in excess of $100,000, which would be payable by such Target Company after the Closing Date;

(xi)  issue any guaranty of sums due from any other person;

(xii)  waive, release, assign, settle or compromise any material claim or litigation;

(xiii)  except as required by Law, increase the compensation payable or to become payable to directors, officers, managers, employees, consultants or agents or grant any rights to severance or termination pay to, or enter into any employment or severance agreement with any of the foregoing Persons or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, share option, restricted share, pension, retirement, deferred compensation, employment, termination, severance or other Target Company plan, agreement, trust, fund, policy or arrangement for the benefit of any of the foregoing persons;

(xiv)  acquire (including, without limitation, by merger, consolidation or acquisition of stock or assets) any interest in any corporation, partnership, other business organization, person or any division thereof or any assets;

(xv)  alter the manner of keeping its books, accounts or records, or change in any manner the accounting practices therein reflected;

(xvi)  make any Tax election or settle or compromise any material federal, state or local or federal income tax liability (“Tax Liability”);

(xvii)  change its accounting practices, methods or assumptions or write down any of its assets;

(xviii)  enter into any commitment or transaction, which would survive the Closing Date, except in the ordinary course of business consistent with past practice;

(xix)  accelerate, terminate, modify or cancel any material Target Company contract;

(xx)  grant any license or sublicense of any right under or with respect to any Intellectual Property or disclose any proprietary or confidential information to any third party;

(xxi)  take or omit to take any action which would render any of such Target Company’s or any of any Red Cat’s representations or warranties contained in the Share Purchase Agreement untrue or misleading, or which would be a breach of any of such Target Company’s or any Red Cat’s covenants contained in the Share Purchase Agreement;

(xxii)  enter into any material contract, transaction or arrangement with any affiliate;

(xxiii)  take any action which could have a Material Adverse Effect on either Target Company; or

(xxiv)  agree, whether in writing or otherwise, to do any of the foregoing.

Conduct of Business of Unusual. The Share Purchase Agreement provides that, from the Effective Date until the Closing Date, Unusual shall operate its business in accordance with its ordinary course and past practice. In addition, during the period commencing on the Effective Date and until the Closing Date, Unusual shall, except to the extent Red Cat specifically gives its prior written consent to the contrary:

(i)  use its best efforts to preserve intact its business organization and the goodwill of its customers, suppliers and others having business relations with it;

(ii)  use its best efforts to keep available to Unusual the services of its officers, managers, employees, independent contractors and agents;

(iii)  promptly furnish to Red Cat a copy of any correspondence received from or delivered to any governmental authority;’

(iv)  maintain and keep its properties and assets in the same repair and condition as they were on the date of the Share Purchase Agreement, ordinary wear and tear excepted;

(v)  continue and maintain the approval process in the ordinary course of business with respect to Unusual products and any products being developed by Unusual; and

(vi)  continuously maintain insurance coverage substantially equivalent to the insurance coverage in existence on the Effective Date.

(b)  Additionally, during the period from the Effective Date to the Closing Date, except with the prior written consent of Red Cat, Unusual shall not directly or indirectly:

(i)  amend or otherwise change its charter documents;

(ii)  issue, sell or authorize for issuance or sale, shares of any class of its equity securities (including, but not limited to, by way of share split or dividend) or any subscriptions, options, warrants, rights, or enter into any agreements or commitments of any character obligating it to issue or sell any such securities;

(iii)  issue or sell any Indebtedness including any convertible indebtedness;

(iv)  redeem, purchase or otherwise acquire directly or indirectly any shares of its authorized share capital or any option, warrant or other right to purchase or acquire any such shares;

(v)  declare or pay any dividend or other distribution to its equity holders;

(vi)  sell, transfer, surrender, abandon or dispose of any of its assets or property rights (tangible or intangible), except for sales or dispositions of inventory in the ordinary course of business consistent with past practice;

(vii)  grant, make or subject itself or any of its assets or properties to any Lien;

(viii)  create, incur or assume any liability other than Indebtedness, except in the ordinary course of business consistent with past practice;

(ix)  enter into, amend or terminate any material Unusual contract;

(x)  commit to make any capital expenditures in excess of $100,000, which would be payable by Unusual after the Closing Date;

(xi)  issue any guaranty of sums due from any other person;

(xii)  waive, release, assign, settle or compromise any material claim or litigation;

(xiii)  except as required by law or scheduled to the Share Purchase Agreement with respect to certain equity awards, increase the compensation payable or to become payable to directors, officers, managers, employees, consultants or agents or grant any rights to severance or termination pay to, or enter into any employment or severance agreement with any of the foregoing persons or establish, adopt, enter into or amend any collective bargaining, bonus, profit sharing, thrift, compensation, share option, restricted share, pension, retirement, deferred compensation, employment, termination, severance or other Unusual plan, agreement, trust, fund, policy or arrangement for the benefit of any of the foregoing persons;

(xiv)  acquire (including, without limitation, by merger, consolidation or acquisition of stock or assets) any interest in any corporation, partnership, other business organization, person or any division thereof or any assets;

(xv)  alter the manner of keeping its books, accounts or records, or change in any manner the accounting practices therein reflected;

(xvi)  make any tax election or settle or compromise any material federal, state or local or federal income tax liability;

(xvii)  change its accounting practices, methods or assumptions or write down any of its assets;

(xviii)  enter into any commitment or transaction, which would survive the Closing Date, except in the ordinary course of business consistent with past practice;

(xix)  accelerate, terminate, modify or cancel any material Unusual contract;

(xx)  grant any license or sublicense of any right under or with respect to any Intellectual Property or disclose any proprietary or confidential information to any third party;

(xxi)  enter into any material contract, transaction or arrangement with any affiliate;

(xxii)  take any action which could have a Material Adverse Effect on Unusual; or

(xxiii)  agree, whether in writing or otherwise, to do any of the foregoing.

Consent of Government Authorities. The Share Purchase Agreement provides that each of Unusual, on the one hand, and each Target Company and Red Cat, on the other hand, agree to file, submit or request (or cause to be filed, submitted or requested) promptly after the Effective Date and to prosecute diligently any and all (a) applications or notices required to be filed or submitted to any governmental authorities, and (b) in the case of each Target Company, requests for consents and approvals of persons required to be obtained in connection with the transactions contemplated by this Agreement. Each of Unusual, on the one hand, and each Target Company and Red Cat on the other hand, shall promptly make available to the other or to a relevant governmental authority, as the case may be, such information as each of them may reasonably request relative to its business, assets and property as may be required by each of them to prepare and file or submit such applications and notices and any additional information requested by any governmental authority, and shall update by amendment or supplement any such information given in writing.

