### S-1/A - S-1/A
S-1/A
1
forms-1a.htm
S-1/A
As
filed with the U.S. Securities and Exchange Commission on May 27, 2026.
Registration
No. 333-295442
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 1 TO
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
First
Breach Inc.
(Exact
Name of Registrant as Specified in its Charter)
Delaware |
|
3480 |
|
82-5147193 |
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer
Identification
Number )
|
18450
Showalter Rd
Hagerstown,
MD 21742
(443)
900-9890
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Jeffrey
Low
Chief
Executive Officer
First
Breach Inc.
18450
Showalter Rd
Hagerstown,
MD 21742
(443)
900-9890
(Name,
Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies
to:
Joseph M. Lucosky, Esq.
Lucosky Brookman LLP
101 Wood Avenue South, 5th Floor
Woodbridge, NJ 08830
Tel. No.: (732) 395-4400
Fax No.: (732) 395-4401
Approximate
date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐ |
|
Accelerated
filer ☐ |
|
Non-accelerated
filer ☒ |
|
Smaller
reporting company ☒ |
|
|
|
|
|
|
Emerging
growth company ☒ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
The
registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the
registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective
in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective
on such date as the U.S. Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
|
The
information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS |
SUBJECT
TO COMPLETION, DATED MAY 27, 2026 |
First
Breach Inc.
70,728,866
Shares
Common
Stock
This
prospectus relates to the registration of the resale of up to 70,728,866 shares of common stock, par value $0.0001 per share,
of First Breach Inc. (the “Company”), a Delaware corporation, consisting of (i) up to 45,034,282 shares of common stock
held by our stockholders identified in this prospectus, or their permitted transferees (the “Registered Stockholders”),
(ii) up to 10,000,000 shares of common stock underlying outstanding restricted stock units; (iii) up to 14,733,046 shares of common
stock issuable, upon exercise of outstanding stock options] and (iv) up to 961,538 shares of common stock issuable upon conversion
of the May 2026 Notes (as defined herein) held by the May 2026 Note Investors (as defined herein), in connection with our direct listing
(the “Direct Listing”) on the Nasdaq Capital Market (“Nasdaq”). The shares being registered herein may be freely
sold in market transactions following the listing and upon the effectiveness of this registration statement. The 45,034,282 shares
of common stock referenced in clause (i) above represent one hundred percent (100%) of our currently issued and outstanding common
stock as of May 27, 2026. The 961,538 shares of common stock referenced in clause (ii) above represent the maximum number of shares
issuable upon conversion of the May 2026 Notes at a fixed conversion price of $8.00 per share. None of the Company’s outstanding
shares registered herein may be freely sold in reliance on an exemption from registration such as Rule 144 (“Rule 144”) under
the Securities Act of 1933, as amended (the “Securities Act”), at this time. Prior to the listing of our common stock on
the Nasdaq Capital Market there has been no public market for our common stock. During the period from March 2023 through March 2026,
we issued shares of common stock to investors at a low price of $1.00 per share and a high price of $8.00 per share. This information,
however, may have little or no relation to broader market demand for our shares of common stock. As a result, you should not place undue
reliance on these historical sales prices as they may differ materially from the public prices of our shares of common stock on Nasdaq.
Unlike
an initial public offering, the resale by the Registered Stockholders is not being underwritten by any investment bank. The Registered
Stockholders may, or may not, elect to sell their shares of Common Stock covered by this prospectus, as and to the extent they may determine.
Such sales, if any, will be made through brokerage transactions on the Nasdaq Capital Market at prevailing market prices. We will not
be involved in the price setting process. Additionally, the price of our shares in prior private transactions may have little or no relation
to the opening price and subsequent public price of our stock on Nasdaq. For more information, see the section titled “Plan of
Distribution.” If the Registered Stockholders choose to sell their shares of common stock, we will not receive any proceeds from
the sale of such shares.
No
public market exists for our common stock. Further, the listing of our common stock on Nasdaq, without a firm-commitment underwritten
offering, is a novel method for commencing public trading in shares of our common stock, and consequently, the trading volume and price
of shares of our common stock may be more volatile than if shares of our common stock were initially listed in connection with an initial
public offering underwritten on a firm-commitment basis.
On
the day that our shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy
and sell orders and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such
accepted orders. The Current Reference Price is calculated each second and, during a 10-minute “Display Only” period, is
disseminated, along with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following
the “Display Only” period, a “Pre-Launch” period begins, during which RBW Capital Partners LLC (the “Advisor”
or “RBW”), in its capacity as our financial advisor, must notify Nasdaq that our shares are “ready to trade.”
Once the Advisor has notified Nasdaq that our shares of common stock are ready to trade, Nasdaq will confirm the Current Reference Price
for our shares of common stock, in accordance with the Nasdaq rules. If the Advisor then approves proceeding at the Current Reference
Price, the applicable orders that have been entered will be executed at such price and the regular trading of our shares of common stock
on Nasdaq will commence, subject to Nasdaq conducting validation checks in accordance with the Nasdaq rules. Under the Nasdaq rules,
the “Current Reference Price” means: (i) the single price at which the maximum number of orders to buy or sell can be matched;
(ii) if there is more than one price at which the maximum number of orders to buy or sell can be matched, then it is the price that minimizes
the imbalance between orders to buy or sell (i.e. minimizes the number of shares that would remain unmatched at such price); (iii) if
more than one price exists under (ii), then it is the entered price (i.e. the specified price entered in an order by a customer to buy
or sell) at which our shares of common stock will remain unmatched (i.e. will not be bought or sold); and (iv) if more than one price
exists under (iii), a price determined by Nasdaq in consultation with the Advisor in its capacity as our financial advisor. In the event
that more than one price exists under (iii), the Advisor will exercise any consultation rights only to the extent that it can do so consistent
with the anti-manipulation provisions of the federal securities laws, including Regulation M, or applicable relief granted thereunder.
The Registered Stockholders will not be involved in Nasdaq’s price-setting mechanism, including any decision to delay or proceed
with trading, nor will they control or influence the Advisor in carrying out its role as a financial adviser. The Advisor will determine
when our shares of common stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations
of volume, timing and price. In particular, the Advisor will determine, based primarily on pre-opening buy and sell orders, when a reasonable
amount of volume will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference
Price. For more information, see “Plan of Distribution.”
We
have applied to list our common stock on the Nasdaq Capital Market under the symbol “FBDT”.
If
our Nasdaq application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on
Nasdaq, we will not complete this Direct Listing. This listing is a condition to the offering. No assurance can be given that our Nasdaq
application will be approved and that our common stock will ever be listed on Nasdaq. If our listing application is not approved by Nasdaq,
we will not be able to consummate the offering and we will terminate this Direct Listing.
We
are an emerging growth company under the Jumpstart Our Business Startups Act of 2012 and a “smaller reporting company” as
defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and, as such, may elect to comply with certain reduced public
company reporting requirements for this prospectus and future filings. See “ Prospectus Summary — Implications of Being
an Emerging Growth Company” and “ Prospectus Summary — Implications of Being a Smaller Reporting Company .”
Investing
in our common stock is speculative and involves a high degree of risk. Before making any investment decision, you should carefully review
and consider all the information in this prospectus , including the risks and uncertainties described under “Risk Factors”
beginning on page 7.
Neither
the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined
if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The
date of this prospectus is __________, 2026.
|
|
TABLE
OF CONTENTS
|
PAGE |
PROSPECTUS SUMMARY |
1 |
SUMMARY OF FINANCIAL INFORMATION |
6 |
RISK FACTORS |
7 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS |
34 |
USE OF PROCEEDS |
35 |
DIVIDEND POLICY |
35 |
CAPITALIZATION |
36 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
37 |
BUSINESS |
47 |
MANAGEMENT |
51 |
EXECUTIVE AND DIRECTOR COMPENSATION |
59 |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS |
63 |
PRINCIPAL AND REGISTERED STOCKHOLDERS |
64 |
DESCRIPTION OF CAPITAL STOCK |
66 |
PLAN OF DISTRIBUTION |
69 |
SHARES ELIGIBLE FOR FUTURE SALE |
71 |
SALE PRICE HISTORY OF COMMON STOCK |
72 |
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS |
73 |
LEGAL MATTERS |
77 |
EXPERTS |
77 |
WHERE YOU CAN FIND ADDITIONAL INFORMATION |
77 |
INDEX TO FINANCIAL STATEMENTS |
F-1 |
You
should only rely on the information contained in this prospectus and in any free writing prospectus prepared by or on behalf of us and
delivered or made available to you. We have not authorized anyone to provide you with additional or different information. The Registered
Stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus or a free writing prospectus is accurate only as of its date, regardless
of its time of delivery or of any sale of shares of our common stock. Our business, financial condition, operating results, and prospects
may have changed since that date.
For
investors outside the United States : We have not done anything that would permit this offering or possession or distribution of this
prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United
States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering
of the shares of common stock and the distribution of this prospectus outside of the United States.
i |
|
ABOUT
THIS PROSPECTUS
This
prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a continuous offering process. Under this
process, the Registered Stockholders may, from time to time, sell the common stock covered by this prospectus in the manner described
in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to,
or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may
obtain this information without charge by following the instructions under the “Where You Can Find Additional Information”
section appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest
in our common stock.
INDUSTRY
AND MARKET DATA
Unless
otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position
is based on a variety of sources, including information from third-party industry analysts and publications and our own estimates and
research. Some of the industry and market data contained in this prospectus are based on third-party industry publications. This information
involves a number of assumptions, estimates and limitations.
The
industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been
obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on
our behalf. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including
those described in “Risk Factors” in this prospectus. These and other factors could cause results to differ materially from
those expressed in these publications.
TRADEMARKS
We
own or have rights to trademarks or trade names that we use in connection with the operation of our businesses, our corporate names,
logos and website names. This prospectus contains references to our trademarks and service marks and to those belonging to other entities.
Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™
symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under
applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or
display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship
of us by any other companies. All other trademarks are the property of their respective owners.
ii |
|
PROSPECTUS
SUMMARY
This
summary highlights certain information appearing elsewhere in this prospectus. Because it is only a summary, it does not contain all
of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and
should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. This summary contains forward-looking
statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions, or future
events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
See “Cautionary Note Regarding Forward-Looking Statements.” Before you decide to invest in our common stock, you should also
read the entire prospectus carefully, including “Risk Factors” beginning on page 7, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” beginning on page 37, and the financial statements and related
notes included in this prospectus.
Unless
the context indicates otherwise, as used in this prospectus, the terms “we,” “us,” “our,” “our
company,” “First Breach,” and “our business” refer to First Breach Inc.
Executive
Summary
We
are an integrated manufacturer of high-quality ammunition and ammunition components, serving commercial, law enforcement, and military
markets. With in-house production capabilities, we are able to maintain tight control over our supply chain and quality assurance from
raw material processing to final product assembly. We operate in a state-of-the-art facility that includes an on-site lead smelting operation,
allowing us to ensure the consistency, purity, and availability of one of the most critical raw materials in ammunition manufacturing,
and brass cup and casing manufacturing from raw materials. We maintain relationships with multiple raw materials suppliers worldwide,
including but not limited to ABCO Metals, Gemciler Guven Metal, and Mittal Metals, to ensure a consistent inflow in the materials needed
to manufacture product and avoid potential global supply issues. Our in-house wearable tooling department further enhances production
efficiency and quality by designing and fabricating precision tools tailored to our manufacturing processes. Through stringent quality
control, high-tech machinery, and deep industry expertise, we have established a strong reputation among shooting sports enthusiasts,
tactical professionals, and OEM clients. We distribute our products primarily through distributor channels, but we also sell smaller
quantities of product directly to consumers and small businesses. We take pride in our customer relationships and do not limit ourselves
to only a few customers, but we strive to distribute as many of our products as practical to as many customers as possible. In doing
so, we have developed a strong customer base with over 140 potential sales channels.
Our
vision is to establish ourselves as a leading participant in the United States and international ammunition markets. Through the
production of high-quality, competitively priced products, we seek to achieve significant expansion of our market share and operational
scale. As one of the few fully vertically integrated manufacturers capable of producing both components and finished cartridges, we maintain
and continuously seek to strengthen a distinct competitive advantage supported by ongoing capital investments, strategic acquisitions,
and partnerships. The global ammunition industry continues to experience robust demand driven by sustained civilian consumption for personal
safety and recreational use, as well as increased defense and law enforcement expenditures amid geopolitical uncertainty. We are well-positioned
to capture this growth through continuous process improvements, product line diversification, and the expansion of our distribution network.
Concurrently, we intend to enhance our direct-to-consumer channels and brand visibility through targeted marketing, industry events,
and strategic media collaborations.
1 |
In
addition to our core operations, on September 23, 2025, we entered into a strategic joint venture with ideaForge Technology Inc., the
world’s #3 ranked dual-category drone manufacturer and a recognized innovator in unmanned aerial systems (“UAS”). The
joint venture—First Forge Technologies Inc.—will be a U.S.-based enterprise focused on the localized production and sale
of advanced drone platforms for defense, homeland security, and commercial applications. Leveraging ideaForge’s proprietary avionics
and autonomous technologies alongside our precision manufacturing infrastructure and domestic supply chain capabilities, the venture
will deliver fully U.S.-compliant, “Made in the USA” aerial systems designed to meet federal and state procurement standards.
We anticipate initial production and pilot deployments beginning in early 2026, with the goal of securing government and enterprise contracts
simultaneously. This initiative aligns with U.S. policy directives aimed at strengthening domestic manufacturing, enhancing national
security, and fostering technological independence, positioning us for meaningful long-term growth across both ammunition and aerospace
sectors.
In furtherance of our drone and defense technology
strategy, on May 1, 2026, we entered into a Master Services Agreement with Hellbender, Inc. for the design, engineering, prototyping
and demonstration of volume manufacturing capability for two Class 1 attritable first-person-view drone platforms targeted for deployment
consistent with U.S. National Defense Authorization Act requirements and the Department of Defense Drone Dominance Program parameters.
See “ Recent Developments — Hellbender ” below for additional information.
Implications
of Being an Emerging Growth Company
We
are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and we may remain an emerging growth company
for up to five years following the listing of our common stock on Nasdaq. For so long as we remain an emerging growth company, we are
permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to
have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b)
of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic
reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and
any golden parachute payments not previously approved. In particular, in this prospectus, we have provided only two years of audited
financial statements and have not included all of the executive compensation-related information that would be required if we were not
an emerging growth company. Accordingly, the information contained herein may be different from the information you receive from other
public companies in which you hold stock.
In
addition, the federal securities laws provide that an emerging growth company may take advantage of an extended transition period for
complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting
standards until those standards would otherwise apply to private companies. We have elected this exemption from new or revised accounting
standards, and, therefore, we will not be subject to the same requirements to adopt new or revised accounting standards as other public
companies that are not emerging growth companies.
We
would cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which
we have $1.235 billion or more in annual revenue, (ii) the date on which we first qualify as a large accelerated filer under the rules
of the U.S. Securities and Exchange Commission, or the SEC, (iii) the date on which we have, in any three-year period, issued more than
$1.0 billion in non-convertible debt securities, and (iv) the last day of the fiscal year ending after the fifth anniversary of the listing
of our common stock on Nasdaq.
2 |
Implications
of Being a Smaller Reporting Company
We
are a “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to
take advantage of these scaled disclosures for so long as (i) the market value of our voting and non-voting common stock held by non-affiliates
is less than $250 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenues are less than $100
million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates
is less than $700 million measured on the last business day of our second fiscal quarter. Specifically, as a smaller reporting company,
we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and
have reduced disclosure obligations regarding executive compensation and, if we are a smaller reporting company with less than $100 million
in annual revenue, we would not be required to obtain an attestation report on internal control over financial reporting issued by our
independent registered public accounting firm.
Corporate
Information
We
were originally formed as a limited liability company named First Breach, LLC under the laws of the State of Maryland on April 9, 2018
and subsequently converted to a corporation named First Breach Inc. incorporated under the laws of the State of Delaware on October 22,
2021. Our principal executive office is located at 18450 Showalter Rd., Hagerstown, MD 21742, and our telephone number is (443) 900-9890.
Our website is https://firstbreach.com. Information contained on, or available through, our website does not constitute part of, and
is not deemed incorporated by reference into, this prospectus, and investors should not rely on such information in deciding whether
to purchase shares of our common stock.
Summary
of Significant Risks
Investing
in our common stock is speculative and involves a high degree of risk. These risks are discussed more fully in “Risk Factors”
and elsewhere in this prospectus. We urge you to read “Risk Factors” beginning on page 7 and this prospectus in full.
Our significant risks may be summarized as follows:
Risks
Related to Our Business and Industry
|
● |
We
have a limited operating history on which you can evaluate our company, and our decision to focus our efforts on establishing our
manufacturing business may not be successful. |
|
● |
We
have incurred net losses and may continue to incur net losses as we seek to expand our business. |
|
● |
Our
manufacturing facility is critical to our success. |
|
● |
Inability
to make timely payments under our equipment lease agreement could lead to forfeiture of important manufacturing equipment, which
may have a negative effect on our manufacturing process and in turn harm our results of operations. |
3 |
|
● |
Shortages
or a disruption in the availability, price or quality of raw materials may delay or reduce our sales and increase our costs, thereby
harming our results of operations. |
|
● |
Our
performance is influenced by a variety of economic, social, and political factors. |
|
● |
Our
business depends on the sale of our ammunition products, and our success requires the introduction of new products that achieve market
acceptance. |
|
● |
War
and other armed conflicts, such as the current Russia-Ukraine conflict and the current armed conflict involving Iran, the United
States, Israel and other parties in the Middle East, or other natural or manmade disasters may affect the markets in which we
operate, our customers, our delivery of products and customer service, and could have a material adverse impact on our business,
results of operations, or financial condition. |
|
● |
The
international nature of our business exposes us to global economic, political and legal risks that could impact our profitability. |
|
● |
The
success of the Company depends, in part, on our ability to protect our intellectual property and our brand. |
|
● |
We
may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management
attention from our business. |
|
● |
We
rely on third-party suppliers for most of our manufacturing equipment. |
|
● |
We
do not have long-term purchase commitments from our customers, and their ability to cancel, reduce, or delay orders could reduce
our revenue and increase our costs. |
|
● |
Revenue
from sales of ammunition components will depend on sales to ammunition manufacturers, some of which will account for a significant
portion of our sales. |
|
● |
We
face intense competition that could result in our losing or failing to gain market share and suffering reduced sales. |
|
● |
We
plan to manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury
claims and litigation. |
|
● |
The
failure to manage our growth could adversely affect our operations. |
|
● |
Our
business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition
or reputation would likely have a material adverse effect on our business. |
|
● |
Our
operating results may experience significant fluctuations. |
|
● |
The
failure to attract and retain key personnel could have an adverse effect on our operating results. |
|
● |
We
may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs. |
|
● |
Any
acquisitions that we undertake will involve significant risks, and any acquisitions that we undertake in the future could disrupt
our business, dilute stockholder value, and harm our operating results. |
|
● |
A
failure of our information technology systems, or an interruption in their operation due to internal or external factors including
cyber-attacks, could have a material adverse effect on our business, financial condition or results of operations. |
|
● |
We
are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements. |
|
● |
Changes
in government policies and firearms legislation could adversely affect our financial results. |
4 |
|
● |
Failure
to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation, and export controls and trade
sanctions, could result in fines or criminal penalties if we expand our business abroad. |
|
● |
Our
founders will have the ability to exert substantial influence over our company. |
|
● |
Our
charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover. |
|
● |
Compliance
with the laws and regulations affecting public companies could adversely affect our business, results of operations, and financial
condition. |
|
● |
We are dependent on Hellbender, Inc., a third-party
contractor, for the design, engineering and prototyping of our attritable drone platforms, and our drone development program may
not be completed on time, within budget or at all. Our attritable drone development program is at an early stage, and we may not
realize any revenue or other commercial benefit from our investment. |
|
● |
If we are unable to satisfy our funding obligations
on the dates required, we may be in breach of the JV Agreement, which could result in the dilution or forfeiture of our equity interests
in the Joint Venture, disputes with IdeaForge, or the termination of the JV Agreement, any of which could have a material adverse
effect on our business, financial condition and results of operations. Furthermore,
even if we are able to satisfy our capital contribution obligations, there is no guarantee that the Joint Venture will achieve its
intended objectives or generate any return on our investment. |
Risks
Related to this Direct Listing and Ownership of Our Common Stock
|
● |
Our
listing differs significantly from an initial public offering conducted on a firm-commitment basis. |
|
● |
Our
shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the
market price of our shares of common stock may be volatile. |
|
● |
We
may not be able to meet each of the quantitative requirements of the Nasdaq Capital Market’s Market Value Standard for Direct
Listings. |
|
● |
We intend to list our common stock on the Nasdaq Capital
Market in connection with the Direct Listing and must satisfy heightened initial listing requirements, and there can be no assurance
that we will be able to do so. |
|
● |
The
market price of our Common Stock may be volatile, and you could lose all or part of your investment. |
|
● |
If
securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock
price and trading volume could decline. |
|
● |
Our
status as an “emerging growth company” and a “smaller reporting company” allows us to take advantage of reduced
disclosure requirements, which could make our Common Stock less attractive to investors. |
|
● |
Exercise
of warrants and options, and vesting of restricted stock units, may have a dilutive effect on our stock and negatively impact
the price of our Common Stock. |
|
● |
Tariffs
and trade tensions could have an adverse effect on economic conditions and financial markets, which may adversely affect the value
of our shares of Common Stock. |
|
● |
Issuance
of Preferred Stock could result in the dilution of the value of the current stockholders’ Common Stock. |
|
● |
The April 2026 Senior Notes (as defined herein)
issued in the April 2026 Note Financing (as defined herein) are secured by a first-priority lien on substantially all of our
assets, were issued at an original issue discount of 35.0%, and are convertible into shares of our common stock at a fixed conversion
price of $8.00 per share. The conversion of the April 2026 Senior Notes and the exercise of the April 2026 Note Warrants
(as defined herein) issued in connection with the April 2026 Note Financing may result in substantial dilution to our existing
stockholders. |
|
● |
The May 2026 Notes (as defined herein) issued in the May 2026 Note Financing
(as defined herein) are secured by a subordinated security interest in substantially all of our assets, were issued at an original issue
discount of 35.0%, and are convertible into shares of our common stock at the election of the holders at a conversion price of $8.00 per
share. Funding of the May 2026 Notes is conditioned upon the Company’s filing of a request for acceleration of effectiveness of
this registration statement pursuant to Rule 461 under the Securities Act and the approval of our listing application by Nasdaq. The conversion
of the May 2026 Notes may result in substantial dilution to our existing stockholders, and if the holders elect not to convert, we would
be required to repay approximately $7,692,308 in cash at maturity. |
|
● |
Failure
to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material
adverse effect on our ability to produce accurate financial statements and on our stock price. |
|
● |
We
do not expect to pay any dividends for the foreseeable future. |
|
● |
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock. |
|
● |
An
investment in our company may involve tax implications, and you are encouraged to consult your own advisors as neither we nor any
related party is offering any tax assurances or guidance on our company or your investment. |
5 |
SUMMARY
OF FINANCIAL INFORMATION
The
following tables set forth summary financial and other data for the periods ended and at the dates indicated below. Our summary balance
sheet and statement of operations data as of and for the year ended December 31, 2025 have been derived from our audited financial statements
included in this prospectus. Our summary balance sheet data as of March 31, 2026 and our summary statement of operations data for
the three months ended March 31, 2026 and 2025 have been derived from our unaudited interim financial statements included elsewhere in
this prospectus. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements
and, in the opinion of our management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair
statement of the financial information set forth therein. Our results for the three months ended March 31, 2026 are not necessarily indicative
of the results to be expected for the full year ending December 31, 2026 or for any other future period. The financial data set forth
below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
and the financial statements and notes thereto included elsewhere in this prospectus.
STATEMENTS
OF OPERATIONS
| |
Three
months ended
March 31, 2026 (Unaudited)
| | |
Three
months ended
March 31, 2025(Unaudited)
| | |
Year
ended
December 31, 2025
| |
| |
| | | |
| | | |
| | |
Net revenues | |
$ | 266,004 | | |
$ | 15,685 | | |
$ | 384,129 | |
Cost of revenues | |
| 629,850 | | |
| 327,496 | | |
| 1,761,368 | |
Net loss associated with liquidation of raw materials | |
| - | | |
| 386,189 | | |
| 684,960 | |
Gross margin | |
| (363,846 | ) | |
| (698,000 | ) | |
| (2,062,199 | ) |
| |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | |
Selling, general, and administrative expense | |
| 14,085,908 | | |
| 472,582 | | |
| 7,926,714 | |
Total operating expenses | |
| 14,085,908 | | |
| 472,582 | | |
| 7,926,714 | |
| |
| | | |
| | | |
| | |
Loss from operations | |
| (14,449,754 | ) | |
| (1,170,582 | ) | |
| (9,988,913 | ) |
| |
| | | |
| | | |
| | |
Total other expenses, net | |
| (197,201 | ) | |
| (399,593 | ) | |
| (3,833,208 | ) |
| |
| | | |
| | | |
| | |
Net loss before income taxes | |
| (14,646,955 | ) | |
| (1,570,175 | ) | |
| (13,822,121 | ) |
Income tax provision | |
| — | | |
| — | | |
| — | |
Net loss | |
$ | (14,646,955 | ) | |
$ | (1,570,175 | ) | |
$ | (13,822,121 | ) |
| |
| | | |
| | | |
| | |
Net loss per share: | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.28 | ) | |
$ | (0.04 | ) | |
$ | (0.36 | ) |
| |
| | | |
| | | |
| | |
Weighted average number of shares outstanding: | |
| | | |
| | | |
| | |
Basic & diluted | |
| 51,407,478 | | |
| 37,784,611 | | |
| 38,276,140 | |
BALANCE
SHEET DATA
| |
March 31, 2026 | | |
December 31, 2025 | |
Cash | |
$ | 1,414,608 | | |
$ | 2,477,122 | |
Total current assets | |
$ | 2,352,846 | | |
$ | 3,493,562 | |
Total assets | |
$ | 11,645,296 | | |
$ | 13,020,782 | |
Total current liabilities | |
$ | 4,091,059 | | |
$ | 4,631,271 | |
Total liabilities | |
$ | 5,543,194 | | |
$ | 6,616,302 | |
Total stockholders’ equity | |
$ | 6,102,102 | | |
$ | 6,404,480 | |
Total liabilities and stockholders’ equity | |
$ | 11,645,296 | | |
$ | 13,020,782 | |
6 |
RISK
FACTORS
An
investment in our securities is speculative and involves a high degree of risk. You should carefully consider the risks described below,
which we believe represent certain of the material risks to our business, together with the information contained elsewhere in this prospectus,
before you make a decision to invest in our shares of common stock. Please note that the risks highlighted here are not the only ones
that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur
could also impair our operations. If any of the following events occur or any additional risks presently unknown to us actually occur,
our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our
securities could decline and you could lose all or part of your investment.
Risks
Related to Our Business and Industry
Our
recurring losses and negative cash flow from operations, as well as current cash and liquidity projections, raise substantial doubt about
our ability to continue as a going concern.
Based
on recurring losses from operations and current cash and liquidity projections, we have concluded that there is substantial doubt about
our ability to continue as a going concern for the next twelve months. As of March 31, 2026, we had cash of $1,414,608 and negative
working capital of $1,738,213. As of December 31, 2025, we had cash of $2,477,122 and negative working capital of $1,137,709. Further,
we have incurred and expect to continue to incur significant costs in pursuit of our product development and growth plans. Our financial
statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if
we do not continue as a going concern. You should not rely on our balance sheet as an indication of the amount of proceeds that would
be available to satisfy claims of creditors, and potentially be available for distribution to holders of our common stock, in the event
of liquidation.
We
have a limited operating history on which you can evaluate our company, and our decision to focus our efforts on establishing our manufacturing
business may not be successful.
We
have a limited operating history on which you can evaluate our company. The company was founded in 2018 and until the first quarter of
2021 our operations consisted principally of securing the necessary licenses to conduct our business in the US and Israel. We are currently
manufacturing ammunition and ammunition components in our manufacturing facility in the US. To date, production has been limited to optimizing
our production lines and production of very high quality products for our customers.
Substantially
all of our revenue to date has been from selling ammunition and components to end-users. We have decided to focus our efforts predominantly
on our manufacturing, and we have significantly limited our wholesaling efforts as the manufacturing equipment began production. While
we limited the wholesale business, our primary focus is on selling our own manufactured products as our manufacturing capabilities ramp
up and are the central focus of our business. As a result, we anticipate that our wholesale revenue will be limited. There can be no
assurance that our efforts to establish our manufacturing business will be successful. Accordingly, our business will be subject to many
of the problems, expenses, delays, and risks inherent in the establishment of a new business enterprise.
7 |
We
have incurred net losses and may continue to incur net losses as we seek to expand our business.
We
have incurred losses since we established the company in 2018. We expect to continue to make significant expenditures and incur substantial
expenses as we develop and expand our business; develop and introduce new products; build our manufacturing capabilities; expand our
sales and distribution networks; implement internal systems and infrastructure; and hire additional personnel. As a result, we may continue
to incur losses as we execute our plan to expand our business and may never achieve or maintain profitability. We may be unable to satisfy
our current obligations solely from cash generated from operations or become profitable until we successfully expand our business. If
we continue to incur substantial losses and are unable to secure additional sources of funding as needed to expand our business, we could
be forced to curtail or discontinue our business operations; sell assets at unfavorable prices; or merge, consolidate, or combine with
a company with greater financial resources in a transaction that may be unfavorable to us.
Our
manufacturing facility is critical to our success.
Our
manufacturing facility is critical to our success, as we currently produce all of our products at this facility. The facility also houses
our principal research, development, engineering, and design functions.
Any
event that causes a disruption of the operation of this facility for even a relatively short period of time would adversely affect our
ability to produce and ship our products and to provide service to our customers. We make certain changes in our manufacturing operations
from time to time to enhance the facility and associated equipment and systems and to introduce certain efficiencies in manufacturing
and other processes to produce our products in a more efficient and cost-effective manner. We anticipate that we will continue to incur
significant capital and other expenditures with respect to this facility, but we may not be successful in continuing to improve efficiencies.
Inability
to make timely payments under our equipment lease agreement could lead to forfeiture of important manufacturing equipment, which may
have a negative effect on our manufacturing process and in turn harm our results of operations.
We
currently lease certain pieces of equipment that are important to our manufacturing operations. We have entered into a lease agreement
for certain equipment which subjects us to monthly payments and requires us to provide a securities interest in the equipment. As such,
any inability to make timely payments under our lease agreement could lead to the forfeiture of the equipment which may have a negative
effect on our manufacturing process and in turn harm our results of operations.
Shortages
or a disruption in the availability, price or quality of raw materials may delay or reduce our sales and increase our costs, thereby
harming our results of operations.
We
use a variety of raw materials in the production of our products including commodity materials such as brass, copper and lead. The price
of raw materials and these commodities can be highly volatile and fluctuate based on the market for these commodities and their existing
supply, which could result in instability in our profit margins. For example, copper has traditionally been used in electrical wiring,
coining, industrial applications, and in alloys with a variety of other uses. Copper demand may increase because of new needs for the
metal including increased telecommunication buildouts, improved batteries, and demand from the rapidly growing industry of electric cars.
Similarly, supply chain disruptions may result in our inability to obtain necessary raw materials and commodities on a timely basis or
from sources that provide consistent quality materials.
8 |
The
inability to obtain sufficient quantities of raw materials necessary for the production of our products could result in reduced or delayed
sales or lost orders. Any delay in or loss of sales or orders could adversely impact our operating results. Many of the materials used
in the production of our products are available only from a limited number of suppliers. We could be subject to increased costs, supply
interruptions, and difficulties in obtaining raw materials. Our reliance on third-party suppliers for various raw materials for our products
exposes us to volatility in the availability, quality, and price of these raw materials. Our orders with certain of our suppliers may
represent a very small portion of their total orders. As a result, they may not give priority to our business, leading to potential delays
in or cancellation of our orders. A disruption in deliveries from our third-party suppliers, capacity constraints, production disruptions,
price increases, or decreased availability of raw materials or commodities could have an adverse effect on our ability to meet our commitments
to customers or increase our operating costs. Quality issues experienced by third party suppliers can also adversely affect the quality
and effectiveness of our products and result in liability and reputational harm.
Our
performance is influenced by a variety of economic, social, and political factors.
Our
performance is influenced by a variety of economic, social, and political factors. General economic conditions and consumer spending
patterns can negatively impact our operating results. Economic uncertainty, unfavorable employment levels, declines in consumer confidence,
increases in consumer debt levels, increased commodity prices, and other economic factors may affect consumer spending on discretionary
items and adversely affect the demand for our products. In times of economic uncertainty, consumers tend to defer expenditures for discretionary
items, which affects demand for our products. Any substantial deterioration in general economic conditions that diminish consumer confidence
or discretionary income could reduce our sales and adversely affect our operating results. Economic conditions also affect governmental
political and budgetary policies. As a result, economic conditions also can have an adverse effect on the sale of our products to law
enforcement, government, and military customers.
Political
and other factors also can adversely affect our performance. Concerns about presidential, congressional, and state elections and legislature
and policy shifts resulting from those elections can adversely affect the demand for our products. In addition, uncertainty surrounding
control of firearms, firearm products, and ammunition at the federal, state, and local level and heightened fears of terrorism and crime
can adversely affect consumer demand for our products. Often, such concerns result in an increase in near-term consumer demand and subsequent
softening of demand when such concerns subside. Inventory levels in excess of customer demand may negatively impact operating results
and cash flow.
Federal
and state legislatures frequently consider legislation relating to the regulation of firearms, including amendment or repeal of existing
legislation. Existing laws may also be affected by future judicial rulings and interpretations regarding firearm products and ammunition.
If such restrictive changes to legislation develop, we could find it difficult, expensive, or even impossible to comply with them, impeding
new product development and distribution of existing products.
9 |
Our
business depends on the sale of our ammunition products, and our success requires the introduction of new products that achieve market
acceptance.
The
sale of ammunition and related components represents the core of our business, and our results of operations are directly tied to the
level of consumer, commercial, and government demand for these products. Demand for ammunition is influenced by the sale and usage of
firearms, which are themselves affected by economic conditions, recreational and sporting trends, law enforcement and security requirements,
and legislative or regulatory developments. As a result, sales of ammunition can be volatile and difficult to predict, and any sustained
reduction in demand would materially and adversely affect our business, financial condition, and results of operations.
In
addition, our long-term success depends on our ability to develop and introduce new ammunition products that align with customer preferences.
Product development is often costly and time-consuming, and new products may not achieve customer acceptance. If we fail to successfully
develop and market new products, or if demand for our ammunition declines, our sales, margins, and overall market position could be materially
harmed.
War
and other armed conflicts, such as the ongoing Russia-Ukraine conflict and the armed conflict involving Iran, the United States, Israel
and other parties in the Middle East, or other natural or manmade disasters may affect the markets in which we operate, our customers,
our delivery of products and customer service, and could have a material adverse impact on our business, results of operations, or financial
condition.
Geopolitical instability and armed conflict in
regions in which we, our customers, or our suppliers operate may adversely affect our business. In February 2022, following Russia’s
invasion of Ukraine, the U.S. and other countries announced sanctions against Russia. These sanctions include restrictions on selling
or importing goods, services or technology in or from affected regions, travel bans and asset freezes impacting connected individuals
and political, military, business and financial organizations in Russia, severing certain Russian banks from the U.S. financial system,
barring some Russian enterprises from raising money in the U.S. market and blocking the access of certain Russian banks to financial
markets. More recently, in February 2026, the United States and Israel commenced military strikes against Iran, and Iran has undertaken
retaliatory actions against Israel, U.S. military installations in the region, and targets in other countries. In connection with that
conflict, Iran has at times restricted or disrupted vessel traffic through the Strait of Hormuz, a critical maritime chokepoint through
which a substantial portion of the world’s seaborne crude oil, refined petroleum products and liquefied natural gas transit, and a number
of major shipping and logistics providers have suspended, rerouted or curtailed transits through the affected region. The U.S. and other
countries have also imposed, and continue to impose, expanding sanctions and other restrictive measures targeting Iran, including measures
directed at Iranian petroleum and petrochemical exports and associated financial and shipping networks.
These conflicts and related measures have contributed
to increased freight rates, higher insurance premiums, longer transit times, port congestion, and elevated and volatile energy and commodity
prices. The U.S. and other countries could impose wider sanctions or take other actions should either conflict further escalate, and
Russia, Iran, or their respective allies could undertake further retaliatory measures, including additional disruption of regional shipping
lanes, cyberattacks, or attacks on infrastructure. While it is difficult to anticipate the impact that these conflicts or the measures
taken to date may have on our company, any escalation of hostilities, any further sanctions or restrictions imposed by the U.S. or other
countries, and any retaliatory measures could increase our costs, reduce our sales and earnings, disrupt our operations and supply chain,
delay our delivery of products and services, adversely affect the businesses of our customers and suppliers, or otherwise have a material
adverse effect on our business, results of operations, or financial condition.
Similarly, our business and supply chain may be
adversely affected by instability, disruption, or destruction in a geographic region in which we operate, regardless of cause, including
war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, flood, fire, earthquake,
storm, pandemic events and spread of disease. Such events may cause customers to suspend their decisions on using our products and services,
make it impossible to access some of our inventory, and give rise to sudden significant changes in regional and global economic conditions
and cycles that could interfere with purchases of goods or services and commitments to develop new products and services. These events
also pose significant risks to our personnel and to physical facilities, transportation and operations, which could have a material adverse
impact on our business, results of operations, or financial condition.
10 |
The
international nature of our business exposes us to global economic, political and legal risks that could impact our profitability.
We
conduct a portion of our business outside the United States. There are inherent risks in our international operations, including:
●
exchange controls and currency restrictions;
●
currency fluctuations and devaluations;
●
tariffs and trade barriers;
●
export duties and quotas;
●
changes in the availability and pricing of raw materials, energy and utilities;
●
changes in local economic conditions;
●
changes in laws and regulations, including the imposition of economic or trade sanctions affecting international commercial
transactions;
●
exposure to possible expropriation, nationalization or other government actions;
●
unsettled political conditions, military action, civil unrest, acts of terrorism, force majeure, war or other armed conflict;
and
●
countries whose governments have been hostile to U.S.-based businesses.
Changes
in U.S. or foreign government policy on international trade, including the imposition or continuation of tariffs, could materially and
adversely affect our business. Also, because of uncertainties regarding the interpretation and application of laws and regulations and
the enforceability of contract rights, we face risks in some countries that our contract rights would not be enforced by local governments.
Other risks in international business also include difficulties in managing credit risk.
The
success of the Company depends, in part, on our ability to protect our intellectual property and our brand.
We
rely on and/or will rely on a combination of federal, provincial, state, common law trademark, patent, and trade secret laws, confidentiality
procedures, and contractual provisions to protect our intellectual property. However, these measures afford only limited protection and
might be challenged, invalidated, or circumvented by third parties. The measures we take to protect our intellectual property may not
be sufficient or effective. Additionally, any competitors may independently develop similar intellectual property.
In
addition, it is difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a cost-effective
manner. In jurisdictions where foreign laws provide less intellectual property protection than afforded domestically and abroad, our
technology or other intellectual property may be compromised, and our business would be materially adversely affected. We may find it
necessary to take legal action in the future to enforce or protect our intellectual property rights, and such action may be expensive
and time consuming. In addition, we may be unable to obtain a favorable outcome in any such intellectual property litigation.
We
may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management attention
from our business.
Any
intellectual property infringement claims against us, with or without merit, could be costly and time-consuming to defend and divert
our management’s attention from our business. If our products were found to infringe a third party’s proprietary rights,
we could be required to enter into costly royalty or licensing agreements to be able to sell our products. Royalty and licensing agreements,
if required, may not be available on terms acceptable to us or at all.
11 |
Our
efforts to avoid the patent, trademark, and copyright rights of others may not provide notice to us of potential infringements in time
to avoid investing in product development and promotion that must later be abandoned if suitable license terms cannot be reached.
There
is no guarantee that our use of conventional technology searching and brand clearance searching will identify all potential rights holders.
Rights holders may demand payment for past infringements and/or force us to accept costly license terms or discontinue use of protected
technology and/or works of authorship that may include for example photos, videos, and software.
To
the extent demand for our products increase, our future success will depend upon our ability to enhance manufacturing production capacity.
To
the extent we are able to establish production of our ammunition component and ammunition products and demand for our products increase
significantly in future periods, one of our key challenges will be to enhance production capacity to meet sales demand, while maintaining
product quality. Our inability to meet any future increase in sales demand or access capital for inventory may hinder growth or increase
dilution in connection with financing activities conducted to meet any such increase in sales demand.
We
rely on third-party suppliers for most of our manufacturing equipment.
