Unusual Machines Inc
For the period ended Dec 31, 2023. Filed Mar 22, 2024.
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FY2023 · Filed Mar 22, 2024
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Item 11. Executive Compensation
| Item 11. | Executive Compensation. |
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Executive Compensation Overview
As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act.
This section provides an overview of the compensation awarded to, earned by, or paid to each individual who served as our principal executive officer during our fiscal year 2023. Our named executive officers, or the Named Executive Officers, for the year ended December 31, 2023, are:
| · | Allan Evans, our Chief Executive Officer; |
| · | Brandon Torres Declet, our former Chief Executive Officer; and |
| · | Brian Hoff, our Chief Financial Officer |
Unusual Machines Summary Compensation Table Year Ended December 31, 2023
The following table contains information about the compensation paid to or earned by each Officer (each a “Named Executive Officer”) with during the two most recently completed fiscal years.
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (2) | Option Awards ($) | All Other Compensation ($) (2) | Total ($) |
|---|---|---|---|---|---|---|---|
| Allan Evans (1) | 2023 | 20,833 | – | – | – | – | 20,833 |
| Chief Executive Officer | 2022 | – | – | – | – | – | – |
| Brandon Torres Declet (2) | 2023 | 229,167 | – | 64,344 | – | 62,500 | 356,011 |
| Former Chief Executive Officer | 2022 | 80,000 | – | – | – | – | 80,000 |
| Brian Hoff (3) | 2023 | 250,000 | – | – | – | – | 250,000 |
| Chief Financial Officer | 2022 | 41,667 | – | – | – | – | 41,667 |
| (1) | Mr. Evans was appointed Chief Executive Officer in December 2023 and did not serve during the 2022 fiscal year. |
| (2) | Mr. Declet was appointed Chief Executive Officer in May 2022 and resigned from the Board and as Chief Executive Officer in November 2023. Mr. Declet did not serve during the 2021 fiscal year. Mr. Declet executed a termination agreement pursuant to which he received three months of salary as severance and three months of medical and insurance premiums. Mr. Declet received 16,086 shares of our common stock. |
| (3) | Mr. Hoff was appointed Chief Financial Officer in November 2022. |
Fat Shark and Rotor Riot Summary Compensation Information
Set forth below is summary compensation information similar to that set forth above, but reflecting amounts paid, payable or allocable to Fat Shark or Rotor Riot for executive officers of one or both of those entities who exceeded the enumerated threshold and which the Company anticipates hiring as an executive officer of the Company (directly or through Fat Shark or Rotor Riot) in connection with the acquisition of those entities in the Business Combination (the “Business Combination Officers”). The compensation information relates to the fiscal year end April 30, 2023 and 2022, respectively. Mr. Camden was appointed our Chief Operating Officer on March 4, 2024.
| Name and Principal Position(1) · Year · Salary ($) · Bonus ($) · Stock Awards ($) · Option Awards ($) · Non- equity incentive plan compensation ($) · All Other Compensation ($) · Total ($) | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Andrew Camden | 2023 | 90,000 | – | – | – | – | – | 90,000 | |
| President of Rotor Riot | 2022 | 72,500 | – | – | 259,483 | (2) | – | – | 331,983 |
| (1) | Represents principal position(s) held at Red Cat, Fat Shark and/or Rotor Riot. |
| (2) | Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of 10-year options to purchase 100,000 shares of Red Cat common stock at an exercise price of $2.60, which become fully vested on June 7, 2024. |
Outstanding Equity Awards at December 31, 2023
There were no outstanding equity awards held by our Named Executive Officers as of December 31, 2023.
Employment Agreements
Employment Agreement with Dr. Allan Evans, Chief Executive Officer
On November 27, 2023, the Company and Dr. Allan Evans entered into an Offer Letter (the “Offer Letter”) under which Dr. Evans serves as the Company’s Chief Executive Officer effective December 4, 2023. The Offer Letter provides that Dr. Evans receives: (i) an annual base salary of $250,000, subject to annual review; (ii) eligibility to earn an annual bonus at the sole discretion of the Company’s Board; (iii) a grant of restricted stock units (“RSUs”) equal to 5% of the outstanding common stock of the Company, vesting on the earlier of (a) a secondary offering, (b) a Change of Control event as defined in Treasury Regulation Section 1.409A-3(i)(5), or (c) the one year anniversary of the signing of the Offer Letter; and (iv) eligibility to participate in employee benefit plans and programs.