No Solicitation

Takeover Proposal. The Share Purchase Agreement provides that neither Red Cat nor Unusual, shall, and each shall cause their respective representatives, subsidiaries or subsidiaries’ representatives as applicable, not to, directly or indirectly, solicit, initiate, or knowingly take any action to facilitate or encourage the submission of any takeover proposal (“Takeover Proposal”) or the making of any proposal that could reasonably be expected to lead to any Takeover Proposal, or, subject to the paragraph below: (i) conduct or engage in any discussions or negotiations with, disclose any non-public information relating to Red Cat or Unusual or any of their respective subsidiaries, as applicable, to, afford access to the business, properties, assets, books, or records of Red Cat or Unusual or any of their respective subsidiaries to, or knowingly assist, participate in, facilitate, or encourage any effort by, any third party (or its potential sources of financing) that is seeking to make, or has made, any Takeover Proposal; (ii) except where the Red Cat Board or Unusual Board, as applicable, makes a good faith determination, after consultation with its financial advisors and outside legal counsel, that the failure to do so would cause it to be in breach of its fiduciary duties, amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Red Cat or Unusual, as applicable, or any of their respective Subsidiaries to, amend or grant any waiver or release under any standstill or similar agreement with respect to any class of equity securities of Red Cat or Unusual, as applicable, or any of their respective Subsidiaries; or (iii) enter into any agreement in principle, letter of intent, term sheet, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement, or other Target Company contract relating to any Takeover Proposal (each, an “Acquisition Agreement”). Except as expressly permitted by the Share Purchase Agreement, the Red Cat Board shall not effect a Red Cat Adverse Recommendation Change (“Red Cat Adverse Recommendation Change”). Red Cat on the one hand, and Unusual, on the other hand, shall, and shall cause their respective representatives, subsidiaries and subsidiaries’ representatives to, cease immediately and cause to be terminated any and all existing activities, discussions, or negotiations, if any, with any third party conducted prior to the Effective Date with respect to any Takeover Proposal and shall use its reasonable best efforts to cause any such third party (or its agents or advisors) in possession of non-public information in respect of Red Cat or Unusual, as applicable, and any of their respective subsidiaries that was furnished by or on behalf of such party or its respective subsidiaries to return or destroy (and confirm destruction of) all such information. Without limiting the foregoing, it is understood that any violation of or the taking of actions inconsistent with the restrictions described herein by any Representative of Red Cat or its subsidiaries, on the one hand, or Unusual or its subsidiaries, on the other hand, whether or not such representative is purporting to act on behalf of the applicable party or any of its subsidiaries, shall be deemed to be a breach of these provisions by the applicable party.

Superior Proposal. Notwithstanding the restriction in the foregoing paragraph, prior to the receipt of the Requisite Red Cat Vote, the Red Cat Board, directly or indirectly through any representative, may, subject to the provisions described below: (i) participate in negotiations or discussions with any third party that has made (and not withdrawn) a bona fide, unsolicited Takeover Proposal in writing that the Red Cat Board believes in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or would reasonably be expected to result in a Superior Proposal; (ii) thereafter furnish to such third party non-public information relating to such Party or any of its subsidiaries pursuant to an executed Confidentiality Agreement that constitutes an acceptable Confidentiality Agreement (“Acceptable Confidentiality Agreement”) (a copy of which Confidentiality Agreement shall be promptly (in all events within 24 hours) provided for informational purposes to the other Party); (iii) following receipt of and on account of a Superior Proposal, make a Red Cat Adverse Recommendation Change; and/or (iv) take any action that any court of competent jurisdiction orders such Party to take (which order remains unstayed), but in each case referred to in the foregoing clauses (i) through (iv), only if the Red Cat Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that the failure to take such action would cause it to be in breach of its fiduciary duties under applicable Law. Nothing contained herein shall prevent the Red Cat Board from disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act with regard to a Takeover Proposal, if the Party determines, after consultation with its financial advisors and outside legal counsel, that failure to disclose such position would cause Red Cat Board to be in breach of its fiduciary duties under applicable Law.

Notification to the Other Party. The Red Cat Board, shall not take any of the actions referred to in clauses (i) through (iv) of the prior paragraph unless Red Cat shall have delivered to Unusual a prior written notice advising Unusual that it intends to take such action. Red Cat shall notify Unusual promptly (but in no event later than 24 hours) after it obtains Knowledge of the receipt by Red Cat (or any of its Representatives) of any Takeover Proposal, any inquiry that could reasonably be expected to lead to a Takeover Proposal, any request for non-public information relating to Red Cat or any of its subsidiaries or for access to the business, properties, assets, books, or records of Red Cat or any of its subsidiaries by any third party. In such notice, Red Cat shall identify the third party making, and details of the material terms and conditions of, any such Takeover Proposal, indication or request, including any proposed financing. Red Cat shall keep Unusual fully informed, on a current basis, of the status and material terms of any such Takeover Proposal, indication or request, including any material amendments or proposed amendments as to price, proposed financing, and other material terms thereof. Red Cat shall provide Unusual with at least 48 hours prior notice of any meeting of the Red Cat Board, or any committee (“Red Cat Board Committee”) thereof (or such lesser notice as is provided to the members of the Red Cat Board or Red Cat Board Committee) at which the Red Cat Board, or Red Cat Board Committee, is reasonably expected to consider any Takeover Proposal. Red Cat shall promptly provide Unusual with a list of any non-public information concerning such Red Cat’s or any of its Subsidiaries’ business, present or future performance, financial condition, or results of operations, provided to any third party, and, to the extent such information has not been previously provided to Unusual, copies of such information.

Adverse Recommendation Change or Acquisition Agreement. Except as expressly permitted by the provisions discussed in this section, the Red Cat Board shall not effect a Red Cat Adverse Recommendation Change; or enter into (or permit any of its respective Subsidiaries to enter into) an Acquisition Agreement. Notwithstanding the foregoing, at any time: (i) prior to the receipt of the Requisite Red Cat Vote, the Red Cat Board may effect a Red Cat Adverse Recommendation Change or enter into (or permit any subsidiary to enter into) an Acquisition Agreement that did not result from a breach of the provisions discussed in this section, if (A) Red Cat promptly notifies Unusual, in writing, at least five Business Days (the “Superior Proposal Notice Period”) before making a Red Cat Adverse Recommendation Change, as applicable, or entering into (or causing one of its Subsidiaries to enter into) an Acquisition Agreement, of its intention to take such action with respect to a Superior Proposal, which notice shall state expressly that Red Cat has received a Takeover Proposal that the Red Cat Board or Red Cat Board Committee intends to declare a Superior Proposal and that it intends to effect a Red Cat Adverse Recommendation Change, and/or Red Cat intends to enter into an Acquisition Agreement, (B) Red Cat specifies the identity to Unusual whom is making the Superior Proposal and the material terms and conditions thereof in such notice and includes an unredacted copy of the Takeover Proposal and attaches to such notice the most current version of any proposed agreement (which version shall be updated on a prompt basis) and any related documents including financing documents, to the extent provided by the relevant Party in connection with the Superior Proposal, (C) Red Cat shall, and shall cause its Representatives to, during the Superior Proposal Notice Period, negotiate with Unusual in good faith to make such adjustments in the terms and conditions of the Share Purchase Agreement so that such Takeover Proposal ceases to constitute a Superior Proposal, if Unusual, in its discretion, proposes to make such adjustments (it being agreed that in the event that, after commencement of the Superior Proposal Notice Period, there is any material revision to the terms of a Superior Proposal, including, any revision in price or financing, the Superior Proposal Notice Period shall be extended, if applicable, to ensure that at least three Business Days remains in the Superior Proposal Notice Period subsequent to the time Red Cat notifies Unusual of any such material revision (it being understood that there may be multiple extensions)), and (D) Red Cat Board or Red Cat Board Committee determines in good faith, after consulting with its financial advisors and outside legal counsel, that such Takeover Proposal continues to constitute a Superior Proposal (after taking into account any adjustments made by Unusual during the Superior Proposal Notice Period in the terms and conditions of the Share Purchase Agreement) and that the failure to take such action would cause Red Cat Board to be in breach of its fiduciary duties under applicable Law.

Proxy Statement, Special Stockholders Meeting and Requirement for Stockholder Approval

As soon as reasonably practicable following the Effective Date, Red Cat shall prepare and file the Proxy Statement with the SEC. Red Cat and Unusual shall furnish to the other party all information concerning such person and its affiliates required by the Exchange Act to be set forth in the Proxy Statement. Each of Red Cat and Unusual shall promptly correct any information provided by it for use in the Proxy Statement if and to the extent that such information shall have become false or misleading in any material respect. Each of Red Cat and Unusual shall take all steps necessary to amend or supplement the Proxy Statement, as applicable, and Red Cat shall cause the Proxy Statement, as so amended or supplemented, to be filed with the SEC and disseminated to the holders of Red Cat Common Stock and other voting securities to the extent required by applicable Law.