We
rely on third-party suppliers for most of the manufacturing equipment necessary for the production our products. The failure of suppliers
to supply manufacturing equipment in a timely manner or on commercially reasonable terms could delay our plans to expand our business
and otherwise disrupt our production schedules and increase our manufacturing costs. Our orders may represent a very small portion of
certain suppliers’ total orders. As a result, they may not give priority to our business, leading to potential delays in or cancellation
of our orders. If any single-source supplier were to fail to supply our needs on a timely basis or cease providing us manufacturing equipment
or components, we would be required to locate and contract with substitute suppliers. We may have difficulty identifying a substitute
supplier in a timely manner and on commercially reasonable terms. If this were to occur, our business would be harmed.
We
do not have long-term purchase commitments from our customers, and their ability to cancel, reduce, or delay orders could reduce our
revenue and increase our costs.
Our
customers do not provide us with firm, long-term volume purchase commitments, but issue purchase orders for our products. As a result,
customers can cancel purchase orders or reduce or delay orders at any time. The cancellation, delay, or reduction of customer purchase
orders could result in reduced sales, excess inventory, unabsorbed overhead, and reduced income from operations.
12 |
As
we continue with manufacturing operations, we schedule internal production levels and place orders for raw materials with third party
suppliers before receiving firm orders from our customers. Therefore, if we fail to accurately forecast customer demand, we may experience
excess inventory levels or a shortage of products to deliver to our customers. Factors that could affect our ability to accurately forecast
demand for our products include the following:
●
an increase or decrease in consumer demand for our products or for the products of our competitors;
●
our failure to accurately forecast customer acceptance of new products;
●
new product introductions by us or our competitors;
●
changes in our relationships with customers;
●
changes in general market conditions or other factors, which may result in cancellations of orders or a reduction or increase in the
rate of reorders placed by retailers;
●
changes in laws and regulations governing the activities for which we sell products;
●
weak economic conditions or consumer confidence, which could reduce demand for discretionary items, such as our products;
and
●
the domestic and international political environment, including debate over the regulation of firearms, ammunition, and related
products and trade restrictions and embargos of our products.
Inventory
levels in excess of consumer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which
could have an adverse effect on our business, operating results, and financial condition. If we underestimate demand for our products,
our manufacturing facility or third-party suppliers may not be able to react quickly enough to meet consumer demand, resulting in delays
in the shipment of products and lost revenue, and damage to our reputation and customer and consumer relationships. We may not be able
to manage inventory levels successfully to meet future order and reorder requirements.
Revenue
from sales of ammunition components will depend on sales to ammunition manufacturers, some of which will account for a significant portion
of our sales.
Our
revenue from sales of ammunition components will depend on sales to ammunition manufacturers. The global market for ammunition manufacturing
is highly concentrated and there are only a few licensed manufacturers in the US. Our sales of ammunition components could become increasingly
dependent on purchases by a limited number of manufacturing customers. Consolidation in the industry could also adversely affect our
business. If our sales were to become increasingly dependent on business with a limited number of manufacturers, we could be adversely
affected by the loss or a significant decline in sales to one or more of these customers. In addition, our dependence on a smaller group
of customers could result in their increased bargaining position putting pressure on the prices we charge.
The
loss of any one or more of our customers or significant or numerous cancellations, reductions, delays in purchases or changes in business
practices by our customers could have an adverse effect on our business, operating results, and financial condition.
These
sales channels involve a number of special risks, including the following:
● |
we
may be unable to secure and maintain favorable relationships with customers; |
● |
we
may be unable to control the timing of delivery of our products to end-user consumers; |
● |
our
customers are not subject to minimum sales requirements or any obligation to market our products to their end-user customers; |
● |
our
customers may terminate their relationships with us at any time; and |
● |
our
customers market and distribute competing products. |
13 |
Although
we intend to expand our customer base, our operating results would likely decline if we lost any major customers or if one of these sizable
customers were to significantly reduce its orders for any reason. Because our sales are made by means of standard purchase orders rather
than long-term contracts, we cannot assure you that our customers will continue to purchase our products at current levels, or at all.
In
addition, periods of sluggish economies and consumer uncertainty regarding future economic prospects in our key markets can have an adverse
effect on the financial health of our customers, which may in turn have a material adverse effect on our business, operating results,
and financial condition.
We
anticipate that we will extend credit to our customers for periods of varying duration based on an assessment of the customer’s
financial condition, generally without requiring collateral, which increases our exposure to the risk of uncollectable receivables. In
addition, we face increased risk of order reduction or cancellation when dealing with financially ailing customer who may struggle with
economic uncertainty. We may reduce our level of business with customers experiencing financial difficulties and may not be able to replace
that business with other customers, which could have a material adverse effect on our business, operating results, and financial condition.
Our
gross margins depend upon our sales mix.
Our
gross margin is higher when our sales mix is skewed toward our higher-margin product lines. If our actual sales mix results in a lower
overall percentage from our higher-margin product lines, our gross margins will be reduced, affecting our results of operations.
We
face intense competition that could result in our losing or failing to gain market share and suffering reduced sales.
We
operate in intensely competitive markets that are characterized by price erosion and competition from major domestic and international
companies. Competition in the markets in which we operate is based on a number of factors, including price, quality, product innovation,
performance, reliability, styling, product features, warranties, and sales and marketing programs. This intense competition could result
in pricing pressures, lower sales, reduced margins, and lower market share.
Our
competitors include Olin Corporation, Hornady Manufacturing Company, PMC Ammunition, and Federal Premium Ammunition.
Most
of our competitors have greater market recognition, larger customer bases, long-term government contracts, and substantially greater
financial, technical, marketing, distribution, and other resources than we possess, and that affords them competitive advantages. As
a result, they may be able to devote greater resources to the promotion and sale of products, to invest more funds in intellectual property
and product development, to negotiate lower prices for raw materials and components, to deliver competitive products at lower prices,
and to introduce new products and respond to consumer requirements more quickly than we can.
14 |
Our
competitors could introduce products with superior features at lower prices than our products and could also bundle existing or new products
with other more established products to compete with us. Certain of our competitors may be willing to reduce prices and accept lower
profit margins to compete with us. Our competitors could also gain market share by acquiring or forming strategic alliances with other
competitors.
Finally,
we may face additional sources of competition in the future because new distribution methods offered by the Internet and electronic commerce
have removed many of the barriers to entry historically faced by start-up companies. Our customers may also demand that we reduce our
prices on products, which could lead to lower margins. Any of the foregoing could cause our sales to decline, which would harm our financial
position and results of operations.
Our
ability to compete successfully depends on a number of factors, both within and outside our control. These factors include the following:
● |
our
success in developing, producing, marketing, and successfully selling new products; |
● |
our
ability to address the needs of our customers; |
● |
the
pricing, quality, performance, and reliability of our products; |
● |
the
quality of our customer service; |
● |
the
efficiency of our production; and |
● |
product
or technology introductions by our competitors. |
Because
we believe technological and functional distinctions among competing products in our markets are perceived by many end-user consumers
to be relatively modest, effectiveness in marketing and manufacturing are particularly important competitive factors in our business.
We
may have difficulty collecting amounts owed to us.
Certain
of our customers may experience business challenges and credit-related issues. We perform ongoing credit evaluations of customers, but
these evaluations may not be completely effective. We do not grant payment terms to most customers, the very few customers that we grant
payment terms to are given terms of a maximum of 30 days and do not generally require collateral. Should more customers than we anticipate
experience liquidity issues, or if payments are not received on a timely basis, we may have difficulty collecting amounts owed to us
by such customers, and our business, operating results, and financial condition could be adversely impacted. Retail consolidation could
result in more concentrated credit-related risks.
We
plan to manufacture and sell products that create exposure to potential product liability, warranty liability, or personal injury claims
and litigation.
Our
products are used in activities and situations that involve risk of personal injury and death. Our products expose us to potential product
liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products, including allegations
of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the
product, negligence, and strict liability. If successful, any such claims could have a material adverse effect on our business, operating
results, and financial condition. Defects in our products may result in a loss of sales, recall expenses, delay in market acceptance,
and damage to our reputation and increased warranty costs, which could have a material adverse effect on our business, operating results,
and financial condition. Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able
to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance
coverage. In addition, our reputation may be adversely affected by such claims, whether or not successful, including potential negative
publicity about our products.
15 |
Product
recall or field action could be costly and harm our reputation.
Our
products are used in activities that involve inherent risks of personal injury and property damage. Defects in design, materials, or
manufacturing, such as misfires, squib loads, or over-pressure rounds, could require us to initiate a recall or other corrective action.
Recalls can result in significant costs, lost sales, reputational harm, and potential product liability claims. If we fail to maintain
robust quality-assurance and lot-traceability systems, the scope and cost of any recall could be magnified, with a material adverse effect
on our results of operations.
The
failure to manage our growth could adversely affect our operations.
The
failure to manage our growth could adversely affect our operations. To continue to expand our business and enhance our competitive position,
we must make significant investments in equipment, facilities, systems, and personnel. In addition, we must commit significant funds
to enhance our sales, marketing, information technology, and research and development efforts. As a result of the increase in fixed costs
and operating expenses, our failure to increase our sales sufficiently to offset these increased costs could adversely affect our business,
operating results, and financial condition.
Managing
our planned growth effectively will require us to take a number of steps, including the following:
● |
enhance
our operational, financial, and management systems; |
● |
enhance
our facilities and purchase additional equipment; and |
● |
successfully
hire, train, and motivate additional employees, including additional personnel for our technological, sales, and marketing efforts. |
The
expansion of our products and customer base will result in increases in our overhead and selling expenses. We may be required to increase
(1) staffing; (2) expenditures on capital equipment and leasehold improvements; and (3) other expenses to meet the demand for our products.
Any increase in expenditures in anticipation of future sales that do not materialize would adversely affect our profitability.
Our
business is highly dependent upon our brand recognition and reputation, and the failure to maintain or enhance our brand recognition
or reputation would likely have a material adverse effect on our business.
Our
brand recognition and reputation are critical aspects of our business. We believe that maintaining and further enhancing our brands and
our reputation are critical to retaining existing customers and attracting new customers. We also believe that the importance of our
brand recognition and reputation will continue to increase as competition in our markets continues to develop.
16 |
We
anticipate that our advertising, marketing, and promotional efforts will increase in the foreseeable future as we continue to seek to
enhance our brands and consumer demand for our products. Historically, we have relied on existing relationships of our management and
customer referrals to increase consumer awareness of our brands to increase purchasing intent and conversation. We anticipate that we
will increasingly rely on other forms of media advertising, including social media and e-marketing. Our future growth and profitability
will depend in large part upon the effectiveness and efficiency of our advertising, promotion, public relations, and marketing programs.
These brand promotion activities may not yield increased revenue, and the efficacy of these activities will depend on a number of factors,
including our ability to do the following:
● |
determine
the appropriate creative message and media mix for advertising, marketing, and promotional expenditures; |
● |
select
the right markets, media, and specific media vehicles in which to advertise; |
● |
identify
the most effective and efficient level of spending in each market, media, and specific media vehicle; and |
● |
effectively
manage marketing costs, including creative and media expenses, in order to maintain acceptable customer acquisition costs. |
In
addition, certain of our products and brands may in the future benefit from endorsements and support from particular sportsmen, athletes,
or other celebrities, and those products and brands may become personally associated with those individuals. As a result, sales of the
endorsed products could be materially and adversely affected if any of those individuals’ images, reputations, or popularity were
to be negatively impacted.
Increases
in the pricing of one or more of our marketing and advertising channels could increase our marketing and advertising expenses or cause
us to choose less expensive but possibly less effective marketing and advertising channels. If we implement new marketing and advertising
strategies, we may incur significantly higher costs than our current channels, which in turn could adversely affect our operating results.
Implementing new marketing and advertising strategies also could increase the risk of devoting significant capital and other resources
to endeavors that do not prove to be cost effective. We also may incur marketing and advertising expenses significantly in advance of
the time we anticipate recognizing revenue associated with such expenses and our marketing and advertising expenditures may not generate
sufficient levels of brand awareness and conversation or result in increased revenue. Even if our marketing and advertising expenses
result in increased sales, the increase might not offset our related expenditures. If we are unable to maintain our marketing and advertising
channels on cost-effective terms or replace or supplement existing marketing and advertising channels with similarly or more effective
channels, our marketing and advertising expenses could increase substantially, our customer base could be adversely affected, and our
business, operating results, financial condition, and reputation could suffer.
17 |
Our
operating results may experience significant fluctuations.
Many
factors contribute to significant periodic and seasonal quarterly fluctuations in our results of operations. These factors include the
following:
● |
the
cyclicality of the markets we serve; |
● |
the
timing and size of new orders; |
● |
the
cancellation of existing orders; |
● |
the
volume of orders relative to our capacity; |
● |
product
introductions and market acceptance of new products or new generations of products; |
● |
timing
of expenses in anticipation of future orders; |
● |
changes
in product mix; |
● |
availability
of production capacity; |
● |
changes
in cost and availability of labor and raw materials; |
● |
timely
delivery of products to customers; |
● |
pricing
and availability of competitive products; |
● |
new
product introduction costs; |
● |
changes
in the amount or timing of operating expenses; |
● |
introduction
of new technologies into the markets we serve; |
● |
pressures
on reducing selling prices; |
● |
our
success in serving new markets; |
● |
adverse
publicity regarding the safety, performance, and use of our products; |
● |
the
institution and outcome of any litigation; |
● |
political,
economic, or regulatory developments; and |
● |
changes
in economic conditions. |
As
a result of these and other factors, we believe that period-to-period comparisons of our results of operations may not be meaningful
in the short term, and our performance in a particular period may not be indicative of our performance in any future period.
The
failure to attract and retain key personnel could have an adverse effect on our operating results.
Our
success depends substantially on the efforts and abilities of our senior management and key personnel. The competition for qualified
management and key personnel is intense. We maintain noncompetition and nondisclosure covenants with many of our key personnel, and we
do have employment agreements with some of them. The loss of services of one or more of our key employees or the inability to hire, train,
and retain additional key personnel could delay the development and sale of our products, disrupt our business, and interfere with our
ability to execute our business plan.
In
addition, our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior management
team, including our two founders Jeffrey Low and Jordan Low. The loss of the services of one or more of our key personnel could materially
and adversely affect our operations.
18 |
We
may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
In
the future, we may require additional capital to fund the planned expansion of our business and to respond to business opportunities,
challenges, potential acquisitions, or unforeseen circumstances. We could encounter unforeseen difficulties that may deplete our capital
resources rapidly, which could require us to seek additional financing in the near future. The timing and amount of any additional financing
that is required to continue the expansion of our business and the marketing of our products will depend on our ability to improve our
operating results and other factors. We may not be able to secure additional debt or equity financing in a timely basis or on favorable
terms, or at all. Such financing could result in substantial dilution of the equity interests of existing stockholders. We have no commitments
for any additional financing should the need arise. If we are unable to secure any necessary additional financing, we may need to delay
expansion plans, conserve cash, and reduce operating expenses. There is no assurance that any additional financing will be sufficient,
that the financing will be available on terms favorable to us or to existing stockholders and at such times as required, or that we will
be able to obtain the additional financing required for the continued operation and growth of our business. Any debt financing obtained
by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational
matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. If we raise additional
funds through further issuances of equity, convertible debt securities, or other securities convertible into equity, our existing stockholders
could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights,
preferences, and privileges senior to those of holders of our Common Stock. If we are unable to obtain adequate financing or financing
on terms satisfactory to us, when we require it, our ability to grow or support our business and to respond to business challenges could
be significantly limited.
Potential
strategic alliances may not achieve their objectives, which could impede our growth.
We
anticipate that we will enter into strategic alliances in the future. We continue to explore strategic alliances designed to expand our
product offerings, enter new markets, and improve our distribution channels. Strategic alliances may not achieve their intended objectives,
and parties to our strategic alliances may not perform as contemplated. The failure of these alliances may impede our ability to introduce
new products and enter new markets.
Any
acquisitions that we undertake will involve significant risks, and any acquisitions that we undertake in the future could disrupt our
business, dilute stockholder value, and harm our operating results.
We
have a strategy to expand our operations through strategic acquisitions to enhance existing products and offer new products, enter new
markets and businesses, strengthen and avoid interruption from our supply chain, and enhance our position in current markets and businesses.
Acquisitions involve significant risks and uncertainties. We cannot accurately predict the timing, size, and success of any future acquisitions.
We may be unable to identify suitable acquisition candidates or complete the acquisitions of candidates that we identify. Increased competition
for acquisition candidates or increased asking prices by acquisition candidates may increase purchase prices for acquisitions to levels
beyond our financial capability or to levels that would not result in the returns required by our acquisition criteria. Unforeseen expenses,
difficulties, and delays frequently encountered in connection with expansion through acquisitions could inhibit our growth and negatively
impact our operating results.
Our
ability to complete acquisitions that we desire to make will depend upon various factors, including the following:
● |
the
availability of suitable acquisition candidates at attractive purchase prices; |
● |
the
ability to compete effectively for available acquisition opportunities; |
● |
the
availability of cash resources, borrowing capacity, or stock at favorable price levels to provide required purchase prices in acquisitions; |
● |
the
ability of management to devote sufficient attention to acquisition efforts; and |
● |
the
ability to obtain any requisite governmental or other approvals. |
19 |
We
may have little or no experience with certain acquired businesses, which could involve significantly different supply chains, production
techniques, customers, and competitive factors than our current business. This lack of experience would require us to rely to a great
extent on the management teams of these acquired businesses. These acquisitions also could require us to make significant investments
in systems, equipment, facilities, and personnel in anticipation of growth. These costs could be essential to implement our growth strategy
in supporting our expanded activities and resulting corporate structure changes. We may be unable to achieve some or all of the benefits
that we expect to achieve as we expand into these new markets within the time frames we expect, if at all. If we fail to achieve some
or all of the benefits that we expect to achieve as we expand into these new markets, or do not achieve them within the time frames we
expect, our business, financial condition, and results of operations could be adversely affected.
As
a part of any potential acquisition, we may engage in discussions with various acquisition candidates. In connection with these discussions,
we and each potential acquisition candidate may exchange confidential operational and financial information, conduct due diligence inquiries,
and consider the structure, terms, and conditions of the potential acquisition. In certain cases, the prospective acquisition candidate
agrees not to discuss a potential acquisition with any other party for a specific period of time and agrees to take other actions designed
to enhance the possibility of the acquisition, such as preparing audited financial information. Potential acquisition discussions frequently
take place over a long period of time and involve difficult business integration and other issues. As a result of these and other factors,
a number of potential acquisitions that from time-to-time appear likely to occur do not result in binding legal agreements and are not
consummated, but may result in significant legal, consulting, and other costs.
Unforeseen
expenses, difficulties, and delays frequently encountered in connection with future acquisitions could inhibit our growth and negatively
impact our profitability. Any future acquisitions may not meet our strategic objectives or perform as anticipated. In addition, the size,
timing, and success of any future acquisitions may cause substantial fluctuations in our operating results from quarter to quarter.
If
we finance any future acquisitions in whole or in part through the issuance of Common Stock or securities convertible into or exercisable
for Common Stock, existing stockholders will experience dilution in the voting power of their Common Stock and earnings per share could
be negatively impacted. The extent to which we will be able or willing to use our Common Stock for acquisitions will depend on the value
of our Common Stock from time-to-time and the willingness of potential acquisition candidates to accept our Common Stock as full or partial
consideration for the sale of their businesses. Our inability to use our Common Stock as consideration, to generate cash from operations,
or to obtain additional funding through debt or equity financings to pursue an acquisition could limit our growth.
20 |
Any
acquisitions or strategic alliances that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value,
and harm our operating results.
We
may be unable to effectively complete an integration of the management, operations, facilities, and accounting and information systems
of acquired businesses with our own; to implement effective controls to mitigate legal and business risks with which we have no prior
experience; to manage efficiently the combined operations of the acquired businesses with our operations; to achieve our operating, growth,
and performance goals for acquired businesses; to achieve additional sales as a result of our expanded operations; or to achieve operating
efficiencies or otherwise realize cost savings as a result of anticipated acquisition synergies. The integration of acquired businesses
involves numerous risks and uncertainties, including the following:
● |
the
potential disruption of our core businesses; |
● |
risks
associated with entering markets and businesses in which we have little or no prior experience; |
● |
diversion
of management’s attention from our core businesses; |
● |
adverse
effects on existing business relationships with suppliers and customers; |
● |
risks
associated with increased regulatory or compliance matters; |
● |
failure
to retain key customers, suppliers, or personnel of acquired businesses; |
● |
the
potential strain on our financial and managerial controls and reporting systems and procedures; |
● |
greater
than anticipated costs and expenses related to the integration of the acquired business with our business; |
● |
potential
unknown liabilities associated with the acquired company; |
● |
risks
associated with weak internal controls over information technology systems and associated cyber security risks; |
● |
meeting
the challenges inherent in effectively managing an increased number of employees in diverse locations; |
● |
failure
of acquired businesses to achieve expected results; |
● |
the
risk of impairment charges related to potential write-downs of acquired assets in future acquisitions; and |
● |
the
challenge of creating uniform standards, controls, procedures, policies, and information systems. |
Breaches
of our information systems could adversely affect our reputation, disrupt our operations, and result in increased costs and loss sales.
There
have been an increasing number of cyber security incidents affecting companies around the world, which have caused operational failures
or compromised sensitive corporate data. Although we do not believe our systems are at a greater risk of cyber security incidents than
other similar organizations, such cyber security incidents may result in the loss or compromise of customer, financial, or operational
data; disruption of billing, collections, or normal operating activities; disruption of electronic monitoring and control of operational
systems; and delays in financial reporting and other management functions. Possible impacts associated with a cyber security incident
may include among others, remediation costs related to lost, stolen, or compromised data; repairs to data processing systems; increased
cyber security protection costs; reputational damage; and adverse effects on our compliance with applicable privacy and other laws and
regulations.
21 |
A
failure of our information technology systems, or an interruption in their operation due to internal or external factors including cyber-attacks,
could have a material adverse effect on our business, financial condition or results of operations.
Our
operations depend on our ability to protect our information systems, computer equipment, and information databases from systems failures.
We rely on our information technology systems generally to manage the day-to-day operations of our business, operate elements of our
manufacturing facility, manage relationships with our customers, fulfill customer orders, and maintain our financial and accounting records.
Failure of our information technology systems could be caused by internal or external events, such as incursions by intruders or hackers,
computer viruses, cyber-attacks, failures in hardware or software, or power or telecommunication fluctuations or failures. The failure
of our information technology systems to perform as anticipated for any reason or any significant breach of security could disrupt our
business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, increased costs,
or loss of important information, any of which could have a material adverse effect on our business, operating results, and financial
condition. Any technology and information security processes and disaster recovery plans we use to mitigate our risk to these vulnerabilities
may not be adequate to ensure that our operations will not be disrupted should such an event occur.
We
are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements.
Like
many other manufacturers and distributors of consumer products, we are required to comply with a wide variety of laws, rules, and regulations,
including those relating to labor, employment, the environment, the export and import of our products, and taxation. These laws, rules,
and regulations currently impose significant compliance requirements on our business, and more restrictive laws, rules and regulations
may be adopted in the future.
Our
operations are subject to a variety of laws and regulations relating to environmental protection, including those governing the discharge,
treatment, storage, transportation, remediation, and disposal of certain materials and wastes, and restoration of damages to the environment,
and health and safety matters. We could incur substantial costs, including remediation costs, resource restoration costs, fines, penalties,
and third-party property damage or personal injury claims as a result of liabilities under or violations of such laws and regulations
or the permits required thereunder. While environmental laws and regulations have not had a material adverse effect on our business,
operating results, financial condition, the ultimate cost of environmental liabilities is difficult to accurately predict and we could
incur material additional costs as a result of requirements or obligations imposed or liabilities identified in the future.
22 |
As
a manufacturer and distributor of consumer products, we are subject to the Consumer Products Safety Act, which empowers the Consumer
Products Safety Commission to exclude from the market products that are found to be unsafe or hazardous. Under certain circumstances,
the Consumer Products Safety Commission could require us to repurchase or recall one or more of our products. In addition, laws regulating
certain consumer products exist in some cities and states, and in other countries in which we sell our products, and more restrictive
laws and regulations may be adopted in the future. Any repurchase or recall of our products could be costly to us and could damage our
reputation. If we were required to remove, or we voluntarily removed, our products from the market, our reputation could be tarnished
and we could have large quantities of finished products that we are unable to sell. We are also subject to the rules and regulations
of the Bureau of Alcohol, Tobacco, Firearms and Explosives, or the ATF. If we fail to comply with ATF rules and regulations, the ATF
may limit our growth or business activities, levy fines against or revoke our license to do business. Our business, and the business
of all producers and marketers of ammunition and firearms, is also subject to numerous federal, state, local, and foreign laws, regulations,
and protocols. Applicable laws have the following effects:
● |
require
the licensing of all persons manufacturing, exporting, importing, or selling firearms and ammunition as a business; |
● |
require
background checks for purchasers of firearms; |
● |
impose
waiting periods between the purchase of a firearm and the delivery of a firearm; |
● |
prohibit
the sale of firearms to certain persons, such as those below a certain age and persons with criminal records; |
● |
regulate
the use and storage of gun powder or other energetic materials; |
● |
regulate
our employment of personnel with criminal convictions; and |
● |
restrict
access to firearm manufacturing facilities for individuals from other countries or with criminal convictions. |
Also,
the export of our products is controlled by International Traffic in Arms Regulations, or ITAR, and Export Administration Regulations,
or EAR. The ITAR implements the provisions of the Arms Export Control Act and is enforced by the U.S. Department of State. The EAR implements
the provisions of the Export Administration Act and is enforced by the U.S. Department of Commerce. Among their many provisions, the
ITAR and the EAR require a license application for the export of many of our products. In addition, the ITAR requires congressional approval
for any firearms export application with a total value of $1 million or higher. Further, because our manufacturing process includes certain
toxic, flammable and explosive chemicals, we are subject to the Chemical Facility Anti-Terrorism Standards, as administered by the U.S.
Department of Homeland Security, which require that we take additional reporting and security measures related to our manufacturing process.
Several
states currently have laws in effect that are similar to, and, in certain cases, more restrictive than, these federal laws. Compliance
with all of these regulations is costly and time-consuming. Inadvertent violation of any of these regulations could cause us to incur
fines and penalties and may also lead to restrictions on our ability to manufacture and sell our products and services and to import
or export the products we sell.
Changes
in government policies and firearms legislation could adversely affect our financial results.
The
sale, purchase, ownership, and use of firearms are subject to numerous and varied federal, state, and local governmental regulations.
Federal laws governing firearms include the National Firearms Act, the Federal Firearms Act, the Arms Export Control Act, and the Gun
Control Act of 1968. These laws generally govern the manufacture, import, export, sale, and possession of firearms and ammunition. We
hold all necessary licenses to legally sell ammunition in the United States.
The
federal and state legislatures may in the future consider additional legislation relating to the regulation of firearms and ammunition.
Such legislation could effectively ban or severely limit the sale of affected firearms and ammunition. In addition, if such restrictions
are enacted and are incongruent, we could find it difficult, expensive, or even practically impossible to comply with them, which could
impede new product development and the distribution of existing products. We cannot assure you that the regulation of our business activities
will not become more restrictive in the future and that any such restriction will not have a material adverse effect on our business.
23 |
Failure
to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation, and export controls and trade
sanctions, could result in fines or criminal penalties if we expand our business abroad.
The
expansion of our business internationally would expose us to trade sanctions and other restrictions imposed by the United States and
other governments. The U.S. Departments of Justice, Commerce, Treasury and other agencies and authorities have a broad range of civil
and criminal penalties they may seek to impose against companies for violations of export controls, the Foreign Corrupt Practices Act,
anti-boycott provisions and other federal statutes, sanctions and regulations and, increasingly, similar or more restrictive foreign
laws, rules and regulations, which may also apply to us. By virtue of these laws and regulations, and under laws and regulations in other
jurisdictions, we may be obliged to limit our business activities, we may incur costs for compliance programs and we may be subject to
enforcement actions or penalties for noncompliance. In recent years, U.S. and foreign governments have increased their oversight and
enforcement activities with respect to these laws, and we expect the relevant agencies to continue to increase these activities. A violation
of these laws, sanctions or regulations could result in restrictions on our exports, civil and criminal fines or penalties and could
adversely impact our business, operating results, and financial condition.
Our
founders will have the ability to exert substantial influence over our company.
As
of the date of this prospectus, our founders, Jeffrey Low and Jordan Low combined own 16,229,500 shares of our common stock representing
36.04% of our issued and outstanding shares of our common stock. As a result, our founders will be able to exert substantial influence
over our company and over matters requiring approval by our stockholders, including electing all our directors, approving any amendments
to our certificate of incorporation, increasing our authorized capital stock, effecting a merger or sale of our assets, and determining
the number of shares available for issuance under our equity-based plans.
Our
charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover.
Our
certificate of incorporation and bylaws contain, and Delaware law contains, certain provisions that may have the effect of deterring
or discouraging, among other things, a non-negotiated tender or exchange offer for shares of Common Stock, a proxy contest for control
of our company, the assumption of control of our company by a holder of a large block of Common Stock, and the removal of the management
of our company. Such provisions also may have the effect of deterring or discouraging a transaction which might otherwise be beneficial
to stockholders. Our amended and restated certificate of incorporation also authorizes our board of directors, without stockholder
approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute
the voting power of the holders of Common Stock. Delaware law also imposes conditions on certain business combination transactions with
“interested stockholders.” Subject to certain exceptions, our bylaws authorizes our board of directors to fill vacancies
or newly created directorships whereby a majority of the directors then in office may elect a successor to fill any vacancies or newly
created directorships. Such provisions could limit the price that investors might be willing to pay in the future for shares of our Common
Stock and impede the ability of the stockholders to replace management.
24 |
The
elimination of monetary liability against our directors, officers, and employees under Delaware law and the existence of indemnification
rights to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our
directors, officers, and employees. We also may enter into contractual indemnification obligations under employment agreements with our
executive officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost
of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs
may also discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties and may similarly
discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful,
might otherwise benefit our company and our stockholders.
Our
results of operations could be impacted by unanticipated changes in tax provisions or exposure to additional income tax liabilities.
Our
business operates in many locations under government jurisdictions that impose income taxes. Changes in domestic or foreign income tax
laws and regulations, or their interpretation, could result in higher or lower income tax rates assessed or changes in the taxability
of certain revenues or the deductibility of certain expenses, and higher excise taxes thereby affecting our income tax expense and profitability.
In addition, audits by income tax authorities could result in unanticipated increases in our income tax expense.
Compliance
with the laws and regulations affecting public companies could adversely affect our business, results of operations, and financial condition.
As
a public company, we will be subject to the reporting requirements of the Exchange Act, the Nasdaq listing standards, and other applicable
securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal,
accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain
on our personnel, systems, and resources. The complexity of complying with these rules may divert management’s attention from other
business matters, potentially harming our operations and financial results. Although we have hired additional employees to assist with
compliance, we may need to hire more or engage consultants in the future, further increasing our operating expenses. As a public company
subject to additional oversight, we may not have the same flexibility we had as a private company.
Additionally,
changing laws, regulations, and governance standards, which are subject to varying interpretations, are creating uncertainty for public
companies, which may result in increased general and administrative expenses and a diversion of management’s time and attention
from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the
activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities
may initiate legal proceedings against us, and our business may be harmed. We also expect that being a public company will make it more
expensive for us to obtain director and officer liability insurance, which may result in reduced coverage or higher premiums, and could
make it more difficult to attract and retain qualified directors and officers.
25 |
Public
disclosures required as a public company may increase our exposure to actual or threatened litigation from competitors and other third
parties. Even if these claims do not result in litigation or are resolved in our favor, the time and resources spent on resolving them
could harm our business.
If we are unable to satisfy our funding obligations on the dates required, we may be in breach of the JV Agreement,
which could result in the dilution or forfeiture of our equity interests in the Joint Venture, disputes with IdeaForge, or the termination
of the JV Agreement, any of which could have a material adverse effect on our business, financial condition and results of operations.
Pursuant
to the JV Agreement (as defined below), we are obligated to invest $10,000,000 in the Joint Venture (as defined below) on or before
December 31, 2026, with the remaining balance of the Capital Contribution (as defined below) of up to $25,000,000 to be funded on or
before December 31, 2027. There can be no assurance that we will have sufficient capital or liquidity to meet these obligations when
due. Our ability to fund these contributions will depend on a number of factors, including our operating cash flows, access to
capital markets, and general economic and market conditions, many of which are outside of our control. If we are unable to satisfy
our funding obligations on the dates required, we may be in breach of the JV Agreement, which could result in the dilution or
forfeiture of our equity interests in the Joint Venture, disputes with IdeaForge (as defined below), or the termination of the JV
Agreement, any of which could have a material adverse effect on our business, financial condition and results of
operations.
Furthermore,
even if we are able to satisfy our capital contribution obligations, there is no guarantee that the Joint Venture will achieve its intended
objectives or generate any return on our investment. The Joint Venture is an early-stage enterprise subject to the risks inherent in
the development and commercialization of drone technology, including regulatory, technological, competitive and market risks. The loss
of all or a portion of our investment in the Joint Venture could have a material adverse effect on our business, financial condition
and results of operations.
We
are dependent on Hellbender, Inc., a third-party contractor, for the design, engineering and prototyping of our attritable drone platforms,
and our drone development program may not be completed on time, within budget or at all.
We have
engaged Hellbender, Inc. (“Hellbender”) to design, engineer, prototype and demonstrate volume manufacturing capability for
two Class 1 attritable first-person-view drone platforms pursuant to a master services agreement dated May 1, 2026 (the “Hellbender
MSA”) and an initial statement of work (the “Initial SOW”). The development program is subject to significant technical,
manufacturing, schedule and cost risks. Hardware prototyping is inherently iterative and exploratory, and the actual timeline and total
cost may vary materially from current estimates due to factors such as the complexity of risk reduction testing, supply chain lead times
and component availability, unforeseen engineering challenges, and the timely performance of our own obligations under the agreement,
including the provision of payload specifications and explosive materials. There can be no assurance that Hellbender will successfully
complete the development program on time, within the estimated budget of approximately $3,000,000, or at all, or that the resulting drone
systems will meet performance specifications, achieve manufacturing scalability targets, or be suitable for deployment in defense or
commercial applications.
In addition,
the Hellbender MSA may be terminated by either party upon five days’ written notice. If Hellbender were to terminate the Hellbender
MSA or become unable to perform, we may be unable to identify a suitable replacement contractor on acceptable terms or in a timely manner,
which could materially delay or impair our drone development efforts. Furthermore, although all intellectual property in the deliverables
produced under the agreement is owned by us, any dispute regarding intellectual property rights, open-source components incorporated
into the deliverables, or the scope of Hellbender’s exclusivity obligations could adversely affect our ability to commercialize
the resulting products. The failure to successfully develop and deploy our attritable drone platforms could have a material adverse effect
on our business, growth strategy, financial condition and results of operations.
Our
attritable drone development program is at an early stage, and we may not realize any revenue or other commercial benefit from our investment.
Our attritable drone development program with
Hellbender is at a pre-revenue, proof-of-concept stage and all deliverables under the Initial SOW are prototype and experimental in nature,
provided “as is” without warranty. We will need to successfully transition from prototyping to a production-stage manufacturing
agreement, which has not yet been negotiated, in order to realize any commercial benefit from the program. Even if we successfully develop
production-intent prototypes, we will need to secure government or commercial procurement contracts, obtain any necessary regulatory
approvals or certifications, establish manufacturing capacity for high-volume production, and compete effectively against established
defense contractors and drone manufacturers with significantly greater resources, existing contract vehicles, and proven track records.
There can be no assurance that the U.S. Department of Defense Drone Dominance Program or similar government procurement programs will
proceed as anticipated, that our products will meet applicable requirements, or that we will be awarded any contracts. Accordingly, we
may not realize any revenue, return on investment, or other commercial benefit from the approximately $3,000,000 investment in this development
program, which could have a material adverse effect on our financial condition and results of operations.
Risks
Related to this Direct Listing and Ownership of Our Common Stock
Our
listing differs significantly from an initial public offering conducted on a firm-commitment basis.
This
is not an initial public offering of common stock conducted on a firm-commitment underwritten basis. There have been few companies that
have undertaken a direct listing to date and there are many uncertainties associated with such type of listing. The listing of our common
stock on Nasdaq differs from a firm-commitment underwritten initial public offering in several significant ways, which include, but are
not limited to, the following:
● |
There
are no underwriters engaged on a firm-commitment basis. Consequently, prior to the opening of trading on Nasdaq, there will be no
traditional book building process and no price at which underwriters initially sold shares to the public to help inform efficient
and sufficient price discovery with respect to the opening trades on Nasdaq. Therefore, buy and sell orders submitted prior to and
at the opening of trading of our common stock on Nasdaq will not have the benefit of being informed by a published price range or
a price at which the underwriters initially sold shares to the public, as would be the case in an initial public offering underwritten
on a firm-commitment basis. Moreover, there will be no underwriters engaged on a firm-commitment underwritten basis assuming risk
in connection with the initial resale of shares of our common stock. In an initial public offering underwritten on a firm-commitment
basis, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’
option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise
the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position,
the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared
to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in
the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have
the effect of preventing a decline in the market price of shares. Given that there will be no underwriters’ option to purchase
additional shares and no underwriters engaging in stabilizing transactions, there could be greater volatility in the public price
of our common stock during the period immediately following the listing. |
|
|
● |
There
is not a fixed number of securities available for sale. Therefore, there can be no assurance that any Registered Stockholders will
sell any or all of their common stock and there may initially be a lack of supply of, or demand for, our common stock on Nasdaq.
Alternatively, we may have a large number of Registered Stockholders who choose to sell their common stock in the near term resulting
in an oversupply of our common stock, which could adversely impact the public price of our common stock once listed on Nasdaq. |
26 |
● |
Consistent
with Regulation M and other federal securities laws applicable to the Direct Listing, we have not consulted with Registered Stockholders
(other than our directors and officers who own our common stock) regarding their desire or plans to sell shares in the public market
following the listing or discussed with potential investors their intentions to buy our common stock in the open market. In a firm-commitment
underwritten initial public offering, it is customary for an issuer’s officers, directors, and most of its other shareholders
to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after listing.
None of our Registered Stockholders have entered into contractual lock-up agreements or other contractual restrictions on transfer.
Consequently, our Registered Stockholders may sell any or all of their common stock at any time (subject to any restrictions under
applicable law), including immediately upon listing. The shares being registered herein may be freely sold in market transactions
following the listing and upon the effectiveness of this registration statement. All shares of common stock subject to stock options
outstanding and reserved for issuance under our equity incentive plan are expected to be registered on Form S-8 under the Securities
Act and such shares are eligible for sale in the public markets, subject to the limitations applicable to affiliates under Rule 144.
If such sales were to occur in a significant quantum, it may result in an oversupply of our common stock in the market, which could
adversely impact the public price of our common stock. See “Our shares of common stock currently have no public market. An
active trading market may not develop or continue to be liquid and the market price of our shares of common stock may be volatile.”
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Sales of substantial
amounts of our common stock in the public markets by our founders, affiliates, or non-affiliates, or the perception that such sales
might occur, could reduce the price that our common stock might otherwise attain. There can be no assurance that the Registered Stockholders
will not sell all of their shares of our common stock, resulting in an oversupply of our common stock on The Nasdaq Capital Market.
In the case of a lack of supply of our common stock, the trading price of our common stock may rise to an unsustainable level. Further,
institutional investors may be discouraged from purchasing our common stock if they are unable to purchase a block of our common
stock in the open market in a sufficient size for their investment objectives due to a potential unwillingness of our existing stockholders
to sell a sufficient amount of our common stock at the price offered by such institutional investors and the greater influence individual
investors have in setting the trading price. If institutional investors are unable to purchase our common stock in a sufficient amount
for their investment objectives, the market for our common stock may be more volatile without the influence of long-term institutional
investors holding significant amounts of our common stock. In the case of a lack of demand for our common stock, the trading price
of our common stock could decline significantly and rapidly after the Direct Listing. |
Such
differences from a firm-commitment underwritten initial public offering could result in a volatile market price for our common stock
and uncertain trading volume and may adversely affect your ability to sell your common stock.
The
direct listing process differs from an initial public offering underwritten on a firm-commitment basis and the impact of awareness of
our brand and investor recognition of our Company on the demand for our common stock is unpredictable and our marketing and brand development
efforts may not be successful.
We
will not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our common stock on Nasdaq.
Instead, we may engage in certain investor presentations and educational meetings to enhance our brand awareness and investor recognition
of our Company. In advance of any investor presentation or educational meeting, we will announce the date for such presentation or meeting
through financial news outlets in a manner consistent with typical corporate outreach to investors. We will prepare an electronic presentation
for any investor presentation or educational meeting that we hold, and will make the presentation publicly available, without restriction,
on a website.
There
can be no assurance that any investor presentations or other educational meetings that we hold will have the same impact on awareness
of our brand and investor recognition of our Company as a traditional “roadshow” conducted in connection with a firm-commitment
underwritten initial public offering. As a result, there may not be efficient price discovery with respect to our common stock or sufficient
demand among investors immediately following our listing, which could result in a more volatile public price of our common stock.
Our
shares of common stock currently have no public market. An active trading market may not develop or continue to be liquid and the market
price of our shares of common stock may be volatile.