The Company and Dr. Evans have agreed to negotiate an acceptable Employment Agreement consistent with the terms of the Offer Letter. The Employment Agreement (“Employment Agreement”) shall be for a term of at least two years. The Employment Agreement will contain a non-compete provision that for a period of 12 months after Dr. Evans is no longer employed by the Company, he will not, directly or indirectly, either as proprietor, stockholder, partner, officer, employee or otherwise, distribute, sell, offer to sell, or solicit any orders for the purchase or distribution of any products or services which are similar to those distributed, sold or provided by the Company during the 12 months preceding his termination of employment with the Company, to or from any person, firm or entity which was a customer of the Company during the 12 months preceding such termination of employment. This section in his Employment Agreement may not be waived by the Company without the consent of Red Cat.
Employment Agreement with Brian Hoff, Chief Financial Officer
The Employment Agreement with Mr. Hoff effective November 1, 2022 provides that he will serve as the Chief Financial Officer of the Company on an at will basis. In August 2023, the Employment Agreement was amended (the “First Hoff Amendment”) to increase the percentage of RSUs from 1% to 3% (as discussed below). Pursuant to his Employment Agreement, Mr. Hoff receives an annual base salary of $250,000. In addition, Mr. Hoff’s Employment Agreement entitles him to the following:
| · | Eligibility to earn an annual bonus of 50% of his annual base salary based on key performance indicators, as set forth in a bonus plan that is to be established, approved, administered and determined by the Board and the Chief Executive Officer. |
| · | A cash and/or equity bonus of up to $125,000 upon the closing of each successful acquisition with the closing of this Offering, he will receive a $125,000 bonus. |
| · | A cash bonus and/or equity bonus equal to up to $125,000 upon the completion of a capital raise event, defined as a second offering, a private placement offering, an at-the-market offering, a private investment in public equity offering. |
| · | A grant of RSUs equal to 3% of the outstanding common stock of the Company (after giving effect to the First Hoff Amendment). The RSUs will vest on the earlier of (i) a secondary offering, (ii) a Change of Control event as defined in Treasury Regulation Section 1.409A-3(i)(5), or (iii) the one year anniversary of the consummation of the Offering. This grant becomes effective upon the earlier to occur of 30 days following (i) the closing of the Fat Shark and Rotor Riot acquisition and (ii) the date on which the Company reasonably determines not to proceed with the acquisition. |
Additionally, under his Employment Agreement, if Mr. Hoff is terminated by the Company without Cause or terminates his employment for Good Reason, he will be entitled to six months’ annual base salary and COBRA premiums, as well as accelerated vesting of 100% of the then unvested RSUs, if applicable.
For this purpose, Good Reason is generally defined as (i) any reduction in his base salary, (ii) any material diminution of his authorities, titles or offices, (iii) being required to report to anyone other than the Chief Executive Officer, (iv) a request by the Company to relocate, or (v) material breach of his Employment Agreement without cure after 30 days’ written notice.
Cause is generally defined as (i) failure to perform his material duties under the Employment Agreement, following 30 days’ written notice without cure, (ii) willful misconduct or gross negligence or breach of a fiduciary duty owed to the Company, (iii) conviction of our guilty pleas to a felony or other criminal offense involving moral turpitude, (iv) any act or omission involving dishonesty, disloyalty, or fraud causing or reasonably expected to cause significant economic harm to the Company, or (v) material breach of his Employment Agreement without cure after 30 days’ written notice.
Employment arrangement with Andrew Camden, Chief Operating Officer
Our Board of Directors appointed Mr. Camden, Chief Operating Officer on March 4, 2024, and agreed to pay him a salary of $150,000 per year.
Non-Employee Director Compensation
Our non-employee directors did not receive any cash or equity compensation from the Company for the year ended December 31, 2023.
Following our February 2024 IPO, our board of directors approved compensation for our non-employee directors. Our non-employee directors will receive annual aggregate compensation of $60,000 for service on the board which will be comprised of cash and equity grants. Additional compensation for the chairperson members as set forth below. All cash payments and equity grants will be made semi-annual in arrears.
| · | Audit Committee Chair: $5,000 |
| · | Compensation Committee Chair: $5,000 |
| · | Nominating and Governance Committee Chair: $5,000 |
All equity grants issued to our non-employee directors will be granted under our 2022 Equity Incentive Plan.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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