Red Cat shall promptly provide Unusual and its counsel with any comments or other communications, whether written or oral, Red Cat, or its counsel may receive from the SEC or its staff with respect to the Proxy Statement promptly after the receipt of such comments. Prior to the filing of the Proxy Statement with the SEC (including in each case any amendment or supplement thereto) or the dissemination thereof to the holders of Red Cat Common Stock and voting securities, or responding to any comments of the SEC with respect to the Proxy Statement, Red Cat shall provide Unusual and its counsel a reasonable opportunity to review and comment on such Proxy Statement, or response (including the proposed final version thereof), and Red Cat shall give reasonable and good faith consideration to any comments made by Unusual or their counsel.

Following clearance of the Proxy Statement by the SEC, we agreed to take all lawful action to call, give notice of, convene and hold as promptly as practical a meeting of Red Cat’s stockholders at which the Requisite Red Cat Vote will be sought.

Preparation of Nasdaq Listing Application

In connection with the Offering, as soon as reasonably practicable following the Effective Date, Unusual shall prepare and file a listing application with the Nasdaq Capital Market (“Nasdaq”) to allow trading of its common stock under the symbol “UMAC” or other symbol acceptable to Unusual but not similar to RCAT (the “Nasdaq Listing Application”). Red Cat and Unusual shall each furnish to the other party all information concerning such person and its affiliates required by the Exchange Act to be set forth in the Nasdaq Listing Application. Each of Red Cat and Unusual shall promptly correct any information provided by it for use in the Nasdaq Listing Application if and to the extent that such information shall have become false or misleading in any material respect. Each of Red Cat and Unusual shall take all steps necessary to amend or supplement the Nasdaq Listing Application, as requested by Nasdaq.

Notice of Certain Events

Subject to applicable Law, Red Cat shall notify Unusual promptly of: (a) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by the Share Purchase Agreement; (b) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by the Share Purchase Agreement; and (c) any event, change, or effect between the Effective Date and the Closing which individually or in the aggregate causes or is reasonably likely to cause or constitute (i) a material breach of any of its representations, warranties, or covenants contained in the Share Purchase Agreement, or (ii) the failure of any of the conditions to closing set forth in the Share Purchase Agreement to be satisfied; provided that, any failure to give notice in accordance with the foregoing with respect to any breach shall not be deemed to constitute a violation of the provisions described in this paragraph or the failure of any closing condition set forth in the Share Purchase Agreement to be satisfied, or otherwise constitute a breach of this Agreement by the Party failing to give such notice, in each case unless the underlying breach would independently result in a failure of the closing conditions set forth in the Share Purchase Agreement to be satisfied; and provided, further, that the delivery of any notice described in this paragraph shall not cure any breach of, or noncompliance with, any other provision of this Agreement or limit the remedies available to the Party receiving such notice.

Reasonable Best Efforts

Governmental and Other Third-Party Approval; Cooperation and Notification. The Share Purchase Agreement provides that upon the terms and subject to the conditions set forth therein (including those described in this paragraph, each of the Parties hereto shall, and shall cause its Subsidiaries to, use its respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Parties in doing, all things necessary, proper, or advisable to consummate and make effective, and to satisfy all conditions to, (and in any event no later than the End Date, as defined), the Share Purchase Agreement and the other transactions contemplated by the Share Purchase Agreement, including: (i) the obtaining of all Material Permits, waivers, and actions or non-actions from Governmental Authorities and the making of all necessary registrations, filings, and notifications (including filings with any Governmental Authority) and the taking of all steps as may be necessary to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority; (ii) the obtaining of all necessary consents or waivers from third parties; and (iii) the execution and delivery of any additional instruments necessary to consummate the Share Purchase Agreement and to fully carry out the purposes of the Share Purchase Agreement. Red Cat and Unusual shall, subject to applicable Law, promptly: (A) cooperate and coordinate with the other in the taking of the actions contemplated by clauses (i), (ii), and (iii) immediately above; and (B) supply each other with any information that may be reasonably required in order to effectuate the taking of such actions. Each Party hereto shall promptly inform the other Party or Parties, as the case may be, of any communication from any Governmental Authority regarding any of the transactions contemplated by the Share Purchase Agreement. If Red Cat, on the one hand, or Unusual, on the other hand, receives a request for additional information or documentary material from any Governmental Authority with respect to the transactions contemplated by the Share Purchase Agreement, then it shall use reasonable best efforts to make, or cause to be made, as soon as reasonably practicable and after consultation with the other Party, an appropriate response in compliance with such request, and, if permitted by applicable Law and by any applicable Governmental Authority, provide the other Party’s counsel with advance notice and the opportunity to attend and participate in any meeting or other form of communication with any Governmental Authority in respect of any filing made thereto in connection with the transactions contemplated by this Agreement.

Actions or Proceedings. In the event that any Legal Proceeding is instituted (or threatened to be instituted) by a Governmental Authority or private party challenging the Share Purchase Agreement or any other transaction contemplated by the Share Purchase Agreement, or any other agreement contemplated thereby, each Party shall cooperate in all respects with the other Party and shall use its reasonable best efforts to contest and resist any Legal Proceeding and to have vacated, lifted, reversed, or overturned any Order, whether temporary, preliminary, or permanent, that is in effect and that prohibits, prevents, or restricts consummation of the transactions contemplated by the Share Purchase Agreement. Notwithstanding anything in the Share Purchase Agreement to the contrary, no Party, or any of its Affiliates shall be required to defend, contest, or resist any Legal Proceeding, or to take any action to have vacated, lifted, reversed, or overturned any Order, in connection with the transactions contemplated by the Share Purchase Agreement.

Public Announcements

The Share Purchase Agreement provides that initial press release with respect to the Share Purchase Agreement and the transactions contemplated thereby shall be a release mutually agreed to by Red Cat and Unusual. Thereafter, each of Red Cat and Unusual agrees that no public release, statement, announcement, or other disclosure concerning the Share Purchase Agreement and the other transactions contemplated hereby shall be issued by any Party without the prior written consent of the other Party (which consent shall not be unreasonably withheld, conditioned, or delayed), except as may be required by: (a) applicable Law; (b) court process; (c) Nasdaq; or (d) any Governmental Authority to which the relevant Party is subject or submits; provided, in each such case, that the Party making the release, statement, announcement, or other disclosure shall use its reasonable best efforts to allow the other Party reasonable time to comment on such release, statement, announcement, or other disclosure in advance of such issuance. Notwithstanding the foregoing, the restrictions described in this Paragraph shall not apply to any release, statement, announcement, or other disclosure made with respect to the Share Purchase Agreement and the other transactions contemplated hereby that is substantially similar (and identical in any material respect) to those in a previous release, statement, announcement, or other disclosure made by Red Cat or Unusual in accordance with this Paragraph.

Anti-Takeover Statues

If any “control share acquisition,” “fair price,” “moratorium,” or other anti-takeover Law becomes or is deemed to be applicable to Red Cat or Unusual relating to the Share Purchase Agreement, then each of Red Cat and the Red Cat Board on the one hand, and Unusual and the Unusual Board on the other hand, shall grant such approvals and take such actions as are necessary so that the transactions contemplated by the Share Purchase Agreement may be consummated as promptly as practicable on the terms contemplated thereby and otherwise act to render such anti-takeover Law inapplicable to the foregoing.