We
expect our shares of common stock to be listed and traded on Nasdaq. We will not be involved in the price setting process and the Registered
Stockholders will not be involved in the price setting process. Additionally the price of our shares in prior private transactions may
have little or no relation to the opening price and subsequent public price of our stock on Nasdaq. We have engaged a third party firm
to conduct a valuation pursuant to Nasdaq’s listing qualification rules and requirements. Prior to the listing on Nasdaq, there
has not been a public market for our shares of common stock, and an active market for our shares of common stock may not develop or be
sustained after the listing, which could depress the market price of our shares of common stock and could affect the ability of our stockholders
to sell our shares of common stock. In the absence of an active public trading market, investors may not be able to liquidate their investments
in our shares of common stock. An inactive market may also impair our ability to raise capital by selling our shares of common stock,
our ability to motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies
by using our shares of common stock as consideration.
In
addition, we cannot predict the prices at which our shares of common stock may trade on Nasdaq following the listing of our shares of
common stock, and the market price of our shares of common stock may fluctuate significantly in response to various factors, some of
which are beyond our control. In particular, as this listing is taking place through a novel process that is not a firm-commitment underwritten
initial public offering, there will be no traditional book building process and no price at which traditional underwriters initially
sold shares to the public to help inform efficient price discovery with respect to the opening trades on Nasdaq. On the day that our
shares of common stock are initially listed on Nasdaq, Nasdaq will begin accepting, but not executing, pre-opening buy and sell orders
and will begin to continuously generate the indicative Current Reference Price (as defined below) on the basis of such accepted orders.
The Current Reference Price is calculated each second and, during a 10-minute “Display Only” period, is disseminated, along
with other indicative imbalance information, to market participants by Nasdaq on its NOII and BookViewer tools. Following the “Display
Only” period, a “Pre-Launch” period begins, during which the Advisor, in its capacity as our financial advisor, must
notify Nasdaq that our shares are “ready to trade.” Once the Advisor has notified Nasdaq that our shares of common stock
are ready to trade, Nasdaq will confirm the Current Reference Price for our shares of common stock, in accordance with the Nasdaq rules.
If the Advisor then approves proceeding at the Current Reference Price, the applicable orders that have been entered will be executed
at such price and regular trading of our shares of common stock on Nasdaq will commence, subject to Nasdaq conducting validation checks
in accordance with Nasdaq rules. The Advisor will determine when our shares of common stock are ready to trade and approve proceeding
at the Current Reference Price primarily based on considerations of volume, timing and price. In particular, the Advisor will determine,
based primarily on pre-opening buy and sell orders, when a reasonable amount of volume will cross on the opening trade such that sufficient
price discovery has been made to open trading at the Current Reference Price. If the Advisor does not approve proceeding at the Current
Reference Price (for example, due to the absence of adequate pre-opening buy and sell interest), the Advisor will request that Nasdaq
delay the open until such a time that sufficient price discovery has been made to ensure a reasonable amount of volume crosses on the
opening trade. For more information, see “Plan of Distribution.”
27 |
Additionally,
prior to the opening trade, there will not be a price at which underwriters initially sold shares of common stock to the public as there
would be in a firm-commitment underwritten initial public offering. The absence of a predetermined initial public offering price could
impact the range of buy and sell orders collected by Nasdaq from various broker-dealers. Consequently, upon listing on Nasdaq, the public
price of our common stock may be more volatile than in a firm-commitment underwritten initial public offering and could decline significantly
and rapidly.
Furthermore,
because of our novel listing process on the Nasdaq Capital Market, Nasdaq’s rules for ensuring compliance with its initial listing
standards, such as those requiring a valuation or other compelling evidence of value, are untested. In the absence of a prior active
public trading market for our common stock, if the price of our common stock or our market capitalization falls below those required
by Nasdaq’s eligibility standards, we may not be able to satisfy the ongoing listing criteria and may be required to delist.
In
addition, because of our novel listing process, individual investors, retail or otherwise, may have greater influence in setting the
opening public price and subsequent public prices of our common stock on Nasdaq and may participate more in our initial trading than
is typical for a firm-commitment underwritten initial public offering. These factors could result in a public price of our common stock
that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading
price of our common stock and an unsustainable trading price if the price of our common stock significantly rises upon listing and institutional
investors believe our common stock is worth less than retail investors, in which case the price of our common stock may decline over
time. Further, if the public price of our common stock is above the level that investors determine is reasonable for our common stock,
some investors may attempt to short our common stock after trading begins, which would create additional downward pressure on the public
price of our common stock. To the extent that there is a lack of consumer awareness among retail investors, such a lack of consumer awareness
could reduce the value of our common stock and cause volatility in the trading price of our common stock.
The
public price of our common stock following the listing also could be subject to wide fluctuations in response to the risk factors described
in this prospectus and others beyond our control, including:
● |
the
number of shares of our common stock publicly owned and available for trading; |
|
|
● |
overall
performance of the equity markets and/or publicly-listed companies that offer competing services and products; |
|
|
● |
actual
or anticipated fluctuations in our revenue or other operating metrics; |
|
|
● |
our
actual or anticipated operating performance and the operating performance of our competitors; |
|
|
● |
changes
in the financial projections we provide to the public or our failure to meet these projections; |
|
|
●
|
failure
of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow
our company, or our failure to meet the estimates or the expectations of investors; |
|
|
● |
any
major change in our board of directors, management, or key personnel; |
|
|
● |
the
economy as a whole and market conditions in our industry; |
|
|
● |
rumors
and market speculation involving us or other companies in our industry; |
|
|
● |
announcements
by us or our competitors of significant innovations, new products, services, features, integrations or capabilities, acquisitions,
strategic investments, partnerships, joint ventures, or capital commitments; |
|
|
● |
new
laws or regulations or new interpretations of existing laws or regulations applicable to our business, in the U.S. or globally; |
|
|
● |
lawsuits
threatened or filed against us; |
|
|
● |
other
events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and |
|
|
● |
sales
or expected sales of our common stock by us and our officers, directors and principal stockholders. |
In
addition, stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of
equity securities of many companies. Stock prices of many companies have fluctuated in a manner often unrelated to the operating performance
of those companies. These fluctuations may be even more pronounced in the trading market for our common stock shortly following the listing
of our common stock on Nasdaq as a result of the supply and demand forces described above. In the past, stockholders have instituted
securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it
could subject us to substantial costs, divert resources and the attention of management from our business and harm our business, results
of operations and financial condition.
We
may not be able to meet each of the quantitative requirements of the Nasdaq Capital Market’s Market Value Standard for
Direct Listings.
We
have applied to have shares of our common stock listed on the Nasdaq Capital Market. We expect that our common stock will be listed on
the Nasdaq Capital Market on or promptly after the date of this prospectus. In order for the Nasdaq Capital Market to approve our listing
application, we will need to meet the quantitative requirements of the Nasdaq Capital Market’s Market Value of Listed Securities
Standard, as provided in Nasdaq Listing Rules 5505(a) and 5505(b)(2), as well as the heightened initial listing requirements for direct
listings set forth in Nasdaq Listing Rule IM-5505-1. We expect to meet all those requirements but in the event that we are unable
to meet such requirements, we will not be approved to list our common stock on the Nasdaq Capital Market and our securities could be
quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
● |
a
limited availability of market quotations for our securities; |
● |
reduced
liquidity for our securities; |
28 |
● |
a
determination that our common stock is “penny stock” which will require brokers trading in our common stock to adhere
to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
● |
a
limited amount of news and analyst coverage; and |
● |
a
decreased ability to issue additional securities or obtain additional financing in the future. |
The
National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the
sale of certain securities, which are referred to as “covered securities.” Because we expect that our common stock will be
listed on the Nasdaq Capital Market, our common stock will qualify as covered securities under the statute. Although the states are preempted
from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion
of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a
particular case. If we cannot be listed on the Nasdaq Capital Market or any other national securities exchange, our securities would
not qualify as covered securities under the statute and we would be subject to regulation in each state in which we offer our securities.
We
intend to list our common stock on the Nasdaq Capital Market in connection with the Direct Listing and must satisfy heightened initial
listing requirements, and there can be no assurance that we will be able to do so.
We
have applied to list our common stock on the Nasdaq Capital Market in connection with the Direct Listing and intend to rely on the Market
Value of Listed Securities Standard for purposes of satisfying the initial listing requirements. Companies listing in connection
with a direct listing on the Nasdaq Capital Market must satisfy certain heightened quantitative and liquidity requirements
under Nasdaq Listing Rules 5505(a) and 5505(b)(2), as well as the additional requirements for direct listings set forth in Nasdaq
Listing Rule IM-5505-1, and Nasdaq will determine whether we meet these requirements based on the price of our common stock at the
time of listing as determined by reference to a third-party valuation or, if applicable, sustained recent trading in a private placement
market.
To
qualify for initial listing under this standard as a direct listing, we must satisfy certain heightened quantitative requirements
set forth in Nasdaq Listing Rules 5505(a) and 5505(b) and the direct listing requirements of IM-5505-1, including, among others:
● |
a valuation-based
market value of listed securities of at least $100.0 million; |
|
|
● |
a valuation-based
market value of unrestricted publicly held shares of at least $30.0 million; |
|
|
● |
at least 1,000,000 unrestricted
publicly held shares; |
|
|
● |
a minimum bid price of at
least $8.00 per share; |
|
|
● |
at least 300 round lot
holders; and |
|
|
● |
stockholders’ equity
of at least $5.0 million; and |
In addition, companies listing in
connection with a direct listing on the Nasdaq Capital Market must have at least three registered and active market makers willing to
act as market makers for the Company’s common stock.
Nasdaq
will determine whether we satisfy the applicable initial listing requirements based on the price of our common stock at the time of listing
and our satisfaction of the quantitative and liquidity requirements of the Nasdaq Capital Market.
Based
on an assumed initial reference price of $19.13 per share, which was determined by reference to a third-party valuation conducted in
connection with the Company’s application to list on Nasdaq pursuant to the requirements of Nasdaq Listing Rule IM-5505-1, we expect
to have a market value of listed securities in excess of $100.0 million, based on 45,034,282 shares of common stock outstanding
as of the date of this prospectus, and a market value of unrestricted publicly held shares in excess of $30.0 million, based on 45,034,282
unrestricted publicly held shares. We further expect to have at least 1,000,000 unrestricted publicly held shares, at least 300 round
lot holders, a minimum bid price of at least $8.00 per share (based on the assumed initial reference price of $19.13 per share, which
exceeds the $8.00 minimum), stockholders’ equity in excess of $5.0 million, based on our stockholders’ equity of $6,102,102
as of March 31, 2026, and at least three registered and active market makers. Accordingly, we expect to satisfy the quantitative
initial listing requirements of the Nasdaq Capital Market for direct listings in connection with the Direct Listing; however, there can
be no assurance that our application will be approved or that we will continue to satisfy the applicable listing requirements.
The assumed initial reference price
of $19.13 per share was derived from an independent third-party valuation conducted by a registered broker-dealer in connection with
the Company’s application to list on Nasdaq. The valuation employed a comparable public company analysis using enterprise value-to-revenue
multiples applied on a sum-of-the-parts basis to the Company’s two principal business segments. The independent appraiser identified
two peer groups of publicly traded companies: drone and unmanned aerial systems companies and ammunition and defense products companies
listed on U.S., European, and Canadian stock exchanges, and calculated the average forward enterprise value-to-revenue multiple for each
peer group based on estimated fiscal year 2026 revenues. The drone peer group average multiple of approximately 9.5x was applied to the
Company’s projected fiscal year 2026 drone division revenue of approximately $77.2 million, and the ammunition peer group average
multiple of approximately 3.2x was applied to the Company’s projected fiscal year 2026 ammunition division revenue of approximately
$35.6 million, yielding an aggregate implied equity value of approximately $851.5 million, or $19.13 per share based on 44,500,111 shares
of common stock then outstanding. The independent appraiser did not conduct a discounted cash flow analysis due to the limited visibility
of long-term cash flows in a rapidly evolving sector. No single factor was determinative, and the foregoing valuation reflected the independent
appraiser’s judgment as to the appropriate weighting of the foregoing factors. The assumed initial reference price does not reflect
an arms’-length negotiation between a buyer and a seller or the price at which underwriters initially sold shares to the public,
as would be the case in an initial public offering underwritten on a firm-commitment basis.
Investors should note that the assumed initial reference price of $19.13
per share represents a substantial premium over the per share prices paid by accredited investors in our prior private transactions, including
as recently as January to March 2026, when we issued an aggregate of 325,836 shares of common stock at prices ranging from $3.00 to $8.00
per share, and earlier issuances at prices ranging from $1.00 to $2.00 per share. The disparity between the per share prices paid by accredited
investors in prior private transactions and the assumed initial reference price may result in investors who purchase shares at or near
the assumed initial reference price experiencing a decline in the value of their investment if the trading price of our common stock does
not sustain such level. There can be no assurance that the trading price of our common stock will equal or exceed the assumed initial
reference price following the listing.
The
market price of our Common Stock may be volatile, and you could lose all or part of your investment.
The
trading price of our Common Stock is likely to be volatile and may fluctuate substantially in response to a variety of factors, many
of which are outside of our control. These factors include, among others, variations in our operating results; progress in establishing
and scaling our manufacturing operations; announcements by us or our competitors; changes in laws or regulations affecting the ammunition
and firearms industry; analyst coverage or lack thereof; litigation or regulatory actions; and changes in general market or economic
conditions. As a result, purchasers of our Common Stock could incur substantial losses if the market price of our Common Stock declines.
29 |
If
securities or industry analysts do not publish research or publish unfavorable or inaccurate research about our business, our stock price
and trading volume could decline.
The
trading market for our Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about
us or our industry. We may never obtain research coverage by securities or industry analysts. If no analysts commence coverage of our
company, the trading price and volume of our Common Stock would likely be negatively impacted. If we do obtain analyst coverage, and
one or more analysts downgrade our Common Stock or publish inaccurate or unfavorable research about our business, the trading price of
our Common Stock would likely decline. If one or more analysts cease coverage of our company or fail to regularly publish reports, demand
for our Common Stock could decrease, which might cause our stock price and trading volume to decline.
Our
status as an “emerging growth company” and a “smaller reporting company” allows us to take advantage of reduced
disclosure requirements, which could make our Common Stock less attractive to investors.
We
are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and a “smaller reporting company” under SEC rules. As such, we are eligible to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies, including reduced disclosure obligations regarding executive
compensation, exemption from the requirements of holding a nonbinding advisory vote on executive compensation, and, for so long as we
qualify as an emerging growth company, exemption from the requirement that our independent registered public accounting firm attest to
the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. We may also choose
to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised
accounting standards. We cannot predict whether investors will find our Common Stock less attractive because we rely on these exemptions.
If some investors find our Common Stock less attractive, there may be a less active trading market for our Common Stock, and our stock
price may be more volatile.
The Advisor, which will own a substantial number of shares of our common
stock on the date of the Direct Listing, may have a conflict of interest.
Given
RBW’s dual role as our financial advisor under Nasdaq direct listing rules and its status as a shareholder and placement agent
may present a conflict of interest. A conflict of interest situation can arise when a person or an entity has interests that may make
it difficult to perform their work objectively and effectively. Conflicts of interest may also arise if a person or entity receives personal
benefits as a result of their position. Nasdaq will determine the Current Reference Price of our shares of common stock in the Direct
listing in consultation with the Advisor in its capacity as our financial advisor. The Advisor will determine when our shares of common
stock are ready to trade and approve proceeding at the Current Reference Price primarily based on considerations of volume, timing and
price. In particular, the Advisor will determine, based primarily on pre-opening buy and sell orders, when a reasonable amount of volume
will cross on the opening trade such that sufficient price discovery has been made to open trading at the Current Reference Price.
As
compensation for successful listing, RBW will be granted 1.0% of our fully diluted common stock outstanding immediately prior to the
Direct Listing, which we currently calculate at 887,472 shares (“Advisory Shares”). Such shares are not registered
pursuant to this prospectus and the Advisor is not a Registered Shareholder. A resale registration statement covering such shares will
be filed within 10 days of the date of the Direct Listing. In addition, upon a successful direct listing, we will pay RBW a one-time
cash advisory fee of $250,000. As the Advisor will receive substantial personal benefit as a result of the Direct Listing, the existence
of such financial and personal interests may result in a conflict of interest on the part of the Advisor between what it may believe
is best for the Company and its shareholders and what it may believe is best for itself.
Exercise
of warrants and options, and vesting of restricted stock units, may have a dilutive effect on our stock and negatively impact
the price of our Common Stock.
As
of the date of this prospectus, we had 16,731,496 warrants, 15,113,046 options, and 10,000,000 restricted stock units outstanding.
Each warrant or option provides the holder the right to purchase up to one share of our Common Stock at a predetermined exercise price,
and each restricted stock unit represents the right to receive one share of our Common Stock upon vesting. Our outstanding warrants
consist of warrants to purchase an aggregate of 16,731,496 shares of Common Stock at an average exercise price of $1.27
per share over the next 1.1 years, and our outstanding options consist of options to purchase an aggregate of 15,113,046 shares
of Common Stock at an average exercise price of $1.07 per share over the next 7.1 years. Our outstanding restricted stock units consist
of 10,000,000 RSUs granted to our Chief Executive Officer and our President, which vest upon the satisfaction of time-based and market-based
conditions through October 2026 and upon the achievement of certain specified market capitalization milestones.
To
the extent that any of the outstanding warrants, options, and restricted stock units described above are exercised or
vest, dilution to the interests of our stockholders will occur. For the life of such warrants and options, and during the
vesting period of such restricted stock units, the holders will have the opportunity to profit from a rise in the price of the Common
Stock with a resulting dilution in the interest of the other holders of Common Stock. The existence of such warrants, options,
and restricted stock units may adversely affect the market price of our Common Stock and the terms on which we can obtain additional
financing, and the holders of such warrants and options can be expected to exercise them at a time when we would, in all likelihood,
be able to obtain additional capital by an offering of our unissued capital stock on terms more favorable to us than those provided by
such warrants and options. The vesting of restricted stock units will result in additional shares becoming freely tradeable, which
may create downward pressure on the market price of our Common Stock.
30 |
Tariffs
and trade tensions could have an adverse effect on economic conditions and financial markets, which may adversely affect the value of
our shares of Common Stock.
U.S.
President Trump has announced a number of tariff-related policies that have resulted in increased tariffs and potentially will result
additional tariffs on products imported into the United States. There is no certainty regarding if and how long the existing increased
tariffs will remain in place or whether additional tariffs will be imposed and, if so, how long such tariffs will remain in place. These
actions have resulted, and may result, in fluctuations in financial markets, including with respect to interest rates, and retaliatory
tariffs or trade actions by other countries. If geopolitical tensions or uncertainty continue, they could result in a reduction of trade
volume, investment and technological exchange and other economic activities among major international economies, which in turn could
lead to a recession and further changes in interest rates. The application of increased tariffs or continuing uncertainty also may result
in a material increase to our costs of operation or otherwise limit our commercial opportunities. Any of these events could adversely
affect our business, results of operations and financial condition, which in turn may adversely affect the value of our shares of Common
Stock.
Issuance
of Preferred Stock could result in the dilution of the value of the current stockholders’ Common Stock.
Our
amended and restated certificate of incorporation allows us to issue Preferred Stock with voting, liquidation, and dividend rights
senior to those of the Common Stock without the approval of our stockholders. The issuance of Preferred Stock could have the effect
of making it more difficult for a third party to acquire a majority of the outstanding stock of our company and result in the dilution
of the value of the then current stockholders’ Common Stock.
We
have granted the April 2026 Note Investors a first-priority security interest in substantially all of our assets to secure our
obligations under the April 2026 Senior Notes, and if we default on the April 2026 Senior Notes, we could lose substantially
all of our assets.
In connection with the April 2026 Note Financing,
we entered into the April 2026 Security Agreement granting the April 2026 Note Investors a first-priority security interest
in substantially all of our assets, including, without limitation, accounts receivable, inventory, equipment, intellectual property,
general intangibles and the proceeds thereof (collectively, the “Collateral”). The April 2026 Security Agreement secures
our obligations under the April 2026 Senior Notes and the other transaction documents related thereto. Upon an event of
default under the April 2026 Senior Notes, including our failure to pay principal or interest when due, a breach of any representation,
warranty or covenant in the related transaction documents, certain bankruptcy or insolvency events, or a material adverse change in our
business or financial condition, the April 2026 Note Investors may exercise all remedies available under the Uniform Commercial
Code and the April 2026 Security Agreement, including taking possession of and disposing of the Collateral. The April 2026
Security Agreement also imposes ongoing covenants on us, including obligations to maintain the Collateral, to refrain from granting additional
liens without the April 2026 Note Investors’ prior written consent, and to provide periodic financial information to the
April 2026 Note Investors. If the April 2026 Note Investors were to exercise such remedies, we could lose some or all of
our assets, which would materially impair our ability to continue operations and could result in a total loss of your investment in our
Common Stock.
The
April 2026 Senior Notes are convertible into shares of our Common Stock at a fixed conversion price and the April 2026
Note Warrants issued in connection with the April 2026 Note Financing will result in significant dilution to our existing stockholders
and may adversely affect the trading price of our Common Stock.
The
April 2026 Senior Notes issued in the April 2026 Note Financing are convertible into shares of our Common Stock at a fixed
Conversion Price of $8.00 per share upon Direct Listing, subject to adjustment as set forth in the April 2026 Senior Notes. Based
on $10,150,000 representing the maximum offering amount pursuant to the April 2026 Senior Notes (the “Maximum Offering
Amount”) and giving effect to the 35.0% original issue discount, the aggregate principal amount of the April 2026 Senior
Notes was approximately $15,615,385, which, at a Conversion Price of $8.00 per share, will result in the issuance of approximately 1,951,923
shares of our Common Stock upon full conversion upon Direct Listing, representing approximately 4.3% of our currently outstanding
shares of Common Stock (based on 45,034,282 shares outstanding as of the date of this prospectus). In addition, we issued April
2026 Note Warrants to purchase approximately 507,500 shares of our Common Stock in connection with the Maximum Offering Amount, each
exercisable at $8.00 per share. In the aggregate, the shares of Common Stock issuable upon full conversion of the April 2026 Senior
Notes and exercise of all April 2026 Note Warrants would total approximately 2,459,423 shares, representing approximately 5.3% of our
currently outstanding shares of Common Stock (based on 45,034,282 shares outstanding as of the date of this prospectus).
These figures are illustrative only and do not give effect to accrued interest or potential adjustments to the Conversion Price as set
forth in the April 2026 Senior Notes, which could result in the issuance of a greater number of shares. The conversion of the
April 2026 Senior Notes and the exercise of the April 2026 Note Warrants will increase the number of shares of our Common
Stock outstanding, which will dilute the ownership percentage and voting power of our existing stockholders. Such dilution could be substantial.
Furthermore, sales or the anticipated sale of a substantial number of shares of Common Stock issuable upon conversion of the April
2026 Senior Notes or exercise of the April 2026 Note Warrants in the public market could adversely affect the prevailing market
price of our Common Stock. The April 2026 Note Investors are not subject to any lock-up or other contractual restriction on transfer
and may sell the securities acquired in the April 2026 Note Financing, including shares of Common Stock issuable upon conversion
or exercise thereof, immediately upon the listing of our Common Stock on a national securities exchange, which could create significant
selling pressure in the period immediately following listing. The April 2026 Note Warrants contain a full-ratchet anti-dilution
provision that adjusts the exercise price downward in the event we issue equity securities at a price per share below the then-current
exercise price. This provision may amplify the dilutive effect in the event of future equity issuances at lower prices, as the exercise
price of the April 2026 Note Warrants would be reduced, allowing the holders of April 2026 Note Warrants to acquire shares
at a discount to the then-prevailing market price.
The
April 2026 Note Financing includes preemptive rights, board representation rights, most favored nations protections and other
investor rights that may limit our operational and financial flexibility and adversely affect our ability to raise additional capital.
The April 2026 Note
Purchase Agreement and the related transaction documents in connection with the April 2026 Note Financing contain various covenants,
restrictions and investor protections that may limit our operational a
### EX-10.1 - EX-10.1
EX-10.1
2
ex10-1.htm
EX-10.1
Exhibit
10.1
FIRST
BREACH, INC.
Executive
Employment Agreement
This
Employment Agreement is entered into as of the date of the last signature affixed hereto, by and between First Breach, Inc., a
Delaware corporation (“First Breach” or “the Company”), and Jeffrey Low
(“Employee”).
In
consideration of the mutual promises and covenants set forth herein, and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, First Breach and Employee hereby agree as follows:
| 1. | Position
of Employment. The Company will employ the Employee in the position of CEO of First Breach and, in that position, Employee
will report to BOD , the Board of First Breach. First Breach retains the right to change Employee’s title,
duties, and reporting relationships as may be determined to be in the best interests of the Company; provided, however, that any
such change in Employee’s duties shall be consistent with Employee’s training, experience, and
qualifications. |
| | |
| | The
terms and conditions of the Employee’s employment shall, to the extent not addressed
or described in this Employment Agreement, be governed by First Breach’s Policies and
Procedures Manual and existing practices. In the event of a conflict between this Employment
Agreement and the Policies and Procedures Manual or existing practices, the terms of this
Agreement shall govern. |
| | |
| 2. | Term
of Employment. Employee’s employment with First Breach shall begin on January 1 , 2026 , and shall continue for a
period of Ten ( 10 ) years, after which time continued employment shall be on an “at will” basis, unless: |
| a. | Employee’s
employment is terminated by either party in accordance with the terms of Section 5 of this
Employment Agreement; or |
| | |
| b. | Such
term of employment is extended or shortened by a subsequent agreement duly executed by each
of the parties to this Employment Agreement, in which case such employment shall be subject
to the terms and conditions contained in the subsequent written agreement. |
| 3. | Compensation
and Benefits. |
| a. | Base
Salary. Employee shall be paid a base salary of $ 33,334 monthly, which is $ 400,008
annually (“Base Salary”), subject to applicable federal, state, and local withholding,
such Base Salary to be paid to Employee in the same manner and on the same payroll schedule
in which all First Breach employees receive payment. Employee’s base salary shall increase by 10% every calendar year for the duration of this agreement. Any additional increases in Employee’s Base
Salary for years beyond the first year of Employee’s employment shall be in the sole
discretion of First Breach management, and nothing herein shall be deemed to require any
such increase. |
| | |
| b. | Incentive
and Deferred Compensation. Employee shall be eligible to participate in all incentive and
deferred compensation programs available to other executives or officers of First Breach,
such participation to be in the same form, under the same terms, and to the same extent that
such programs are made available to other such executives or officers. Employee shall receive a cash bonus every calendar year at a minimum of 50% of their base salary. Any additional
bonus offered shall be at the discretion of the Company or Compensation Committee of the Board of Directors. |
1 |
|
c. |
Employee Benefits. Employee
shall be eligible to participate in all employee benefit plans, policies, programs, or perquisites in which other First Breach Company
executive or officers participate, including, if and when applicable, the First Breach Stock Option program. The terms and conditions
of Employee’s participation in First Breach’s employee benefit plans, policies, programs, or perquisites shall be governed
by the terms of each such plan, policy, or program. |
|
|
|
|
d. |
Paid Time Off (PTO) and Sick Leave. |
| 1. | PTO:
Employe shall be entitled to 25 days |
| | |
| 2. | Sick
Leave: Employee shall accrue up to 40 hours of paid sick leave per calendar year in accordance
with Maryland law at a rate of one hour of paid leave earned for every thirty hours worked.
Employee may carry over any earned but unused sick and safe leave up to 40 hours, but an
employee may not accrue more than 64 hours of sick and safe leave at any time. Employee will
not be paid for any unused sick and safe leave upon termination of employment. |
| 4. | Duties
and Performance. The Employee acknowledges and agrees that he is being offered a position
of employment by the Company with the understanding that the Employee possesses a unique
set of skills, abilities, and experiences which will benefit the Company, and he agrees that
his continued employment with the Company, whether during the term of this Employment Agreement
or thereafter, is contingent upon his successful performance of his duties in his position
as noted above, or in such other position to which he may be assigned. |
| a. | General
Duties. |
| 1. | Employee
shall render to the very best of Employee’s ability, on behalf of the Company, services
to and on behalf of the Company, and shall undertake diligently all duties assigned to him
by the Company. |
| | |
| 2. | Employee
shall devote his full time, energy and skill to the performance of the services in which
the Company is engaged, at such time and place as the Company may direct. Employee shall
not undertake, either as an owner, director, shareholder, employee or otherwise, the performance
of services for compensation (actual or expected) for any other entity without the express
written consent of the Board of Directors of First Breach. |
| | |
| 3. | Employee
shall faithfully and industriously assume and perform with skill, care, diligence and attention
all responsibilities and duties connected with his employment on behalf of the Company. |
| | |
| 4. | Employee
shall have no authority to enter into any contracts binding upon the Company, or to deliberately
create any obligations on the part of the Company, except as may be specifically authorized by the Board of Directors of First Breach. |
2 |
| b. | Specific
Duties. |
| 5. | Termination
of Employment. Employee’s employment with the Company may be terminated prior to the
expiration of the term of this Employment Agreement, in accordance with any of the following
provisions: |
| a. | Termination
by Employee. The Employee may terminate his employment at any time during the course of this
agreement by giving 2 weeks [weeks/months)]’ notice in writing to the Board of
Directors of First Breach. During the notice period, Employee must fulfill all his duties
and responsibilities set forth above and use his best efforts to train and support his replacement,
if any. Failure to comply with this requirement may result in Termination for Cause described
below, but otherwise Employee’s salary and benefits will remain unchanged during the
notification period. |
| | |
| b. | Termination
by the Company Without Cause. First Breach may terminate Employee’s employment at any
time during the course of this agreement by giving 1 month [weeks/months]’ notice
in writing to the Employee. During the notice period, Employee must fulfill all of Employee’s
duties and responsibilities set forth above and use Employee’s best efforts to train
and support Employee’s replacement, if any. Failure of Employee to comply with this
requirement may result in Termination for Cause described below, but otherwise Employee’s
salary and benefits will remain unchanged during the notification period. First Breach shall
pay Employee severance pay in the amount of the total value of Base Salary for the remaining
contract period in lieu of actual employment, and nothing herein shall require Company to
maintain employee in active employment for the duration of the notice period. |
| | |
| c. | Termination
by the Company for Cause. The Company may, at any time and without notice, terminate the
Employee for “cause”. Termination by the Company of the Employee for “cause”
shall include but not be limited to termination based on any of the following grounds: (a)
failure to perform the duties of the Employee’s position in a satisfactory manner;
(b) fraud, misappropriation, embezzlement or acts of similar dishonesty; (c) conviction of
a felony involving moral turpitude; (d) use of illegal drugs or narcotics (e) excessive use
of alcohol in the workplace; (f) intentional and willful misconduct that may subject the
Company to criminal or civil liability; (g) breach of the Employee’s duty of loyalty,
including the diversion or usurpation of corporate opportunities properly belonging to the
Company; (i) willful disregard of Company policies and procedures; (j) breach of any of the
material terms of this Agreement and/or the First Breach Restrictive Covenant Agreement attached
hereto and incorporated herein as Appendix A; and (k) insubordination or deliberate refusal
to follow the instructions of the Board of Directors of First Breach. First Breach shall
pay Employee severance pay in the amount of the total value of Base Salary for the remaining contract
period if termination is pursuant to this paragraph. |
3 |
| d. | Termination
By Death or Disability. The Employee’s employment and rights to compensation under this
Employment Agreement shall terminate if the Employee is unable to perform the duties of his
position due to death or disability lasting more than 90 days, and the Employee’s heirs,
beneficiaries, successors, or assigns shall not be entitled to any of the compensation or
benefits to which Employee is entitled under this Agreement, except: (a) to the extent specifically
provided in this Employment Agreement (b) to the extent required by law; or (c) to the extent
that such benefit plans or policies under which Employee is covered provide a benefit to
the Employee’s heirs, beneficiaries, successors, or assigns. |
| 6. | Expenses.
The Company shall pay or reimburse Employee for any expenses reasonably incurred by him in
furtherance of his duties hereunder, including expenses for entertainment, travel, meals
and hotel accommodations. |
| | |
| 7. | Company
Property |
| a. | Employee
may be provided with a company-issued laptop and/or other company-owned equipment to facilitate
the proper execution of Employee’s job responsibilities. Employee agrees to handle
the laptop, and all company property, with utmost care and acknowledge responsibility for
any damage incurred beyond normal wear and tear. |
| | |
| b. | Employee
acknowledges that the laptop remains the property of Company. Employee should therefore have
no expectation of privacy whatsoever in any message, file, data, document, or any other kind
or form of information or communication transmitted to, received, or printed from, or stored
or recorded on the laptop or any other company electronic device. Employee is expressly advised
that to prevent against misuse, Company reserves the right to monitor, intercept, and review,
without further notice, Employee’s activities using the company’s IT resources
and communications systems, including but not limited to email (both outgoing and incoming). |
| | |
| c. | Upon
conclusion of Employee’s employment with Company, the Employee will return the laptop
and any other Company property in Employee’s possession or control promptly using a
prepaid shipping label provided by Company, within a timeframe not exceeding 7 calendar days. |
|
8. |
General Provisions. |
| a. | Notices.
All notices and other communications required or permitted by this Agreement to be delivered
by First Breach or Employee to the other party shall be delivered in writing to the address
shown below, either personally, by facsimile transmission or by registered, certified or express
mail, return receipt requested, postage prepaid, to the address for such party specified
below or to such other address as the party may from time to time advise the other party,
and shall be deemed given and received as of actual personal delivery, on the first business
day after the date of delivery shown on any such facsimile transmission or upon the date
or actual receipt shown on any return receipt if registered, certified or express mail is
used, as the case may be. |
First
Breach:
First
Breach, Inc.
18450
Showalter Road
Hagerstown,
Maryland 21742
Attention:
Board Chairman
4 |
Employee:
Jeffrey
Low
| b. | Legal
Fees and Other Remedies. In the event First Breach brings any action to enforce any term
or provision of this Agreement and/or the RCA, the court in such proceeding shall award the
Employer such attorney’s fees and costs as it determines reasonable and appropriate.
Such award shall not be merged into any judgment, and the Employer shall be entitled to an
award of attorney’s fees and costs incurred seeking to collect any award or judgment. |
| | |
| c. | Partial
Invalidity. In the event that any one or more of the provisions of this Agreement or any
word, phrase, clause, sentence, or other portion thereof (including without limitation the
temporal restrictions contained herein) shall be deemed by a court of competent jurisdiction
to be illegal or unenforceable for any reason, such provision or portion thereof shall be
considered modified or deleted in such manner as to make this Agreement, as modified, legal
and enforceable to the fullest extent permitted under applicable laws. The validity and enforceability
of the remaining provisions or portions thereof shall continue unimpaired. |
| | |
| d. | Amendments
and Termination; Entire Agreement. This Agreement may not be amended or terminated except
by a writing executed by all of the parties hereto. This Agreement constitutes the entire
agreement of First Breach and Employee relating to the subject matter hereof and supersedes
all prior oral and written understandings and agreements relating to such subject matter. |
| | |
| f. | Successors
and Assigns. The rights and obligations of the parties hereunder are not assignable to another
person without prior written consent; provided, however, that First Breach, without obtaining
Employee’s consent, may assign its rights and obligations hereunder to a wholly-owned
subsidiary and provided further that any post-employment restrictions shall be assignable
by First Breach to any entity which purchases all or substantially all of the Company’s
assets. |
| | |
| g. | Waiver
of Rights. No waiver by First Breach or Employee of a right or remedy hereunder shall be
deemed to be a waiver of any other right or remedy or of any subsequent right or remedy of
the same kind. |
5 |
| j. | Definitions;
Headings; and Number. A term defined in any part of this Employment Agreement shall have
the defined meaning wherever such term is used herein. The headings contained in this Agreement
are for reference purposes only and shall not affect in any manner the meaning or interpretation
of this Employment Agreement. Where appropriate to the context of this Agreement, use of
the singular shall be deemed also to refer to the plural, and use of the plural to the singular. |
| | |
| k. | Counterparts.
This Agreement may be executed in separate counterparts, each of which shall be deemed an
original but both of which taken together shall constitute but one and the same instrument. |
| | |
| h. | Governing
Laws and Venue. This Agreement shall be governed by, construed, and enforced in accordance
with the laws of the State of Maryland. The parties hereto further agree that any action brought
to enforce any right or obligation under this Agreement must be brought in the courts of
the State of Maryland or the United States District Court of Maryland. |
| | |
| i. | |
IN
WITNESS WHEREOF, First Breach and Employee have executed and delivered this Agreement as of the date written below.
First Breach, Inc. |
|
Employee |
|
|
|
|
|
By |
/s/ Jeffrey
Low |
|
By |
/s/
Jeffrey Low |
Name |
Jeffrey Low |
|
Name |
Jeffrey
Low |
Title |
CEO |
|
Date |
January 1, 2026 |
Date |
January
1, 2026
|
|
|
|
6 |
### EX-10.2 - EX-10.2
EX-10.2
3
ex10-2.htm
EX-10.2
Exhibit
10.2
FIRST
BREACH, INC.
Executive
Employment Agreement
This
Employment Agreement is entered into as of the date of the last signature affixed hereto, by and between First Breach, Inc., a Delaware
corporation (“First Breach” or “the Company”), and Jordan Low (“Employee”).
In
consideration of the mutual promises and covenants set forth herein, and other good and valuable consideration, the sufficiency of which
is hereby acknowledged, First Breach and Employee hereby agree as follows:
|
1. |
Position
of Employment. The Company will employ the Employee in the position of President & COO of First Breach and, in that position,
Employee will report to Jeffrey Low , the CEO of First Breach. First Breach retains the right to change Employee’s
title, duties, and reporting relationships as may be determined to be in the best interests of the Company; provided, however, that
any such change in Employee’s duties shall be consistent with Employee’s training, experience, and qualifications. |
|
|
|
|
|
The
terms and conditions of the Employee’s employment shall, to the extent not addressed or described in this Employment Agreement,
be governed by First Breach’s Policies and Procedures Manual and existing practices. In the event of a conflict between this
Employment Agreement and the Policies and Procedures Manual or existing practices, the terms of this Agreement shall govern. |
|
|
|
|
2.
|
Term
of Employment. Employee’s employment with First Breach shall begin on January 1 , 2026 , and shall continue for
a period of Ten ( 10 ) years, after which time continued employment shall be on an “at will” basis, unless: |
|
a.
|
Employee’s
employment is terminated by either party in accordance with the terms of Section 5 of this Employment Agreement; or |
|
|
|
|
b.
|
Such
term of employment is extended or shortened by a subsequent agreement duly executed by each of the parties to this Employment Agreement,
in which case such employment shall be subject to the terms and conditions contained in the subsequent written agreement. |
|
3.
|
Compensation
and Benefits. |
|
a.
|
Base
Salary. Employee shall be paid a base salary of $ 25,000 monthly, which is $ 300,000 annually (“Base Salary”),
subject to applicable federal, state, and local withholding, such Base Salary to be paid to Employee in the same manner and on the
same payroll schedule in which all First Breach employees receive payment. Employee’s base salary shall increase by 10% every calendar year for the duration of this agreement. Any additional increases in Employee’s Base Salary for years
beyond the first year of Employee’s employment shall be in the sole discretion of First Breach management, and nothing herein
shall be deemed to require any such increase. |
|
|
|
|
b.
|
Incentive
and Deferred Compensation. Employee shall be eligible to participate in all incentive and deferred compensation programs available
to other executives or officers of First Breach, such participation to be in the same form, under the same terms, and to the same
extent that such programs are made available to other such executives or officers. Employee shall receive a cash bonus every
calendar year at a minimum of 50% of their base salary. Any additional bonus offered shall be at the discretion of the Company or
Compensation Committee of the Board of Directors. |
1 |
|
|
c. |
Employee
Benefits. Employee shall be eligible to participate in all employee benefit plans, policies, programs, or perquisites in which other
First Breach Company executive or officers participate, including, if and when applicable, the First Breach Stock Option program.