Stockholder Litigation

Red Cat shall promptly advise Unusual in writing after becoming aware of any legal proceeding commenced, or to Red Cat’s knowledge threatened, against Red Cat or any of its directors by any stockholder of Red Cat (on their own behalf or on behalf of Red Cat) relating to the Share Purchase Agreement or the transactions contemplated thereby (including the Share Purchase Agreement and the other transactions contemplated by the Share Purchase Agreement) and shall keep Unusual reasonably informed regarding any such legal proceeding. Red Cat shall: (a) give Unusual the opportunity to participate in the defense and settlement of any such stockholder litigation, (b) keep Unusual reasonably apprised on a prompt basis of proposed strategy and other significant decisions with respect to any such stockholder litigation, and provide Unusual with the opportunity to consult with Red Cat regarding the defense of any such litigation, which advice Red Cat shall consider in good faith, and (c) not settle any such stockholder litigation without the prior written consent of Unusual.

Resignations

At the written request of Unusual, Red Cat shall cause each director or manager of any of the Target Companies and Subsidiaries to resign in such capacity, with such resignations to be effective as of the Closing.

Debt

On or prior to the Closing, Red Cat shall have eliminated any and all indebtedness, relating to the Target Companies and all liens related to the assets of the Target Companies shall have been released prior to the Closing, except for permitted liens.

Assignment of Intellectual Property

On or prior to the Closing, Red Cat shall have taken all action to assign or license the trademarks and other Intellectual Property on Rotor Riot and Fat Shark from Red Cat, UAV Patent Corp., or any other Red Cat Subsidiary to Unusual at the Closing (the “IP Assignments”).

Lock-Up Agreements

If requested by the underwriters in connection with the Offering, Red Cat shall enter into a lock-up agreement for a maximum of 180 days, provided, however, that on and following 90 days after the Closing, in the event that the trading price on the principal exchange for Unusual Common Stock equals or exceeds 150% of the Offering price, Red Cat (and its successors and assigns) shall be permitted to offer and sell up to 25% of the 30 day average daily trading volume per day for Unusual Common Stock underlying the Unusual Preferred Stock. Unusual’s officers, directors and 5% stockholders shall enter into a lock-up agreement with Red Cat for 180 days following the Offering and if requested by the underwriters in connection with the Offering, Unusual shall enter into a lock-up agreement with such underwriters if requested by the underwriters in connection with the Offering (the “Lock-Up Agreements”).

Registration Rights Agreement

At the Closing, Unusual and Red Cat shall execute and deliver a Registration Rights Agreement (the “Registration Rights Agreement”) which shall cover the Exchange Securities issuable upon conversion of the Unusual Note and the Unusual Preferred Stock.

Escrow Agreement

At the Closing, Red Cat, Unusual, the Principal Stockholder and the Escrow Agent shall execute and deliver the Escrow Agreement on terms and conditions reasonably acceptable to the Parties.

Notice of Developments

During the period from the date of the Share Purchase Agreement to the Closing Date, each Party will give prompt written notice after discovery thereof to the other Parties of any material adverse development causing a breach of any of such Party’s representations, warranties and covenants set forth herein.

Delivery of Financial Statements

Each Party will prepare and deliver to the other Parties audited financial statements and reviewed any unaudited financial statement for any interim period, in each instance that will be reasonably requested by the other Party prior to or following Closing, including all material respect required to be included in the Registration Statement or the Proxy.

Non-Competition Agreement

Red Cat and Unusual shall enter into a Non-Competition Agreement which shall be in form and substance mutually acceptable to the Parties. The Non-Competition Agreement will generally bar Unusual for a period of time from pursuing enterprise or government contracts, other than in connection with Red Cat. Mr. Brandon Torres Declet will also be required to enter into an employment agreement which contains comparable restrictions on competition with Red Cat and restrictions on competition with Unusual.

Tax Matters

Tax Covenants

Without the prior written consent of Unusual, Red Cat (and, prior to the Closing, the Target Companies, their respective affiliates and its and their respective representatives) shall not, to the extent it may affect, or relate to, the Target Companies, make, change or rescind any tax election, amend any tax return or take any position on any tax return, take any action, omit to take any action or enter into any other transaction that would have the effect of increasing the tax liability or reducing any tax asset of Unusual or the Target Companies in respect of any Post-Closing Tax Period. Red Cat agrees that Unusual is to have no liability for any Tax resulting from any action of Red Cat, the Target Companies, their respective Affiliates or any of its or their respective representatives, and agrees to indemnify and hold harmless Unusual (and, after the Closing Date, the Target Companies) against any such Tax or reduction of any Tax asset.

All transfer, documentary, sales, use, stamp, registration, value added and other such Taxes and fees (including any penalties and interest) incurred in connection with the Share Purchase Agreement and the transaction documents (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Red Cat when due. Red Cat shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees (and Unusual shall cooperate with respect thereto as necessary).

Unusual shall prepare, or cause to be prepared, all Tax Returns required to be filed by the Target Companies after the Closing Date with respect to a Pre-Closing Tax Period. Any such tax return shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and without a change of any election or any accounting method and shall be submitted by Unusual to Red Cat (together with schedules, statements and, to the extent requested by Red Cat, supporting documentation) at least 45 days prior to the due date (including extensions) of such Tax Return. If Red Cat objects to any item on any such Tax Return, it shall, within 10 days after delivery of such Tax Return, notify Unusual in writing that it so objects, specifying with particularity any such item and stating the specific factual or legal basis for any such objection. If a notice of objection shall be duly delivered, Unusual and Red Cat shall negotiate in good faith and use their reasonable best efforts to resolve such items. If Unusual and Red Cat are unable to reach such agreement within 10 days after receipt by Unusual of such notice, the disputed items shall be resolved by the Independent Accounting Firm and any determination by the Independent Accounting Firm shall be final. The Independent Accounting Firm shall resolve any disputed items within 20 days of having the item referred to it pursuant to such procedures as it may require. If the Independent Accounting Firm is unable to resolve any disputed items before the due date for such Tax Return, the Tax Return shall be filed as prepared by Unusual and then amended to reflect the Independent Accounting Firm’s resolution. The costs, fees and expenses of the Independent Accounting Firm shall be borne equally by Unusual and Red Cat. The preparation and filing of any Tax Return of the Target Companies that does not relate to a Pre-Closing Tax Period shall be exclusively within the control of Unusual.

Termination of Existing Tax Sharing Agreements

Any and all existing Tax sharing agreements (whether written or not) binding upon the Target Companies shall be terminated as of the Closing Date. After such date none of the Target Companies, Red Cat nor any of Red Cat's or the Target Companies’ affiliates and their respective representatives shall have any further rights or liabilities thereunder.

Tax Indemnification

Except to the extent treated as a liability in the calculation of Final Working Capital, Red Cat and the Principal Stockholder shall jointly and severally indemnify the Target Companies, Unusual, and each Unusual Indemnitee and hold them harmless from and against: (a) any Indemnified Losses attributable to any breach of or inaccuracy in any representation or warranty made with respect to tax matters; (b) any Indemnified Losses attributable to any breach or violation of, or failure to fully perform, any covenant, agreement, undertaking or obligation described in this Tax Matters section; (c) all Taxes of the Target Companies or relating to the business of the Target Companies for all Pre-Closing Tax Periods ("Pre-Closing Taxes"); (d) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which the Target Companies (or any predecessor of the Target Companies) is or was a member on or prior to the Closing Date by reason of a liability under Treasury Regulation Section 1.1502-6 or any comparable provisions of foreign, state or local Law; and (e) any and all Taxes of any person imposed on the Target Companies arising under the principles of transferee or successor liability or by contract, relating to an event or transaction occurring before the Closing Date. In each of the above cases, together with any out-of-pocket fees and expenses (including attorneys' and accountants' fees) incurred in connection therewith, Red Cat shall reimburse Unusual for any Taxes of the Target Companies that are the responsibility of Red Cat as described in this paragraph within [10] business days after payment of such Taxes by Unusual or the Target Companies.

Straddle Period

In the case of Taxes that are payable with respect to a taxable period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any such Taxes that are treated as Pre-Closing Taxes for purposes of this Agreement shall be:

(a)  in the case of Taxes (i) based upon, or related to, income, receipts, profits, wages, capital or net worth, (ii) imposed in connection with the sale, transfer or assignment of property, or (iii) required to be withheld, deemed equal to the amount which would be payable if the taxable year ended with the Closing Date; and

(b)  in the case of other Taxes, deemed to be the amount of such Taxes for the entire period multiplied by a fraction the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period.

Contests

Unusual agrees to give written notice to Red Cat of the receipt of any written notice by [the Acquisition], Unusual or any of Unusual's Affiliates which involves the assertion of any claim, or the commencement of any Legal Proceeding, in respect of which an indemnity may be sought by any Unusual Indemnitee described in this Tax Matters section (a “Tax Claim”); provided, that failure to comply with this provision shall not affect Unusual's right to indemnification under the Share Purchase Agreement. Unusual shall control the contest or resolution of any Tax Claim; provided, however, that Unusual shall obtain the prior written consent of Red Cat (which consent shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of a claim or ceasing to defend such Tax Claim; and, provided, further, that Red Cat shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose, the fees and expenses of which separate counsel shall be borne solely by Red Cat.

Cooperation and Exchange of Information

Red Cat and Unusual shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return described in this Tax Matters section or in connection with any audit or other proceeding in respect of Taxes of the Target Companies. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by tax authorities. Each of Red Cat and Unusual shall retain all Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Target Companies for any taxable period beginning before the Closing Date until the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods. Prior to transferring, destroying or discarding any Tax Returns, schedules and work papers, records and other documents in its possession relating to Tax matters of the Target Companies for any taxable period beginning before the Closing Date, Red Cat or Unusual (as the case may be) shall provide the other party with reasonable written notice and offer the other party the opportunity to take custody of such materials.

Tax Treatment of Indemnification Payments

Any indemnification payments described in this Tax Matters section shall be treated as an adjustment to the Purchase Price by the parties for Tax purposes, unless otherwise required by Law.

Payments to Unusual

Any amounts payable to Unusual described in this Tax Matters section shall be satisfied from Red Cat and the Principal Stockholder, jointly and severally.

Survival

Notwithstanding anything in the Share Purchase Agreement to the contrary, the representation and warranty of the Company and the Principal Stockholder regarding taxes, and the provisions described in this Tax Matters section shall survive for the full period of all applicable statutes of limitations (giving effect to any waiver, mitigation or extension thereof) plus 90 days. If, at any time prior to the expiration of the limitation period described in this paragraph including any applicable statute of limitations, any Unusual Indemnitee delivers to the Red Cat a written notice asserting in good faith a claim for recovery described in this Tax Matters section), then the claim asserted in such notice shall survive such expiration time until such time as such claim is fully and finally resolved including the expiration of any applicable time to appeal.

Closing Conditions

Conditions to Each Party’s Obligation to Effect the Closing of the Share Purchase Agreement . The respective obligations of each Party to effect the Share Purchase Agreement is subject to the satisfaction or waiver (where permissible pursuant to applicable Law) on or prior to the Closing of each of the following conditions (collectively, the “Closing Conditions”):

(c)  The sale of the Target Companies shall have been duly approved by the Requisite Red Cat Vote.

(d)  The SEC shall have declared the Registration Statement effective and the Offering shall have been consummated.

(e)  Unusual’s Nasdaq Listing Application shall have been approved and trading shall commence simultaneously with the consummation of the Offering and the Closing of the Share Purchase Agreement.

(f)   Brandon Torres Declet and Unusual shall have entered into an Employment Agreement (with a customary non-compete provision that may not be amended or waived without the reasonable consent of Red Cat) in form and substance reasonably acceptable to Unusual and Brandon Torres Declet and Unusual and the Target Companies shall have entered into a Non-Competition Agreement with Red Cat referenced in the Share Purchase Agreement in form and substance mutually acceptable to the Parties.

(g)  Unusual and Red Cat shall have executed and delivered a Demand Registration Rights Agreement for Unusual Common Stock issuable upon conversion of the Unusual Preferred Stock, which shall be in form and substance mutually acceptable to the Parties.

(h)  The Principal Stockholder and Unusual and the Escrow Agent shall have executed and delivered the Escrow Agreement.

(i)   Unusual shall have entered into an Engagement Letter and Underwriting Agreement with Revere Securities in form and substance satisfactory to Red Cat.

(j)   Lockup Agreements with officers, directors and 5% owners of Unusual in form and substance acceptable to Red Cat shall have been executed and delivered by the applicable parties.

(k)  Unusual and Red Cat shall execute and deliver a transition services agreement (the “Transition Services Agreement”)

(l)   Unusual, Red Cat and each Target Company shall have obtained all authorizations, waivers, consents and approvals of, and made all filings, applications and notices with, persons which are necessary or advisable to consummate the transactions contemplated by the Share Purchase Agreement, each of which shall have been obtained without the imposition of any materially adverse term or condition.

(m)      No governmental authority shall have enacted, issued, promulgated, enforced, or entered any Laws or Orders, whether temporary, preliminary, or permanent, that make illegal, enjoin, or otherwise prohibit consummation of the Share Purchase Agreement, or the other transactions contemplated by the Share Purchase Agreement.

(n)  Each Party shall deliver updated disclosure schedules to the Share Purchase Agreement necessary to make their respective representations and warranties true and correct as of the Closing Date.

Conditions to Obligations of Unusual. The obligations of Unusual to effect the Share Purchase Agreement are also subject to the satisfaction or waiver (where permissible pursuant to applicable law) by Unusual on or prior to the Closing of the following conditions:

(a)  The representations and warranties of the Parties (other than Unusual set forth in the Share Purchase Agreement) shall be true and correct in all respects (without giving effect to any limitation indicated by the words “in all material respects,” “in any material respect,” “material,” or “materially”) as of the Effective Date and as of the Closing Date, as if made on and as of such date (except those representations and warranties that address matters only as of a particular date, which shall be true and correct in all respects as of that date), except where the failure of such representations and warranties to be so true and correct would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on such Parties.

(b)  Red Cat and the Principal Stockholder shall have performed in all material respects all obligations and complied in all material respects with the agreements and covenants, in the Share Purchase Agreement required to be performed by or complied with by it at or prior to the Closing.

(c)  There shall not have occurred any Material Adverse Effect with respect to Red Cat or Target Company, the impact of which the Parties have not been able to resolve to the satisfaction of the Parties, acting in good faith and in a commercially reasonable manner.

(d)  Each Target Company shall have delivered to Unusual a certificate executed by an authorized representative of such Target Company, on behalf of such Target Company and of Red Cat, dated the Closing Date, certifying in such detail as Unusual may reasonably request, that the conditions described in this Conditions to Obligations of Unusual section have been fulfilled.

(e)  No legal proceeding shall be pending or threatened by or before any Governmental Authority, no law shall have been enacted after the date of the Share Purchase Agreement, and no judicial or administrative decision shall have been rendered; in each case, which enjoins, prohibits or materially restricts, or seeks to enjoin, prohibit or materially restrict, the consummation of the transactions contemplated by the Share Purchase Agreement.