The terms and conditions of Employee’s participation in First Breach’s employee benefit plans, policies, programs, or
perquisites shall be governed by the terms of each such plan, policy, or program. |
|
|
|
|
d. |
Paid
Time Off (PTO) and Sick Leave. |
|
1. |
PTO:
Employe shall be entitled to 25 days |
|
|
|
|
2. |
Sick
Leave: Employee shall accrue up to 40 hours of paid sick leave per calendar year in accordance with Maryland law at a rate of one
hour of paid leave earned for every thirty hours worked. Employee may carry over any earned but unused sick and safe leave up to
40 hours, but an employee may not accrue more than 64 hours of sick and safe leave at any time. Employee will not be paid for any
unused sick and safe leave upon termination of employment. |
|
4. |
Duties
and Performance. The Employee acknowledges and agrees that he is being offered a position
of employment by the Company with the understanding that the Employee possesses a unique
set of skills, abilities, and experiences which will benefit the Company, and he agrees that
his continued employment with the Company, whether during the term of this Employment Agreement
or thereafter, is contingent upon his successful performance of his duties in his position
as noted above, or in such other position to which he may be assigned.
|
|
a. |
General
Duties. |
|
1. |
Employee
shall render to the very best of Employee’s ability, on behalf of the Company, services to and on behalf of the Company, and
shall undertake diligently all duties assigned to him by the Company. |
|
|
|
|
2. |
Employee
shall devote his full time, energy and skill to the performance of the services in which the Company is engaged, at such time and
place as the Company may direct. Employee shall not undertake, either as an owner, director, shareholder, employee or otherwise,
the performance of services for compensation (actual or expected) for any other entity without the express written consent of the
Chief Executive Officer of First Breach. |
|
|
|
|
3. |
Employee
shall faithfully and industriously assume and perform with skill, care, diligence and attention all responsibilities and duties connected
with his employment on behalf of the Company. |
|
|
|
|
4. |
Employee
shall have no authority to enter into any contracts binding upon the Company, or to deliberately create any obligations on the part
of the Company, except as may be specifically authorized by the Chief Executive Officer of First Breach. |
2 |
|
|
b. |
Specific
Duties. |
|
5. |
Termination
of Employment. Employee’s employment with the Company may be terminated prior to the expiration of the term of this Employment
Agreement, in accordance with any of the following provisions: |
|
a. |
Termination
by Employee. The Employee may terminate his employment at any time during the course of this agreement by giving 2 weeks [weeks/months]’
notice in writing to the Chief Executive Officer of First Breach. During the notice period, Employee must fulfill all his duties
and responsibilities set forth above and use his best efforts to train and support his replacement, if any. Failure to comply with
this requirement may result in Termination for Cause described below, but otherwise Employee’s salary and benefits will remain
unchanged during the notification period. |
|
|
|
|
b. |
Termination
by the Company Without Cause. First Breach may terminate Employee’s employment at any time during the course of this agreement
by giving 1 month [weeks/months]’ notice in writing to the Employee. During the notice period, Employee must fulfill
all of Employee’s duties and responsibilities set forth above and use Employee’s best efforts to train and support Employee’s
replacement, if any. Failure of Employee to comply with this requirement may result in Termination for Cause described below, but
otherwise Employee’s salary and benefits will remain unchanged during the notification period. First Breach shall pay Employee
severance pay in the amount of the total value of Base Salary for the remaining contract period in lieu of actual employment, and
nothing herein shall require Company to maintain employee in active employment for the duration of the notice period. |
|
|
|
|
c. |
Termination
by the Company for Cause. The Company may, at any time and without notice, terminate the Employee for “cause”.
Termination by the Company of the Employee for “cause” shall include but not be limited to termination based on any of
the following grounds: (a) failure to perform the duties of the Employee’s position in a satisfactory manner; (b) fraud,
misappropriation, embezzlement or acts of similar dishonesty; (c) conviction of a felony involving moral turpitude; (d) use of
illegal drugs or narcotics; (e) excessive use of alcohol in the workplace; (f) intentional and willful misconduct that may subject
the Company to criminal or civil liability; (g) breach of the Employee’s duty of loyalty, including the diversion or
usurpation of corporate opportunities properly belonging to the Company; (i) willful disregard of Company policies and procedures;
(j) breach of any of the material terms of this Agreement and/or the First Breach Restrictive Covenant Agreement attached hereto and
incorporated herein as Appendix A; and (k) insubordination or deliberate refusal to follow the instructions of Employee’s
direct supervisor and/or the Chief Executive Officer of First Breach. First Breach shall pay Employee severance pay in the amount of
the total value of Base Salary for the remaining contract period if termination is pursuant to this paragraph. |
3 |
|
|
d. |
Termination
By Death or Disability. The Employee’s employment and rights to compensation under this Employment Agreement shall terminate
if the Employee is unable to perform the duties of his position due to death or disability lasting more than 90 days, and the Employee’s
heirs, beneficiaries, successors, or assigns shall not be entitled to any of the compensation or benefits to which Employee is entitled
under this Agreement, except: (a) to the extent specifically provided in this Employment Agreement (b) to the extent required by
law; or (c) to the extent that such benefit plans or policies under which Employee is covered provide a benefit to the Employee’s
heirs, beneficiaries, successors, or assigns. |
|
6. |
Expenses.
The Company shall pay or reimburse Employee for any expenses reasonably incurred by him in furtherance of his duties hereunder, including
expenses for entertainment, travel, meals and hotel accommodations. |
|
|
|
|
7. |
Company
Property |
|
a. |
Employee
may be provided with a company-issued laptop and/or other company- owned equipment to facilitate the proper execution of Employee’s
job responsibilities. Employee agrees to handle the laptop, and all company property, with utmost care and acknowledge responsibility
for any damage incurred beyond normal wear and tear. |
|
|
|
|
b. |
Employee
acknowledges that the laptop remains the property of Company. Employee should therefore have no expectation of privacy whatsoever
in any message, file, data, document, or any other kind or form of information or communication transmitted to, received, or printed
from, or stored or recorded on the laptop or any other company electronic device. Employee is expressly advised that to prevent against
misuse, Company reserves the right to monitor, intercept, and review, without further notice, Employee’s activities using the
company’s IT resources and communications systems, including but not limited to email (both outgoing and incoming). |
|
|
|
|
c. |
Upon
conclusion of Employee’s employment with Company, the Employee will return the laptop and any other Company property in Employee’s
possession or control promptly using a prepaid shipping label provided by Company, within a timeframe not exceeding 7 calendar days. |
|
8. |
General
Provisions. |
|
a. |
Notices.
All notices and other communications required or permitted by this Agreement to be delivered by First Breach or Employee to the other
party shall be delivered in writing to the address shown below, either personally, by facsimile transmission or by registered, certified
or express mail, return receipt requested, postage prepaid, to the address for such party specified below or to such other address
as the party may from time to time advise the other party, and shall be deemed given and received as of actual personal delivery,
on the first business day after the date of delivery shown on any such facsimile transmission or upon the date or actual receipt
shown on any return receipt if registered, certified or express mail is used, as the case may be. |
First
Breach:
First
Breach, Inc.
18450
Showalter Road
Hagerstown,
Maryland 21742
Attention:
Jeffrey Low, Chief Executive Officer
4 |
|
Employee:
Jordan
Low
|
b. |
Legal
Fees and Other Remedies. In the event First Breach brings any action to enforce any term or provision of this Agreement and/or the
RCA, the court in such proceeding shall award the Employer such attorney’s fees and costs as it determines reasonable and appropriate.
Such award shall not be merged into any judgment, and the Employer shall be entitled to an award of attorney’s fees and costs
incurred seeking to collect any award or judgment. |
|
|
|
|
c.
|
Partial
Invalidity. In the event that any one or more of the provisions of this Agreement or any word, phrase, clause, sentence, or other
portion thereof (including without limitation the temporal restrictions contained herein) shall be deemed by a court of competent
jurisdiction to be illegal or unenforceable for any reason, such provision or portion thereof shall be considered modified or deleted
in such manner as to make this Agreement, as modified, legal and enforceable to the fullest extent permitted under applicable laws.
The validity and enforceability of the remaining provisions or portions thereof shall continue unimpaired. |
|
|
|
|
d. |
Amendments
and Termination; Entire Agreement. This Agreement may not be amended or terminated except by a writing executed by all of the parties
hereto. This Agreement constitutes the entire agreement of First Breach and Employee relating to the subject matter hereof and supersedes
all prior oral and written understandings and agreements relating to such subject matter. |
|
|
|
|
f. |
Successors
and Assigns. The rights and obligations of the parties hereunder are not assignable to another person without prior written consent;
provided, however, that First Breach, without obtaining Employee’s consent, may assign its rights and obligations hereunder
to a wholly-owned subsidiary and provided further that any post-employment restrictions shall be assignable by First Breach to any
entity which purchases all or substantially all of the Company’s assets. |
|
|
|
|
g. |
Waiver
of Rights. No waiver by First Breach or Employee of a right or remedy hereunder shall be deemed to be a waiver of any other right
or remedy or of any subsequent right or remedy of the same kind. |
5 |
|
|
j. |
Definitions;
Headings; and Number. A term defined in any part of this Employment Agreement shall have the defined meaning wherever such term is
used herein. The headings contained in this Agreement are for reference purposes only and shall not affect in any manner the meaning
or interpretation of this Employment Agreement. Where appropriate to the context of this Agreement, use of the singular shall be
deemed also to refer to the plural, and use of the plural to the singular. |
|
|
|
|
k. |
Counterparts.
This Agreement may be executed in separate counterparts, each of which shall be deemed an original but both of which taken together
shall constitute but one and the same instrument. |
|
|
|
|
h. |
Governing
Laws and Venue. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Maryland.
The parties hereto further agree that any action brought to enforce any right or obligation under this Agreement must be brought
in the courts of the State of Maryland or the United States District Court of Maryland. |
|
|
|
|
i. |
|
IN
WITNESS WHEREOF, First Breach and Employee have executed and delivered this Agreement as of the date written below.
First
Breach, Inc. |
|
Employee |
|
|
|
|
|
By |
/s/
Jeffrey Low |
|
By |
/s/ Jordan Low |
Name |
Jeffrey
Low |
|
Name |
Jordan Low |
Title
|
CEO |
|
Date |
January
1, 2026 |
Date |
January
1, 2026 |
|
|
|
6 |
### EX-10.3 - EX-10.3
EX-10.3
4
ex10-3.htm
EX-10.3
Exhibit
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
### EX-10.4 - EX-10.4
EX-10.4
5
ex10-4.htm
EX-10.4
Exhibit 10.4
LEASE
AGREEMENT
THIS
LEASE AGREEMENT (this “ Lease ”) is made as of February 1, 2022 (the “ Effective Date ”) by and between
NEW HEIGHTS INDUSTRIAL PARK LLC, a Delaware limited liability company (“ Landlord ”), and FIRST BREACH INC., a Delaware
corporation ( “Tenant ”).
R
E C I T A L S
A. Landlord
is the owner of the improved real property located at 18450 Showalter Road, Hagerstown, Maryland 21742, which is more particularly described
on Exhibit A (the “ Property ”).
B. Tenant
desires to lease a portion of the Property referred to as Bay 1 and Bay 2, comprising approximately 71,500 rentable square feet, as more
particularly shown on Exhibit B (the “ Premises ”).
C. Landlord
has agreed to lease to Tenant, and Tenant has agreed to rent from Landlord, the Premises on the terms of this Lease.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants and conditions contained herein, Landlord and Tenant hereby agree
as follows:
1. Term .
(a) Initial
Term . Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises pursuant to the terms, and subject to
the conditions, of this Lease. The term of this Lease (the “ Term ”) shall commence at 12:01 a.m. on February 1, 2022
(the “ Commencement Date ”) and expire at 11:59 p.m. on January 31, 2029 (the “ Expiration Date ”).
“ Lease Year ” means a period of twelve (12) consecutive months during the Term.
(b) Extension
Term . Tenant shall have the right and option (the “ Extension Option ”) to extend the Term upon all of the same
terms and conditions (except as this Lease otherwise expressly states) for two (2) successive periods of five (5) years (each, an “ Extension
Term ”). Tenant shall exercise the Extension Option (if at all) by delivering to Landlord written notice of such exercise at
least twelve (12), and no more than twenty-four (24), months before the commencement of such Extension Term (the “ Option Exercise
Period ”), TIME BEING OF THE ESSENCE. If Tenant does not timely and validly exercise the Extension Option, then the Term shall
unconditionally expire and terminate as of the Expiration Date and, thereafter, Tenant shall have no right to extend the Term. Tenant
waives and disclaims any rights, and covenants not to assert any claim, that would extend any Option Exercise Period or that would validate,
or require Landlord to accept, any Extension Option exercised outside any Option Exercise Period. Any purported exercise of the Extension
Option shall be null and void if: (i) not timely and validly exercised; (ii) Tenant assigned this Lease or sublet or licensed any of
the Premises before the Extension Term commences; or (iii) an Event of Default exists at the time of exercise or on the day before the
Extension Term commences. If Tenant timely and validly exercises the Extension Option, then the “Term” shall extend to include
the Extension Term, and the “Expiration Date” shall become the last day of the Extension Term. Annual Rent for the first
Lease Year of the Extension Term shall be one hundred three percent (103%) of Annual Rent in the last Lease Year before the Extension
Term, and thereafter Annual Rent shall be one hundred three percent (103%) of the Annual Rent for the immediately preceding Lease Year.
Landlord need not provide any Landlord work or Rent abatement during the Extension Term. After each of the two (2) Extension Terms, Tenant
shall have no further right to extend the Term.
1 |
|
(c) Termination
Right . If by February 28, 2022 Tenant has not obtained a Federal Firearm License necessary for the operation of the Permitted Use
in the Premises, then Tenant may terminate this Lease by delivering written notice to Landlord before February 28, 2022, TIME BEING OF
THE ESSENCE, in which event Tenant shall forfeit (and Landlord shall retain) Twenty-Six Thousand Eight Hundred Twelve and 50/100 Dollars
($26,812.50) of the Security Deposit and this Lease shall terminate and be of no further force or effect and the balance of the Security
Deposit will be returned to Tenant as provided for in Section 2(g). If Tenant does not timely and validly exercise its termination right
under this paragraph, then such termination right shall expire and be of no further force or effect and Tenant shall have no right to
terminate this Lease.
| 2. | Rent . |
(a) Annual
Rent . Tenant shall pay to Landlord (without demand, offset or deduction) annual base rent (“ Annual Rent ”) of Three
Hundred Twenty-One Thousand Seven Hundred Fifty Dollars ($321,750), payable in advance on the first day of each and every month during
the Term in equal monthly installments of Twenty-Six Thousand Eight Hundred Twelve and 50/100 Dollars ($26,812.50) each. However, upon
Tenant’s execution and delivery of this Lease, Tenant shall deliver to Landlord the monthly installment of Annual Rent and Expense
Rent (defined below) for the first monthly installment of Annual Rent and Expense Rent due under this Lease. Beginning with the second
(2 nd ) Lease Year and for each successive Lease Year (including each Extension Term), the Annual Rent shall increase by three
percent (3%) of the Annual Rent for the immediately preceding Lease Year. For any period during the Term of less than a calendar month,
(a) Landlord shall reasonably prorate Rent and (b) Tenant shall pay prorated Rent on the first day of such period. Upon request, Tenant
shall execute and deliver to Landlord an instrument in form reasonably satisfactory to Landlord confirming the Commencement Date, the
Expiration Date, the Annual Rent, Additional Rent and such other items as Landlord reasonably may request; provided , however ,
that Tenant’s failure to execute or deliver such instrument shall not affect Landlord’s calculation of such dates, amounts
or other items (which shall be final and conclusive absent manifest error) or otherwise affect the validity of this Lease.
(b) Expenses .
Tenant shall pay to Landlord, as Additional Rent, an amount (the “ Expense Rent ”) equal to Sixty Thousand Seven Hundred
Seventy-Five Dollars ($60,775.00), payable in advance in monthly installments of Five Thousand Sixty-Four and 58/100 Dollars ($5,064.58)
each. Beginning with the second (2 nd ) Lease Year and for each successive Lease Year (including each Extension Term), the Expense
Rent shall increase by three percent (3%) of the Expense Rent for the immediately preceding Lease Year.
(c) Additional
Rent. All money other than Annual Rent that this Lease requires Tenant to pay constitutes additional rent (“ Additional Rent ”).
Annual Rent and Additional Rent are sometimes referred to as “ Rent .”
2 |
|
(d) Rent
Abatement . Notwithstanding anything to the contrary contained in this Lease, Annual Rent (but not Expense Rent) shall abate for February
2022 (the “ Rent Abatement Period ”) provided that Tenant is not in default under this Lease during the Rent Abatement
Period.
(e) Payment .
Rent shall be made payable to Landlord and shall be sent to Landlord c/o The Bluestone Group, 225 Broadway, 32 nd Floor, New
York, NY 10007, Attn: Mr. Eli Tabak, or at such other place or person or entity as Landlord may from time to time designate in writing
to Tenant. If any sum due under this Lease payable to Landlord by Tenant is paid by check and such check is returned for non-sufficient
funds, then, in addition to the rights and remedies set forth in this Lease pertaining to default, Landlord shall have the right to require
that any replacement payment and all future payments be made in cash or by certified check or money order.
(f) Late
Fee . If Landlord does not receive any payment from Tenant within seven (7) days after it is due, Tenant shall pay Landlord upon demand
a late charge of five percent (5%) of the late payment. Any money not paid when due under this Lease shall bear interest at one percent
(1%) per month from the date due until the date on which Landlord receives it.
(g) Security
Deposit . Simultaneously with its execution and delivery of this Lease, Tenant shall deposit with Landlord Fifty-Three Thousand Six
Hundred Twenty-Five Dollars ($53,625) as security for the payment and performance of Tenant’s obligations under this Lease (the
“ Security Deposit ”). Landlord shall hold the Security Deposit without interest payable to Tenant. If any Rent or other
sums payable by Tenant to Landlord is overdue and unpaid, or if Landlord makes any payment on behalf of Tenant, or if Tenant fails to
perform any of the terms of this Lease, then Landlord, at its option and without prejudice to any other remedy that Landlord may have
on account thereof, may apply the entire Security Deposit (or so much thereof as may be necessary) to compensate Landlord. Tenant shall
replenish the Security Deposit (to the extent so applied) within seven (7) days after written demand and, upon request, shall increase
the amount of the Security Deposit as Annual Rent increases during the Term so that the Security Deposit at all times equals two (2)
monthly installments of Annual Rent. Landlord shall refund to Tenant the Security Deposit (less any amounts applied to pay Tenant’s
obligations and liabilities) within forty-five (45) days after the later of the expiration of the Term and Tenant’s vacation of
the Premises. If Landlord sells or transfers its estate or interest in the Premises, Landlord may transfer the Security Deposit to the
purchaser or transferee and thereafter shall be released from all liability in connection with the Security Deposit and Tenant shall
look solely to the purchaser or transferee for the return of the Security Deposit.
(h) Any
description or depiction of the Premises in this Lease is only an approximation. It might not include, or might inaccurately show, existing
conditions. Neither party shall have any rights or obligations because of variations between any such description or depiction and the
Premises as delivered. The Premises and the Rent are not subject to remeasurement, survey, or adjustment for “rentable square footage,”
“loss factor recalculation,” or any other recomputation or recalculation of any kind.
3. Use . The
Premises shall be used and occupied solely for the manufacture of ammunition components and related products (the “ Permitted
Use ”). In any event, Tenant shall not use or suffer the use of the Premises for any unlawful, disreputable or ultra-hazardous
purpose. Tenant (at its sole expense) shall obtain, maintain in good standing and comply with the terms of all licenses, permits and
other governmental approvals required for Tenant’s lawful use and occupation of, and operations in, the Premises. Tenant shall
have access to the Premises twenty-four (24) hours a day, seven (7) days a week during the Term.
3 |
|
| 4. | Reserved . |
| 5. | Conduct . |
(a) Tenant
shall not do (or suffer or permit) anything in the Premises that reasonably could invalidate or conflict with the fire insurance policies
on the Property, fixtures or on personalty kept therein, or obstruct or interfere with the rights of Landlord or of other tenants, or
in any other way injure or annoy Landlord or the other tenants, or subject Landlord to any liability for injury to persons or damage
to property. Without Landlord’s prior written approval (which Landlord may grant, condition or withhold in its sole and absolute
discretion), Tenant shall not install (or suffer or permit to be installed) anything in the Premises other than Tenant’s equipment
and trade fixtures required for the Permitted Use.
(b) Operational
Covenants. Tenant covenants: (i) to use, maintain and occupy the Premises in a careful, safe and proper manner; (ii) to maintain
the Premises in a clean, orderly and sanitary condition, free of insects, rodents, vermin and other pests; (iii) to keep all mechanical
apparatus reasonably free of vibration and noise which may be transmitted beyond the Premises; (iv) to properly vent and control any
odors and not cause or permit objectionable odors to emanate or be dispelled from the Premises; (v) not to obstruct any driveway, corridor,
footwalks or parking area, or any other common area; (vi) not to place a load upon any floor which exceeds the floor load which the floor
was designed to carry; (vii) not to use the Premises for any unlawful or illegal business, use or purpose, , or for any purpose or in
any way in violation of the certificates of occupancy (or other similar approvals of applicable governmental authorities); and (viii)
not to use the parking areas or any common areas in any way or in any manner reasonably objectionable to Landlord.
6. Common
Areas; Parking . In addition to the Premises, Tenant shall have a license for the non-exclusive use in common with Landlord and other
tenants and each of their agents, employees, contractors and invitees, of such loading facilities, elevators, and other facilities as
may be constructed and intended for common use, and of the common driveways, footways and parking areas on the Property, subject to such
rules and regulations as Landlord may, from time to time, prescribe governing such common areas and which Landlord provides to Tenant
in writing, and to Landlord’s right to designate limited reserve parking areas for other tenants, provided that such designation
does not materially and adversely affect Tenant’s use of the existing common areas. Landlord shall at all times have full and exclusive
control, management and direction of all common areas. Tenant shall observe and comply (and cause its invitees, employees, contractors,
agents and representatives to observe and comply) with any rules and regulations that Landlord promulgates or modifies from time to time
with respect to the Property (including the Premises) and provides to Tenant in writing.
4 |
|
7. Condition;
Landlord Work . (a) Landlord delivers, and Tenant accepts, possession of the Premises in its “AS IS, WHERE IS, HOW IS, WITH
ALL FAULTS” condition as of the Effective Date. However, Landlord shall deliver the Premises in broom clean condition with all
electrical and mechanical services in good working order. Tenant has thoroughly inspected and is fully familiar with the Premises. Except
as expressly set forth in this Lease, (i) Landlord has not made any representation, warranty, covenant or guaranty with respect to the
Premises, (ii) Landlord has no obligation to perform or provide any work, alterations, improvements, repairs, decorations, furniture
or equipment and (iii) Tenant shall be solely responsible for any and all work. Tenant fully, unconditionally and forever waives, and
releases and discharges Landlord and its affiliates, parents, subsidiaries, partners, members, managers, officers, directors, employees,
agents, representatives, investors and lenders from, any and all actions, claims, demands, damages, obligations and liabilities with
respect to the physical and environmental condition of the Premises.
(b) Notwithstanding anything to the contrary set forth in subsection (a) above, (i) before the Commencement Date, Landlord shall install
a wet sprinkler system in the Premises, and (ii) before March 15, 2022, Landlord shall level (and cure large cracks in) the warehouse
floor.
(c) In
addition to subsection (b) above, upon Tenant’s receipt of a Federal Firearms License, Landlord shall provide Tenant with a work
allowance (the “ Work Allowance ”) not to exceed Two Hundred Eighty-Six Thousand Dollars ($286,000) for the hard costs
of coating the warehouse floors and constructing an office in the Premises (collectively, the “ Tenant Work ”).
(i) Landlord
shall disburse the Work Allowance to Tenant in installments (in amounts not less than Twenty Thousand Dollars ($20,000) and not more
frequently than once per calendar month) after March 1, 2022 to reimburse Tenant for the Tenant Work upon Landlord’s receipt and
approval of (A) a written request for payment specifying the work and materials for which payment is requested and stating that such
work and materials have been finally and satisfactorily performed or installed (as applicable) in accordance with all applicable legal
and contractual requirements, (B) an invoice from the applicable contractor or supplier and (C) a lien waiver from each contractor and
supplier to be paid (conditional only upon receipt of payment). Upon completion of the Tenant Work and before the final disbursement
of the Work Allowance, Tenant shall deliver to Landlord an affidavit from Tenant’s general contractor that all subcontractors,
laborers and suppliers have been paid in full and that all liens have been waived or discharged of record, together with such other documentation
as Landlord reasonably may require.
(ii) Tenant
(promptly after the Effective Date, before commencing any Tenant Work and at its sole cost and expense) diligently shall design the Tenant
Work, file plans for the Tenant Work with applicable governmental authorities, and pay all fees and obtain all permits and approvals
required for the Tenant Work. Tenant promptly shall deliver to Landlord a copy of all applications and correspondence with governmental
authorities, approved plans and specifications and issued permits and approvals, and Tenant shall keep Landlord reasonably informed about
the status of the Tenant Work. Tenant shall pay all amounts necessary to fully and finally complete all Tenant Work to the extent such
cost exceeds the Work Allowance. Tenant (at its sole cost and expense) shall complete all Tenant Work lien-free, close out all related
permits and deliver to Landlord a final certificate of occupancy promptly (but in all events before August 1, 2022). Upon the expiration
or sooner termination of the Term, all decorations, installations, alterations, additions or other improvements affixed to the realty
so that they cannot be removed without material damage shall become the property of Landlord and shall remain upon, and be surrendered
with, the Premises as a part thereof unless Landlord elects otherwise, in which event Tenant (at its sole expense) shall remove those
items that Landlord requires and restore the Premises to its original condition before the expiration of the Term.
5 |
|
8.
Alterations . Except for Tenant Work in accordance with the terms of this Lease, Tenant shall not perform, suffer or
permit any demolition, construction, reconstruction, renovation, alteration, addition, improvement or installation in, on, at or to
the Premises (collectively, “ Alterations ”) without Landlord’s prior written approval in each instance
(which Landlord may grant, condition or withhold in its sole and absolute discretion). If Landlord approves any Alterations, then
Tenant shall perform and complete all Alterations (including Tenant Work) (a) in a diligent, good, workmanlike and lien-free manner
that does not impair the building’s structural integrity, (b) in accordance with all applicable legal and insurance
requirements, (c) after receiving, and delivering to Landlord a copy of, all necessary governmental permits, licenses and approvals,
(d) in accordance with plans and specifications that Landlord approves in writing, (e) at Tenant’s sole expense and (f) in
accordance with any other conditions or restrictions that Landlord requires. At the end of the Term, all Alterations (including
equipment, fixtures and trade fixtures) shall, at Landlord’s election, either (i) belong to and become the property of
Landlord (in which case Tenant shall surrender them in good order and condition as part of the Premises) or (ii) be removed by
Tenant at its sole expense. Tenant shall not install on, affix to, penetrate or otherwise use the roof of the Premises without
Landlord’s prior written consent.
| 9. | Maintenance
and Repair . |
(a) Landlord .
Landlord shall maintain the roof, foundation and exterior walls (excluding windows and doors) of the Premises at its sole expense; provided ,
however , that Tenant, promptly and at its sole expense, shall repair any damage to the roof, foundation or exterior walls caused
by Tenant or its employees, contractors, agents, licensees and invitees.
(b) Tenant .
Tenant shall, during the Term, keep and maintain the Premises and the improvements therein in good, safe, clean and orderly condition
and in compliance with all legal requirements and, at the expiration of the Term (or at the sooner termination of the Term), deliver
the same in the same good order and condition as of the Commencement Date (reasonable wear and tear excepted). Tenant shall not (a) commit,
permit or suffer any damage, destruction or waste to, or nuisance or any other act or thing that may disturb the quiet enjoyment of any
other tenant at, the Premises, (b) do or fail to do anything in, on or about the Premises that results in an unsafe, unsanitary or unsightly
condition or in violation of any applicable legal requirement, (c) generate, use, store, handle, deposit or release (or suffer or permit
the generation, use, storage, handling, deposit or release of) in, on or about the Premises any hazardous or toxic substances, materials
or wastes that are regulated or prohibited by applicable legal requirements other than in compliance with applicable law or (d) install
any underground storage tank at the Premises. Except as set forth in Section 9(a), Tenant shall pay for all maintenance of and repairs
to the Premises and its fixtures, equipment and appurtenances, as well as all damages sustained by Tenant or occupants of the Property
due to any waste, misuse or neglect of the Premises, its fixtures, equipment and appurtenances, by Tenant, its employees or any other
person or persons upon the Premises by Tenant’s permission. Tenant shall not place a load upon any floor of the Premises exceeding
the floor load per square foot area which such floor was designed to carry, and which may be allowed by law.
6 |
|
10. Services
and Utilities . Tenant shall arrange to obtain, and timely pay directly to the utility company or service provider all charges for,
water, sewer, gas, electricity, telephone, cable, trash removal and other utilities and services that Tenant desires to be furnished
to the Premises. No change, interference, interruption, disruption, reduction, defect, or failure in the character or supply of any services
or utilities furnished to the Premises (regardless of duration), and no unavailability or unsuitability of the quantity or character
of any services or utilities, shall: (i) constitute an eviction (actual or constructive) of Tenant (in whole or in part); (ii) impose
any liability on Landlord; (iii) entitle Tenant to any damages or offset; (iv) relieve or release Tenant from any obligation under this
Lease; or (v) entitle Tenant to terminate this Lease (and Tenant waives all benefits of any law permitting Tenant to assert any claim
or terminate this Lease on account thereof). If any utilities or services are metered or billed jointly with any other portion of the
Property, Landlord shall bill Tenant, and Tenant promptly shall pay Landlord, the amount that Landlord estimates for such utilities as
Additional Rent. Landlord may install separate meters, sub-meters or other devices to measure the usage of any utilities for the Premises,
in which event Tenant shall reimburse Landlord for the cost to install, operate, maintain, repair and replace such meters and shall pay
the utility provider directly for the cost of Tenant’s usage of such utilities and, until such meters are installed, Tenant shall
pay the amount that Landlord estimates for such utilities. This paragraph shall survive the expiration or earlier termination of this
Lease.
11. Landlord
Access . Landlord shall retain duplicate keys to all of the doors of the Premises. During normal business hours and upon prior written
notice (except in the event of an emergency), Landlord and its agents shall have (a) access to the Premises in order to inspect, clean,
make necessary repairs or conduct tests and investigations within the Premises or on the Property and (b) the right to enter the Premises
for the purpose of making necessary repairs to any other portion of the Property adjacent to the Premises that may require entering the
Premises; provided , however , that it shall be done at such time or times and under such circumstances as to cause the least
disturbance or interference with Tenant’s occupancy of the Premises. Landlord shall have the right to display a “for rent”
sign and to show the Premises to prospective tenants at all reasonable times during the last six (6) months of the Term. Except in the
event of an emergency, Tenant’s representatives may accompany Landlord’s representatives while in the Premises.
| 12. | Subordination
and Attornment . |
(a) Subordination .
This Lease and all of Tenant’s rights under this Lease are and shall remain subject and subordinate in all respects to the operation
and effect of any mortgage, deed of trust or other security instrument encumbering the Premises or Landlord’s interest therein,
whether in existence on the Effective Date or subsequently created, and to any and all modifications, amendments, replacements, renewals,
extensions, consolidations or substitutions thereof. Any such mortgage, deed of trust or other security instrument (as may be modified,
amended, replaced, renewed, extended, consolidated or substituted) is referred to as a “ Mortgage ”, and the mortgagee,
trustee, noteholder or other secured or beneficial party under a Mortgage is referred to as a “ Mortgagee ”. Such subordination
shall be automatic (without the execution of any further subordination agreement by Tenant), however if (at any time and from time to
time) any Mortgagee requests a written subordination agreement consistent with the foregoing terms, Tenant shall execute, acknowledge
and deliver it; if Tenant fails to do so, Landlord may, in addition to any other remedies for breach of covenant hereunder, execute,
acknowledge and deliver it as Tenant’s agent or attorney-in-fact, and Tenant hereby irrevocably constitutes Landlord as Tenant’s
attorney-in-fact for such purpose. However, in any foreclosure or other enforcement of rights under a Mortgage, Tenant’s quiet
enjoyment of the Premises shall not be disturbed unless Tenant is in default under this Lease beyond all applicable notice and cure periods.
7 |
|
(b) Mortgagee’s
Unilateral Subordination . Notwithstanding the terms of subsection (a) above, at any Mortgagee’s election by delivering notice
to Tenant or recording a unilateral declaration of subordination, this Lease and Tenant’s rights hereunder shall be superior and
prior to the rights under the Mortgage of which such Mortgagee has the benefit, with the same force and effect as if this Lease had been
executed, delivered and recorded before the execution, delivery and recording of such Mortgage, subject, nevertheless, to such conditions
as may be set forth in any such notice or declaration.
(c) Attornment .
If any person shall succeed to all or part of Landlord’s interest in the Premises, whether by purchase, foreclosure, deed in lieu
of foreclosure, power of sale, termination of lease or otherwise, and if so requested in writing or required by such successor in interest,
Tenant shall attorn to such successor in interest and shall execute such agreement in confirmation of such attornment as such successor
in interest shall reasonably request.
(d) Estoppel
Certificates . Tenant and Landlord shall, without charge, at any time and from time to time, within ten (10) days after receipt of
written request therefor by the other party, execute, acknowledge and deliver to the other and to such Mortgagee or other party as may
be designated by the requesting party a written estoppel certificate in form and substance as may be requested from time to time, certifying
to the requesting party, any Mortgagee, any purchaser, or any other person or entity designated by the requesting party, as of the date
of such estoppel certificate, the following: (i) whether Tenant is in possession of the Premises; (ii) whether this Lease is in full
force and effect; (iii) whether there are any amendments to this Lease, and if so, specifying such amendments; (iv) whether there are
any then-existing setoffs or defenses against the enforcement of any rights hereunder, and if so, specifying such matters in detail;
(v) the dates, if any, to which any rent or other sums due hereunder have been paid in advance and the amount of any security deposit;
(vi) that the responding party has no knowledge of any then-existing defaults under this Lease, or if there are such defaults, specifying
them in detail; and (vii) any and all other matters requested. Any such estoppel certificate may be relied upon by any Mortgagee and/or
any other person or entity to whom it is directed or by any other person or entity who could reasonably be expected to rely on it in
the normal course of business.
13. Assignment
and Subletting . Tenant agrees for itself and its permitted successors and assigns in interest hereunder that it will not (a) assign,
encumber or otherwise transfer this Lease or any of its rights hereunder, (b) sublet, transfer, mortgage or otherwise encumber the Premises
or any part thereof or permit the occupancy or use of the Premises or any part thereof by any person other than Tenant or (c) permit
the assignment or other transfer of this Lease or any of Tenant’s rights hereunder by operation of law or otherwise (each of the
events referred to in the foregoing clauses (a)-(c) is referred to as a “ Transfer ”), without Landlord’s prior
written consent in each instance (which Landlord may grant, condition or withhold in its sole, absolute and unfettered discretion). Any
consent given shall not constitute a consent to any subsequent Transfer. Any attempted Transfer without Landlord’s consent shall
be null and void and shall not confer any rights upon any purported transferee, assignee, mortgagee, sublessee, or occupant. No Transfer,
regardless of whether Landlord’s consent has been granted, shall be deemed to release Tenant from any of its obligations hereunder
or to alter, impair or release the obligations of any person guaranteeing the obligations of Tenant hereunder. A Transfer shall be deemed
to include any Transfer by sale, assignment, bequest, inheritance, operation of law, or other disposition of partnership interests or
corporate shares or assets. However, Landlord shall not unreasonably withhold, condition or delay its consent to one assignment of this
Lease by Tenant to any third party (unaffiliated with Tenant) that acquires all or substantially all of the business and/or assets of
Tenant (whether by asset sale, merger, stock sale or otherwise).
8 |
|
14. Signage .
Tenant shall not erect, display or maintain (or permit to be erected, displayed or maintained) any signs or lights on the exterior of
the Premises without Landlord’s prior written approval with respect to location, size, appearance and content. Landlord’s
approval of any signs shall be conditioned upon Tenant obtaining (at its sole expense) all necessary governmental approvals and permits
for such signs. Upon expiration or termination of this Lease, Tenant shall pay for the costs of removing any such signs and for any damage
to the Premises caused thereby. Landlord (in its reasonable discretion) may establish and from time to time change the specifications
for Tenant signage to comply with applicable laws or Landlord’s signage program for the Property. As used in this paragraph, “signs”
shall include all signs, designs, monuments, canopies, poles, logos, banners, projected images, pennants, decals, advertisements, pictures,
notices, lettering, numerals, graphics, or decoration.
| 15. | Damage . |
(a) Landlord’s
Obligation to Repair . If the Premises shall be damaged by fire, the elements, accident or other casualty (any of such causes being
referred to herein as a “ Casualty ”), but the Premises shall not be thereby rendered wholly or partially untenantable,
Landlord shall promptly (due allowance being made for delay which may arise by reason of adjustment of loss under insurance policies
and for reasonable delays due to causes beyond Landlord’s control such as strikes, weather, acts of G-d, etc.) cause such damage
to be repaired with the same improvements that existed as of the Commencement Date and there shall be no abatement of rent. If, as the
result of a Casualty, the Premises shall be rendered wholly or partially untenantable, then, subject to the provisions of Section 15(b),
Landlord shall cause such damage to be repaired with the same improvements that existed as of the Commencement Date and all Rent, except
for that rent due Landlord by reason of Tenant’s failure to perform any of its obligations hereunder, shall be abated proportionately
as to the portion of the Premises rendered untenantable during the period of such untenantability. Such repairs shall be made at the
expense of Landlord. Landlord shall not be liable for interruption to Tenant’s business or for damage to, or replacement or repair
of, Tenant’s personal property (including inventory, trade fixtures, floor coverings, furniture and other property removable by
Tenant under the provisions of this Lease) or to any leasehold improvements installed in the Premises by or on behalf of Tenant or otherwise,
all of which damage, replacement or repair shall be undertaken and completed by Tenant promptly.
(b) Landlord’s
Termination Option . If the Premises are: (i) rendered wholly untenantable; (ii) damaged as a result of any cause which is not covered
by Landlord’s insurance; or (iii) damaged or destroyed in whole or in part during the last one (1) year of the Term, or, if in
the opinion of Landlord, the Property is totally or substantially damaged or destroyed and Landlord elects not to rebuild the same to
its prior condition, then, in any of such events, Landlord may elect to terminate this Lease by giving to Tenant notice of such election
within thirty (30) days after the occurrence of such event. If such notice is given, the rights and obligations of the parties shall
cease as of the date of such notice, and Rent (other than any Additional Rent due Landlord by reason of Tenant’s failure to perform
any of its obligations hereunder) shall be adjusted as of the date of such termination.
9 |
|
(c) Insurance
Proceeds . If Landlord does not elect to terminate this Lease pursuant to Section 15(b), Landlord shall, subject to the prior rights
of any Mortgagee, disburse and apply any insurance proceeds received by Landlord to the restoration and rebuilding of the Premises in
accordance with Section 15(a). All insurance proceeds payable with respect to the Premises (excluding Tenant’s trade fixtures,
inventory and other movable personal property) shall belong to and shall be payable to Landlord.
16. Condemnation .
If any or all of the Premises is taken by condemnation or eminent domain, this Lease shall terminate as to the part so taken on the day
when Tenant is required to yield possession thereof, and Landlord shall (subject to the sufficiency of the condemnation award and Landlord’s
right to terminate described below) repair and restore the portion not taken to useful condition. Upon such taking, Rent shall be reduced
proportionately by the portion of the Premises so taken. If the portion of the Premises so taken substantially impairs the usefulness
of the Premises for the Permitted Use, then either party may terminate this Lease as of the date when Tenant is required to yield possession
by delivering written notice of termination to the other party within thirty (30) days after such taking. The compensation awarded for
any taking (both as to Landlord’s reversionary interest and Tenant’s leasehold interest) shall belong to and be the sole
property of Landlord. Tenant shall have no claim or entitlement (and waives all claims and entitlements) against Landlord and the condemning
authority for any award or damages in connection with any taking of the Premises or the Property by condemnation or eminent domain. Notwithstanding
the foregoing, Landlord may terminate this Lease if any of the Premises is taken by condemnation or eminent domain (or sale in lieu thereof)
if, in Landlord’s sole and absolute discretion, any taking by condemnation or eminent domain materially impairs the economic viability
of the Property (regardless of the effect of any such taking on the Premises).
| 17. | Indemnification;
Insurance . |
(a) Indemnification .
Tenant shall indemnify, defend and hold harmless Landlord, and its affiliates, partners, members, managers, officers, directors, employees,
agents, representatives, investors and lenders, from and against any and all actions, claims, demands, suits, judgments, settlements,
awards, damages, fines, penalties, obligations, liabilities, losses, costs and expenses (including reasonable attorneys’ fees and
litigation costs) suffered or incurred by, imposed on or asserted against any of them caused by, arising out of or relating to (i) the
use or occupancy of, or alterations or damage to, the Premises by Tenant or any of its employees, contractors, agents, representatives,
licensees or invitees, (ii) any act or omission of Tenant or any of its employees, contractors, agents, representatives, licensees or
invitees, (iii) any occurrence in, on or about the Premises during the Term, or (iv) Tenant’s breach of this Lease. This paragraph
shall survive the expiration or earlier termination of this Lease. Tenant’s obligations under this paragraph shall not be limited
to the insurance coverage that Tenant maintains (or is required to maintain) under this Lease.
10 |
|
(b) Exculpation .
Landlord shall not be responsible or liable to Tenant, or to those claiming by, through or under Tenant, for any loss or damage which
may be occasioned by or through the acts or omissions of persons occupying space adjoining the Premises or any part of the premises adjacent
to or connecting with the Premises or any other part of the Property, or otherwise, or for any loss or damage resulting to Tenant, or
those claiming by, through or under Tenant, or its or their property, from the breaking, bursting, stoppage or leaking of electrical
cable and wires, or water, gas, sewer or steam pipes. To the maximum extent permitted by law, Tenant agrees to use and occupy the Premises,
and to use such other portions of the Property as Tenant is herein given the right to use, at Tenant’s own risk.