(f)   Red Cat shall have delivered to Unusual the Closing Trial Balance, which shall not reflect any indebtedness.

(g)  Red Cat shall have delivered to Unusual certificates representing the Target Companies’ Capital Stock with stock powers endorsed in blank, free and clear of any Liens, which deliveries and maybe in book entry.

(h)  Red Cat shall have executed and delivered to Unusual the IP Assignment, in a form and substance reasonably acceptable to Unusual or taken steps to deliver promptly following closing.

(i)   The Principal Stockholder and the Escrow Agent shall have executed and delivered to Unusual the Escrow Agreement, and the Escrow Agent shall have received the Escrow Shares.

(j)   Red Cat shall have executed and delivered to Unusual the Lock-Up Agreement.

(k)  The Persons set forth on Schedule 10.02 to the Share Purchase Agreement shall have entered into agreements with Unusual or the applicable Target Company in form and substance satisfactory to Unusual providing for the continued services for the applicable Target Company, for protection from disclosure of confidential information, protection of Intellectual Property and trade secrets, compliance with Law, and non-competition for a minimum term of 12 months for such non-competition with Red Cat substantially on the terms acceptable to Red Cat. The Persons listed on Schedule 10.02(l) to the Share Purchase Agreement have waived the payments of any severance arising solely from a change of control of the Target Companies.

(l)   Unusual will have received a certificate signed by the Chief Executive Officer or Chief Financial Officer of Red Cat certifying as to the matters described in this Conditions to Obligations of Unusual.

Conditions to Obligations of Red Cat and Principal Stockholder. The obligations of Red Cat and the Principal Stockholder to effect the Share Purchase Agreement and the transaction contemplated by it is also subject to the satisfaction or waiver by Red Cat on or prior to the Closing of the following conditions:

(a)  The representations and warranties of contained in the Share Purchase Agreement or in any certificate or other document delivered pursuant to the Share Purchase Agreement, shall be true and correct in all material respects (except for representations and warranties which are by their terms qualified by materiality, which shall be true and correct to the extent of such materiality), as of the Closing Date with the same force and effect as though made on and as of such date and shall have been true as of the Effective Date.

(b)  Unusual shall have performed in all material respects all obligations, and complied in all material respects with the agreements and covenants, in the Share Purchase Agreement required to be performed by or complied with it at or prior to the Closing.

(c)  Since the Effective Date, there shall not have been any Unusual Material Adverse Effect with respect to Unusual or any event, change, or effect that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Unusual.

(d)  No legal proceedings shall be pending or threatened by or before any governmental authority; no laws shall have been enacted after the date of the Share Purchase Agreement, and no judicial or administrative decision shall have been rendered; in each case, which enjoins, prohibits or materially restricts, or seeks to enjoin, prohibit or materially restrict, the consummation of the transactions contemplated by the Share Purchase Agreement.

(e)  Red Cat will have received a certificate, signed by the Chief Executive Officer and Chief Financial Officer of Unusual, certifying in such detail as Red Cat may reasonably request, that the conditions described in this Conditions to Obligations of Red Cat and Principal Stockholder have been fulfilled.

Termination

Termination by Mutual Consent. The Share Purchase Agreement may be terminated at any time prior to the Closing by the mutual written consent of Unusual and Red Cat.

Termination by Either Red Cat or Unusual. The Share Purchase Agreement may be terminated by either Red Cat or Unusual at any time prior to the Closing:

(a)  if the Share Purchase Agreement has not been consummated on or before March 30, 2023 (the “End Date”); provided, however, that this right to terminate the Share Purchase Agreement shall not be available to any Party whose breach of any representation, warranty, covenant, or agreement set forth in the Share Purchase Agreement has been the principal cause of, or that resulted in, the failure of the Share Purchase Agreement to be consummated on or before any the End Date;

(b)  if any governmental authority shall have enacted, issued, promulgated, enforced, or entered any law or order making illegal, or permanently enjoining, the consummation of the Share Purchase Agreement, or the other transactions contemplated by the Share Purchase Agreement, and such Law or Order shall have become final and non-appealable;

(c)  if the Share Purchase Agreement has been submitted to the stockholders of Red Cat for approval at a duly convened Red Cat Stockholders Meeting and the Requisite Red Cat Vote shall not have been obtained at such meeting (unless such Red Cat Stockholders Meeting has been adjourned or postponed, in which case at the final adjournment or postponement thereof); or

(d)  if any Closing Condition described under Conditions to Each Party’s Obligation to Effect the Share Purchase Agreement section shall not be satisfied by Unusual.

Termination by Red Cat. The Share Purchase Agreement may be terminated by the Red Cat at any time prior to the Closing:

(a)  if prior to the receipt of the Requisite Red Cat Vote at the Red Cat Stockholders Meeting or any adjournment thereof, the disinterested Red Cat stockholders fail to approve this Agreement by a majority vote or the Red Cat Board shall have accepted a Superior Proposal and entered into an Acquisition Agreement with a third party;

(b)  if Unusual shall have breached or failed to perform in any material respect any of its covenants and agreements described in the Interim Covenants section above; or

(c)  if there shall have been a breach of any representation, warranty, covenant, or agreement on the part of Unusual set forth in the Share Purchase Agreement such that the conditions to the Closing of the Share Purchase Agreement described in subparagraph (a) or (b) under Conditions to Obligations of Red Cat and Principal Stockholder above, as applicable, would not be satisfied and, in either such case, such breach is incapable of being cured by the End Date; provided, that Red Cat shall have given Unusual at least 30 days written notice prior to such termination stating Red Cat’s intention to terminate the Share Purchase Agreement pursuant to the provisions described in this paragraph; provided further, that Red Cat shall not have the right to terminate the Share Purchase Agreement pursuant to the provision described in this paragraph if Red Cat is then in material breach of any representation, warranty, covenant, or obligation contained in the Share Purchase Agreement that would cause any condition set forth in subparagraph (a) or (b) under Conditions to Obligations of Red Cat and Principal Stockholder above, not to be satisfied.

Termination by Unusual. The Share Purchase Agreement may be terminated by Unusual at any time prior to the Closing:

(a)  if prior to the receipt of the Requisite Red Cat Vote at the Red Cat Stockholders Meeting, or any adjournment thereof the disinterested Red Cat stockholders fail to approve the Share Purchase Agreement by a majority vote or the Red Cat Board shall have accepted a Superior Proposal and entered into an Acquisition Agreement with a third party;

(b)  if Red Cat shall have breached or failed to perform in any material respect any of its covenants and agreements described in the Interim Covenants section above; or

(c)  if there shall have been a breach of any representation, warranty, covenant, or agreement on the part of Red Cat, the Target Companies or the Principal Stockholder set forth in the Share Purchase Agreement such that the conditions to the Closing of the Share Purchase Agreement described in subparagraph (a) or (b) under Conditions to Obligations of Unusual above, as applicable, would not be satisfied and, in either such case, such breach is incapable of being cured by the End Date; provided, that Unusual shall have given Red Cat, the Target Companies and the Principal Stockholder, as applicable, at least 30 days written notice prior to such termination stating Unusual’s intention to terminate this Agreement pursuant to this Paragraph; provided further, that Unusual shall not have the right to terminate this Agreement pursuant to this Paragraph if Unusual is then in material breach of any representation, warranty, covenant, or obligation hereunder that would cause any condition set forth in subparagraph (a) or (b) under Conditions to Obligations of Unusual above, not be satisfied.

Termination Fee. The Share Purchase Agreement provides that if Red Cat accepts an Acquisition Proposal relating to a third party obtaining control of the Target Companies collectively, an “Acquisition Proposal”), then Red Cat upon closing the Acquisition Proposal shall pay Unusual a non-refundable fee in the amount of $500,000 in cash or shares of Red Cat common stock if elected by Red Cat, at the highest VWAP prior to the date of issuance payable within 5 days. For purposes of the immediately preceding sentence, the term “obtaining control” or “acquiring control” (collectively “Control”) shall mean one or more persons obtaining or acquiring more than 50.1% of the voting power of the Target Companies in the case of Red Cat. In no event shall a Termination Fee by payable if the Share Purchase Agreement is not consummated by the End Date (unless such End Date is extended by the written agreement of the Parties) Notwithstanding anything to the contrary herein, if Unusual (1) fails to Close on or prior to March 31, 2023, (2) fails to complete the Offering on or prior to March 31, 2023 or (3) enters into an alternative transaction for an acquisition and a public offering within 12 months of termination of this Agreement, Unusual shall pay Red cat a non-refundable fee in the amount of $500,000 in cash or shares of Unusual if Unusual has a class of its securities listed for trading on a national securities exchange if elected by Unusual at the highest VWAP prior to the date of issuance.

8% Senior Secured Convertible Note

 The following discussion sets forth the material terms of the Unusual 8% Senior Secured Convertible Note that will mature on the 3 year anniversary date of the closing of the transaction to be issued to the Company pursuant to the Share Purchase Agreement, and is qualified in its entirety by reference to the complete text of the 8% Senior Secured Convertible Note, a copy of which is attached as Annex B to this proxy statement and is incorporated by reference into this proxy statement. You are encouraged to read Annex B carefully and in its entirety.

Under the Share Purchase Agreement, at closing Unusual will issue to Red Cat $2.5 million original principal amount of its 8% Senior Secured Convertible Note unless Unusual elects to pay Red Cat an additional $2.5 million of cash purchase price at closing.

The Unusual Note will mature 36 months following the date of closing, and bears interest at a rate of 8% per annum, payable in cash on each of the three, six, nine and twelve month anniversary of the end of each calendar quarter until paid in full on the maturity date. The Unusual Note is secured by a security interest granted to Red Cat in all of the assets and property of Unusual. The Unusual Note is initially convertible into Unusual common stock at a conversion price equal to the lower of $4.00 or the initial public offering price of UM. The conversion price is subject to adjustment in the event of certain events, including stock splits and dividends and for so long as the Unusual Note is outstanding, upon a lower-priced issuance by Unusual, other than Exempt Issuances, as defined in the Unusual Note.

At no time may all or a portion of the Unusual Note be converted if the number of shares of common stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Unusual common stock owned by the holder at such time, the number of shares of common stock which would result in the holder beneficially owning more than 4.99% of all of the common stock outstanding at such time; provided, however, that upon the holder providing Unusual with sixty-one (61) days’ advance notice that the holder would like to waive this paragraph with regard to any or all shares of common stock issuable upon conversion of the Unusual Note, this paragraph will be of no force or effect with regard to all or a portion of the Unusual Note referenced in the 4.99% waiver. Following waiver, at no time may all or a portion of the Unusual Note be converted if the number of shares of common stock to be issued pursuant to such conversion, when aggregated with all other shares of common stock owned by the holder at such time, would result in the holder beneficially owning in excess of 9.99% of the then issued and outstanding shares of common stock outstanding at such time.

Unusual has agreed to file a “resale” registration statement with the Securities and Exchange Commission covering the Common Stock underlying the Unusual Note upon Red Cat’s written request made following 90 days after the effective date of any underwritten public offering by Unusual (including the Unusual IPO) and a piggy-back registration statement whenever Unusual shall file a registration statement for its own account or the account of other security holders (other than the Unusual IPO). Unusual has agreed to use its best efforts to have the registration statement filed and declared effective.

In the event that the Company issues any Common Stock equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the holders of the Notes will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holders could have acquired if the holders had held the number of shares of Common Stock acquirable upon complete conversion of the Notes.

Security Agreement

 The following discussion sets forth the material terms of the Unusual Security Agreement to be issued to the Company pursuant to the Share Purchase Agreement, and is qualified in its entirety by reference to the complete text of the Security Agreement, a copy of which is attached as Annex C to this proxy statement and is incorporated by reference into this proxy statement. You are encouraged to read Annex C carefully and in its entirety.

Under the Security Agreement, as collateral for the prompt payment in full when due of the obligations of Unusual under the Unusual Note, Unusual (as debtor, including each of its subsidiaries) will grant to Red Cat as closing of the Share Purchase Agreement, provided the Unusual Note is issued at closing, a first priority lien and security interest on Unusual’s assets and properties consisting of Instruments, Accounts, Inventory, General Intangible, Equipment, Documents, Contracts, Goods, Investment Property, Deposit Accounts, Trademarks, Patents and Copyrights as well as books and records, tangible and intangible property of Unusual whether currently owned or acquired in the future, as such terms are defined in the Security Agreement.

Series A Convertible Preferred Stock - Certificate of Designation

The following discussion sets forth the material terms of Unusual’s Series A Convertible Preferred Stock – Certificate of Designation to be issued to the Company pursuant to the Share Purchase Agreement, and is qualified in its entirety by reference to the complete text of the Certificate of Designation, a copy of which is attached as Annex D to this proxy statement and is incorporated by reference into this proxy statement. You are encouraged to read Annex D carefully and in its entirety.

Under the Share Purchase Agreement, at closing Unusual will issue to Red Cat $10.5 million its Series A Convertible Preferred Stock. The Stated Value of each share of Unusual Preferred Stock is $10 per share and Unusual will issue 1,050,000 shares of Series A Preferred to Red Cat at closing of the Share Purchase Agreement.

The Unusual Preferred Stock is initially convertible into Unusual common stock at a conversion price equal to the lower of $4.00 or the initial public offering price of UM. The conversion price is subject to adjustment in the event of certain events, including stock splits and dividends and for so long as the Unusual Preferred Stock is outstanding, upon a lower-priced issuance by Unusual, other than Exempt Issuances, as defined in the Unusual Preferred Stock Certificate of Designation.

The holder of Unusual Preferred Stock shall be entitled to vote on all matters submitted to shareholders of Unusual and shall be entitled to the number of votes for each share of Unusual Preferred Stock owned at the record date for the determination of shareholders entitled to vote on such matter or, if no such record date is established, at the date such vote is taken or any written consent of shareholders is solicited, equal to the number of shares of common stock such shares of Unusual Preferred Stock are convertible into at such time. Except as otherwise required by law, the holders of shares of Unusual Preferred Stock shall vote together with the holders of common stock on all matters and shall not vote as a separate class. 

Upon the liquidation, dissolution or winding up of the business of Unusual, whether voluntary or involuntary, the holder of Unusual Preferred Stock shall be entitled to receive, for each share thereof, out of assets of Unusual legally available therefor, a preferential amount in cash equal to (and not more than) the stated value. All preferential amounts to be paid to the holders of Unusual Preferred Stock in connection with such liquidation, dissolution or winding up shall be paid before the payment or setting apart for payment of any amount for, or the distribution of any assets of Unusual to the holders of (i) any other class or series of capital stock whose terms expressly provide that the holders of Unusual Preferred Stock should receive preferential payment with respect to such distribution (to the extent of such preference) and (ii) Unusual’s common stock. If upon any such distribution the assets of Unusual shall be insufficient to pay the holders of the outstanding shares of Unusual Preferred Stock (or the holders of any class or series of capital stock ranking on a parity with the Unusual Preferred Stock as to distributions in the event of a liquidation, dissolution or winding up of Unusual) the full amounts to which they shall be entitled, such holders shall share ratably in any distribution of assets in accordance with the sums which would be payable on such distribution if all sums payable thereon were paid in full.