(c) Insurance
Requirements . The company or companies writing any insurance which Tenant is required to carry and maintain or cause to be carried
or maintained pursuant to Sections 17(d)-(e), as well as the form of such insurance, shall at all times be subject to Landlord’s
reasonable approval and any such company or companies shall be licensed to do business in the State of Maryland. Commercial general liability
and special form insurance policies evidencing such insurance shall name Landlord and/or its designee(s) as additional insured, shall
be primary and non-contributory, and shall also contain a provision by which the insurer agrees that such policy shall not be canceled,
materially changed or not renewed without at least thirty (30) days advance notice to Landlord. All policies shall be written on an occurrence,
rather than a claims made, basis. Each such policy, or a certificate thereof, shall be deposited with Landlord by Tenant promptly upon
commencement of Tenant’s obligation to procure the same. If Tenant shall fail to perform any of its obligations under Sections
17(d)-(e), Landlord may perform the same and the cost of same shall be deemed Additional Rent and shall be payable upon Landlord’s
demand.
(d) Tenant’s
Insurance . At all times after the Premises are released to Tenant for construction of its improvements, Tenant shall carry and maintain,
at its sole expense:
(i) Commercial
general liability insurance, including insurance against assumed or contractual liability under this Lease against any liability arising
out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto, to afford protection with limits
of not less than:
$2,000,000 |
General
Aggregate |
$1,000,000 |
Products/Completed
Operation |
$1,000,000 |
Per
Occurrence |
$1,000,000 |
Personal/Advertising
Injury |
$10,000 |
Medical
Payments |
$500,000 |
Damage
to Premises Rented to You (formerly Fire/Legal) |
$5,000,000 |
Umbrella |
(ii) Special
form property insurance, including full replacement cost endorsement, covering the value of the leasehold improvements made to the Premises
by or for Tenant and the value of Tenant’s personal property in the Premises (including inventory, trade fixtures, floor coverings,
furniture and other property removable by Tenant under the provisions of this Lease). Any deductible under any such policy shall not
exceed $5,000.
11 |
|
(iii) Commercial
automobile liability insurance with a combined single limit of not less than $1,000,000 for bodily injury and property damage.
(iv) Worker’s compensation or similar insurance in form and amounts required by law.
(v) Rental interruption insurance in an amount equal to twelve (12) months’ Rent.
Additionally,
Tenant shall obtain such other insurance coverages in such amounts (or such increases in the amounts of the insurance coverages this
Lease requires), as Landlord may reasonably require from time to time.
(e) Tenant’s
Contractor’s Insurance . Tenant shall require any contractor of Tenant performing work on the Premises to carry and maintain,
at no expense to Landlord:
| (i) | Commercial
general liability with limits of not less than: |
$2,000,000 |
General
Aggregate |
$1,000,000 |
Products/Completed
Operation |
$1,000,000 |
Per
Occurrence |
$1,000,000 |
Personal/Advertising
Injury |
$10,000 |
Medical
Payments |
$500,000 |
Fire
Legal |
$5,000,000 |
Umbrella |
or
such other reasonable levels as Landlord deems appropriate and approves.
| (ii) | Property
damage insurance in an amount not less than $2,000,000. |
(iii) Commercial
automobile liability insurance with a combined single limit of not less than $1,000,000 for bodily injury and property damage.
| (iv) | Worker’s
compensation or similar insurance in form and amounts required
by law. |
(f) Increase
in Insurance Premiums . Tenant shall not cause, permit or suffer the Premises to be used in any way that violates Landlord’s
insurance policies, prevents Landlord from obtaining any insurance, or results in a premium increase, or a cancellation, for any insurance
for the Property. Without limiting Landlord’s remedies, if because of the nature or manner of Tenant’s use of the Premises
Landlord cannot obtain and maintain any insurance whose amount, cost, scope, form and coverage are reasonably acceptable to Landlord,
then Tenant shall pay any resulting increased premiums.
12 |
|
(g) Waiver
of Right of Recovery . Notwithstanding anything to the contrary contained in this Lease, Tenant waives all rights to recover against
Landlord, its officers, directors, shareholders, partners, joint ventures, employees or agents, for any loss or damage to Tenant’s
property to the extent covered by insurance either actually carried or required to be carried hereunder. Landlord waives (except for
the amount of any deductible) all rights to recover against Tenant, its officers, directors, shareholders, partners, joint ventures,
employees or agents, for any loss or damage to Landlord’s property to the extent covered by insurance either actually carried or
required to be carried hereunder. The foregoing waiver by Landlord shall not release the Tenant of its maintenance, repair and other
obligations under this Lease. Neither Landlord nor Tenant shall be liable to each other or any insurance company (by way of subrogation
or otherwise) which insured any such losses, damages or expenses. Each party shall use reasonable efforts to cause their respective insurers
to issue appropriate waiver of subrogation rights endorsements to all policies of insurance carried in connection with the Property or
the Premises or the contents of either of them, and if obtained then each party shall deliver to the other party (within a reasonable
period of time after a written request for the same) adequate written proof (for example, a policy and certificate of insurance with
attached endorsement) of the issuance of the foregoing.
| 18. | Landlord’s
Liability . |
(a) Landlord
shall not be liable for any damage to property placed in the custody of its employees, nor for the loss of any property by theft or otherwise.
Landlord shall not be liable for interference with the light, air or other incorporeal hereditaments; nor shall Landlord be liable for
any latent defect on the Property or its equipment; nor shall Landlord be liable for the negligence or willful misconduct of any other
tenant or occupant. Landlord shall in no event be liable to Tenant, its agents, employees, contractors, customers or other visitors for
any injury or damage to persons or property resulting from falling sheetrock or ceiling tiles, steam, gas, electricity, water, rain,
snow, or dampness which may leak or issue from or through any part of the Premises, or from pipes, appliances or plumbing, or from sewers,
or the street, or subsurface, or from any other place by dampness or other cause of whatsoever nature and Tenant shall defend and indemnify
Landlord from any claim of liability from which Landlord is hereby exonerated.
(b) If
Landlord sells, assigns, conveys, or otherwise transfers its estate in and to the Property, then the transferee shall be deemed to have
assumed and succeeded to Landlord’s rights and obligations under this Lease and the transferor shall be relieved, released and
discharged of all obligations and liabilities as Landlord under this Lease. Any deed of the Property automatically shall assign Landlord’s
interest in and rights under this Lease and shall fully evidence the transfer of Landlord’s rights to the grantee, and no separate
assignment or assumption of such interest or rights shall be necessary. Each Landlord’s obligations under this Lease shall bind
that Landlord only while it holds Landlord’s interest under this Lease.
| 19. | Holding
Over; Surrender |
(a) Holding
Over . This Lease and the tenancy hereby created shall cease and expire at the end of the Term without the necessity of any notice
of termination from either Landlord or Tenant, and Tenant hereby waives any statutorily or otherwise required notice to remove, quit
or vacate. If Tenant holds possession of the Premises after the expiration or sooner termination of this Lease for any reason, Tenant
shall be deemed to be a tenant-at-will and Tenant shall pay Landlord 125% of the Rent (including Annual Rent, Additional Rent and any
taxes or operating or maintenance costs pass-through to the Tenant under the terms of this Lease) reserved in this Lease for the first
month that Tenant remains in possession of the Premises and 150% for each month thereafter; but such payment of rent shall not create
any lease arrangement whatsoever between Landlord and Tenant. During such period, Landlord shall retain all of Landlord’s rights
under this Lease and shall be entitled to the benefit of any law respecting summary recovery of possession of leased premises from a
tenant holding over regardless of whether or not any required statutory notice to quit, vacate or surrender has been given by Landlord.
If the Premises be not surrendered at the expiration or sooner termination of this Lease, then Tenant shall indemnify, defend and hold
Landlord harmless against all loss, claim, expense or liability resulting from the delay by Tenant in so surrendering the Premises, including
any claims made by any succeeding occupant founded on such delay. Tenant’s obligations under this Section shall survive the expiration
of the Term (including renewal(s)) or the earlier termination of this Lease.
13 |
|
(b) Surrender .
On or before the expiration or earlier termination of the Term, Tenant shall at its sole expense: (i) surrender to the Landlord possession
of the Premises (excluding any trade fixtures, machinery, equipment or other improvements or personal property owned by Tenant) in good
order and repair (ordinary wear and tear excepted) and broom clean, together with all keys and combinations to locks, safes and vaults;
(ii) carefully remove (so as not to damage any portion of the Premises) all signs, personalty, furniture, equipment, machinery and fixtures;
and (iii) repair any damage caused by such removal. If Tenant does not remove any of Tenant’s personalty, furniture, equipment,
machinery or fixtures (to the extent not retained by Landlord), such items shall be conclusively presumed to have been abandoned by the
Tenant and the Landlord, may at the Landlord’s sole option, thereafter take possession of such property and either declare the
same to be the property of the Landlord or, at the expense of the Tenant, dispose of such property in any manner and for whatever consideration
the Landlord, in its sole discretion, deems advisable without liability to Tenant.
| 20. | Default;
Remedies . |
| (a) | Events
of Default . Each of the following events shall constitute an “ Event of Default ”:
payment is due. |
(i)
If Tenant fails to pay any Rent within seven (7) days after such
(ii) If Tenant makes any assignment or sublet that requires Landlord’s consent without obtaining such consent.
(iii) If Tenant fails to maintain the insurance this Lease requires.
(iv) If
Tenant fails to perform or observe any other term of this Lease and such failure continues for fifteen (15) days after written notice
from Landlord.
(v) If
Tenant either (a) becomes bankrupt, insolvent, makes an assignment for the benefit of creditors, ceases to pay its debts as they become
due or admits in writing that it is unable to pay its debts as they become due, or becomes a “debtor” or is otherwise the
subject of any similar proceeding or (b) a custodian, administrator, receiver or trustee is appointed to take possession of, or an attachment,
execution or other judicial seizure is made for, all or a substantial part of its assets or its interest in this Lease; and in either
case was either voluntarily initiated by (or with the collusion of) Tenant or is not dismissed, cancelled, vacated, discharged, and rescinded
within forty-five (45) days.
14 |
|
(b) Remedies .
Upon the occurrence of an Event of Default, Landlord, after written notice to Tenant, may do any one or more of the following:
(i) perform,
on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant has failed to perform and of which Landlord
shall have given Tenant notice, the cost of which performance by Landlord, shall be deemed Additional Rent and shall be payable by Tenant
to Landlord upon demand. Notwithstanding the provisions of this clause and regardless of whether an Event of Default shall have occurred,
Landlord may exercise the remedy described in this clause after written notice to Tenant if Landlord, in its good faith judgment, believes
it would be materially injured by failure to take rapid action or if the unperformed obligation of Tenant constitutes an emergency;
(ii) elect
to terminate this Lease and the tenancy created hereby by giving notice of such election to Tenant, or elect to terminate Tenant’s
possessory rights and all other rights of Tenant without terminating this Lease, and in either event, at any time thereafter without
notice or demand and without any liability whatsoever, re-enter the Premises by force, summary proceedings or otherwise, and remove Tenant
and all other persons and property from the Premises, and store such property in a public warehouse or elsewhere at the cost and for
the account of Tenant without resort to legal process and without Landlord being deemed guilty of trespass or becoming liable for any
loss or damage occasioned thereby;
(iii) exercise
any other legal or equitable right or remedy (including obtaining injunctive relief) which it may have.
(c) Expenses;
Waiver . Any costs and expenses incurred by Landlord (including attorneys’ fees and expenses) in enforcing this Lease shall
constitute Additional Rent and shall be paid to Landlord by Tenant upon demand. To the extent permitted by law, Tenant hereby expressly
waives any and all rights of redemption which Tenant may have under any current or future laws in the event Tenant is evicted for any
reason.
21. Mechanics’
Liens . No work performed by Tenant pursuant to this Lease, whether in the nature of erection, construction, alteration, or repair,
shall be deemed to be done at the direction of or for the immediate use and benefit of Landlord. No mechanic’s or other lien shall
be allowed against the estate of Landlord by reason of any consent given by Landlord to Tenant to improve the Premises. Tenant shall
pay promptly all persons furnishing labor or materials with respect to any work performed by Tenant or its contractor on or about the
Premises. If any mechanic’s or other lien shall at any time be filed against the Premises by reason of work, labor, services or
materials performed or furnished, or alleged to have been performed or furnished to Tenant or to anyone holding the Premises through
or under Tenant, or if Landlord or Tenant shall receive a written notice of any intent to file a lien, Tenant shall cause the same to
be discharged of record or bonded to the satisfaction of Landlord. If Tenant shall fail to cause such lien to be so discharged or bonded
after being notified of the filing thereto or the intent to file such lien, then, in addition to any other right or remedy of Landlord,
Landlord may bond or discharge the same by paying the amount claimed to be due, and the amount so paid by Landlord including reasonable
attorneys’ fees incurred by Landlord, either in defending against such lien or in procuring the bonding or discharge of such lien
shall be due and payable by Tenant to Landlord upon demand as Additional Rent.
15 |
|
22. Broker .
Except for Lee & Associates of Eastern Pennsylvania, LLC (who Landlord shall pay pursuant to a separate written agreement), Landlord
and Tenant represent and warrant to each other that no broker, agent or finder brought about or was involved in the making of this Lease
and that no brokerage fee or commission is due as a result of the execution of this Lease. Each of the parties hereto agrees to indemnify
and hold harmless the other against any claim by any broker, agent or finder based upon the execution of this Lease and predicated upon
a breach of the above representation and warranty.
| 23. | Compliance
with Law . |
(a) Tenant
(at its sole expense) shall promptly and timely observe and comply with all laws, statutes, regulations, orders, requirements and rules
(whether now in force or which may hereafter be in force) of all federal, state and local governmental authorities and of any board of
fire underwriters or other similar organization respecting the Premises and the manner in which the Premises are or should be used, occupied
and maintained by Tenant, whether that compliance requires work or remedial measures to the Premises that is ordinary or extraordinary,
foreseen or unforeseen, or expenditures that are capital in nature, and pay all fines and penalties due to any lack of observance or
compliance. All licenses, fees, and charges arising out of Tenant’s use of the Premises and all charges for minor privileges occasioned
by the occupancy of Tenant shall be the responsibility of Tenant.
(b) Tenant
(at its sole expense) shall comply with all requirements of (i) the Americans with Disabilities Act of 1990 and with all rules, regulations
and guidelines thereto, as the same are in effect on the date hereof and may hereafter be amended, modified or supplemented (collectively
the “ ADA ”) and any other similar laws, rules or regulations, as they relate to the Premises and the conduct of Tenant’s
business therein. Any Alterations shall be subject to the requirements of this Section. Notwithstanding anything contained herein to
the contrary, if the Alterations, or Tenant’s use and occupancy of the Premises, necessitate any Alterations to any other parts
of the Property outside the Premises, Tenant shall pay the full cost of such alterations or improvements promptly upon demand by Landlord.
Tenant shall indemnify, defend and hold harmless Landlord from any and all lawsuits, actions, claims, losses, damages, costs and expenses
(including court costs and reasonable attorneys’ fees) incurred by Landlord as a result of Tenant’s failure to comply with
any provisions of this Section, which obligation shall survive the expiration or earlier termination of this Lease. If Tenant fails to
comply with its obligations hereunder, Landlord shall have the right, in its sole discretion, to do or cause to be done any and all work
necessary to comply with same, and Tenant shall pay the cost thereof as Additional Rent. Tenant shall pay such Additional Rent within
ten (10) days after receipt of a bill from Landlord. Within ten (10) days after receipt, Tenant shall provide Landlord with copies of
any notices alleging violation of the ADA relating to any portion of the Premises; any claims made or threatened in writing regarding
non-compliance with the ADA and relating to any portion of the Premises; or any governmental or regulatory actions or investigations
instituted or threatened regarding non-compliance with the ADA and relating to any portion of the Premises.
16 |
|
| 24. | Environmental
Requirements . |
(a) Tenant
shall (i) not engage in any activity that reasonably may result in any Contamination (defined below), (ii) promptly deliver notice and
a description to Landlord upon acquiring knowledge of the presence of any “hazardous substance” or “hazardous material”
or “hazardous waste” (defined below) in the Premises in violation of applicable laws or any Contamination; (iii) comply with
all laws, ordinances, rules, regulations, orders and directives requiring the removal, treatment or disposal of any Contamination and
provide to Landlord, upon demand, satisfactory evidence of such compliance; (iv) provide to Landlord, within thirty (30) days after notice,
reasonable assurance that Tenant has the funds necessary to pay the cost of removing, treating and disposing of any Contamination caused
by Tenant or any of its shareholders, members, officers, directors, employees, contractors, agents, invitees, assignees or subtenants;
(v) discharge any lien that may be established on the Premises as a result of any Contamination; and (vi) indemnify, hold harmless and
defend Landlord and any Mortgagee from any and all claims, losses, costs, damages and expenses (including reasonable attorneys’
fees and court costs) that may be asserted as a result of the presence of any hazardous substance , hazardous material or hazardous waste
on the Premises or any Contamination due to any action or omission by Tenant or any of its shareholders, members, officers, directors,
employees, contractors, agents, invitees, assignees or subtenants. “ Contamination ” means the contamination of the
Premises, facilities, soil, ground water, air, or other elements on, or off, any other property as a result of any hazardous substance,
hazardous material or hazardous waste at any time emanating from the Premises. “ Hazardous waste ” has the meaning set
forth in the Resource Conservation and Recovery Act of 1976, as amended from time to time, and regulations promulgated thereunder. “ Hazardous
substance ” has the meaning set forth in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended from time to time, and regulations promulgated thereunder, and the Environment Article of the Annotated Code of Maryland (1987
Vol., as amended). “ Hazardous material ” means (A) any “oil” as defined in Section 4-401(g) of the Environment
Article of the Annotated Code of Maryland (1987 Vol., as amended), or (B) any substance, material or waste that, whether by its nature
or use, is subject to regulation under any present or future law, ordinance, rule, regulation, order or directive, addressing environmental
health or safety issues, of or by any federal, state or local government or governmental agency (collectively, “ Environmental
Requirements ”).
(b) If
at any time it is determined that Tenant, its shareholders, members, officers, directors, employees, contractors, agents, invitees, assignees
or subtenants have placed or stored on or brought onto the Property materials which under any Environmental Requirements require special
handling in collection, storage, treatment, or disposal, Tenant promptly shall take or cause to be taken, at its sole expense, such actions
as may be necessary to comply with all Environmental Requirements. If Tenant fails to take such action, Landlord may make advances or
payments towards performance or satisfaction of the same but shall be under no obligation to do so; and all sums so advanced or paid,
including all sums advanced or paid in connection with any judicial or administrative investigation or proceeding relating thereto, including
reasonable attorneys’ fees, fines, or other costs, shall be repaid by Tenant, upon demand by Landlord, and shall bear interest
at one percent (1%) per month, compounded annually. Failure of Tenant to comply with all Environmental Requirements shall be a default
under this Lease.
17 |
|
| 25. | Notices. |
(a) Sending
of Notices . All notices, demands, requests, approvals and consents (collectively referred to as “ Notices ”)
required or permitted under this Lease shall be in writing and shall be either (i) personally delivered with signed receipt, or (ii)
sent by a nationally-recognized, overnight courier and addressed (i) if to Landlord, c/o of The Bluestone Group, 225 Broadway,
32 nd Floor, New York, NY, Attn: Mr. Eli Tabak, with a copy to Neuberger, Quinn, Gielen, Rubin & Gibber, P.A., 1 South
Street, 27 th Floor, Baltimore, MD 21202, Attn: Isaac M. Neuberger, Esq., imn@nqgrg.com, or (ii) if to Tenant, at the
Premises. All Notices personally delivered shall conclusively be deemed delivered at the time of such delivery. All Notices
delivered by overnight courier shall conclusively be deemed made one (1) business day after delivery to such courier service. Any
party may designate a change of address by notice to the other party, given at least ten (10) days before such change of address is
to become effective.
(b) Notice
to Mortgagees . If any Mortgagee shall notify Tenant that it is the holder of a mortgage affecting the Premises, no notice, request
or demand thereafter sent by Tenant to Landlord shall be effective unless and until a copy of the same shall also be sent to such Mortgagee
to such address as such Mortgagee shall designate.
| 26. | Miscellaneous . |
(a) Accord
and Satisfaction . No payment by Tenant or receipt or retention by Landlord of any payment in connection with this Lease will give
rise to, support or constitute an accord and satisfaction, notwithstanding any accompanying statement, instruction, or other assertion
to the contrary (whether by notation on a check or in a transmittal letter or otherwise), unless Landlord expressly agrees to an accord
and satisfaction in a separate writing duly executed by the appropriate persons. Landlord may receive and retain, absolutely and for
itself, any and all payments so tendered, notwithstanding any accompanying instructions by Tenant to the contrary. Landlord will be entitled
to treat any such payments as being received on account of any item or items of rent, interest, expense, or damage due in connection
herewith, in such amounts and in such order as Landlord may determine at its sole discretion.
(b) Captions
and Pronouns . The captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe
the scope of this Lease, or the intent of any provision thereof. Reference to masculine, feminine, or neuter gender shall include all
other genders.
(c) Corporate
Tenants . If Tenant is a corporation, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that: Tenant
is a duly constituted corporation qualified to do business in the State of Maryland; all Tenant’s franchises and corporate taxes
have been paid to date; all future forms, reports, fees and other documents necessary for Tenant to comply with applicable laws will
be filed by Tenant when due; and such persons are duly authorized by the board of directors of such corporation to execute and deliver
this Lease on behalf of the corporation.
(d) Fees
and Expenses . If Tenant shall default in the observance or performance of any term or covenant on Tenant’s part to be observed
or performed under or by virtue of any of the terms or provisions in this Lease, Landlord may immediately, or at any time thereafter
and without notice, perform the same for the account of Tenant, and if Landlord makes any expenditures or incurs any obligations for
the payment of money in connection therewith including attorneys’ fees in instituting, prosecuting or defending any action or proceeding,
such sums paid or obligations incurred and costs shall be deemed to be Additional Rent hereunder and shall be paid by Tenant to Landlord
within seven (7) days of rendition of any bill or statement to Tenant therefor.
18 |
|
(e) Governing
Law . This Lease shall be governed by and construed in accordance with the laws of the State of Maryland (without regard to principles
of conflicts of laws).
(f) Interpretation .
This Lease represents the results of bargaining and negotiations between the parties (each of which is represented by legal counsel of
its own choosing) and a combined draftsmanship effort and therefore shall be construed without regard to any custom or rule of law requiring
construction or interpretation against the party responsible for drafting this Lease. As used in this Lease, the word “including”
shall be interpreted as if followed by the words “without limitation.”
(g) Non-Recourse .
Notwithstanding anything to the contrary contained in this Lease, Landlord’s liability under this Lease is limited to and shall
not extend beyond Landlord’s interest in the Property and Tenant shall not enforce any judgment for Landlord’s breach of
this Lease against any asset or property of Landlord (or of any shareholder, partner, member or other equity interest holder of Landlord)
beyond Landlord’s interest in the Property. Landlord has no personal liability under this Lease. This provision, which shall inure
to Landlord’s successors and assigns (including any Mortgagee), is not intended to relieve Landlord from the performance of its
obligations under this Lease but rather to limit Landlord’s liability in the event Tenant obtains a judgment against Landlord.
(h) No
Option . The submission of this Lease for examination does not constitute a reservation of, or option for, the Premises, and this
Lease shall become effective only upon execution thereof by both parties.
(i) No
Oral Modification . This writing is intended by the parties as a final expression of their agreement and as a complete and exclusive
statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein.
No course of prior dealings between the parties or their officers, employees, agents or affiliates shall be relevant or admissible to
supplement, explain, or vary any of the terms of this Lease. Acceptance of, or acquiescence in, a course of performance rendered under
this or any prior agreement between the parties or their affiliates shall not be relevant or admissible to determine the meaning of any
of the terms of this Lease. No representations, understandings, or agreements have been made or relied upon in the making of this Lease
other than those specifically set forth herein. This Lease can be modified only in writing and when signed by the party against whom
the modification is enforceable.
(j) No
Waivers . The failure of Landlord to insist, in any one or more instances, upon a strict performance of any of the covenants of this
Lease, or to exercise any option herein contained, shall not be construed as a waiver, or a relinquishment for the future, of such covenant
or option, but the same shall continue and remain in full force and effect. The receipt by Landlord of Rent, with knowledge of the breach
of any covenant hereof, shall not be deemed a waiver of such breach, and no waiver by Landlord of any provision hereof shall be deemed
to have been made unless expressed in writing and signed by Landlord.
19 |
|
(k) Performance
of Landlord’s Obligations by Mortgagee . Tenant shall accept performance of any of Landlord’s obligations hereunder by
any Mortgagee.
(l) Possession .
Landlord covenants and agrees that possession of the Premises shall be given to Tenant as soon as the Premises are ready for occupancy
by said Tenant. In case possession, in whole or in part, cannot be given to Tenant on or before the Commencement Date of this Lease,
Landlord agrees to abate the Annual Rent proportionately until possession is given to Tenant, and Tenant agrees to accept such pro-rata
abatement as liquidated damages for the failure to obtain possession. If Tenant takes possession of the Premises, in whole or in part,
prior to the Commencement Date, Tenant’s obligation to pay Rent as set forth in this Lease shall commence as of the day Tenant
obtains possession of the Premises.
(m) No
Recordation . Tenant shall not record this Lease or a memorandum of this Lease. If Tenant violates the previous sentence, then at
Landlord’s option Tenant shall be deemed to have committed an incurable Event of Default and Landlord may record a “Notice
of Termination” of this Lease that shall be effective without Tenant’s signature.
(n) Remedies
Cumulative . No reference to any specific right or remedy shall preclude Landlord from exercising any other right or from having any
other remedy or from maintaining any action to which it may otherwise be entitled at law or in equity. No failure by Landlord to insist
upon strict performance of any agreement, term, covenant or condition hereof, or to exercise any right or remedy consequent upon a breach
thereof, and no acceptance of full or partial rent during the continuance of any such breach shall constitute a waiver of any such breach.
No waiver by Landlord of any breach by Tenant under this Lease or of any breach by any other tenant under any other lease of any portion
of the Property shall affect or alter this Lease in any way whatsoever.
(o) Severability .
The provisions of this Lease are severable, and the invalidity or unenforceability of any provision shall not affect the validity or
enforceability of any other provision.
(p) Several
Liability . If Tenant shall be one or more individuals, corporations or other entities, whether or not operating as a partnership
or joint venture, then each such individual, corporation, entity, joint venturer or partner shall be deemed to be both jointly and severally
liable for the payment of the entire rent and other payments specified herein.
(q) Prior
Information . The Tenant acknowledges and agrees that no prior information provided or statements made by the Landlord or its agent(s)
(“ Prior Information ”), including estimated gross sales and common area maintenance calculations, any other financial
matters, and any matters related to: (i) any of the premises on the Property; (ii) the Property itself; or (iii) the number or kind of
tenants on the Property, have in any way induced the Tenant to enter into this Lease. The Tenant acknowledges that prior to entering
into this Lease, the Tenant has satisfied itself of all its concerns by conducting an independent investigation of the validity of such
Prior Information.
20 |
|
(r) Successors
and Assigns . This Lease and the covenants, terms and conditions contained herein shall inure to the benefit of and be binding on
Landlord, its successors and assigns, provided that, if Landlord shall transfer title to the Property, by operation of law or otherwise,
Landlord shall be relieved of all covenants and obligations hereunder upon completion of such sale or transfer, and it shall be considered
that the transferee has assumed and agreed to carry out all of the obligations of Landlord hereunder. This Lease and the covenants, terms
and conditions contained herein shall be binding on and inure to the benefit of Tenant, its heirs, personal representatives, and permitted
successors and assigns.
(s) Third
Party Beneficiary . Nothing contained in this Lease shall be construed so as to confer upon any other party the rights of a third-party
beneficiary except rights contained herein for the benefit of a Mortgagee.
(t)
Time of the Essence . TIME IS OF THE ESSENCE OF THIS LEASE.
(u) Waiver
of Jury Trial . LANDLORD AND TENANT HEREBY MUTUALLY
WAIVE ANY AND ALL RIGHTS WHICH EITHER MAY HAVE TO REQUEST A JURY TRIAL IN ANY ACTION, PROCEEDING OR COUNTERCLAIM AT LAW OR IN EQUITY
IN ANY COURT OF COMPETENT JURISDICTION ARISING OUT OF THIS LEASE OR TENANT’S OCCUPANCY OF OR RIGHT TO OCCUPY THE LEASED PREMISES.
TENANT FURTHER AGREES THAT IF LANDLORD COMMENCES ANY SUMMARY PROCEEDING FOR NONPAYMENT OF RENT OR POSSESSION OF THE LEASED PREMISES,
TENANT WILL NOT, AND HEREBY WAIVES, ALL RIGHT TO INTERPOSE ANY COUNTERCLAIM OF WHATEVER NATURE IN ANY SUCH PROCEEDING. TENANT FURTHER
WAIVES ANY RIGHT TO REMOVE SAID SUMMARY PROCEEDING TO ANY OTHER COURT OR TO CONSOLIDATE SAID SUMMARY PROCEEDING WITH ANY OTHER ACTION,
WHETHER BROUGHT PRIOR OR SUBSEQUENT TO THE SUMMARY PROCEEDING.
(v) Disclosure .
Tenant certifies that: (i) it is not acting, directly or indirectly, for or on behalf of any person, group, entity or nation named by
an Executive Order or the United States Treasury Department as a terrorist, “Specially Designated National and Blocked Person,”
or other banned or blocked person, entity, nation or transaction pursuant to any law, order, rule, or regulation that is enforced or
administered by the Office of Foreign Assets Control; and (ii) it is not engaged in this transaction, directly or indirectly on behalf
of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any person, group, entity, or nation. Tenant
hereby agrees to defend, indemnify, and hold harmless Landlord from and against any and all claims, damages, losses, risks, liabilities,
and expenses (including attorney’s fees and costs) arising from or related to any breach of the foregoing certification.
(w) Confidentiality .
Tenant, and its agents, employees and third party contractors, shall maintain the contents of this Lease and all discussions between
Tenant and Landlord, Landlord’s agents, employees and representatives, regarding this Lease in confidence. Tenant agrees that Tenant
shall not at any time or in any manner, either directly or indirectly, divulge, disclose or communicate to any person, entity or association
the contents of this Lease, except as necessary for legal or accounting purposes. If Tenant fails to comply with this paragraph, Tenant
acknowledges that because its failure to comply with the provisions of this paragraph could cause irreparable injury to Landlord that
cannot be compensated by the payment of money, Landlord shall have the right to all remedies available to it at law or in equity in addition
to those available at law for other violations of the Lease.
21 |
|
(x) Exhibits
and Counterparts . The Recitals set forth above and the exhibits attached below are incorporated in and made a material part of this
Lease. This Lease may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same Lease. Electronic signatures, and counterparts transmitted by e-mail or facsimile, shall be valid and binding to the
same extent as originals.
(y) Fixtures,
Machinery and Equipment . All fixtures, machinery and equipment in the Premises that are not owned by Landlord (“ Tenant’s
Equipment ”) shall be and remain owned by Tenant. During the first two (2) Lease Years, Tenant shall not remove any of Tenant’s
Equipment from the Property. Tenant shall not convey any Tenant’s Equipment to any other person or entity (even if affiliated with
Tenant) unless Tenant promptly replaces it with items of equal or greater value, quality and utility. Nothing in this Lease prohibits
Tenant from granting a lien on or security interest in Tenant’s Equipment to Tenant’s bona-fide third party lender.
[SIGNATURE
PAGE FOLLOWS]
22 |
|
IN
WITNESS WHEREOF, Landlord and Tenant have signed, sealed and delivered this Lease Agreement as of the Effective Date.
|
LANDLORD: |
|
|
|
NEW
HEIGHTS INDUSTRIAL PARK LLC , |
|
a
Delaware limited liability company |
|
|
|
|
By: |
New
Heights Industrial Park Venture LLC, a Delaware limited liability company, its Sole Member |
|
|
|
|
By: |
New
Heights GP LLC, a Delaware limited liability company, its Managing Member |
|
|
|
|
By: |
TBSG
New Heights GP LLC, a Delaware limited liability company, its Managing Member |
|
By: |
/s/
Michael Langer |
[SEAL] |
|
|
Michael
Langer |
|
|
Manager |
|
TENANT: |
|
|
|
|
|
FIRST BREACH INC. , a Delaware corporation |
|
|
|
|
|
By: |
/s/ Jordan Low |
[SEAL] |
|
|
Name:
Jordan Low |
|
|
|
Title:
President/COO |
|
|
|
Exhibit
A
PROPERTY
All
that certain land, together with the improvements, rights, privileges and appurtenances to the same belonging, situate in the Washington
County, State of Maryland, and described as follows, to wit:
All
that land in the Twenty Seventh (27th) Election District, Washington County, Maryland and being known and designated as Unit 2, in that
Condominium Regime known as “First Flight Air Park Condominium, Inc.” as established by that “Condominium Declaration
of First Flight Air Park Condominium, Inc.” Dated May 31, 2008 and recorded among the Land Records of Washington County, Maryland,
in Liber No. 3511 folio 557 and per plat thereof recorded among Land Records at Condominium Plat Nos. 429, 420 and 431.
Together
with an undivided 97% interest or such undivided interest as may be established from time to time, in the common elements as set forth
in the Condominium Declaration of First Flight Air Park Condominium, Inc. above referred to.
Being
the same property as conveyed by Deed recorded among the said Land Records in Liber 836 at folio 438.
Together
with the buildings and improvements thereon erected, made or being; and all and every, the rights, alleys, ways, waters, privileges,
appurtenances and advantages thereto belonging, or in anywise appertaining.
Tax
ID# 27-038166
The
improvements thereon being known as: 18450 Showalter Road, Unit 2
Being
the same property conveyed to New Heights Industrial Park LLC, a Delaware limited liability company by Special Warranty Deed from Topflight
Owner LLC, a New York limited liability company, dated 01/22/2020, filed 01/24/2020, of record in Book KRT 6166, page 342, Recorder Office
for Washington County, Maryland.
|
|
Exhibit
B
LEASED
PREMISES
Bay
1
|
|
Bay
2
|
### EX-10.5 - EX-10.5
EX-10.5
6
ex10-5.htm
EX-10.5
Exhibit
10.5
|
|
|
|
|
|
|
|
|
### EX-10.6 - EX-10.6
EX-10.6
7
ex10-6.htm
EX-10.6
Exhibit 10.6
FIRST
BREACH INC.
OMNIBUS
SECURITIES AND INCENTIVE PLAN
TWELVE
MILLION SHARES OF COMMON STOCK
Table
of Contents
|
|
|
Page |
|
|
|
|
ARTICLE
I |
PURPOSE |
1 |
|
|
|
ARTICLE
II |
DEFINITIONS |
1 |
|
|
|
ARTICLE
III |
EFFECTIVE
DATE OF PLAN |
4 |
|
|
|
ARTICLE
IV |
ADMINISTRATION |
4 |
|
Section
4.1 |
Administration |
|
|
Section
4.2 |
Powers |
|
|
Section
4.3 |
Additional
Powers |
|
|
Section
4.4 |
Delegation |
|
|
Section
4.5 |
Power
and Authority of the Board |
|
|
|
|
|
ARTICLE
V |
SHARES
SUBJECT TO PLAN AND LIMITATIONS THEREON |
5 |
|
Section
5.1 |
Shares
Grant and Award Limits |
|
|
Section
5.2 |
Prior
Stock Plan |
|
|
Section
5.3 |
Common
Stock Offered |
|
|
Section
5.4 |
Limitations
on Awards for Directors |
|
|
|
|
|
ARTICLE
VI |
ELIGIBILITY
FOR AWARDS |
6 |
|
|
|
|
ARTICLE
VII |
OPTIONS |
6 |
|
Section
7.1 |
Option
Period |
|
|
Section
7.2 |
Limitations
on Exercise of Option |
|
|
Section
7.3 |
Special
Limitations on Incentive Share Options |
|
|
Section
7.4 |
Option
Agreement |
|
|
Section
7.5 |
Option
Price and Payment |
|
|
Section
7.6 |
Stockholder
Rights and Privileges |
|
|
Section
7.7 |
Options
and Rights in Substitution for Stock or Share Options Granted by Other Corporations |
|
|
Section
7.8 |
Prohibition
Against Repricing |
|
|
|
|
|
ARTICLE
VIII |
RESTRICTED
SHARE AWARDS |
7 |
|
Section
8.1 |
Restriction
Period |
|
|
Section
8.2 |
Other
Terms and Conditions |
|
|
Section
8.3 |
Payment
for Restricted Shares |
|
|
Section
8.4 |
Restricted
Share Award Agreements |
|
|
|
|
|
ARTICLE
IX |
UNRESTRICTED
SHARE AWARDS |
8 |
|
|
|
|
ARTICLE
X. |
RESTRICTED
SHARE UNIT AWARDS |
8 |
|
Section
10.1 |
Terms
and Conditions |
|
|
Section
10.2 |
Payments |
|
|
|
|
|
ARTICLE
XI |
PERFORMANCE
UNIT AWARDS |
9 |
|
Section
11.1 |
Terms
and Conditions |
|
|
Section
11.2 |
Payments |
|
- i - |
|
ARTICLE XII |
DISTRIBUTION EQUIVALENT RIGHTS |
9 |
|
Section 12.1 |
Terms and Conditions |
|
|
Section 12.2 |
Interest Equivalents |
|
|
|
|
|
ARTICLE XIII |
SHARE APPRECIATION RIGHTS |
9 |
|
Section 13.1 |
Terms and Conditions |
|
|
Section 13.2 |
Tandem Share Appreciation Rights |
|
|
|
|
|
ARTICLE XIV |
RECAPITALIZATION OR REORGANIZATION |
10 |
|
Section 14.1 |
Adjustments to Common Stock |
|
|
Section 14.2 |
Recapitalization |
|
|
Section 14.3 |
Other Events |
|
|
Section 14.4 |
Powers Not Affected |
|
|
Section 14.5 |
No Adjustment for Certain Awards |
|
|
|
|
|
ARTICLE XV |
AMENDMENT AND TERMINATION OF PLAN |
11 |
|
|
|
ARTICLE XVI |
MISCELLANEOUS |
11 |
|
|
|
|
|
Section 16.1 |
No Right to Award |
|
|
Section 16.2 |
No Rights Conferred |
|
|
Section 16.3 |
Other Laws; No Fractional Shares; Withholding |
|
|
Section 16.4 |
No Restriction on Corporate Action |
|
|
Section 16.5 |
Restrictions on Transfer |
|
|
Section 16.6 |
Beneficiary Designations |
|
|
Section 16.7 |
Rule 16b-3 |
|
|
Section 16.8 |
Section 409A |
|
|
Section 16.9 |
Indemnification |
|
|
Section 16.10 |
Other Plans |
|
|
Section 16.11 |
Limits of Liability |
|
|
Section 16.12 |
Governing Law |
|
|
Section 16.13 |
Severability of Provisions |
|
|
Section 16.14 |
No Funding |
|
|
Section 16.15 |
Headings |
|
|
Section 16.16 |
Terms of Award Agreements |
|
- ii - |
|
FIRST
BREACH INC.
OMNIBUS
SECURITIES AND INCENTIVE PLAN
TWELVE
MILLION SHARES OF COMMON STOCK
ARTICLE
I
PURPOSE
The
purpose of this First Breach Inc. Omnibus Securities and Incentive Plan (the “Plan”) is to benefit the stockholders of First
Breach Inc., a Delaware corporation (the “Company”), by assisting the Company to attract, retain and provide incentives to
key management employees and non-employee directors of, and non-employee consultants to, the Company and its Affiliates, and to align
the interests of such employees, non-employee directors and non-employee consultants with those of the Company’s stockholders.
Accordingly, the Plan provides for the granting of Distribution Equivalent Rights, Incentive Share Options, Non-Qualified Share Options,
Performance Unit Awards, Restricted Share Awards, Restricted Share Unit Awards, Share Appreciation Rights, Tandem Share Appreciation
Rights, Unrestricted Share Awards or any combination of the foregoing, as may be best suited to the circumstances of the particular Employee,
Director or Consultant as provided herein.
ARTICLE
II
DEFINITIONS
The
following definitions shall be applicable throughout the Plan unless the context otherwise requires:
“Affiliate”
shall mean any corporation which, with respect to the Company, is a “subsidiary corporation” within the meaning of Section
424(f) of the Code.
“Award”
shall mean, individually or collectively, any Distribution Equivalent Right, Option, Performance Unit Award, Restricted Share Award,
Restricted Share Unit Award, Share Appreciation Right or Unrestricted Share Award.
“Award
Agreement” shall mean a written agreement between the Company and the Holder with respect to an Award, setting forth the terms
and conditions of the Award, and each of which shall constitute a part of the Plan.
“Board”
shall mean the Board of Directors of the Company.