At no time may all or a portion of the Unusual Preferred Stock be converted if the number of shares of common stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Unusual common stock owned by the holder at such time, the number of shares of common stock which would result in the holder beneficially owning more than 4.99% of all of the common stock outstanding at such time; provided, however, that upon the holder providing Unusual with sixty-one (61) days’ advance notice that the holder would like to waive this paragraph with regard to any or all shares of common stock issuable upon conversion of the Unusual Preferred Stock, this paragraph will be of no force or effect with regard to all or a portion of the Unusual Preferred Stock referenced in the 4.99% waiver. Following waiver, at no time may all or a portion of the Unusual Preferred Stock be converted if the number of shares of common stock to be issued pursuant to such conversion, when aggregated with all other shares of common stock owned by the holder at such time, would result in the holder beneficially owning in excess of 9.99% of the then issued and outstanding shares of common stock outstanding at such time.

Unusual has agreed to file a “resale” registration statement with the Securities and Exchange Commission covering the Common Stock underlying the Unusual Preferred Stock upon Red Cat’s written request made following 90 days after the effective date of any underwritten public offering by Unusual (including the Unusual IPO) and a piggy-back registration statement whenever Unusual shall file a registration statement for its own account or the account of other security holders (other than the Unusual IPO). Unusual has agreed to use its best efforts to have the registration statement filed and declared effective.

 The Registration Rights Agreement

The following discussion sets forth the material terms of Unusual’s Registration Rights Agreement to be issued to the Company pursuant to the Share Purchase Agreement, and is qualified in its entirety by reference to the complete text of the Registration Rights Agreement, a copy of which is attached as Annex E to this proxy statement and is incorporated by reference into this proxy statement. You are encouraged to read Annex E carefully and in its entirety.

Pursuant to the Share Purchase Agreement, Unusual agreed to enter into a Registration Rights Agreement with Red Cat at closing. The Registration Rights Agreement provides that subject to the terms and conditions thereof, Unusual will register for resale, pursuant to a registration statement filed pursuant to the Securities Act, shares of Unusual’s common stock issuable to Red Cat upon conversion of the Unusual Note and the Unusual , inlcuidng any accrued and unpaid interest and dividends thereon. The parties agreed following execution of the Share Purchase Agreement and in response to comments from the staff of the SEC to eliminate from the Unusual IPO registration statement shares of Unusual common stock issuable under the Unusual Note, and instead to include such shares of common stock as registerable securities under the Registration Rights Agreement. The Registration Rights Agreements provides that as soon as practicable following Red Cat’s written request, Unusual, shall use its best efforts to effect the registration under the Securities Act of the Registrable Securities of Red Cat which Unusual has been requested to register.

The Registration Rights Agreement provides that, subject to certain conditions, each time Unusual proposes for any reasons to register any of its Common Stock under the Securities Act in connection with the proposed offer and sale of its Common Stock for money, either for its own account or on behalf of other security holders, Unusual shall offer Red Cat the right to request inclusion of its Registrable Securities in such registration.

In connection with any registration, Unusual shall be obligated to pay all costs and expenses incident to the performance of Unusual’s obligations and registration, other than discounts and commissions on sale incurred by Red Cat.

The Registration Rights Agreement provides that in the event of any registration under the agreement, Unusual shall indemnify and hold harmless Red Cat from and against any losses, claims, damages or liabilities to witch Red Cat may become subject insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or any document incident to registration or qualification of any Registrable Securities, or which arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any prospectus, necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or any violation by Unusual of the Securities Act, the Exchange Act, or state securities or blue sky laws applicable to Unusual and relating to action or inaction required of Unusual in connection with such registration or qualification under the Securities Act or such state securities or blue sky laws. If Unusual fails to defend Red Cat as required, it shall reimburse (after receipt of appropriate documentation) Red Cat for any legal or any other out-of-pocket expenses reasonably incurred in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that Unusual shall not be liable to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, said preliminary prospectus, said prospectus, or said amendment or supplement or any document incident to registration or qualification of any Registrable Securities in reliance upon and in conformity with written information furnished to Unusual by Red Cat specifically for use in the preparation thereof or information omitted to be furnished by Red Cat or (ii) any act or failure to act of Red Cat including the failure of Red Cat to deliver a prospectus as required by the Securities Act.

PRO-FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information included herein presents the historical consolidated financial statements of Red Cat, adjusted to give effect to the sale of the Target Companies, as further described in Note 1 — Description of Transaction and Basis of Presentation.

The unaudited pro forma condensed combined balance sheet as of October 31, 2022 gives effect to the transaction as if it had occurred on October 31, 2022. The unaudited pro forma condensed combined statement of operations gives effect to the transaction as if it had occurred at the beginning of each indicated reporting period.

The unaudited pro forma condensed combined financial information was derived from Red Cat’s historical annual and interim consolidated financial statements, which were prepared in accordance with U.S. GAAP, and should be read in conjunction with the following:

• The accompanying notes to the unaudited pro forma condensed combined financial information;

• Red Cat’s audited consolidated financial statements as of and for the years ended April 30, 2022 and 2021, included in its Annual Report on Form 10-K for the year ended April 30, 2022;

• Red Cat’s unaudited condensed consolidated financial statements for the six months ended October 31, 2022, included in its Quarterly Report on Form 10-Q for the quarter ended October 31, 2022;

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, SEC Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaced the prior pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and to allow the presentation of reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Red Cat has elected not to present Management’s Adjustments and have only presented Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only, and is not necessarily indicative of what the Company’s financial position or results of operations would have been had the transactions been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the Company.

The final purchase consideration paid by UM could differ significantly from the amounts presented in the unaudited pro forma condensed combined financial statements. Adjustments related to the final amounts of working capital on the closing date could result in a material change in the amount of consideration payable by UM. If there was an Estimated Working Capital Excess Amount or an Estimated Working Capital Deficiency Amount at the Closing, then the aggregate Consideration shall be adjusted upward or downward dollar-for-dollar, as appropriate. If there is an Estimated Working Capital Excess Amount, the amount shall be paid to Red Cat as additional cash Consideration at the Closing, unless Red Cat agrees to payment terms for current assets such as inventory. Working capital balances can fluctuate from period to period and were unusually high as of the October 31, 2022 date of the pro-forma balance sheet. This higher than normal level was primarily attributable to inventory deposits and purchases, primarily related to the supply chain challenges of securing inventory on a timely basis. These challenges are beginning to ease and the Company expects that working capital balances will be lower on the date of the closing of the transaction. Prior to closing the transaction, Red Cat plans to capitalize, as an investment in the Target Companies, any amounts owed by the Target Companies such that the balance owed at closing shall be zero. If there is an Estimated Working Capital Deficiency Amount, the amount shall first be credited to the Unusual Note amount and any additional amount applied as a reduction in the cash consideration.

As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analyses are performed. The preliminary pro forma adjustments have been made solely for the purpose of providing the unaudited pro forma condensed combined financial information.

Red Cat Holdings

Pro Forma Condensed Combined Balanced Sheet

As of October 31, 2022

(Unaudited)

Red Cat Holdings

Pro Forma Condensed Combined Statement of Operations

For the Six Months ended October 31, 2022

(Unaudited)

Red Cat Holdings

Pro Forma Condensed Combined Statement of Operations

For the Fiscal Year ended April 30, 2022

(Unaudited)