“Change
of Control” shall mean (i) for a Holder who is a party to an employment or consulting agreement with the Company or an Affiliate
which agreement defines “Change of Control” (or a similar term) therein, “Change of Control” shall have the same
meaning as provided for in such agreement, or (ii) for a Holder who is not a party to such an agreement, “Change of Control”
shall mean the satisfaction of any one or more of the following conditions (and the “Change of Control” shall be deemed to
have occurred as of the first day that any one or more of the following conditions shall have been satisfied):
(a) Any
person (as such term is used in paragraphs 13(d) and 14(d)(2) of the Exchange Act, hereinafter in this definition, “Person”),
other than the Company or an Affiliate or an employee benefit plan of the Company or an Affiliate, becomes the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%)
of the combined voting power of the Company’s then outstanding securities;
(b) The
closing of a merger, consolidation or other business combination (a “Business Combination”) other than a Business Combination
in which holders of the Common Stock immediately prior to the Business Combination have substantially the same proportionate ownership
of the Company or surviving corporation immediately after the Business Combination as immediately before;
(c) The
closing of an agreement for the sale or disposition of all or substantially all of the Company’s assets to any entity that is not
an Affiliate;
- 1 - |
|
(d) The
approval by the holders of shares of Common Stock of a Plan of complete liquidation of the Company other than a liquidation of the Company
into any subsidiary or a liquidation a result of which Persons who were stockholders of the Company immediately prior to such liquidation
have substantially the same proportionate ownership of shares of the surviving corporation immediately after such liquidation as immediately
before; or
(e) Within
any twenty-four (24)-month period, the Incumbent Directors shall cease to constitute at least a majority of the Board or the board of
directors of any successor to the Company; provided, however, that any director elected to the Board, or nominated for election, by a
majority of the Incumbent Directors then still in office, shall be deemed to be an Incumbent Director for purposes of this paragraph
(e), but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or
threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of an individual, entity or “group” other than the Board (including, but not limited to, any
such assumption that results from paragraph (a), (b), (c) or (d) of this definition).
Notwithstanding
the foregoing, a “Change of Control” shall not be deemed to occur if the Company files for bankruptcy, liquidation or reorganization
under the United States Bankruptcy Code.
“Code”
shall mean the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include
any amendments or successor provisions to any section and any regulation under such section.
“Committee”
shall mean such other committee designated by the Board to administer the Plan. “Common Share” shall mean a share of Common
Stock.
“Common
Stock” shall mean the common stock, par value $0.01 per share, of the Company. “Company” shall mean First Breach Inc.,
a Delaware corporation, and any successor thereto.
“Consultant”
shall mean any non-Employee advisor to the Company or an Affiliate who or which has contracted directly with the Company or an Affiliate
to render bona fide consulting or advisory services thereto.
“Director”
shall mean a member of the Board or a member of the board of directors of an Affiliate, in either case, who is not an Employee.
“Distribution
Equivalent Right” shall mean an Award granted under Article XII of the Plan which entitles the Holder to receive bookkeeping credits,
cash payments and/or Common Share distributions equal in amount to the distributions that would have been made to the Holder had the
Holder held a specified number of Common Stock during the period the Holder held the Distribution Equivalent Right.
“Distribution
Equivalent Right Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Distribution
Equivalent Right Award.
“Effective
Date” shall have the meaning ascribed to that term in Article III.
“Employee”
shall mean any employee, including officers, of the Company or an Affiliate. “Exchange Act” shall mean the Securities Exchange
Act of 1934, as amended.
“Fair
Market Value” shall mean, as determined consistent with the applicable requirements of Sections 409A and 422 of the Code, as of
any specified date, the closing sales price of the Common Stock for such date (or, in the event that the Common Stock are not traded
on such date, on the immediately preceding trading date) as reported in The Wall Street Journal or a comparable reporting service.
If the Common Stock are not listed on a national securities exchange, but are quoted on the OTC Markets OTC Link, the Fair Market Value
of the Common Stock shall be the mean of the bid and asked prices per Common Share for such date. If the Common Stock are not quoted
or listed as set forth above, Fair Market Value shall be determined by the Committee in good faith by any fair and reasonable means (which
means, with respect to a particular Award grant, may be set forth with greater specificity in the applicable Award Agreement). The Fair
Market Value of property other than Common Stock shall be determined by the Committee in good faith by any fair and reasonable means,
and consistent with the applicable requirements of Sections 409A and 422 of the Code.
- 2 - |
|
“Family
Member” shall mean any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the
Holder’s household (other than a tenant or employee of the Holder), a trust in which such persons have more than fifty percent
(50%) of the beneficial interest, a foundation in which such persons (or the Holder) control the management of assets and any other entity
in which such persons (or the Holder) own more than fifty percent (50%) of the voting interests.
“Holder”
shall mean an Employee, Director or Consultant who has been granted an Award or any such individual’s beneficiary, estate or representative,
to the extent applicable.
“Incentive
Share Option” shall mean an Option which is intended by the Committee to constitute an “incentive stock option” under
Section 422 of the Code.
“Incumbent
Director” shall mean, with respect to any period of time specified under the Plan for purposes of determining whether or not a
Change of Control has occurred, the individuals who were members of the Board at the beginning of such period.
“Non-Qualified
Share Option” shall mean an Option which is not an Incentive Share Option.
“Option”
shall mean an Award granted under Article VII of the Plan of an option to purchase Common Stock and includes both Incentive Share Options
and Non-Qualified Share Options.
“Option
Agreement” shall mean a written agreement between the Company and a Holder with respect to an Option.
“Performance
Unit” shall mean a Unit awarded to a Holder pursuant to a Performance Unit Award.
“Performance
Unit Award” shall mean an Award granted under Article XI of the Plan under which, upon the satisfaction of predetermined individual
and/or Company (and/or Affiliate) performance goals and/or objectives, a cash payment shall be made to the Holder, based on the number
of Units awarded to the Holder.
“Performance
Unit Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Performance Unit Award.
“Plan”
shall mean this First Breach Inc. Omnibus Securities and Incentive Plan, as amended from time to time, together with each of the Award
Agreements utilized hereunder.
“Restricted
Share Award” shall mean an Award granted under Article VIII of the Plan of Common Stock, the transferability of which by the Holder
shall be subject to Restrictions.
“Restricted
Share Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Share Award.
“Restricted
Share Unit Award” shall mean an Award granted under Article X of the Plan under which, upon the satisfaction of predetermined individual
service-related vesting requirements, a cash payment shall be made to the Holder, based on the number of Units awarded to the Holder.
- 3 - |
|
“Restricted
Share Unit Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Restricted Share
Unit Award.
“Restriction
Period” shall mean the period of time for which Common Stock subject to a Restricted Share Award shall be subject to Restrictions,
as set forth in the applicable Restricted Share Award Agreement.
“Restrictions”
shall mean forfeiture, transfer and/or other restrictions applicable to Common Stock awarded to an Employee, Director or Consultant under
the Plan pursuant to a Restricted Share Award and set forth in a Restricted Share Award Agreement.
“Rule
16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such may be amended
from time to time, and any successor rule, regulation or statute fulfilling the same or a substantially similar function.
“Share
Appreciation Right” shall mean an Award granted under Article XIII of the Plan of a right, granted alone or in connection with
a related Option, to receive a payment on the date of exercise.
“Share
Appreciation Right Award Agreement” shall mean a written agreement between the Company and a Holder with respect to a Share Appreciation
Right.
“Tandem
Share Appreciation Right” shall mean a Share Appreciation Right granted in connection with a related Option, the exercise of which
shall result in termination of the otherwise entitlement to purchase some or all of the Common Stock under the related Option, all as
set forth in Section 13.2.
“Ten
Percent Shareholder” shall mean an Employee who, at the time an Option is granted to him or her, owns shares possessing more than
ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any parent corporation or subsidiary
corporation thereof (both as defined in Section 424 of the Code), within the meaning of Section 422(b)(6) of the Code.
“Units”
shall mean bookkeeping units, each of which represents such monetary amount as shall be designated by the Committee in each Performance
Unit Award Agreement, or represents one (1) Common Share for purposes of each Restricted Share Unit Award.
“Unrestricted
Share Award” shall mean an Award granted under Article IX of the Plan of Common Stock which are not subject to Restrictions.
“Unrestricted
Share Award Agreement” shall mean a written agreement between the Company and a Holder with respect to an Unrestricted Share Award.
ARTICLE
III
EFFECTIVE DATE OF PLAN
The
Plan shall be effective as of January 22, 2026 (the “Effective Date”), subject to approval by the board of the Company.
ARTICLE
IV
ADMINISTRATION
Section
4.1. Administration . The Plan shall be administered by the Committee.
Section
4.2. Powers . Subject to the provisions of the Plan, the Committee shall have the sole authority, in its discretion, to make all
determinations under the Plan, including, but not limited to, determining which Employees, Directors or Consultants shall receive an
Award, the time or times when an Award shall be made (the date of grant of an Award shall be the date on which the Award is awarded by
the Committee), what type of Award shall be granted, the term of an Award, the date or dates on which an Award vests (including acceleration
of vesting), the form of any payment to be made pursuant to an Award, the terms and conditions of an Award (including the forfeiture
of the Award (and/or any financial gain) if the Holder of the Award violates any applicable restrictive covenant thereof), the Restrictions
under a Restricted Share Award and the number of Common Stock which may be issued under an Award, all as applicable. In making such determinations,
the Committee may take into account the nature of the services rendered by the respective Employees, Directors and Consultants, their
present and potential contribution to the Company’s (or the Affiliate’s) success and such other factors as the Committee,
in its discretion, shall deem relevant.
- 4 - |
|
Section
4.3. Additional Powers . The Committee shall have such additional powers as are delegated to it under the other provisions of the
Plan. Subject to the express provisions of the Plan, the Committee is authorized to construe the Plan and the respective Award Agreements
executed hereunder, to prescribe such rules and regulations relating to the Plan as it may deem advisable to carry out the intent of
the Plan, and to determine the terms, restrictions and provisions of each Award, including such terms, restrictions and provisions as
shall be requisite in the judgment of the Committee to cause designated Options to qualify as Incentive Share Options, and to make all
other determinations necessary or advisable for administering the Plan. The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any Award Agreement in the manner and to the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this Article IV shall be conclusive and binding on the Company and all
Holders.
Section
4.4. Delegation . The Committee may delegate to one or more officers or Directors of the Company, subject to such terms,
conditions and limitations as the Committee may establish, in its sole discretion, the authority to grant Awards; provided, however,
that the Committee shall not delegate such authority (i) with regard to grants of Awards to be made to officers of the Company or
any Affiliate who are subject to Section 16 of the Exchange Act, or (ii) in such a manner as would cause the Plan not to comply with
the requirements of applicable law or applicable exchange rules.
Section
4.5. Power and Authority of the Board . Notwithstanding anything to the contrary contained herein, (i) the Board may, at any time
and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless
the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Rule 16b-3, other applicable
law or applicable exchange rules, and (ii) only the Committee (or another committee of the Board comprised of directors who qualify as
independent directors within the meaning of the independence rules of any applicable securities exchange where the shares of Common Stock
are then listed) may grant Awards to Directors who are not also Employees.
ARTICLE
V
SHARES
SUBJECT TO PLAN AND LIMITATIONS THEREON
Section
5.1. Shares Grant and Award Limits . The Committee may from time to time grant Awards to one or more Employees, Directors and/or
Consultants determined by it to be eligible for participation in the Plan in accordance with the provisions of Article VI. Subject to
Article XIV, the aggregate number of Common Shares (including Common Shares underlying Options designated as Incentive Share Options)
that may be issued under the Plan shall not exceed the sum of (i)] twelve million (12,000,000) Common Shares, plus (ii) an annual
increase on the first day of each calendar year beginning January 1, 2026 and ending on and including January 1, 2031 equal to a fifteen
percent (15%) of the Common Shares outstanding on the final day of the immediately preceding calendar year. The Common Stock shall be
deemed to have been issued under the Plan solely to the extent actually issued and delivered pursuant to an Award. To the extent that
an Award lapses, expires, is canceled, is terminated unexercised or ceases to be exercisable for any reason, or the rights of its Holder
terminate, any Common Stock subject to such Award shall again be available for the grant of a new Award.
Section
5.2. Prior Awards . All outstanding awards previously granted by the Company shall remain outstanding and subject to their terms.
Section
5.3. Common Stock Offered . The Common Stock to be offered pursuant to the grant of an Award will be
authorized but unissued Common Stock or Common Stock previously issued and outstanding and reacquired by the Company.
- 5 - |
|
Section
5.4. Limitations on Awards for Directors . Notwithstanding any provision to the contrary in the Plan, the sum of the grant date
fair value of equity-based Awards (such value computed as of the date of grant in accordance with applicable financial accounting rules)
and the amount of any cash-based compensation granted to a Director during any calendar year shall not exceed [Five Hundred Thousand]
Dollars ($[500,000]). The independent members of the Board may make exceptions to this limit for a non-executive chair of the Board,
provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation.
ARTICLE
VI
ELIGIBILITY FOR AWARDS
Awards
made under the Plan may be granted solely to persons who, at the time of grant, are Employees, Directors or Consultants (or any such
person to whom an offer of employment or engagement with the Company or any Affiliate is extended). An eligible person must be a natural
person, and may only be granted an Award in connection with the provision of services. An Award may be granted on more than one occasion
to the same Employee, Director or Consultant, and, subject to the limitations set forth in the Plan, such Award may include a Non-Qualified
Share Option, a Restricted Share Award, an Unrestricted Share Award, a Distribution Equivalent Right Award, a Performance Unit Award,
a Share Appreciation Right, a Tandem Share Appreciation Right, any combination thereof or, solely for Employees, an Incentive Share Option.
ARTICLE
VII
OPTIONS
Section
7.1. Option Period . The term of each Option shall be as specified in the Option Agreement; provided, however, that except as set
forth in Section 7.3, no Option shall be exercisable after the expiration of ten (10) years from the date of its grant.
Section
7.2. Limitations on Exercise of Option . An Option shall be exercisable in whole or in such installments and at such times as specified
in the Option Agreement.
Section
7.3. Special Limitations on Incentive Share Options . To the extent that the aggregate Fair Market Value (determined at the time
the respective Incentive Share Option is granted) of Common Stock with respect to which Incentive Share Options are exercisable for the
first time by an individual during any calendar year under all plans of the Company and any parent corporation or subsidiary corporation
thereof (both as defined in Section 424 of the Code) which provide for the grant of Incentive Share Options exceeds One Hundred Thousand
Dollars ($100,000) (or such other individual limit as may be in effect under the Code on the date of grant), the portion of such Incentive
Share Options that exceeds such threshold shall be treated as Non-Qualified Share Options. Incentive Share Options shall be granted to
Employees only. The Committee shall determine, in accordance with applicable provisions of the Code, Treasury Regulations and other administrative
pronouncements, which of a Holder’s Options, which were intended by the Committee to be Incentive Share Options when granted to
the Holder, will not constitute Incentive Share Options because of such limitation, and shall notify the Holder of such determination
as soon as practicable after such determination. No Incentive Share Option shall be granted to an Employee if, at the time the Incentive
Share Option is granted, such Employee is a Ten Percent Shareholder, unless (i) at the time such Incentive Share Option is granted the
Option price is at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock subject to the Incentive Share Option,
and (ii) such Incentive Share Option by its terms is not exercisable after the expiration of five (5) years from the date of grant. No
Incentive Share Option shall be granted more than ten (10) years from the date on which the Plan is approved by the Company’s stockholders.
The designation by the Committee of an Option as an Incentive Share Option shall not guarantee the Holder that the Option will satisfy
the applicable requirements for “incentive stock option” status under Section 422 of the Code.
Section
7.4. Option Agreement . Each Option shall be evidenced by an Option Agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall approve, including, but not limited to, provisions intended
to qualify an Option as an Incentive Share Option. An Option Agreement may provide for the payment of the Option price, in whole or in
part, by the delivery of a number of Common Stock (plus cash if necessary) that have been owned by the Holder for at least six (6) months
and having a Fair Market Value equal to such Option price, or such other forms or methods as the Committee may determine from time to
time, in each case, subject to such rules and regulations as may be adopted by the Committee. Each Option Agreement shall specify the
effect of termination of employment, Director status or Consultant status on the exercisability of the Option. Moreover, without limiting
the generality of the foregoing, an Option Agreement may provide for a “cashless exercise” of the Option, in whole or in
part, by (a) establishing procedures whereby the Holder, by a properly-executed written notice, directs (i) an immediate market sale
or margin loan as to all or a part of Common Stock to which he is entitled to receive upon exercise of the Option, pursuant to an extension
of credit by the Company to the Holder of the Option price, (ii) the delivery of the Common Stock from the Company directly to a brokerage
firm, and (iii) the delivery of the Option price from sale or margin loan proceeds from the brokerage firm directly to the Company, or
(b) reducing the number of Common Stock to be issued upon exercise of the Option by the number of such Shares having an aggregate Fair
Market Value equal to the Option price (or portion thereof to be so paid) as of the date of the Option’s exercise. Each Option
Agreement shall specify the effect of the termination of the Holder’s employment, Director status or Consultant status on the exercisability
of the Option. An Option Agreement may also include provisions relating to (i) subject to the provisions hereof, accelerated vesting
of Options, including, but not limited to, upon the occurrence of a Change of Control, (ii) tax matters (including provisions covering
any applicable Employee wage withholding requirements), and (iii) any other matters not inconsistent with the terms and provisions of
the Plan that the Committee shall, in its sole discretion, determine. The terms and conditions of the respective Option Agreements need
not be identical.
- 6 - |
|
Section
7.5. Option Price and Payment . The price at which a Common Share may be purchased upon exercise of an Option shall be determined
by the Committee and shall not be less than the Fair Market Value of a Common Share on the date of grant of such Option; provided, however,
that such Option price as determined by the Committee shall be subject to adjustment as provided in Article XIV. The Option price or
portion thereof shall be paid in full in the manner prescribed by the Committee as set forth in the Plan and the applicable Option Agreement,
which manner, with the consent of the Committee, may include the withholding of Common Stock otherwise issuable in connection with the
exercise of the Option, for purposes of Section 7.4(b). Separate share certificates shall be issued by the Company for those Common Stock
acquired pursuant to the exercise of an Incentive Share Option and for those Common Stock acquired pursuant to the exercise of a Non-Qualified
Share Option.
Section
7.6. Stockholder Rights and Privileges . The Holder of an Option shall be entitled to all the privileges and rights of a stockholder
of the Company solely with respect to such Common Stock as have been purchased under the Option and for which share certificates have
been registered in the Holder’s name.
Section
7.7. Options and Rights in Substitution for Stock or Share Options Granted by Other Corporations . Options may be granted under
the Plan from time to time in substitution for stock or share options held by individuals employed by entities who become Employees as
a result of a merger or consolidation of the employing entity with the Company or any Affiliate, or the acquisition by the Company or
an Affiliate of the assets of the employing entity or the acquisition by the Company or an Affiliate of stock or shares of the employing
entity with the result that such employing entity becomes an Affiliate. Notwithstanding Section 7.5, the Committee may designate a purchase
price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously granted by
an entity that is acquired by or merged with the Company or an Affiliate.
Section
7.8. Prohibition Against Repricing . Except to the extent (i) approved in advance by holders of a majority of the shares of the
Company entitled to vote generally in the election of directors, or (ii) as a result of any Change of Control or any adjustment as provided
in Article XIV, the Committee shall not have the power or authority to reduce, whether through amendment or otherwise, the exercise price
under any outstanding Option or Share Appreciation Right, or to grant any new Award or make any payment of cash in substitution for or
upon the cancellation of Options and/or Share Appreciation Rights previously granted.
ARTICLE
VIII
RESTRICTED SHARE AWARDS
Section
8.1. Restriction Period . At the time a Restricted Share Award is made, the Committee shall establish the Restriction Period applicable
to such Award. Each Restricted Share Award may have a different Restriction Period, in the discretion of the Committee, but not to exceed
90 calendar days. The Restriction Period applicable to a particular Restricted Share Award shall not be changed except as permitted by
Section 8.2.
- 7 - |
|
Section
8.2. Other Terms and Conditions . Common Stock awarded pursuant to a Restricted Share Award shall be represented by a share certificate
registered in the name of the Holder of such Restricted Share Award. If provided for under the Restricted Share Award Agreement, the
Holder shall have the right to vote Common Stock subject thereto and to enjoy all other stockholder rights, including the entitlement
to receive dividends on the Common Stock during the Restriction Period, except that (i) the Holder shall not be entitled to delivery
of the share certificate until the Restriction Period shall have expired, (ii) the Company shall retain custody of the share certificate
during the Restriction Period (with a share power endorsed by the Holder in blank), (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or otherwise dispose of the Common Stock during the Restriction Period, and (iv) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Share Award Agreement shall cause a forfeiture of the Restricted Share Award.
At the time of such Award, the Committee may, in its sole discretion, prescribe additional terms and conditions or restrictions relating
to Restricted Share Awards, including, but not limited to, rules pertaining to the effect of termination of employment, Director status
or Consultant status prior to expiration of the Restriction Period. Such additional terms, conditions or restrictions shall be set forth
in a Restricted Share Award Agreement made in conjunction with the Award. Such Restricted Share Award Agreement may also include provisions
relating to (i) subject to the provisions hereof, accelerated vesting of Awards, including, but not limited to, accelerated vesting upon
the occurrence of a Change of Control, (ii) tax matters (including provisions covering any applicable Employee wage withholding requirements),
and (iii) any other matters not inconsistent with the terms and provisions of the Plan that the Committee shall, in its sole discretion,
determine. The terms and conditions of the respective Restricted Share Agreements need not be identical.
Section
8.3. Payment for Restricted Shares . The Committee shall determine the amount and form of any payment from a Holder for Common
Stock received pursuant to a Restricted Share Award, if any, provided that in the absence of such a determination, a Holder shall not
be required to make any payment for Common Stock received pursuant to a Restricted Share Award, except to the extent otherwise required
by law.
Section
8.4. Restricted Share Award Agreements . At the time any Award is made under this Article VIII, the Company and the Holder shall
enter into a Restricted Share Award Agreement setting forth each of the matters contemplated hereby and such other matters as the Committee
may determine to be appropriate.
ARTICLE
IX
UNRESTRICTED SHARE AWARDS
Pursuant
to the terms of the applicable Unrestricted Share Award Agreement, a Holder may be awarded (or sold) Common Stock which are not subject
to Restrictions, in consideration for past services rendered thereby to the Company or an Affiliate or for other valid consideration.
ARTICLE
X
RESTRICTED SHARE UNIT AWARDS
Section
10.1. Terms and Conditions . The Committee shall set forth in the applicable Restricted Share Unit Award Agreement the individual
service-based vesting requirement which the Holder would be required to satisfy before the Holder would become entitled to payment pursuant
to Section 10.2 and the number of Units awarded to the Holder. At the time of such Award, the Committee may, in its sole discretion,
prescribe additional terms and conditions or restrictions relating to Restricted Share Unit Awards, including, but not limited to, rules
pertaining to the effect of termination of employment, Director status or Consultant status prior to expiration of the applicable vesting
period. The terms and conditions of the respective Restricted Share Unit Award Agreements need not be identical.
Section
10.2. Payments . The Holder of a Restricted Share Unit shall be entitled to receive a cash payment equal to the Fair Market Value
of an Common Share, or one (1) Common Share, as determined, in the sole discretion, of the Committee and as set forth in the Restricted
Share Unit Award Agreement, for each Restricted Share Unit subject to such Restricted Share Unit Award, if the Holder satisfies the applicable
vesting requirement.
- 8 - |
|
ARTICLE
XI
PERFORMANCE UNIT AWARDS
Section
11.1. Terms and Conditions . The Committee shall set forth in the applicable Performance Unit Award Agreement the performance goals
and objectives (and the period of time to which such goals and objectives shall apply) which the Holder and/or the Company would be required
to satisfy before the Holder would become entitled to payment pursuant to Section 11.2, the number of Units awarded to the Holder and
the dollar value assigned to each such Unit. At the time of such Award, the Committee may, in its sole discretion, prescribe additional
terms and conditions or restrictions relating to Performance Unit Awards, including, but not limited to, rules pertaining to the effect
of termination of employment, Director status or Consultant status prior to expiration of the applicable performance period. The terms
and conditions of the respective Performance Unit Award Agreements need not be identical.
Section
11.2. Payments . The Holder of a Performance Unit shall be entitled to receive a cash payment equal to the dollar value or number
of Common Shares assigned to such Unit under the applicable Performance Unit Award Agreement if the Holder and/or the Company satisfy
(or partially satisfy, if applicable under the applicable Performance Unit Award Agreement) the performance goals and objectives set
forth in such Performance Unit Award Agreement.
ARTICLE
XII
DISTRIBUTION EQUIVALENT RIGHTS
Section
12.1. Terms and Conditions . The Committee shall set forth in the applicable Distribution Equivalent Rights Award Agreement the
terms and conditions applicable to such Award, including whether the Holder is to receive credits currently in cash, is to have such
credits reinvested (at Fair Market Value determined as of the date of reinvestment) in additional Common Stock or is to be entitled to
choose among such alternatives. Distribution Equivalent Rights Awards may be settled in cash or in Common Stock, as set forth in the
applicable Distribution Equivalent Rights Award Agreement. A Distribution Equivalent Rights Award may, but need not, be awarded in tandem
with another Award, whereby, if so awarded, such Distribution Equivalent Rights Award shall expire, terminate or be forfeited by the
Holder, as applicable, under the same conditions as under such other Award.
Section
12.2. Interest Equivalents . The Distribution Equivalent Rights Award Agreement for a Distribution Equivalent Rights Award may
provide for the crediting of interest on a Distribution Rights Award to be settled in cash at a future date, at a rate set forth in the
applicable Distribution Equivalent Rights Award Agreement, on the amount of cash payable thereunder.
ARTICLE
XIII
SHARE
APPRECIATION RIGHTS
Section
13.1. Terms and Conditions . The Committee shall set forth in the applicable Share Appreciation Right Award Agreement the terms
and conditions of the Share Appreciation Right, including (i) the base value (the “Base Value”) for the Share Appreciation
Right, which for purposes of a Share Appreciation Right which is not a Tandem Share Appreciation Right, shall be not less than the Fair
Market Value of a Common Share on the date of grant of the Share Appreciation Right (unless granted in substitution for an appreciation
right previously granted by an entity that is acquired by or merged with the Company or an Affiliate), (ii) the number of Common Stock
subject to the Share Appreciation Right, (iii) the period during which the Share Appreciation Right may be exercised; provided, however,
that no Share Appreciation Right shall be exercisable after the expiration of ten (10) years from the date of its grant, and (iv) any
other special rules and/or requirements which the Committee imposes upon the Share Appreciation Right. Upon the exercise of some or all
of the portion of a Share Appreciation Right, the Holder shall receive a payment from the Company, in cash or in the form of Common Stock
having an equivalent Fair Market Value or in a combination of both, as determined, in the sole discretion of the Committee, equal to
the product of:
(a) The
excess of (i) the Fair Market Value of a Common Share on the date of exercise, over (ii) the Base Value, multiplied by;
- 9 - |
|
(b) The number of Common Stock with respect to which the Share Appreciation Right is exercised.
Section
13.2. Tandem Share Appreciation Rights . If the Committee grants a Share Appreciation Right which is intended to be a Tandem Share
Appreciation Right, the Tandem Share Appreciation Right shall be granted at the same time as the related Option, and the following special
rules shall apply:
(a) The
Base Value shall be equal to or greater than the per Common Share exercise price under the related Option;
(b) The
Tandem Share Appreciation Right may be exercised for all or part of the Common Stock which are subject to the related Option, but solely
upon the surrender by the Holder of the Holder’s right to exercise the equivalent portion of the related Option (and when an Common
Share is purchased under the related Option, an equivalent portion of the related Tandem Share Appreciation Right shall be cancelled);
(c) The
Tandem Share Appreciation Right shall expire no later than the date of the expiration of the related Option;
(d) The
value of the payment with respect to the Tandem Share Appreciation Right may be no more than one hundred percent (100%) of the difference
between the per Common Share exercise price under the related Option and the Fair Market Value of the Common Stock subject to the related
Option at the time the Tandem Share Appreciation Right is exercised, multiplied by the number of the Common Stock with respect to which
the Tandem Share Appreciation Right is exercised; and
(e) The
Tandem Share Appreciation Right may be exercised solely when the Fair Market Value of the Common Stock subject to the related Option
exceeds the per Common Share exercise price under the related Option.
ARTICLE
XIV
RECAPITALIZATION OR REORGANIZATION
Section
14.1. Adjustments to Common Stock . The shares with respect to which Awards may be granted under the Plan are Common Stock as presently
constituted; provided, however, that if, and whenever, prior to the expiration or distribution to the Holder of Common Stock underlying
an Award theretofore granted, the Company shall effect a subdivision or consolidation of the Common Stock or the payment of a Common
Share dividend on Common Stock without receipt of consideration by the Company, the number of Common Stock with respect to which such
Award may thereafter be exercised or satisfied, as applicable, (i) in the event of an increase in the number of outstanding Common Stock,
shall be proportionately increased, and the purchase price per Common Share shall be proportionately reduced, and (ii) in the event of
a reduction in the number of outstanding Common Stock, shall be proportionately reduced, and the purchase price per Common Share shall
be proportionately increased. Notwithstanding the foregoing or any other provision of this Article XIV, any adjustment made with respect
to an Award (x) which is an Incentive Share Option, shall comply with the requirements of Section 424(a) of the Code, and in no event
shall any adjustment be made which would render any Incentive Share Option granted under the Plan to be other than an “incentive
stock option” for purposes of Section 422 of the Code, and (y) which is a Non-Qualified Share Option, shall comply with the requirements
of Section 409A of the Code, and in no event shall any adjustment be made which would render any Non-Qualified Share Option granted under
the Plan to become subject to Section 409A of the Code.
Section
14.2. Recapitalization . If the Company recapitalizes or otherwise changes its capital structure (for the purposes of clarity,
excluding any public offering of shares), thereafter upon any exercise or satisfaction, as applicable, of a previously granted Award,
the Holder shall be entitled to receive (or entitled to purchase, if applicable) under such Award, in lieu of the number of Common Stock
then covered by such Award, the number and class of shares and securities to which the Holder would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to such recapitalization, the Holder had been the holder of record of the number
of Common Stock then covered by such Award.
- 10 - |
|
Section
14.3. Other Events . In the event of changes to the outstanding Common Stock by reason of extraordinary cash dividend, reorganization,
mergers, consolidations, combinations, split-ups, spin-offs, exchanges, stock split, reverse stock split or other relevant changes in
capitalization occurring after the date of the grant of any Award and not otherwise provided for under this Article XIV, any outstanding
Awards and any Award Agreements evidencing such Awards shall be adjusted by the Committee, in such manner as the Committee shall deem
equitable or appropriate taking into consideration the applicable accounting and tax consequences, as to the number and price of Common
Stock or other consideration subject to such Awards. In the event of any adjustment pursuant to Sections 14.1, 14.2 or this Section 14.3,
the aggregate number of Common Stock available under the Plan pursuant to Section 5.1 may be appropriately adjusted by the Committee,
the determination of which shall be conclusive. In addition, the Committee may make provision for a cash payment to a Holder or a person
who has an outstanding Award. The number of Common Stock subject to any Award shall be rounded to the nearest whole number.
Section
14.4. Powers Not Affected . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or
power of the Board or of the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other
change of the Company’s capital structure or business, any merger or consolidation of the Company, any issue of debt or equity
securities ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding.
Section
14.5. No Adjustment for Certain Awards . Except as hereinabove expressly provided, the issuance by the Company of shares of any
class or securities convertible into shares of any class, for cash, property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon conversion of shares or obligations of the Company convertible into such shares or
other securities, and in any case whether or not for fair value, shall not affect previously granted Awards, and no adjustment by reason
thereof shall be made with respect to the number of Common Stock subject to Awards theretofore granted or the purchase price per Common
Share, if applicable.
ARTICLE
XV
AMENDMENT
AND TERMINATION OF PLAN
The
Plan shall continue in effect, unless sooner terminated pursuant to this Article XV, until the tenth (10th) anniversary of the date on
which it is adopted by the Board (except as to Awards outstanding on that date). The Board, in its discretion, may terminate the Plan
at any time with respect to any shares for which Awards have not theretofore been granted; provided, however, that the Plan’s termination
shall not materially and adversely impair the rights of a Holder with respect to any Award theretofore granted without the consent of
the Holder. The Board shall have the right to alter or amend the Plan or any part hereof from time to time; provided, however, stockholder
approval shall be required for ay modification of the Plan that (i) requires stockholder approval under the rules or regulations of the
Securities and Exchange Commission or any securities exchange applicable to the Company, (ii) increases the number of shares authorized
under the Plan as specified in Section 5.1, (iii) increases the dollar limitation specified in Section 5.4, or (iv) amends, modifies
or suspends Section 7.8 (repricing prohibitions) or this Article XV. In addition, unless otherwise permitted under the Award Agreement,
no change in any Award theretofore granted may be made which would materially and adversely impair the rights of a Holder with respect
to such Award without the consent of the Holder.
ARTICLE
XVI MISCELLANEOUS
Section
16.1. No Right to Award . Neither the adoption of the Plan by the Company nor any action of the Board or the Committee shall be
deemed to give an Employee, Director or Consultant any right to an Award except as may be evidenced by an Award Agreement duly executed
on behalf of the Company, and then solely to the extent and on the terms and conditions expressly set forth therein.
Section
16.2. No Rights Conferred . Nothing contained in the Plan shall (i) confer upon any Employee any right with respect to continuation
of employment with the Company or any Affiliate, (ii) interfere in any way with any right of the Company or any Affiliate to terminate
the employment of an Employee at any time, (iii) confer upon any Director any right with respect to continuation of such Director’s
membership on the Board, (iv) interfere in any way with any right of the Company or an Affiliate to terminate a Director’s membership
on the Board at any time, (v) confer upon any Consultant any right with respect to continuation of such Consultant’s consulting
engagement with the Company or any Affiliate, or (vi) interfere in any way with any right of the Company or an Affiliate to terminate
a Consultant’s consulting engagement with the Company or an Affiliate at any time.
- 11 - |
|
Section
16.3. Other Laws; No Fractional Shares; Withholding . The Company shall not be obligated by virtue of any provision of the Plan
to recognize the exercise of any Award or to otherwise sell or issue Common Stock in violation of any laws, rules or regulations, and
any postponement of the exercise or settlement of any Award under this provision shall not extend the term of such Award. Neither the
Company nor its directors or officers shall have any obligation or liability to a Holder with respect to any Award (or Common Stock issuable
thereunder) (i) that shall lapse because of such postponement, or (ii) for any failure to comply with the requirements of any applicable
law, rules or regulations, including, but not limited to, any failure to comply with the requirements of Section 409A of this Code. No
fractional Common Stock shall be delivered, nor shall any cash in lieu of fractional Common Stock be paid. The Company shall have the
right to deduct in cash (whether under this Plan or otherwise) in connection with all Awards any taxes required by law to be withheld
and to require any payments required to enable it to satisfy its withholding obligations. In the case of any Award satisfied in the form
of Common Stock, no Common Stock shall be issued unless and until arrangements satisfactory to the Company shall have been made to satisfy
any tax withholding obligations applicable with respect to such Award. Subject to such terms and conditions as the Committee may impose,
the Company shall have the right to retain, or the Committee may, subject to such terms and conditions as it may establish from time
to time, permit Holders to elect to tender, Common Stock (including Common Stock issuable in respect of an Award) to satisfy, in whole
or in part, the amount required to be withheld.
Section
16.4. No Restriction on Corporate Action . Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate
from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether
or not such action would have an adverse effect on the Plan or any Award made under the Plan. No Employee, Director, Consultant, beneficiary
or other person shall have any claim against the Company or any Affiliate as a result of any such action.
Section
16.5. Restrictions on Transfer . No Award under the Plan or any Award Agreement and no rights or interests herein or therein, shall
or may be assigned, transferred, sold, exchanged, encumbered, pledged or otherwise hypothecated or disposed of by a Holder except (i)
by will or by the laws of descent and distribution, or (ii) except for an Incentive Share Option, by gift to any Family Member of the
Holder. An Award may be exercisable during the lifetime of the Holder only by such Holder or by the Holder’s guardian or legal
representative unless it has been transferred by gift to a Family Member of the Holder, in which case it shall be exercisable solely
by such transferee. Notwithstanding any such transfer, the Holder shall continue to be subject to the withholding requirements provided
for under Section 16.3 hereof.
Section
16.6. Beneficiary Designations . The Committee may also establish procedures as it deems appropriate for a Holder to designate
a person or persons, as beneficiary or beneficiaries, to exercise the rights of the Holder and receive any property distributable with
respect to any Award in the event of the Holder’s death. In the absence of any such written beneficiary designation, for purposes
of the Plan, a Holder’s beneficiary shall be the Holder’s estate.
Section
16.7. Rule 16b-3 . It is intended that the Plan and any Award made to a person subject to Section 16 of the Exchange Act shall
meet all of the requirements of Rule 16b-3. If any provision of the Plan or of any such Award would disqualify the Plan or such Award
under, or would otherwise not comply with the requirements of, Rule 16b-3, such provision or Award shall be construed or deemed to have
been amended as necessary to conform to the requirements of Rule 16b-3.
Section
16.8. Section 409A . Notwithstanding anything in the Plan or any Award to the contrary, to the extent that any amount or benefit
that constitutes “deferred compensation” to a Holder under Section 409A of the Code and applicable guidance thereunder is
otherwise payable or distributable to a Holder under the Plan or any Award solely by reason of the occurrence of a change in control
event or due to the Holder’s disability or “separation from service” (as such term is defined under Section 409A of
the Code), such amount or benefit will not be payable or distributable to the Holder by reason of such circumstance unless the Committee
determines in good faith that (i) the circumstances giving rise to such change in control event, disability or separation from service
meet the definition of a change in control event, disability or separation from service, as the case may be, in Section 409A of the Code
and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the
application of Section 409A of the Code by reason of the short-term deferral exemption or otherwise. Any payment or distribution that
otherwise would be made to a Holder who is a “specified employee” (as defined under Section 409A of the Code) on account
of separation from service may not be made before the date which is six (6) months after the date of the specified employee’s separation
from service (or if earlier, upon the specified employee’s death) unless the payment or distribution is exempt from the application
of Section 409A of the Code by reason of the short-term deferral exemption or otherwise.
- 12 - |
|
Section
16.9. Indemnification . Each person who is or shall have been a member of the Board or of the Committee shall be indemnified and
held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred thereby
in connection with or resulting from any claim, action, suit or proceeding to which such person may be made a party or may be involved
by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid thereby in settlement thereof,
with the Company’s approval, or paid thereby in satisfaction of any judgment in any such action, suit or proceeding against such
person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive
and shall be independent of any other rights of indemnification to which such persons may be entitled under the Company’s Articles
of Incorporation or By-laws, by contract, as a matter of law, or otherwise.
Section
16.10. Other Plans . No Award, payment or amount received hereunder shall be taken into account in computing an Employee’s
salary or compensation for the purposes of determining any benefits under any pension, retirement, life insurance or other benefit plan
of the Company or any Affiliate, unless such other plan specifically provides for the inclusion of such Award, payment or amount received.
Nothing in the Plan shall be construed to limit the right of the Company to establish other plans or to pay compensation to its employees,
directors and other service providers, in cash or property, in a manner which is not expressly authorized under the Plan.
Section
16.11. Limits of Liability . Any liability of the Company with respect to an Award shall be based solely upon the contractual obligations
created under the Plan and the Award Agreement. None of the Company, any member of the Board nor any member of the Committee shall have
any liability to any party for any action taken or not taken, in good faith, in connection with or under the Plan.
Section
16.12. Governing Law . Except as otherwise provided herein, the Plan shall be construed in accordance with Delaware law, without
regard to principles of conflicts of law.
Section
16.13. Severability of Provisions . If any provision of the Plan is held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such invalid or unenforceable provision
had not been included in the Plan.
Section
16.14. No Funding . The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or
to make any other segregation of funds or assets to ensure the payment of any Award.
Section
16.15. Headings . Headings used throughout the Plan are for convenience only and shall not be given legal significance.
Section
16.16. Terms of Award Agreements . Each Award shall be evidenced by an Award Agreement. The terms of the Award Agreements utilized
under the Plan need not be the same.
- 13 - |
### EX-10.7 - EX-10.7
EX-10.7
8
ex10-7.htm
EX-10.7
Exhibit
10.7
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “ Agreement ”) is dated as of April 24, 2026 among First Breach Inc., a corporation
incorporated under the laws of the state of Delaware (“ Company ”), and each purchaser identified on the Annex A
hereto (each, including its successors and assigns, an “ Investor ” and collectively, the “ Investors ”).
WHEREAS,
the Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, senior secured convertible
promissory notes in the form set forth in Appendix B hereto (each, a “ Note ” and collectively, the “ Notes ”)
and equity warrants in the form set forth on Appendix C hereto (each, a “ Warrant ” and collectively, the “ Warrants ”)
contemplated by this Agreement (“ Offering ”); and
WHEREAS ,
the Company and Investors are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements
of the Securities Act afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder by the
U.S. Securities and Exchange Commission.
NOW,
THEREFORE , in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and each Investor agree as follows:
ARTICLE
I.
DEFINITIONS
Section
1.01. Definitions . In addition to the terms defined elsewhere in this Agreement:
(a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and
(b)
the following terms have the meanings set forth in this Agreement:
“ $ ”
or “ USD ” means United States Dollars.
“ Action ”
shall have the meaning ascribed to such term in Section 3.01(h).
“ Affiliate ”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“ Business
Day ” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law or other governmental action to close. If the last or
appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then
such action may be taken or such right may be exercised on the next succeeding Business Day.
“ Change
of Control ” means (a) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the
Exchange Act), other than the Company or any employee benefit plan of the Company, becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%)
of the combined voting power of the Company’s then-outstanding securities; (b) the consummation of a merger, consolidation or similar
transaction involving the Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders
of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction;
(c) a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company; or (d)
a liquidation or dissolution of the Company.
|
SECURITIES PURCHASE AGREEMENT |
“ Closing ”
means the closing of the purchase and sale of the Securities pursuant to section 2.01.
“ Closing
Date ” means for any Securities, the Business Day when: (i) all of the Transaction Documents for such Securities have been executed
and delivered by the applicable parties thereto, and conditions precedent to the applicable Investors’ obligations to pay the Subscription
Amount; and (ii) the Company’s obligations to deliver such Securities have been satisfied or waived.
“ Commission ”
means the United States Securities and Exchange Commission.
“ Confidential
Investor Questionnaire ” means the Confidential Investor Questionnaire attached as Appendix A hereto.
“ Exempt
Issuance ” means the issuance of Common Stock or options to employees, officers, or directors of the Company pursuant to any
stock or option plan duly adopted by the Company .
“ Exchange
Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ GAAP ”
means generally accepted accounting principles in the United States in effect from time to time.
“ Intellectual
Property Rights ” shall have the meaning ascribed to such term in Section 3.01(l).
“ Common
Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“ Liens ”
shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“ Liquidity
Event ” has the meaning ascribed to it the Notes.
“ Material
Adverse Effect ” shall have the meaning ascribed to such term in Section 3.01(b).
“ Material
Permits ” shall have the meaning ascribed to such term in Section 3.01(j).
“ Maximum
Offering Amount ” means an aggregate Subscription Amount of up to Ten Million One Hundred Fifty Thousand U.S. Dollars ($10,150,000).
“ National
Securities Exchange ” means the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, the NYSE American, or any other national securities exchange registered with the Commission under the Exchange Act.
“ Notes ”
means the senior secured convertible promissory notes issued by the Company to the Investors hereunder, in the form of Appendix B
attached hereto.
“ New
Securities ” means any shares of Common Stock, Preferred Stock, or other equity securities of the Company, or any securities
convertible into or exchangeable for, or options, warrants or other rights to acquire, any shares of Common Stock or other equity securities
of the Company, other than (i) securities issued upon conversion or exercise of the Notes or Warrants, (ii) securities issued pursuant
to any equity incentive plan or similar compensatory arrangement approved by the Board of Directors, (iii) securities issued upon conversion,
exercise or exchange of any convertible securities, options or warrants outstanding as of the date hereof, (iv) securities issued in
connection with any stock split, stock dividend, combination or recapitalization, and (v) securities issued in connection with a bona
fide strategic transaction approved by the Board of Directors, provided such issuance is not primarily for capital raising purposes.
|
SECURITIES PURCHASE AGREEMENT |
“ Offering
Period ” means the period commencing on the date hereof and ending on the Termination Date.
“ Person ”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“ Preferred
Stock ” means the preferred stock of the Company, par value $0.0001 per share, and any other class of preferred securities
into which such securities may hereafter be reclassified or changed.
“ Proceeding ”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
“ Purchasers ”
means the Investors.
“ Required
Approvals ” shall have the meaning ascribed to such term in section 3.01(e).
“ Securities ”
means the Notes and Underlying Securities.
“ Securities
Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Security
Agreement ” means the Security Agreement between the Company and Secured Parties (as defined therein), in the form of Appendix
D attached hereto.
“ State
Securities Laws ” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular
state.
“ Termination
Date ” means May 30, 2026, or such other date as mutually agreed by the parties.
“ Subscription
Amount ” means, as to each Investor, the aggregate amount to be paid for the Securities purchased hereunder as specified below
such Investor’s name on Annex A of this Agreement and next to the heading “Aggregate Subscription Amount,” in
United States dollars and in immediately available funds.
“ Subsidiary ”
means any subsidiary of the Company as set forth in section 3.01(a) and shall, where applicable, include any direct or indirect subsidiary
of the Company formed or acquired after the date hereof.
“ Transaction
Documents ” means this Agreement, the Notes, the Warrant, the Security Agreement, and all appendices, exhibits and schedules
hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“ Underlying
Securities ” means the Conversion Shares (as defined in the Note) and the Warrant Shares.
“ Warrants ”
means the equity warrants, issued by the Company to the Investors hereunder, in the form of Appendix C attached hereto.
“ Warrant
Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.
|
SECURITIES PURCHASE AGREEMENT |
ARTICLE
II.
PURCHASE
AND SALE
Section
2.01 Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with
the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Investors, severally and not
jointly, agree to purchase, the Securities up to the Maximum Offering Amount. At the Closing, each Investor shall deliver to the Company,
via wire transfer, immediately available funds equal to the Investor’s aggregate Subscription Amounts and the Company shall deliver
to each Investor (i) a Note and (ii) 50,000 Warrant Shares for every One Million Dollars ($1,000,000) of the Subscription Amount paid
to the Company hereunder. For the avoidance of doubt, the Warrants may be substituted for an equivalent economic instrument. The Company
and each Investor shall deliver the other items set forth in section 2.02 deliverable at the Closing. Upon satisfaction of the conditions
set forth in section 2.02 and section 2.03, the Closing shall occur at the offices of Company’s counsel, or such other location
as the parties shall mutually agree or may be closed remotely by electronic delivery of documents. The Company may conduct multiple closings
for the sale of the Securities until it has received the Maximum Offering Amount. The Closing Date for any Securities shall be the date
indicated on the applicable Investor signature pages attached hereto and the final Closing Date shall be no later than the Termination
Date. No minimum amount of Securities need be sold by the Company to complete and close the Offering.
Section
2.01(a) Additional Closings . Following the initial Closing, the Company and the Investors may, upon mutual written consent, conduct
one or more additional closings (each, an “ Additional Closing ”) for the purchase and sale of additional Notes and
Warrants on the same terms and conditions set forth in this Agreement, , in an aggregate principal amount of up to Five Million U.S.
Dollars ($5,000,000) in addition to the Maximum Offering Amount (the “Additional Closing Amount”). Any such Additional Closing
shall be subject to: (a) the mutual agreement of the Company and the participating Investors as to the aggregate principal amount of
additional Notes to be issued at such Additional Closing and the corresponding number of Warrants; (b) the satisfaction or waiver of
the conditions set forth in Section 2.03, mutatis mutandis, as of the date of such Additional Closing; (c) the execution and delivery
of such additional signature pages, Notes, Warrants, and other documents as may be reasonably required to effect such Additional Closing.
For the avoidance of doubt, any additional Notes and Warrants issued at an Additional Closing shall be deemed “Securities”
for all purposes under this Agreement and the other Transaction Documents, and any Investor participating in an Additional Closing shall
be bound by all terms and conditions of this Agreement.
Section
2.02 Closing Deliverables .
(a)
On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Investors the following:
| (i) | this
Agreement executed by the Company; |
| (ii) | a
Note with a principal amount equal to such Investor’s Subscription Amount, registered
in the name of such Investor; |
| (iii) | the
Warrants, in an amount equal to 50,000 shares of common stock for every $1,000,000 of the
Subscription Amount paid to the Company hereunder; and |
| (iv) | the
Security Agreement executed by the Company. |
|
SECURITIES PURCHASE AGREEMENT |
(b)
On or prior to the Closing Date, each Investor shall deliver or cause to be delivered to the Company the following:
| (i) | this
Agreement executed by such Investor; |
| (ii) | such
Investor’s Subscription Amount by wire transfer to the Company pursuant
to the wiring instructions set forth in Section 2.03(c).; and |
| (iii) | a
duly completed and signed Confidential Investor Questionnaire along with such other duly
completed and signed questionnaires as may be requested by the Company. |
Section
2.03 Closing Conditions .
(a)
The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
| (i) | the
accuracy in all material respects on the Closing Date of the representations and warranties
of the Investors contained herein; |
| (ii) | all
obligations, covenants and agreements of each Investor required to be performed at or prior
to the Closing Date shall have been performed; and |
| (iii) | the
delivery by each Investor of the items set forth in section 2.02(b) of this Agreement. |
(b)
The respective obligations of the Investors hereunder in connection with the Closing are subject to the following conditions being met:
| (i) | the
accuracy in all material respects (or, to the extent representations or warranties are qualified
by materiality or Material Adverse Effect, in all respects) when made and on the Closing
Date of the representations and warranties of the Company contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date); |
| (ii) | all
obligations, covenants and agreements of the Company required to be performed at or prior
to the Closing Date shall have been performed; |
| (iii) | the
delivery by the Company of the items set forth in section 2.02(a) of this Agreement; and |
| (iv) | there
shall have been no Material Adverse Effect with respect to the Company since the date hereof. |
The
wiring instructions for counsel of the Company shall be as set forth on Appendix “E” attached hereto.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
Section
3.01 Representations and Warranties of the Company . The Company hereby makes the following representations and warranties to each
Investor as of the date hereof:
(a)
Subsidiaries . The Company does not have any Subsidiaries.
|
SECURITIES PURCHASE AGREEMENT |
(b)
Organization and Qualification . The Company is an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, with the requisite power and authority to own and use its properties and assets and to carry on
its business as currently conducted. The Company is not in violation or default of any of the provisions of its articles of formation
or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected
to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material
adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, taken
as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority
or qualification; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition
or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions, (ii) conditions generally
affecting the industry in which the Company or any Subsidiary operates, (iii) any changes in financial or securities markets in general,
(iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof, (v) any pandemic,
epidemics or human health crises (including COVID-19), (vi) any changes in applicable laws or accounting rules (including GAAP), (vii)
the announcement, pendency or completion of the transactions contemplated by the Transaction Documents, or (viii) any action required
or permitted by the Transaction Documents or any action taken (or omitted to be taken) with the written consent of or at the written
request of the Investors holding a majority in principal amount outstanding of the Notes).
(c)
Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company,
the manager(s) or the Company’s shareholders in connection therewith other than in connection with the Required Approvals. Each
Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as
limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar
as indemnification and contribution provisions may be limited by applicable law.
(d)
No Conflicts . The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, the
issuance and sale of the Securities and the consummation by it of the other transactions contemplated hereby and thereby do not and will
not: (i) conflict with or violate any provision of the Company’s organizational or charter documents; (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt
or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected;
or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the Company is subject (including federal and State Securities
Laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
|
SECURITIES PURCHASE AGREEMENT |
(e)
Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) such consents,
waivers, or authorizations as have been obtained before the Closing; and (ii) the filing of Form D with the Commission and such filings
as are required to be made under applicable State Securities Laws (collectively, the “ Required Approvals ”).
(f)
Issuance of the Securities . The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions
on transfer provided for in the Transaction Documents. The Underlying Securities, when issued in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for herein
or therein. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance upon Note
conversions and Warrant exercises at least equal to the minimum number of shares of Common Stock issuable on the date hereof upon the
full conversion of the Maximum Offering Amount of Notes and exercise of Warrants.
(g)
Capitalization . The Company has authorized 500,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. As of the
date of this Agreement, 45,034,282 shares of Common Stock are issued and outstanding and 0 shares of preferred stock are issued and outstanding.
There are no outstanding options (other than pursuant to the Company’s equity incentive plan), warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to issue additional shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common Stock other than the existing convertible instruments (if any). Except as
set forth in Section 4.09, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents except for such, if any, as will have been validly waived before
the Closing. The issuance and sale of the Securities and Underlying Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock
of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and State Securities
Laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the board of directors or others is required for the issuance and
sale of the Securities, except for such approvals as have been obtained prior to Closing. There are no stockholders’ agreements,
voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s stockholders.
(h)
Litigation . There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, or any of its properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”)
which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities;
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability
under federal or State Securities Laws or a claim of breach of fiduciary duty.
|
SECURITIES PURCHASE AGREEMENT |
(i)
Compliance . The Company is unaware of, and to its knowledge: (i) is neither in default under nor in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor
has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default
or violation has been waived); (ii) is not in violation of any order of any court, arbitrator or governmental body; nor (iii) is or has
been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business and all such laws that affect the environment, except in each of the foregoing cases
as could not have or reasonably be expected to result in a Material Adverse Effect.
(j)
Regulatory Permits . The Company, to its knowledge, possesses all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits
could not reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”), and the Company has
not received any notice of proceedings relating to the revocation or modification of any Material Permit.
(k)
Title to Assets . The Company has good and marketable title in fee simple to all real property and good and marketable title in
all personal property owned by it that, in each case, is material to the business of the Company, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and Liens for the payment of federal, state or other taxes, the payment of which
is neither delinquent nor subject to penalties in any material respect. Any real property and facilities held under lease by the Company
is held by it under valid, subsisting and enforceable leases with which the Company are in compliance.
(l)
Patents and Trademarks . (i) The Company, to its knowledge, has, or has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights as necessary or material for use in connection with its business and which the failure to so have could reasonably
be expected to have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”); (ii) the Company
has not received a notice (written or otherwise) that any of the Intellectual Property Rights violates or infringes upon the intellectual
property rights of any Person; (iii) to the knowledge of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual Property Rights, except where the failure to be so enforceable
or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and
(iv) the Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual
properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(m)
Certain Fees . [Except for commissions owed in connection with the RBW Engagement Agreement in an amount estimated as set forth
on Appendix F,]no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the
Transaction Documents. The Investors shall have no obligation with respect to any fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section 3.01(m) that may be due in connection with the transactions contemplated
by the Transaction Documents.
(n)
Private Placement . Assuming the accuracy of the Investors’ representations and warranties set forth in section 3.02, no
registration under the Securities Act is required for the offer and sale of the Securities and Underlying Securities by the Company to
the Investors as contemplated hereby.
(o)
No General Solicitation . Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
or Underlying Securities by any form of general solicitation or general advertising. The Company has offered the Securities and Underlying
Securities for sale only to the Investors and certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.
|
SECURITIES PURCHASE AGREEMENT |
(p)
Acknowledgment Regarding Investors’ Purchase of Securities . The Company acknowledges and agrees that each of the Investors
is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Investor or
any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby
is merely incidental to the Investors’ purchase of the Securities. The Company further represents to each Investor that the Company’s
decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
(q)
Foreign Corrupt Practices . The Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the
Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees
or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made
by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law; or (iv) violated
in any material respect any provision of the Foreign Corrupt Practices Act.
(r)
Office of Foreign Assets Control . Neither the Company nor, to the Company’s knowledge, any director, officer, agent, employee
or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“ OFAC ”).
(s)
Money Laundering . The operations of the Company are and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder (collectively, the “ Money Laundering Laws ”), and
no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with
respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
Section
3.02 Representations and Warranties of the Investors .
Each
Investor, for itself and for no other Investor, hereby represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a)
Authority; Organization . Such Investor has full power and authority (and, if such Investor is an individual, the capacity) to
enter into this Agreement and to perform all obligations required to be performed by it hereunder. If an entity, such Investor is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right,
corporate, limited liability company or partnership power and authority to enter into and to consummate the transactions contemplated
by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction
Documents and performance by such Investor of the transactions contemplated by the Transaction Documents have been duly authorized by
all necessary corporate or similar action on the part of such Investor. Each Transaction Document to which it is a party has been duly
executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement
of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
|
SECURITIES PURCHASE AGREEMENT |
(b)
Own Account . Such Investor understands that the Securities are and Underlying Securities will be ‘restricted securities’
and have not been registered under the Securities Act or any applicable State Securities Law and is acquiring the Securities and any
Underlying Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any
part thereof in violation of the Securities Act or any applicable State Securities Law, has no present intention of distributing any
of such Securities or Underlying Securities in violation of the Securities Act or any applicable State Securities Law and has no direct
or indirect arrangement or understandings with any other persons to distribute or regarding the distribution the same (this representation
and warranty not limiting such Investor’s right to sell the Securities and Underlying Securities in compliance with applicable
federal and State Securities Laws) in violation of the Securities Act or any applicable State Securities Law. Such Investor is acquiring
the Securities and any Underlying Securities in the ordinary course of its investment business.
(c)
Non-Transferrable . Such Investor agrees: (i) that the Investor will not sell, assign, pledge, give, transfer or otherwise dispose
of the Securities or Underlying Securities or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant
to a registration of the Securities under the Securities Act and all applicable State Securities Laws, or in a transaction which is exempt
from the registration provisions of the Securities Act and all applicable State Securities Laws; (ii) that the certificates representing
the Securities and Underlying Securities will bear a legend making reference to the foregoing restrictions; and (iii) that the Company
and its Affiliates shall not be required to give effect to any purported transfer of such Securities and Underlying Securities except
upon compliance with the foregoing restrictions.
(d)
Investor Status . Such Investor is an “accredited investor” as defined in Rule 501(a) under the Securities Act. The
undersigned agrees to furnish any additional information requested by the Company or any of its Affiliates to assure compliance with
applicable U.S. federal and state securities laws in connection with the purchase and sale of the Securities. The undersigned has completed
the Confidential Investor Questionnaire contained in Appendix A and the information contained therein is complete and accurate
as of the date thereof and is hereby affirmed as of the Closing Date. Any information that has been furnished or that will be furnished
by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation
or material omission.
(e)
Experience of Such Investor . Such Investor, either alone or together with its representatives, has such knowledge, sophistication,
and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities and Underlying Securities, and has so evaluated the merits and risks of such investment. Such Investor is able to bear
the economic risk of an investment in the Securities and Underlying Securities and, at the present time, is able to afford a complete
loss of such investment.
(f)
No Trading Market . Such Investor acknowledges that there is currently no trading or public market for the Securities and Underlying
Securities and that none is expected to develop for the Securities unless a Liquidity Event occurs.
(g)
General Solicitation . Such Investor undersigned acknowledges that neither the Company nor any other person offered to sell the
Securities to it by means of any form of general solicitation or advertising, including but not limited to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio; or (ii) any
seminar or meeting whose attendees were invited by any general solicitation or general advertising.
(h)
Confidentiality . Other than to other Persons party to this Agreement and its advisors who have agreed to keep information confidential
or have a fiduciary obligation to keep such information confidential, such Investor has maintained the confidentiality of all disclosures
made to it in connection with the transaction (including the existence and terms of this transaction).
|
SECURITIES PURCHASE AGREEMENT |
(i)
Foreign Investor . If such Investor is not a United States person, such Investor represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities and Underlying
Securities or any use of this Agreement, including: (i) the legal requirements within its jurisdiction for the purchase of the Securities
and any Underlying Securities; (ii) any foreign exchange restrictions applicable to such purchase; (iii) any governmental or other consents
that may need to be obtained; and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the Securities or Underlying Securities. The Investor further represents that its payment for, and its
continued beneficial ownership of the Securities and any Underlying Securities, will not violate any applicable securities or other laws
of its jurisdiction.
(j)
Information from Company . Such Investor and its purchaser representatives or investment managers, if any, have been afforded the
opportunity to obtain any information necessary to verify the accuracy of any representations or information presented by the Company
in this Agreement and have had all inquiries to the Company answered, and have been furnished all requested materials, relating to the
Company and the Offering and sale of the Securities and anything set forth in the Transaction Documents. Neither the Investor nor the
Investor’s purchaser’s representatives or investment managers, if any, have been furnished any offering literature by the
Company or any of its Affiliates, associates or agents other than the Transaction Documents, and the agreements referenced therein.
(k)
Speculative Nature of Investment; Risk Factors . SUCH INVESTOR UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES AND UNDERLYING
SECURITIES INVOLVES A HIGH DEGREE OF RISK. Such Investor acknowledges that: (i) any projections, forecasts or estimates as may have
been provided to the Investor are purely speculative and cannot be relied upon to indicate actual results that may be obtained through
this investment; any such projections, forecasts and estimates are based upon assumptions which are subject to change and which are beyond
the control of the Company or its management; (ii) the tax effects which may be expected by this investment are not susceptible to absolute
prediction, and new developments and rules of the Internal Revenue Service, audit adjustment, court decisions or legislative changes
may have an adverse effect on one or more of the tax consequences of this investment; and (iii) the Investor has been advised to consult
with his own advisor regarding legal matters and tax consequences involving this investment. The Investor represents that the Investor’s
investment objective is speculative in that the Investor seeks the maximum total return through an investment in a broad spectrum of
securities, which involves a higher degree of risk than other investment styles and therefore the Investor’s risk exposure is also
speculative. The Securities offered hereby are highly speculative and involve a high degree of risk and Investor should only purchase
these securities if Investor can afford to lose their entire investment.
(l)
Money Laundering . If an entity, the operations of such Investor are and have been conducted at all times in compliance with applicable
financial record-keeping and reporting requirements of the Money Laundering Laws, and no Action or Proceeding by or before any court
or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company or any Subsidiary, threatened.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
Section
4.01 Transfer Restrictions .
(a)
The Securities and Underlying Securities may only be disposed of in compliance with state and federal securities laws. The Securities
and Underlying Securities may not be sold or transferred by the Investors without the written consent of the Company, which shall not
be unreasonably withheld. As a condition of such sale or transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of an Investor under this Agreement.
|
SECURITIES PURCHASE AGREEMENT |
(b)
The Investors agree to the imprinting, so long as is required by this Section 4.01, of a legend on any of the Securities and Underlying
Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(c)
Each Investor, severally and not jointly with the other Investors, agrees that such Investor will sell any Securities and Underlying
Securities only pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities or Underlying Securities are sold pursuant to a registration statement,
they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive
legend from certificates representing Securities as set forth in this Section 4.01 is predicated upon the Company’s reliance upon
this understanding.
(d)
Each Investor understands that upon conversion of a Note, it will acquire shares of Common Stock in and become a shareholder of the Company.
Section
4.02 Acknowledgment of Dilution . The Company acknowledges that the issuance of the Underlying Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges
that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Securities
pursuant to the Securities, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have against any Investor and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the Company.
Section
4.03 Integration . The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities or Underlying
Securities to the Investors in a manner that would require the registration under the Securities Act of the sale of the Securities to
the Investors.
Section
4.04 Publicity . The Company and each Investor shall consult with each other in issuing any other press releases with respect to
the transactions contemplated hereby, and neither the Company nor any Investor shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company with respect to any press release of any Investor, or without the
prior consent of each Investor with respect to any press release of the Company mentioning such Investor, which consent shall not unreasonably
be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.05 Indemnification of Investors . The Company shall indemnify, reimburse and hold harmless the Investors and their respective
partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar
functions) (collectively, “ Indemnitees ”) from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing)
imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (i) any breach
of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction
Documents; and (ii) any action instituted against such Indemnitee in any capacity, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Indemnitee’s representations, warranties or covenants
under the Transaction Documents or any agreements or understandings such Indemnitee may have with any such stockholder or any violations
by such Indemnitee of state or federal securities laws or any conduct by such Indemnitee which results from the gross negligence or willful
misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction).
Section
4.06 Equal Treatment of Investors . No consideration (including any modification of any Transaction Document) shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction Documents. Further, the Company shall not make any payment
of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes
at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Investor by the Company
and negotiated separately by each Investor, and is intended for the Company to treat the Investors as a class and shall not in any way
be construed as the Investors acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
Section
4.07 Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Securities and Underlying Securities
as required under Regulation D and to provide a copy thereof, promptly upon request of any Investor. The Company shall take such action
as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities and Underlying
Securities for, sale to the Investors under applicable State Securities Laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any Investor.
Section
4.08 Use of Proceeds . The Company shall use the net proceeds received from the sale of the Securities at the Closing Date for
general corporate purposes and general working capital requirements, including the payment of transaction-related fees and expenses.
Section
4.09 Preemptive Rights.
(a)
Preemptive Rights. Subject to the exceptions set forth in subsection (c) below, if the Company proposes to issue any New Securities,
the Company shall deliver written notice (an “Issuance Notice”) to each Purchaser at least thirty (30) days prior to the
proposed issuance date, which notice shall set forth the material terms and conditions of such issuance, including (i) the type and number
of New Securities to be issued, (ii) the purchase price and payment terms, and (iii) the proposed issuance date. Each Purchaser shall
have the right, exercisable by written notice to the Company within twenty (20) days after receipt of the Issuance Notice, to purchase
up to such Purchaser’s Pro Rata Share of the New Securities at the same price and on the same terms as set forth in the Issuance
Notice. For purposes of this Section, “Pro Rata Share” means, with respect to each Purchaser, a fraction, the numerator of
which is the number of shares of Common Stock held by such Purchaser immediately prior to the proposed issuance (calculated on a fully-diluted,
as-converted basis), and the denominator of which is the total number of shares of Common Stock outstanding immediately prior to the
proposed issuance (calculated on a fully-diluted, as-converted basis).
(b)
Individual Preemptive Rights. In addition to the rights set forth in Section 4.09(a) above, Bradford Johnsonand Bert Bersolis (each,
a “ Specified Holder ”) shall each have the right to purchase New Securities in an amount sufficient to maintain such
Specified Holder’s percentage ownership of the Company (on a fully-diluted, as-converted basis) as of immediately prior to such
issuance. This right shall be in addition to, and not in lieu of, any rights such Specified Holder may have under Section 4.09(a) as
a Purchaser. (c) Excluded Issuances. The preemptive rights set forth in Sections 4.09(a) and (b) shall not apply to any issuance of:
(i) shares of Common Stock or options to purchase Common Stock issued to employees, officers, directors, or consultants of the Company
pursuant to any equity incentive plan approved by the Board of Directors; (ii) securities issued upon the conversion or exercise of any
convertible securities, options, or warrants outstanding as of the date hereof; (iii) securities issued as consideration in connection
with a bona fide acquisition or strategic transaction approved by the Board of Directors; (iv) securities issued in connection with any
stock split, stock dividend, or recapitalization; or (v) securities issued in an underwritten public offering registered under the Securities
Act.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.10 Lock-Up Provisions .
| (a) | Purchasers
Lock-Up Exemption. Notwithstanding any other provision of this Agreement or any other agreement
to which the Company is a party, the Purchasers shall not be subject to any lock-up provision
and shall be permitted to sell the Securities immediately upon the listing of the Common
Stock on a National Securities Exchange. The Purchasers may provide liquidity for the Company’s
stock in the public market through sales of the Securities. |
Section
4.11. Tag-Along and Drag-Along Rights . The Purchasers shall have tag-along and drag-along rights with respect to all of the Purchasers’
stock positions in the Company, as follows:
| (a) | Tag-Along
Rights . If Jeffrey Low, Jordan Low, and any other stockholder holding at least five percent
(5%) of the outstanding Common Stock (collectively, the “Selling Stockholders”)
propose to sell, in the aggregate, shares of Common Stock to a third party in a single transaction
or series of related transactions representing more than [10%] of the outstanding Common
Stock (excluding (i) any public offering, (ii) sales pursuant to Rule 144 or other routine
market transactions, (iii) transfers to affiliates or for estate planning purposes, (iv)
sales to the Company or its designees, and (v) transfers in connection with a Change of Control
subject to Section 4.11(b) below), the Selling Stockholders shall give the Purchasers written
notice at least ten (10) days prior to the proposed closing. The Purchasers shall have the
right, exercisable by written notice within five (5) business days of receipt, to participate
in such sale on the same terms and conditions, pro rata based on the Purchasers’ percentage
ownership relative to the Selling Stockholders’ aggregate ownership. The Purchasers’
participation shall be subject to the Purchasers executing the same transaction documents
and making the same representations, warranties, and indemnities as the Selling Stockholders
(on a several and not joint basis, and capped at the net proceeds received). |
| (b) | Drag-Along
Rights . If the Selling Stockholders, who in the aggregate hold a majority of the outstanding
Common Stock, together with the approval of the Board of Directors, approve a bona fide Change
of Control transaction with an unaffiliated third party, the Selling Stockholders may require
the Purchasers to (i) sell all of the Purchasers’ shares on the same terms and conditions
as the Selling Stockholders, (ii) vote all shares in favor of the transaction, (iii) waive
any dissenters’ or appraisal rights, and (iv) execute all customary transaction documents,
including representations, warranties, and indemnities (provided that the Purchasers’
indemnification obligations shall be several and not joint, limited to breaches of the Purchasers’
individual representations and a pro rata share of general indemnities, and capped at the
net proceeds received by the Purchasers). The consideration per share received by the Purchasers
shall be the same form and amount as received by the Selling Stockholders for shares of the
same class. |
| (c) | Board
Representation . |
| (i) | Board
Seat . Effective as of the Closing, the Company shall appoint Bert Basolis to serve as
a member of the Board of Directors . Mr. Basolis shall serve as a director for a term
of five (5) years from the Closing Date, or until his earlier voluntary resignation or removal
by the stockholders of the Company. The Company shall not remove Mr. Basolis from the Board
of Directors without his consent during such five-year term, except for cause . |
| (ii) | Board
Observer Rights . Bradford Johnson shall have the right to attend all meetings of the
Board of Directors in a non-voting observer capacity for so long as Mr. Johnson remains a
shareholder of the Company. The Company shall provide Mr. Johnson with copies of all notices,
minutes, consents, and other materials provided to directors at the same time such materials
are provided to directors. Mr. Johnson shall be entitled to participate in discussions at
Board meetings but shall not be entitled to vote on any matter. |
Section
4.12 Stock Price Support . The Company shall use its best efforts to support the stock price of the Common Stock following any
listing on a National Securities Exchange, including but not limited to timely disclosure of material information, maintenance of good
corporate governance practices, and such other reasonable measures as may be appropriate under the circumstances.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.13 Most Favored Nations . If the Company issues any equity securities to any other investor on terms more favorable than those
provided to the Purchasers hereunder (including, without limitation, with respect to price, anti-dilution protections, board rights,
information rights, or other investor protections), the Company shall promptly notify the Purchasers and, at the Purchasers’ election,
amend this Agreement and the other Transaction Documents to provide the Purchasers with such more favorable terms.
ARTICLE
V.
MISCELLANEOUS
Section
5.01 Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Investors.
Section
5.02 Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section
5.03 Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be
in writing and shall be deemed given and effective on the earliest of: (i) one Business Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m.
(New York City time) on a Business Day, with written confirmation of successful transmission; (ii) the next Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day; (iii) the second
Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service; or (iv) upon actual receipt
by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the
signature pages attached hereto.
Section
5.04 Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the Investors holding at least a majority in principal amount of the
Notes then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No
waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
Section
5.05 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent
of each Investor (other than by merger). Any Investor may assign any or all of its rights under this Agreement to any Person to whom
such Investor assigns or transfers any Securities, provided that such transfer complies with the terms of this Agreement and all applicable
federal and State Securities Laws and that such transferee agrees in writing with the Company to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the ‘Investors’.
Section
5.06 No Third-Party Beneficiaries . Except for the Indemnitees named herein, who are intended third-party beneficiaries of this
Agreement, including the representations and warranties made by the Company hereunder, this Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other Person.
|
SECURITIES PURCHASE AGREEMENT |
Section
5.07 Governing Law . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents
shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates,
members, managers, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to the Transaction Documents or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such Action or Proceeding.
Section
5.08 Survival . The representations and warranties contained herein shall survive the Closing and the delivery of the Securities
and issuance of Underlying Securities.
Section
5.09 Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page was an original thereof.
Section
5.10 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
Section
5.11 Rescission and Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) any of the other Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may
rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election
in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion
of a Note, the Investor shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice.
|
SECURITIES PURCHASE AGREEMENT |
Section
5.12 Replacement of Securities . If any certificate or instrument evidencing any Securities or Underlying Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof
(in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities or Underlying Securities.
Section
5.13 Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages,
each of the Investors and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree
that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
Section
5.14 Payment Set Aside . To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction
Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff had not occurred.
Section
5.15 Independent Nature of Investors’ Obligations and Rights . The obligations of each Investor under any Transaction Document
are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance
or non-performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor shall be
entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor has been represented by its own separate legal counsel in their review and negotiation of
the Transaction Documents. The Company has elected to provide all Investors with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by the Investors.
Section
5.16 Reserved .
Section
5.17 Construction . The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to
revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition,
each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the shares of Common Stock that occur
after the date of this Agreement.
Section
5.18 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof.
Section
5.19 WAIVER OF JURY TRIAL . IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY,
THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
[ SIGNATURE
PAGES FOLLOW ]
|
SECURITIES PURCHASE AGREEMENT |
IN
WITNESS WHEREOF , the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date below.
|
First
Breach Inc. |
|
|
|
|
By:
|
/s/
Jeffrey Low |
|
Name: |
Jeffrey
Low |
|
Title: |
CEO |
|
|
|
|
INVESTORS: |
|
|
|
|
The
Investors executing the Signature Page in the form attached hereto as Annex A and
delivering the same to the Company or its agents shall be deemed to have executed this Agreement
and agreed to the terms hereof.
|
[Signature
Page to Securities Purchase Agreement]
|
SECURITIES PURCHASE AGREEMENT |
Annex
A
Securities
Purchase Agreement Investor Counterpart Signature Page
The
undersigned, desiring to: (i) enter into this Securities Purchase Agreement dated as of April __, 2026 (“ Agreement ”),
with First Breach Inc. (“ Company ”), in the form furnished to the undersigned; and (ii) purchase the Securities as
set forth below, hereby agrees to purchase such Securities from the Company as of the Closing and further agrees to join the Agreement
as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions
thereof. The undersigned specifically acknowledges having read the representations in the Agreement section entitled ‘ Representations
and Warranties of the Investors, ’ and hereby represents that the statements contained therein are complete and accurate with
respect to the undersigned as an Investor.
PURCHASER
(if an individual): |
|
PURCHASER
(if an entity): |
|
|
|
|
|
By |
/s/
Elbert Basolis |
|
|
|
|
|
(Legal
Name of Entity) |
Name: |
Elbert Basolis
|
|
|
|
|
|
|
|
|
Date: |
April
24, 2026 |
|
|
|
|
|
|
|
|
PUCHASER
(if investing jointly) |
|
By |
|
|
|
|
|
|
By |
|
|
Name: |
|
|
|
|
|
|
Name: |
|
|
Title: |
|
|
|
|
|
|
Date: |
|
|
Date: |
|
|
|
|
|
|
Fax
No. ________________________ |
|
Fax
No.: ________________________ |
State/Country
of Domicile or Formation: _____________________________Aggregate Subscription Amount: $7,692,307.70 ________________________ SS/EIN/TIN:
_______________
Address:
________________________________________________
Telephone:
______________________________________________
E-Mail:
_________________________________________________
[Investor
Counter Signature Page to Securities Purchase Agreement]
|
|
APPENDIX
A
CONFIDENTIAL
INVESTOR QUESTIONNAIRE
|
|
APPENDIX
B
FORM
OF SENIOR SECURED PROMISSORY NOTE
|
|
APPENDIX
C
FORM
OF WARRANT
|
|
APPENDIX
D
FORM
OF SECURITY AGREEMENT
|
|
APPENDIX
E
WIRING
INSTRUCTIONS
(see
attached)
|
|
APPENDIX
F
RBW
ENGAGEMENT AGREEMENT COMMISSION SCHEDULE
(see
attached)
|
### EX-10.8 - EX-10.8
EX-10.8
9
ex10-8.htm
EX-10.8
Exhibit
10.8
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “ Agreement ”) is dated as of April 24, 2026 among First Breach Inc., a corporation
incorporated under the laws of the state of Delaware (“ Company ”), and each purchaser identified on the Annex A
hereto (each, including its successors and assigns, an “ Investor ” and collectively, the “ Investors ”).
WHEREAS,
the Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, senior secured convertible
promissory notes in the form set forth in Appendix B hereto (each, a “ Note ” and collectively, the “ Notes ”)
and equity warrants in the form set forth on Appendix C hereto (each, a “ Warrant ” and collectively, the “ Warrants ”)
contemplated by this Agreement (“ Offering ”); and
WHEREAS ,
the Company and Investors are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements
of the Securities Act afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder by the
U.S. Securities and Exchange Commission.
NOW,
THEREFORE , in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and each Investor agree as follows:
ARTICLE
I.
DEFINITIONS
Section
1.01. Definitions . In addition to the terms defined elsewhere in this Agreement:
(a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and
(b)
the following terms have the meanings set forth in this Agreement:
“ $ ”
or “ USD ” means United States Dollars.
“ Action ”
shall have the meaning ascribed to such term in Section 3.01(h).
“ Affiliate ”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“ Business
Day ” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law or other governmental action to close. If the last or
appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then
such action may be taken or such right may be exercised on the next succeeding Business Day.
“ Change
of Control ” means (a) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the
Exchange Act), other than the Company or any employee benefit plan of the Company, becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%)
of the combined voting power of the Company’s then-outstanding securities; (b) the consummation of a merger, consolidation or similar
transaction involving the Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders
of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction;
(c) a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company; or (d)
a liquidation or dissolution of the Company.
|
SECURITIES PURCHASE AGREEMENT |
“ Closing ”
means the closing of the purchase and sale of the Securities pursuant to section 2.01.
“ Closing
Date ” means for any Securities, the Business Day when: (i) all of the Transaction Documents for such Securities have been executed
and delivered by the applicable parties thereto, and conditions precedent to the applicable Investors’ obligations to pay the Subscription
Amount; and (ii) the Company’s obligations to deliver such Securities have been satisfied or waived.
“ Commission ”
means the United States Securities and Exchange Commission.
“ Confidential
Investor Questionnaire ” means the Confidential Investor Questionnaire attached as Appendix A hereto.
“ Exempt
Issuance ” means the issuance of Common Stock or options to employees, officers, or directors of the Company pursuant to any
stock or option plan duly adopted by the Company .
“ Exchange
Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ GAAP ”
means generally accepted accounting principles in the United States in effect from time to time.
“ Intellectual
Property Rights ” shall have the meaning ascribed to such term in Section 3.01(l).
“ Common
Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“ Liens ”
shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“ Liquidity
Event ” has the meaning ascribed to it the Notes.
“ Material
Adverse Effect ” shall have the meaning ascribed to such term in Section 3.01(b).
“ Material
Permits ” shall have the meaning ascribed to such term in Section 3.01(j).
“ Maximum
Offering Amount ” means an aggregate Subscription Amount of up to Ten Million One Hundred Fifty Thousand U.S. Dollars ($10,150,000).
“ National
Securities Exchange ” means the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, the NYSE American, or any other national securities exchange registered with the Commission under the Exchange Act.
“ Notes ”
means the senior secured convertible promissory notes issued by the Company to the Investors hereunder, in the form of Appendix B
attached hereto.
“ New
Securities ” means any shares of Common Stock, Preferred Stock, or other equity securities of the Company, or any securities
convertible into or exchangeable for, or options, warrants or other rights to acquire, any shares of Common Stock or other equity securities
of the Company, other than (i) securities issued upon conversion or exercise of the Notes or Warrants, (ii) securities issued pursuant
to any equity incentive plan or similar compensatory arrangement approved by the Board of Directors, (iii) securities issued upon conversion,
exercise or exchange of any convertible securities, options or warrants outstanding as of the date hereof, (iv) securities issued in
connection with any stock split, stock dividend, combination or recapitalization, and (v) securities issued in connection with a bona
fide strategic transaction approved by the Board of Directors, provided such issuance is not primarily for capital raising purposes.
|
SECURITIES PURCHASE AGREEMENT |
“ Offering
Period ” means the period commencing on the date hereof and ending on the Termination Date.
“ Person ”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“ Preferred
Stock ” means the preferred stock of the Company, par value $0.0001 per share, and any other class of preferred securities into
which such securities may hereafter be reclassified or changed.
“ Proceeding ”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
“ Purchasers ”
means the Investors.
“ Required
Approvals ” shall have the meaning ascribed to such term in section 3.01(e).
“ Securities ”
means the Notes and Underlying Securities.
“ Securities
Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Security
Agreement ” means the Security Agreement between the Company and Secured Parties (as defined therein), in the form of Appendix
D attached hereto.
“ State
Securities Laws ” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular
state.
“ Termination
Date ” means May 30, 2026, or such other date as mutually agreed by the parties.
“ Subscription
Amount ” means, as to each Investor, the aggregate amount to be paid for the Securities purchased hereunder as specified below
such Investor’s name on Annex A of this Agreement and next to the heading “Aggregate Subscription Amount,” in
United States dollars and in immediately available funds.
“ Subsidiary ”
means any subsidiary of the Company as set forth in section 3.01(a) and shall, where applicable, include any direct or indirect subsidiary
of the Company formed or acquired after the date hereof.
“ Transaction
Documents ” means this Agreement, the Notes, the Warrant, the Security Agreement, and all appendices, exhibits and schedules
hereto and thereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“ Underlying
Securities ” means the Conversion Shares (as defined in the Note) and the Warrant Shares.
“ Warrants ”
means the equity warrants, issued by the Company to the Investors hereunder, in the form of Appendix C attached hereto.
“ Warrant
Shares ” means the shares of Common Stock issuable upon exercise of the Warrants.
|
SECURITIES PURCHASE AGREEMENT |
ARTICLE
II.
PURCHASE
AND SALE
Section
2.01 Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with
the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Investors, severally and not
jointly, agree to purchase, the Securities up to the Maximum Offering Amount. At the Closing, each Investor shall deliver to the Company,
via wire transfer, immediately available funds equal to the Investor’s aggregate Subscription Amounts and the Company shall deliver
to each Investor (i) a Note and (ii) 50,000 Warrant Shares for every One Million Dollars ($1,000,000) of the Subscription Amount paid
to the Company hereunder. For the avoidance of doubt, the Warrants may be substituted for an equivalent economic instrument. The Company
and each Investor shall deliver the other items set forth in section 2.02 deliverable at the Closing. Upon satisfaction of the conditions
set forth in section 2.02 and section 2.03, the Closing shall occur at the offices of Company’s counsel, or such other location
as the parties shall mutually agree or may be closed remotely by electronic delivery of documents. The Company may conduct multiple closings
for the sale of the Securities until it has received the Maximum Offering Amount. The Closing Date for any Securities shall be the date
indicated on the applicable Investor signature pages attached hereto and the final Closing Date shall be no later than the Termination
Date. No minimum amount of Securities need be sold by the Company to complete and close the Offering.
Section
2.01(a) Additional Closings . Following the initial Closing, the Company and the Investors may, upon mutual written consent, conduct
one or more additional closings (each, an “ Additional Closing ”) for the purchase and sale of additional Notes and
Warrants on the same terms and conditions set forth in this Agreement, , in an aggregate principal amount of up to Five Million U.S.
Dollars ($5,000,000) in addition to the Maximum Offering Amount (the “Additional Closing Amount”). Any such Additional Closing
shall be subject to: (a) the mutual agreement of the Company and the participating Investors as to the aggregate principal amount of
additional Notes to be issued at such Additional Closing and the corresponding number of Warrants; (b) the satisfaction or waiver of
the conditions set forth in Section 2.03, mutatis mutandis, as of the date of such Additional Closing; (c) the execution and delivery
of such additional signature pages, Notes, Warrants, and other documents as may be reasonably required to effect such Additional Closing.
For the avoidance of doubt, any additional Notes and Warrants issued at an Additional Closing shall be deemed “Securities”
for all purposes under this Agreement and the other Transaction Documents, and any Investor participating in an Additional Closing shall
be bound by all terms and conditions of this Agreement.
Section
2.02 Closing Deliverables .
(a)
On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Investors the following:
| (i) | this
Agreement executed by the Company; |
| (ii) | a
Note with a principal amount equal to such Investor’s Subscription Amount, registered
in the name of such Investor; |
| (iii) | the
Warrants, in an amount equal to 50,000 shares of common stock for every $1,000,000 of the
Subscription Amount paid to the Company hereunder; and |
| (iv) | the
Security Agreement executed by the Company. |
|
SECURITIES PURCHASE AGREEMENT |
(b)
On or prior to the Closing Date, each Investor shall deliver or cause to be delivered to the Company the following:
| (i) | this
Agreement executed by such Investor; |
| (ii) | such
Investor’s Subscription Amount by wire transfer to counsel of the Company pursuant
to the wiring instructions set forth in Section 2.03(c).; and |
| (iii) | a
duly completed and signed Confidential Investor Questionnaire along with such other duly
completed and signed questionnaires as may be requested by the Company. |
Section
2.03 Closing Conditions .
(a)
The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
| (i) | the
accuracy in all material respects on the Closing Date of the representations and warranties
of the Investors contained herein; |
| (ii) | all
obligations, covenants and agreements of each Investor required to be performed at or prior
to the Closing Date shall have been performed; and |
| (iii) | the
delivery by each Investor of the items set forth in section 2.02(b) of this Agreement. |
(b)
The respective obligations of the Investors hereunder in connection with the Closing are subject to the following conditions being met:
| (i) | the
accuracy in all material respects (or, to the extent representations or warranties are qualified
by materiality or Material Adverse Effect, in all respects) when made and on the Closing
Date of the representations and warranties of the Company contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date); |
| (ii) | all
obligations, covenants and agreements of the Company required to be performed at or prior
to the Closing Date shall have been performed; |
| (iii) | the
delivery by the Company of the items set forth in section 2.02(a) of this Agreement; and |
| (iv) | there
shall have been no Material Adverse Effect with respect to the Company since the date hereof. |
The
wiring instructions for counsel of the Company shall be as set forth on Appendix “E” attached hereto.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
Section
3.01 Representations and Warranties of the Company . The Company hereby makes the following representations and warranties to each
Investor as of the date hereof:
(a)
Subsidiaries . The Company does not have any Subsidiaries.
|
SECURITIES PURCHASE AGREEMENT |
(b)
Organization and Qualification . The Company is an entity duly organized, validly existing and in good standing under the laws
of the jurisdiction of its formation, with the requisite power and authority to own and use its properties and assets and to carry on
its business as currently conducted. The Company is not in violation or default of any of the provisions of its articles of formation
or other organizational or charter documents. The Company is duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected
to result in: (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document; (ii) a material
adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company, taken
as a whole; or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority
or qualification; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition
or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions, (ii) conditions generally
affecting the industry in which the Company or any Subsidiary operates, (iii) any changes in financial or securities markets in general,
(iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof, (v) any pandemic,
epidemics or human health crises (including COVID-19), (vi) any changes in applicable laws or accounting rules (including GAAP), (vii)
the announcement, pendency or completion of the transactions contemplated by the Transaction Documents, or (viii) any action required
or permitted by the Transaction Documents or any action taken (or omitted to be taken) with the written consent of or at the written
request of the Investors holding a majority in principal amount outstanding of the Notes).
(c)
Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company,
the manager(s) or the Company’s shareholders in connection therewith other than in connection with the Required Approvals. Each
Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered
in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally; (ii) as
limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies; and (iii) insofar
as indemnification and contribution provisions may be limited by applicable law.
(d)
No Conflicts . The execution, delivery and performance by the Company of the Transaction Documents to which it is a party, the
issuance and sale of the Securities and the consummation by it of the other transactions contemplated hereby and thereby do not and will
not: (i) conflict with or violate any provision of the Company’s organizational or charter documents; (ii) conflict with, or constitute
a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company, or give to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company debt
or otherwise) or other understanding to which the Company is a party or by which any property or asset of the Company is bound or affected;
or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the Company is subject (including federal and State Securities
Laws and regulations), or by which any property or asset of the Company is bound or affected; except in the case of each of clauses (ii)
and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
|
SECURITIES PURCHASE AGREEMENT |
(e)
Filings, Consents and Approvals . The Company is not required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) such consents,
waivers, or authorizations as have been obtained before the Closing; and (ii) the filing of Form D with the Commission and such filings
as are required to be made under applicable State Securities Laws (collectively, the “ Required Approvals ”).
(f)
Issuance of the Securities . The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions
on transfer provided for in the Transaction Documents. The Underlying Securities, when issued in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for herein
or therein. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance upon Note
conversions and Warrant exercises at least equal to the minimum number of shares of Common Stock issuable on the date hereof upon the
full conversion of the Maximum Offering Amount of Notes and exercise of Warrants.
(g)
Capitalization . The Company has authorized 500,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. As of the
date of this Agreement, 45,034,282 shares of Common Stock are issued and outstanding and 0 shares of preferred stock are issued and outstanding.
There are no outstanding options (other than pursuant to the Company’s equity incentive plan), warrants, script rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable
or exchangeable for, or giving any person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to issue additional shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common Stock other than the existing convertible instruments (if any). Except as
set forth in Section 4.09, no Person has any right of first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents except for such, if any, as will have been validly waived before
the Closing. The issuance and sale of the Securities and Underlying Securities will not obligate the Company to issue shares of Common
Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities
to adjust the exercise, conversion, exchange or reset price under any of such securities. All of the outstanding shares of capital stock
of the Company are validly issued, fully paid and nonassessable, have been issued in compliance with all federal and State Securities
Laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder, the board of directors or others is required for the issuance and
sale of the Securities, except for such approvals as have been obtained prior to Closing. There are no stockholders’ agreements,
voting agreements or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s stockholders.
(h)
Litigation . There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company, or any of its properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”)
which: (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities;
or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability
under federal or State Securities Laws or a claim of breach of fiduciary duty.
|
SECURITIES PURCHASE AGREEMENT |
(i)
Compliance . The Company is unaware of, and to its knowledge: (i) is neither in default under nor in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company under), nor
has the Company received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default
or violation has been waived); (ii) is not in violation of any order of any court, arbitrator or governmental body; nor (iii) is or has
been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal,
state and local laws applicable to its business and all such laws that affect the environment, except in each of the foregoing cases
as could not have or reasonably be expected to result in a Material Adverse Effect.
(j)
Regulatory Permits . The Company, to its knowledge, possesses all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct its business, except where the failure to possess such permits
could not reasonably be expected to result in a Material Adverse Effect (“ Material Permits ”), and the Company has
not received any notice of proceedings relating to the revocation or modification of any Material Permit.
(k)
Title to Assets . The Company has good and marketable title in fee simple to all real property and good and marketable title in
all personal property owned by it that, in each case, is material to the business of the Company, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and Liens for the payment of federal, state or other taxes, the payment of which
is neither delinquent nor subject to penalties in any material respect. Any real property and facilities held under lease by the Company
is held by it under valid, subsisting and enforceable leases with which the Company are in compliance.
(l)
Patents and Trademarks . (i) The Company, to its knowledge, has, or has rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights
and similar rights as necessary or material for use in connection with its business and which the failure to so have could reasonably
be expected to have a Material Adverse Effect (collectively, the “ Intellectual Property Rights ”); (ii) the Company
has not received a notice (written or otherwise) that any of the Intellectual Property Rights violates or infringes upon the intellectual
property rights of any Person; (iii) to the knowledge of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual Property Rights, except where the failure to be so enforceable
or for such infringements as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and
(iv) the Company has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual
properties, except where failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse
Effect.
(m)
Certain Fees . [Except for commissions owed in connection with the RBW Engagement Agreement in an amount estimated as set forth
on Appendix F,]no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor
or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the
Transaction Documents. The Investors shall have no obligation with respect to any fees or with respect to any claims made by or on behalf
of other Persons for fees of a type contemplated in this Section 3.01(m) that may be due in connection with the transactions contemplated
by the Transaction Documents.
(n)
Private Placement . Assuming the accuracy of the Investors’ representations and warranties set forth in section 3.02, no
registration under the Securities Act is required for the offer and sale of the Securities and Underlying Securities by the Company to
the Investors as contemplated hereby.
(o)
No General Solicitation . Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities
or Underlying Securities by any form of general solicitation or general advertising. The Company has offered the Securities and Underlying
Securities for sale only to the Investors and certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.
|
SECURITIES PURCHASE AGREEMENT |
(p)
Acknowledgment Regarding Investors’ Purchase of Securities . The Company acknowledges and agrees that each of the Investors
is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Investor is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Investor or
any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby
is merely incidental to the Investors’ purchase of the Securities. The Company further represents to each Investor that the Company’s
decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives.
(q)
Foreign Corrupt Practices . The Company, nor to the knowledge of the Company, any agent or other person acting on behalf of the
Company, has: (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity; (ii) made any unlawful payment to foreign or domestic government officials or employees
or to any foreign or domestic political parties or campaigns from corporate funds; (iii) failed to disclose fully any contribution made
by the Company (or made by any person acting on its behalf of which the Company is aware) which is in violation of law; or (iv) violated
in any material respect any provision of the Foreign Corrupt Practices Act.
(r)
Office of Foreign Assets Control . Neither the Company nor, to the Company’s knowledge, any director, officer, agent, employee
or affiliate of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“ OFAC ”).
(s)
Money Laundering . The operations of the Company are and have been conducted at all times in compliance with applicable financial
record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, applicable money
laundering statutes and applicable rules and regulations thereunder (collectively, the “ Money Laundering Laws ”), and
no Action or Proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company with
respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
Section
3.02 Representations and Warranties of the Investors .
Each
Investor, for itself and for no other Investor, hereby represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows (unless as of a specific date therein, in which case they shall be accurate as of such date):
(a)
Authority; Organization . Such Investor has full power and authority (and, if such Investor is an individual, the capacity) to
enter into this Agreement and to perform all obligations required to be performed by it hereunder. If an entity, such Investor is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right,
corporate, limited liability company or partnership power and authority to enter into and to consummate the transactions contemplated
by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction
Documents and performance by such Investor of the transactions contemplated by the Transaction Documents have been duly authorized by
all necessary corporate or similar action on the part of such Investor. Each Transaction Document to which it is a party has been duly
executed by such Investor, and when delivered by such Investor in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement
of creditors’ rights generally; (ii) as limited by laws relating to the availability of specific performance, injunctive relief
or other equitable remedies; and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
|
SECURITIES PURCHASE AGREEMENT |
(b)
Own Account . Such Investor understands that the Securities are and Underlying Securities will be ‘restricted securities’
and have not been registered under the Securities Act or any applicable State Securities Law and is acquiring the Securities and any
Underlying Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any
part thereof in violation of the Securities Act or any applicable State Securities Law, has no present intention of distributing any
of such Securities or Underlying Securities in violation of the Securities Act or any applicable State Securities Law and has no direct
or indirect arrangement or understandings with any other persons to distribute or regarding the distribution the same (this representation
and warranty not limiting such Investor’s right to sell the Securities and Underlying Securities in compliance with applicable
federal and State Securities Laws) in violation of the Securities Act or any applicable State Securities Law. Such Investor is acquiring
the Securities and any Underlying Securities in the ordinary course of its investment business.
(c)
Non-Transferrable . Such Investor agrees: (i) that the Investor will not sell, assign, pledge, give, transfer or otherwise dispose
of the Securities or Underlying Securities or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant
to a registration of the Securities under the Securities Act and all applicable State Securities Laws, or in a transaction which is exempt
from the registration provisions of the Securities Act and all applicable State Securities Laws; (ii) that the certificates representing
the Securities and Underlying Securities will bear a legend making reference to the foregoing restrictions; and (iii) that the Company
and its Affiliates shall not be required to give effect to any purported transfer of such Securities and Underlying Securities except
upon compliance with the foregoing restrictions.
(d)
Investor Status . Such Investor is an “accredited investor” as defined in Rule 501(a) under the Securities Act. The
undersigned agrees to furnish any additional information requested by the Company or any of its Affiliates to assure compliance with
applicable U.S. federal and state securities laws in connection with the purchase and sale of the Securities. The undersigned has completed
the Confidential Investor Questionnaire contained in Appendix A and the information contained therein is complete and accurate
as of the date thereof and is hereby affirmed as of the Closing Date. Any information that has been furnished or that will be furnished
by the undersigned to evidence its status as an accredited investor is accurate and complete, and does not contain any misrepresentation
or material omission.
(e)
Experience of Such Investor . Such Investor, either alone or together with its representatives, has such knowledge, sophistication,
and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities and Underlying Securities, and has so evaluated the merits and risks of such investment. Such Investor is able to bear
the economic risk of an investment in the Securities and Underlying Securities and, at the present time, is able to afford a complete
loss of such investment.
(f)
No Trading Market . Such Investor acknowledges that there is currently no trading or public market for the Securities and Underlying
Securities and that none is expected to develop for the Securities unless a Liquidity Event occurs.
(g)
General Solicitation . Such Investor undersigned acknowledges that neither the Company nor any other person offered to sell the
Securities to it by means of any form of general solicitation or advertising, including but not limited to: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio; or (ii) any
seminar or meeting whose attendees were invited by any general solicitation or general advertising.
(h)
Confidentiality . Other than to other Persons party to this Agreement and its advisors who have agreed to keep information confidential
or have a fiduciary obligation to keep such information confidential, such Investor has maintained the confidentiality of all disclosures
made to it in connection with the transaction (including the existence and terms of this transaction).
|
SECURITIES PURCHASE AGREEMENT |
(i)
Foreign Investor . If such Investor is not a United States person, such Investor represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities and Underlying
Securities or any use of this Agreement, including: (i) the legal requirements within its jurisdiction for the purchase of the Securities
and any Underlying Securities; (ii) any foreign exchange restrictions applicable to such purchase; (iii) any governmental or other consents
that may need to be obtained; and (iv) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding,
redemption, sale or transfer of the Securities or Underlying Securities. The Investor further represents that its payment for, and its
continued beneficial ownership of the Securities and any Underlying Securities, will not violate any applicable securities or other laws
of its jurisdiction.
(j)
Information from Company . Such Investor and its purchaser representatives or investment managers, if any, have been afforded the
opportunity to obtain any information necessary to verify the accuracy of any representations or information presented by the Company
in this Agreement and have had all inquiries to the Company answered, and have been furnished all requested materials, relating to the
Company and the Offering and sale of the Securities and anything set forth in the Transaction Documents. Neither the Investor nor the
Investor’s purchaser’s representatives or investment managers, if any, have been furnished any offering literature by the
Company or any of its Affiliates, associates or agents other than the Transaction Documents, and the agreements referenced therein.
(k)
Speculative Nature of Investment; Risk Factors . SUCH INVESTOR UNDERSTANDS THAT AN INVESTMENT IN THE SECURITIES AND UNDERLYING
SECURITIES INVOLVES A HIGH DEGREE OF RISK. Such Investor acknowledges that: (i) any projections, forecasts or estimates as may have
been provided to the Investor are purely speculative and cannot be relied upon to indicate actual results that may be obtained through
this investment; any such projections, forecasts and estimates are based upon assumptions which are subject to change and which are beyond
the control of the Company or its management; (ii) the tax effects which may be expected by this investment are not susceptible to absolute
prediction, and new developments and rules of the Internal Revenue Service, audit adjustment, court decisions or legislative changes
may have an adverse effect on one or more of the tax consequences of this investment; and (iii) the Investor has been advised to consult
with his own advisor regarding legal matters and tax consequences involving this investment. The Investor represents that the Investor’s
investment objective is speculative in that the Investor seeks the maximum total return through an investment in a broad spectrum of
securities, which involves a higher degree of risk than other investment styles and therefore the Investor’s risk exposure is also
speculative. The Securities offered hereby are highly speculative and involve a high degree of risk and Investor should only purchase
these securities if Investor can afford to lose their entire investment.
(l)
Money Laundering . If an entity, the operations of such Investor are and have been conducted at all times in compliance with applicable
financial record-keeping and reporting requirements of the Money Laundering Laws, and no Action or Proceeding by or before any court
or governmental agency, authority or body or any arbitrator involving the Company with respect to the Money Laundering Laws is pending
or, to the knowledge of the Company or any Subsidiary, threatened.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
Section
4.01 Transfer Restrictions .
(a)
The Securities and Underlying Securities may only be disposed of in compliance with state and federal securities laws. The Securities
and Underlying Securities may not be sold or transferred by the Investors without the written consent of the Company, which shall not
be unreasonably withheld. As a condition of such sale or transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of an Investor under this Agreement.
|
SECURITIES PURCHASE AGREEMENT |
(b)
The Investors agree to the imprinting, so long as is required by this Section 4.01, of a legend on any of the Securities and Underlying
Securities in the following form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS [EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
(c)
Each Investor, severally and not jointly with the other Investors, agrees that such Investor will sell any Securities and Underlying
Securities only pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom, and that if Securities or Underlying Securities are sold pursuant to a registration statement,
they will be sold in compliance with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive
legend from certificates representing Securities as set forth in this Section 4.01 is predicated upon the Company’s reliance upon
this understanding.
(d)
Each Investor understands that upon conversion of a Note, it will acquire shares of Common Stock in and become a shareholder of the Company.
Section
4.02 Acknowledgment of Dilution . The Company acknowledges that the issuance of the Underlying Securities may result in dilution
of the outstanding shares of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges
that its obligations under the Transaction Documents, including, without limitation, its obligation to issue the Underlying Securities
pursuant to the Securities, are unconditional and absolute and not subject to any right of set off, counterclaim, delay or reduction,
regardless of the effect of any such dilution or any claim the Company may have against any Investor and regardless of the dilutive effect
that such issuance may have on the ownership of the other stockholders of the Company.
Section
4.03 Integration . The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities or Underlying
Securities to the Investors in a manner that would require the registration under the Securities Act of the sale of the Securities to
the Investors.
Section
4.04 Publicity . The Company and each Investor shall consult with each other in issuing any other press releases with respect to
the transactions contemplated hereby, and neither the Company nor any Investor shall issue any such press release nor otherwise make
any such public statement without the prior consent of the Company with respect to any press release of any Investor, or without the
prior consent of each Investor with respect to any press release of the Company mentioning such Investor, which consent shall not unreasonably
be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall promptly provide the other
party with prior notice of such public statement or communication.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.05 Indemnification of Investors . The Company shall indemnify, reimburse and hold harmless the Investors and their respective
partners, members, shareholders, officers, directors, employees and agents (and any other persons with other titles that have similar
functions) (collectively, “ Indemnitees ”) from and against any and all losses, claims, liabilities, damages, penalties,
suits, costs and expenses, of any kind or nature, (including fees relating to the cost of investigating and defending any of the foregoing)
imposed on, incurred by or asserted against such Indemnitee in any way related to or arising from or alleged to arise from: (i) any breach
of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction
Documents; and (ii) any action instituted against such Indemnitee in any capacity, or any of them or their respective Affiliates, by
any stockholder of the Company who is not an Affiliate of such Indemnitee, with respect to any of the transactions contemplated by the
Transaction Documents (unless such action is based upon a breach of such Indemnitee’s representations, warranties or covenants
under the Transaction Documents or any agreements or understandings such Indemnitee may have with any such stockholder or any violations
by such Indemnitee of state or federal securities laws or any conduct by such Indemnitee which results from the gross negligence or willful
misconduct of the Indemnitee as determined by a final, nonappealable decision of a court of competent jurisdiction).
Section
4.06 Equal Treatment of Investors . No consideration (including any modification of any Transaction Document) shall be offered
or paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless the
same consideration is also offered to all of the parties to the Transaction Documents. Further, the Company shall not make any payment
of principal or interest on the Notes in amounts which are disproportionate to the respective principal amounts outstanding on the Notes
at any applicable time. For clarification purposes, this provision constitutes a separate right granted to each Investor by the Company
and negotiated separately by each Investor, and is intended for the Company to treat the Investors as a class and shall not in any way
be construed as the Investors acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
Section
4.07 Form D; Blue Sky Filings . The Company agrees to timely file a Form D with respect to the Securities and Underlying Securities
as required under Regulation D and to provide a copy thereof, promptly upon request of any Investor. The Company shall take such action
as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities and Underlying
Securities for, sale to the Investors under applicable State Securities Laws of the states of the United States, and shall provide evidence
of such actions promptly upon request of any Investor.
Section
4.08 Use of Proceeds . The Company shall use the net proceeds received from the sale of the Securities at the Closing Date for
general corporate purposes and general working capital requirements, including the payment of transaction-related fees and expenses.
Section
4.09 Preemptive Rights.
(a)
Preemptive Rights. Subject to the exceptions set forth in subsection (c) below, if the Company proposes to issue any New Securities,
the Company shall deliver written notice (an “Issuance Notice”) to each Purchaser at least thirty (30) days prior to the
proposed issuance date, which notice shall set forth the material terms and conditions of such issuance, including (i) the type and number
of New Securities to be issued, (ii) the purchase price and payment terms, and (iii) the proposed issuance date. Each Purchaser shall
have the right, exercisable by written notice to the Company within twenty (20) days after receipt of the Issuance Notice, to purchase
up to such Purchaser’s Pro Rata Share of the New Securities at the same price and on the same terms as set forth in the Issuance
Notice. For purposes of this Section, “Pro Rata Share” means, with respect to each Purchaser, a fraction, the numerator of
which is the number of shares of Common Stock held by such Purchaser immediately prior to the proposed issuance (calculated on a fully-diluted,
as-converted basis), and the denominator of which is the total number of shares of Common Stock outstanding immediately prior to the
proposed issuance (calculated on a fully-diluted, as-converted basis).
(b)
Individual Preemptive Rights. In addition to the rights set forth in Section 4.09(a) above, Bradford Johnsonand Bert Bersolis (each,
a “ Specified Holder ”) shall each have the right to purchase New Securities in an amount sufficient to maintain such
Specified Holder’s percentage ownership of the Company (on a fully-diluted, as-converted basis) as of immediately prior to such
issuance. This right shall be in addition to, and not in lieu of, any rights such Specified Holder may have under Section 4.09(a) as
a Purchaser. (c) Excluded Issuances. The preemptive rights set forth in Sections 4.09(a) and (b) shall not apply to any issuance of:
(i) shares of Common Stock or options to purchase Common Stock issued to employees, officers, directors, or consultants of the Company
pursuant to any equity incentive plan approved by the Board of Directors; (ii) securities issued upon the conversion or exercise of any
convertible securities, options, or warrants outstanding as of the date hereof; (iii) securities issued as consideration in connection
with a bona fide acquisition or strategic transaction approved by the Board of Directors; (iv) securities issued in connection with any
stock split, stock dividend, or recapitalization; or (v) securities issued in an underwritten public offering registered under the Securities
Act.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.10 Lock-Up Provisions .
| (a) | Purchasers
Lock-Up Exemption. Notwithstanding any other provision of this Agreement or any other agreement
to which the Company is a party, the Purchasers shall not be subject to any lock-up provision
and shall be permitted to sell the Securities immediately upon the listing of the Common
Stock on a National Securities Exchange. The Purchasers may provide liquidity for the Company’s
stock in the public market through sales of the Securities. |
Section
4.11. Tag-Along and Drag-Along Rights . The Purchasers shall have tag-along and drag-along rights with respect to all of the Purchasers’
stock positions in the Company, as follows:
| (a) | Tag-Along
Rights . If Jeffrey Low, Jordan Low, and any other stockholder holding at least five percent
(5%) of the outstanding Common Stock (collectively, the “Selling Stockholders”)
propose to sell, in the aggregate, shares of Common Stock to a third party in a single transaction
or series of related transactions representing more than [10%] of the outstanding Common
Stock (excluding (i) any public offering, (ii) sales pursuant to Rule 144 or other routine
market transactions, (iii) transfers to affiliates or for estate planning purposes, (iv)
sales to the Company or its designees, and (v) transfers in connection with a Change of Control
subject to Section 4.11(b) below), the Selling Stockholders shall give the Purchasers written
notice at least ten (10) days prior to the proposed closing. The Purchasers shall have the
right, exercisable by written notice within five (5) business days of receipt, to participate
in such sale on the same terms and conditions, pro rata based on the Purchasers’ percentage
ownership relative to the Selling Stockholders’ aggregate ownership. The Purchasers’
participation shall be subject to the Purchasers executing the same transaction documents
and making the same representations, warranties, and indemnities as the Selling Stockholders
(on a several and not joint basis, and capped at the net proceeds received). |
| (b) | Drag-Along
Rights . If the Selling Stockholders, who in the aggregate hold a majority of the outstanding
Common Stock, together with the approval of the Board of Directors, approve a bona fide Change
of Control transaction with an unaffiliated third party, the Selling Stockholders may require
the Purchasers to (i) sell all of the Purchasers’ shares on the same terms and conditions
as the Selling Stockholders, (ii) vote all shares in favor of the transaction, (iii) waive
any dissenters’ or appraisal rights, and (iv) execute all customary transaction documents,
including representations, warranties, and indemnities (provided that the Purchasers’
indemnification obligations shall be several and not joint, limited to breaches of the Purchasers’
individual representations and a pro rata share of general indemnities, and capped at the
net proceeds received by the Purchasers). The consideration per share received by the Purchasers
shall be the same form and amount as received by the Selling Stockholders for shares of the
same class. |
| (c) | Board
Representation . |
| (i) | Board
Seat . Effective as of the Closing, the Company shall appoint Bert Basolis to serve as
a member of the Board of Directors . Mr. Basolis shall serve as a director for a term
of five (5) years from the Closing Date, or until his earlier voluntary resignation or removal
by the stockholders of the Company. The Company shall not remove Mr. Basolis from the Board
of Directors without his consent during such five-year term, except for cause . |
| (ii) | Board
Observer Rights . Bradford Johnson shall have the right to attend all meetings of the
Board of Directors in a non-voting observer capacity for so long as Mr. Johnson remains a
shareholder of the Company. The Company shall provide Mr. Johnson with copies of all notices,
minutes, consents, and other materials provided to directors at the same time such materials
are provided to directors. Mr. Johnson shall be entitled to participate in discussions at
Board meetings but shall not be entitled to vote on any matter. |
Section
4.12 Stock Price Support . The Company shall use its best efforts to support the stock price of the Common Stock following any
listing on a National Securities Exchange, including but not limited to timely disclosure of material information, maintenance of good
corporate governance practices, and such other reasonable measures as may be appropriate under the circumstances.
|
SECURITIES PURCHASE AGREEMENT |
Section
4.13 Most Favored Nations . If the Company issues any equity securities to any other investor on terms more favorable than those
provided to the Purchasers hereunder (including, without limitation, with respect to price, anti-dilution protections, board rights,
information rights, or other investor protections), the Company shall promptly notify the Purchasers and, at the Purchasers’ election,
amend this Agreement and the other Transaction Documents to provide the Purchasers with such more favorable terms.
ARTICLE
V.
MISCELLANEOUS
Section
5.01 Fees and Expenses . Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if
any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the delivery
of any Securities to the Investors.
Section
5.02 Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
Section
5.03 Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be
in writing and shall be deemed given and effective on the earliest of: (i) one Business Day after the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m.
(New York City time) on a Business Day, with written confirmation of successful transmission; (ii) the next Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages
attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day; (iii) the second
Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service; or (iv) upon actual receipt
by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the
signature pages attached hereto.
Section
5.04 Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written
instrument signed, in the case of an amendment, by the Company and the Investors holding at least a majority in principal amount of the
Notes then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No
waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver
in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
Section
5.05 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors
and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent
of each Investor (other than by merger). Any Investor may assign any or all of its rights under this Agreement to any Person to whom
such Investor assigns or transfers any Securities, provided that such transfer complies with the terms of this Agreement and all applicable
federal and State Securities Laws and that such transferee agrees in writing with the Company to be bound, with respect to the transferred
Securities, by the provisions of the Transaction Documents that apply to the ‘Investors’.
Section
5.06 No Third-Party Beneficiaries . Except for the Indemnitees named herein, who are intended third-party beneficiaries of this
Agreement, including the representations and warranties made by the Company hereunder, this Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other Person.
|
SECURITIES PURCHASE AGREEMENT |
Section
5.07 Governing Law . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents
shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates,
members, managers, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts
sitting in the City of New York. Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, or such courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any such suit, Action or Proceeding by mailing
a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable
law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to the Transaction Documents or the transactions contemplated hereby. If any party
shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such Action or Proceeding.
Section
5.08 Survival . The representations and warranties contained herein shall survive the Closing and the delivery of the Securities
and issuance of Underlying Securities.
Section
5.09 Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature
page was an original thereof.
Section
5.10 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall
remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would
have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
Section
5.11 Rescission and Withdrawal Right . Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) any of the other Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may
rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election
in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion
of a Note, the Investor shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise notice.
|
SECURITIES PURCHASE AGREEMENT |
Section
5.12 Replacement of Securities . If any certificate or instrument evidencing any Securities or Underlying Securities is mutilated,
lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof
(in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities or Underlying Securities.
Section
5.13 Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages,
each of the Investors and the Company will be entitled to seek specific performance under the Transaction Documents. The parties agree
that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the
Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
Section
5.14 Payment Set Aside . To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction
Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent
of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff had not occurred.
Section
5.15 Independent Nature of Investors’ Obligations and Rights . The obligations of each Investor under any Transaction Document
are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance
or non-performance of the obligations of any other Investor under any Transaction Document. Nothing contained herein or in any other
Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert
or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor shall be
entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor has been represented by its own separate legal counsel in their review and negotiation of
the Transaction Documents. The Company has elected to provide all Investors with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by the Investors.
Section
5.16 Reserved .
Section
5.17 Construction . The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to
revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition,
each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the shares of Common Stock that occur
after the date of this Agreement.
Section
5.18 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed
to limit or affect any of the provisions hereof.
Section
5.19 WAIVER OF JURY TRIAL . IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY,
THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
[ SIGNATURE
PAGES FOLLOW ]
|
SECURITIES PURCHASE AGREEMENT |
IN
WITNESS WHEREOF , the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date below.
|
First
Breach Inc. |
|
|
|
|
By:
|
/s/ Jeffrey Low |
|
Name: |
Jeffrey
Low |
|
Title: |
CEO |
|
|
|
|
INVESTORS: |
|
|
|
|
The
Investors executing the Signature Page in the form attached hereto as Annex A and
delivering the same to the Company or its agents shall be deemed to have executed this Agreement
and agreed to the terms hereof.
|
[Signature
Page to Securities Purchase Agreement]
|
SECURITIES PURCHASE AGREEMENT |
Annex
A
Securities
Purchase Agreement Investor Counterpart Signature Page
The
undersigned, desiring to: (i) enter into this Securities Purchase Agreement dated as of April __, 2026 (“ Agreement ”),
with First Breach Inc. (“ Company ”), in the form furnished to the undersigned; and (ii) purchase the Securities as
set forth below, hereby agrees to purchase such Securities from the Company as of the Closing and further agrees to join the Agreement
as a party thereto, with all the rights and privileges appertaining thereto, and to be bound in all respects by the terms and conditions
thereof. The undersigned specifically acknowledges having read the representations in the Agreement section entitled ‘ Representations
and Warranties of the Investors, ’ and hereby represents that the statements contained therein are complete and accurate with
respect to the undersigned as an Investor.
PURCHASER
(if an individual): |
|
PURCHASER
(if an entity): |
|
|
|
|
|
By |
/s/ Bradford Johnson |
|
|
|
|
|
(Legal
Name of Entity) |
Name: |
Bradford
Johnson |
|
|
|
|
|
|
|
|
Date: |
April
24, 2026 |
|
|
|
|
|
|
|
|
PUCHASER
(if investing jointly) |
|
By |
|
|
|
|
|
|
By |
|
|
Name: |
|
|
|
|
|
|
Name: |
|
|
Title: |
|
|
|
|
|
|
Date: |
|
|
Date: |
|
|
|
|
|
|
Fax
No. ________________________ |
|
Fax
No.: ________________________ |
State/Country
of Domicile or Formation: _____________________________
Aggregate
Subscription Amount: $5,000,000
SS/EIN/TIN:
_______________ ___________________________________
Address:
________________________________________________ ____
Telephone:
______________________________________________ ____
E-Mail:
_________________________________________________ _____
[Investor
Counter Signature Page to Securities Purchase Agreement]
|
|
APPENDIX
A
CONFIDENTIAL
INVESTOR QUESTIONNAIRE
|
|
APPENDIX
B
FORM
OF SENIOR SECURED PROMISSORY NOTE
|
|
APPENDIX
C
FORM
OF WARRANT
|
|
APPENDIX
D
FORM
OF SECURITY AGREEMENT
|
|
APPENDIX
E
WIRING
INSTRUCTIONS
(see
attached)
|
|
APPENDIX
F
RBW
ENGAGEMENT AGREEMENT COMMISSION SCHEDULE
(see
attached)
|
### EX-10.9 - EX-10.9
EX-10.9
10
ex10-9.htm
EX-10.9
Exhibit
10.9
SECURITIES
PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “ Agreement ”) is dated as of April 24, 2026 among First Breach Inc., a corporation
incorporated under the laws of the state of Delaware (“ Company ”), and each purchaser identified on the Annex A
hereto (each, including its successors and assigns, an “ Investor ” and collectively, the “ Investors ”).
WHEREAS,
the Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, senior secured convertible
promissory notes in the form set forth in Appendix B hereto (each, a “ Note ” and collectively, the “ Notes ”)
and equity warrants in the form set forth on Appendix C hereto (each, a “ Warrant ” and collectively, the “ Warrants ”)
contemplated by this Agreement (“ Offering ”); and
WHEREAS ,
the Company and Investors are executing and delivering this Agreement in reliance upon an exemption from securities registration requirements
of the Securities Act afforded by the provisions of Section 4(a)(2) and/or Rule 506(b) of Regulation D promulgated thereunder by the
U.S. Securities and Exchange Commission.
NOW,
THEREFORE , in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company and each Investor agree as follows:
ARTICLE
I.
DEFINITIONS
Section
1.01. Definitions . In addition to the terms defined elsewhere in this Agreement:
(a)
capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Notes (as defined herein), and
(b)
the following terms have the meanings set forth in this Agreement:
“ $ ”
or “ USD ” means United States Dollars.
“ Action ”
shall have the meaning ascribed to such term in Section 3.01(h).
“ Affiliate ”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“ Business
Day ” means any day except Saturday, Sunday, any day which is a federal legal holiday in the United States or any day on which
banking institutions in the State of New York are authorized or required by law or other governmental action to close. If the last or
appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Business Day, then
such action may be taken or such right may be exercised on the next succeeding Business Day.
“ Change
of Control ” means (a) any “person” or “group” (within the meaning of Section 13(d) and 14(d) of the
Exchange Act), other than the Company or any employee benefit plan of the Company, becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%)
of the combined voting power of the Company’s then-outstanding securities; (b) the consummation of a merger, consolidation or similar
transaction involving the Company if, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders
of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than fifty
percent (50%) of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction;
(c) a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company; or (d)
a liquidation or dissolution of the Company.
|
SECURITIES PURCHASE AGREEMENT |
“ Closing ”
means the closing of the purchase and sale of the Securities pursuant to section 2.01.
“ Closing
Date ” means for any Securities, the Business Day when: (i) all of the Transaction Documents for such Securities have been executed
and delivered by the applicable parties thereto, and conditions precedent to the applicable Investors’ obligations to pay the Subscription
Amount; and (ii) the Company’s obligations to deliver such Securities have been satisfied or waived.
“ Commission ”
means the United States Securities and Exchange Commission.
“ Confidential
Investor Questionnaire ” means the Confidential Investor Questionnaire attached as Appendix A hereto.
“ Exempt
Issuance ” means the issuance of Common Stock or options to employees, officers, or directors of the Company pursuant to any
stock or option plan duly adopted by the Company .
“ Exchange
Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ GAAP ”
means generally accepted accounting principles in the United States in effect from time to time.
“ Intellectual
Property Rights ” shall have the meaning ascribed to such term in Section 3.01(l).
“ Common
Stock ” means the common stock of the Company, par value $0.001 per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“ Liens ”
shall mean a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“ Liquidity
Event ” has the meaning ascribed to it the Notes.
“ Material
Adverse Effect ” shall have the meaning ascribed to such term in Section 3.01(b).
“ Material
Permits ” shall have the meaning ascribed to such term in Section 3.01(j).
“ Maximum
Offering Amount ” means an aggregate Subscription Amount of up to Ten Million One Hundred Fifty Thousand U.S. Dollars ($10,150,000).
“ National
Securities Exchange ” means the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York
Stock Exchange, the NYSE American, or any other national securities exchange registered with the Commission under the Exchange Act.
“ Notes ”
means the senior secured convertible promissory notes issued by the Company to the Investors hereunder, in the form of Appendix B
attached hereto.
“ New
Securities ” means any shares of Common Stock, Preferred Stock, or other equity securities of the Company, or any securities
convertible into or exchangeable for, or options, warrants or other rights to acquire, any shares of Common Stock or other equity securities
of the Company, other than (i) securities issued upon conversion or exercise of the Notes or Warrants, (ii) securities issued pursuant
to any equity incentive plan or similar compensatory arrangement approved by the Board of Directors, (iii) securities issued upon conversion,
exercise or exchange of any convertible securities, options or warrants outstanding as of the date hereof, (iv) securities issued in
connection with any stock split, stock dividend, combination or recapitalization, and (v) securities issued in connection with a bona
fide strategic transaction approved by the Board of Directors, provided such issuance is not primarily for capital raising purposes.
|
SECURITIES PURCHASE AGREEMENT |
“ Offering
Period ” means the period commencing on the date hereof and ending on the Termination Date.
“ Person ”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“ Preferred
Stock ” means the preferred stock of the Company, par value $0.0001 per share, and any other class of preferred securities into
which such securities may hereafter be reclassified or changed.
“ Proceeding ”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
“ Purchasers ”
means the Investors.
“ Required
Approvals ” shall have the meaning ascribed to such term in section 3.01(e).
“ Securities ”
means the Notes and Underlying Securities.
“ Securities
Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Security
Agreement ” means the Security Agreement between the Company and Secured Parties (as defined therein), in the form of Appendix
D attached hereto.
“ State
Securities Laws ” means the securities (or “blue sky”) rules, regulations, or other similar laws of a particular
state.
“ Termination
Date ” means May 30, 2026, or such other date as mutually agreed by the parties.
“ Subscription
Amount ” means, as to each Investor, the aggregate amount to be paid for the Securities purchased hereunder as specified below
such Investor’s name on Annex A of this Agreement and next to the heading “Aggregate Subscription Amount,